9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (11) TMI 715 - AT - Income TaxDetermination of ALP of the international transaction of AMP expenses - Held that - Since the orders of the authorities below are not in conformity with the ratio laid down in Sony Ericsson (2015 (3) TMI 580 - DELHI HIGH COURT) as discussed above and further necessary details for doing this exercise at our end are also not available, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon ble High Court in Sony Ericson Mobile (supra). International transaction of Receipt of I.T. Support Services is required to be separately benchmarked, distinct from the international transactions of purchase etc. - Held that - Since the view of the TPO as regards the receipt of no services etc. has been set aside by us, we remit the matter to the AO/TPO for determining the ALP of this international transaction afresh as per law after allowing a reasonable opportunity of being heard to the assessee. International transactions of Procurement support and Training services - Held that - On going through the nature of services given in this Annexure, it is manifested that the assessee was supposed to procure the goods from India and export it to the global production network of the BMW Group. For doing this, the assessee was carrying out supplier assessments to identify the most suitable supplier. The assessee was receiving proposal from the supplier and forwarding it to BMW AG for final assessment and approval. On such approval, the International Purchase Office (IPO) was working with the supplier to ensure compliance of BMW AG requirements. In so far as Training services are concerned, a copy of the relevant agreement between the assessee and BMW AG is available on page 599 of the paper book. Preamble of the agreement provides that BMW AG entered into a contract with Satyam Venture Engineering Services for the provision of design and simulation services. Because Satyam was unfamiliar with BMW processes and tools, the assessee was assigned a duty to impart training to the employees of the Satyam for their utilization in complying with design and simulation services for BMW AG. It is overt from the two Agreements that the nature of Procurement and Training services is entirely different and bear no functional similarity with each other. Whereas the Procurement services were rendered by IPO of the assessee, the Training services were rendered by its technical staff. In view of there being functional differences between the two and use of separate work force for their rendition, we are not inclined to accept the view point of the TPO for aggregating these two distinct services into one and thereafter determine their ALP in a combined manner. We, therefore, set aside the impugned order and remit the matter to the file of the AO/TPO for a fresh determination of ALP for these two services independently, after allowing a reasonable opportunity of being heard to the assessee. Higher depreciation on DVR - Held that - It is noticed that the DRP followed its order for the A.Y. 2009-10 for negating the assessee s claim of higher depreciation on DVR. Such issue came up consideration before the Tribunal in assessee s case for the A.Y. 2009-10. The Tribunal has held in its order that higher rate of depreciation is applicable to switches. Thus the departmental view was upheld on others. Since DVR is not a switch, respectfully following the precedent, we approve the view taken by the AO in its order for treating DVR as a part of Plant and machinery and not computer peripherals and allowing depreciation accordingly.
Issues Involved:
1. Transfer Pricing Addition on Account of Advertisement, Marketing, and Promotion (AMP) Expenses. 2. Transfer Pricing Addition from the International Transaction of Receipt of I.T. Support Services. 3. Transfer Pricing Addition on Account of Procurement Support and Training Services. 4. Depreciation Rate on Digital Video Recorder (DVR). Issue-wise Detailed Analysis: 1. Transfer Pricing Addition on Account of Advertisement, Marketing, and Promotion (AMP) Expenses: The first issue concerns the transfer pricing addition of ?85,83,61,733/- made by the Assessing Officer (AO) on account of AMP expenses. The assessee, a BMW Group company, was responsible for marketing and promoting BMW products in India. The Transfer Pricing Officer (TPO) considered the AMP expenses as an international transaction under Section 92B(1) read with Clause (v) of section 92F. The TPO referred to an agreement dated 1.1.2006 between the assessee and BMW Germany, which outlined the assessee's duties in India, including advertisement and sales promotion. The TPO determined the ALP of AMP expenses with a mark-up of 11.105%, resulting in the addition. The Tribunal rejected the assessee’s contention that there was no international transaction of AMP expenses, citing the agreement and the assessee’s own Transfer Pricing study report. The Tribunal directed the AO/TPO to determine the ALP of the international transaction of AMP spend afresh in accordance with the guidelines laid down by the Hon’ble Delhi High Court in Sony Ericsson Mobile Communications (India)Pvt. Ltd. vs. CIT. 2. Transfer Pricing Addition from the International Transaction of Receipt of I.T. Support Services: The second issue pertains to the transfer pricing addition of ?2,20,31,561/- from the international transaction of ‘Receipt of I.T. Support Services’. The TPO rejected the assessee’s combined TNMM approach and applied the CUP method, concluding that no services were received or that the services were duplicate in nature. The Tribunal found that the assessee did receive I.T. Support Services and that some services were charged on a cost-plus basis. The Tribunal remitted the matter to the AO/TPO for determining the ALP of this international transaction afresh, in light of the Hon’ble jurisdictional High Court's guidelines in Knorr Bremse India Pvt Ltd vs. ACIT and CIT VS. Cushman Wakefield India (P) Ltd. 3. Transfer Pricing Addition on Account of Procurement Support and Training Services: The third issue involves the transfer pricing addition of ?1,16,99,748/- made by the AO on account of international transactions of ‘Procurement support’ and ‘Training services’. The TPO combined these transactions and applied the TNMM, which the Tribunal found inappropriate due to the distinct nature of the services. The Tribunal directed the AO/TPO to determine the ALP for these services independently. 4. Depreciation Rate on Digital Video Recorder (DVR): The final issue concerns the depreciation rate on a Digital Video Recorder (DVR). The AO treated the DVR as an item of Plant and Machinery, allowing depreciation at 15% instead of 60% claimed by the assessee. The Tribunal upheld the AO's view, following its earlier decision for the A.Y. 2009-10, and confirmed that DVR should be classified as Plant and Machinery, not computer peripherals. Conclusion: The Tribunal provided a detailed analysis and remanded certain issues back to the AO/TPO for fresh determination, ensuring compliance with legal precedents and guidelines. The decision highlights the importance of correctly identifying and benchmarking international transactions and adhering to prescribed methods for transfer pricing adjustments.
|
