2022 (1) TMI 277 - AT - Income Tax

TP adjustment made in respect of payment of Corporate management services - Admission of additional evidence - HELD THAT - We are of the view that, in the interest of natural justice, the additional evidences furnished by the assessee requires to be admitted. Accordingly, we admit them. We also notice that the details of various facilities availed by the assessee from its AE as well as the nature of services provided by the AE to the assessee have not been correctly appreciated by the AO/TPO. Accordingly, we are of the view that this issue requires fresh examination at the end of the AO/TPO. Accordingly, we set aside the order passed by the AO on this issue and restore the same to the file of AO/TPO for examining it afresh duly considering the additional evidences furnished and also the information and explanations that may be furnished by the assessee. Computation of deduction u/s. 10AA by not including items that were excluded from export turnover from the total turnover - HELD THAT - AO held that these expenses would fall under the category of delivery of articles or tools or computer software outside India or expenses incurred in providing the technical services outside India as per explanation 1(i) to Section 10AA. Accordingly he took the view that these expenses have to be reduced from export turnover while computing deduction u/s. 10AA of the Act. However, he held that these expenses are not required to be deducted from total turnover'. Accordingly, the AO recomputed the deduction u/s. 10AA. DRP, in principle, agreed with the view taken by AO.DRP noted that the decision rendered by the jurisdictional Karnataka High Court in the case of CIT vs. Tata Elxsi Ltd. others 2011 (8) TMI 782 - KARNATAKA HIGH COURT is in favour of the assessee and SLP is pending before Hon'ble Supreme Court. Accordingly, the Ld. DRP directed the AO to keep the disallowance made u/s. 10AA of the Act as protective addition till the final outcome of the SLP filed in Hon'ble Supreme Court. We heard the parties and perused the record. This controversy has since been settled by Hon'ble Supreme Court in the case of HCL Technologies Ltd. 2018 (5) TMI 357 - SUPREME COURT . Accordingly, we restore this issue to the file of AO with the direction to follow the decision rendered by Hon'ble Supreme Court in the above said case - Appeal filed by the assessee is treated as allowed for statistical purposes.

Summary

Issues:
1. Transfer pricing adjustment for corporate management services payment
2. Computation of deduction u/s. 10AA by excluding certain items from export turnover

Issue 1: Transfer pricing adjustment for corporate management services payment

The appellant challenged the assessment order concerning transfer pricing adjustments for corporate management services payment. The AO and TPO held that the ALP of the corporate management fee was Nil, resulting in a transfer pricing adjustment of ?1,33,20,286. The appellant argued that the services provided by its AE were essential for its business operations and submitted additional evidence to support this claim. The appellant contended that the corporate management fee was linked to the core business and should not have been treated separately. The Tribunal, after considering the arguments and additional evidence, admitted the evidence and decided to set aside the order for fresh examination by the AO/TPO to properly evaluate the nature of services and facilities provided by the AE.

Issue 2: Computation of deduction u/s. 10AA by excluding certain items from export turnover

The appellant claimed a deduction of ?2,30,44,653 u/s. 10AA, which the AO reduced to ?2,27,16,601 by excluding expenses like leased line charges, foreign currency payments, and forex loss from the export turnover. The DRP agreed with the AO but noted a favorable decision by the Karnataka High Court in a similar case pending before the Supreme Court. However, the Tribunal referred to a settled Supreme Court decision in the case of HCL Technologies Ltd. and directed the AO to follow the Supreme Court's decision. Consequently, the issue was restored to the AO to comply with the Supreme Court's ruling.

In conclusion, the Tribunal allowed the appeal for statistical purposes, addressing the transfer pricing adjustment issue by admitting additional evidence and directing a fresh examination by the AO/TPO. Additionally, the Tribunal resolved the computation of deduction u/s. 10AA by referring to a Supreme Court decision, ensuring compliance with the established legal precedent.