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2018 (1) TMI 726 - AT - Income TaxTPA - adjustment towards profit attributable to the assessee company in connection with sale of intangible assets by the assessee to its AE - Held that - The IPR was sold by the assessee to its AE in the earlier A.Ys and the ALP of the same had arisen for consideration in the A.Y 2010-11. The Coordinate Bench of the Tribunal in 2016 (8) TMI 727 - ITAT HYDERABAD held that there is no doubt there exists tax planning. There can be tax planning within the four corners of the taxation laws. There is enough mechanism in the existing Act and also there is DTAA - arrangement with Ireland which will take care of the situations of tax avoidance. The revenue has not brought any cogent evidence to prove that there exists any tax avoidance. In our considered view the action of the TPO is not justified and accordingly the grounds raised by assessee are allowed. Management Consultancy Fee - Held that - As in assessee s own case 2016 (1) TMI 451 - ITAT HYDERABAD as per the details furnished by assessee before the TPO the actual management fee of US 4, 27, 000 with administration charges of US 14000 and markup of 5% at the exchange value as on the date of 31-03-2008 can be considered as service charges for the intra group services rendered. This can be taken as ALP. Therefore modifying the order of TPO we determine the Management Consultancy Fee as detailed above and AO is directed to modify the order accordingly. Computation of exemption u/s 10AA - Held that - We direct the AO to exclude the insurance and travelling and conveyance expenses both from the export turnover as well as the total turnover for the purpose of computation of exemption u/s 10AA of the Act.
Issues involved:
1. Adjustment of profit attributable to the appellant company under the Profit Split Method. 2. Adjustment of management consultancy fees. 3. Exclusion of insurance, travelling, conveyance expenses from export turnover. 4. Exclusion of communication charges from export turnover. 5. Levy of interest u/s 234B of the Act. Issue 1: Adjustment of profit attributable to the appellant company under the Profit Split Method: The appellant contested the adjustment made by the Ld. DRP/AO regarding the profit attributable to the appellant company in connection with the sale of intangible assets to its AE. The Tribunal referred to a previous decision where it was held that once the intangible property is sold to the AE, there is no international transaction between the parties. As the facts were similar, the Tribunal allowed the appeal, stating that no international transaction existed during the relevant financial year. Issue 2: Adjustment of management consultancy fees: The dispute arose from the payment of management consultancy fees by the appellant to its AE. The TPO suggested an adjustment as the appellant failed to provide evidence of the benefit received for the payment. The Tribunal referred to a previous decision where it was held that certain charges were not related to management consultancy services. After considering the facts, the Tribunal determined the ALP for the consultancy fee and directed the AO to modify the order accordingly, thus allowing the appeal. Issue 3: Exclusion of insurance, travelling, conveyance expenses from export turnover: The appellant contested the exclusion of certain expenses from the export turnover for the computation of exemption u/s 10AA. The Tribunal relied on previous judgments and directed the AO to exclude the mentioned expenses from both export turnover and total turnover for the purpose of computing the exemption u/s 10AA, thereby allowing the appeal. Issue 4: Exclusion of communication charges from export turnover: The appellant challenged the exclusion of communication charges from the export turnover for the computation of exemption u/s 10AA. The Tribunal directed the AO to exclude communication charges from both export turnover and total turnover, in line with previous decisions, allowing the appeal on this ground. Issue 5: Levy of interest u/s 234B of the Act: The appellant raised a ground against the levy of interest u/s 234B of the Act. The Tribunal remitted this issue to the AO with a direction to provide any consequential relief to the appellant in accordance with the law, thereby partially allowing the appeal. This judgment by the Appellate Tribunal ITAT Hyderabad addressed various issues raised by the appellant concerning TP adjustments, consultancy fees, exclusion of expenses from turnover, and interest levy, providing detailed analysis and referencing previous decisions to support its conclusions.
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