2022 (12) TMI 457 - AT - Income Tax

TP Adjustment - Comparable selection - HELD THAT - Companies functionally dissimilar with that of assessee need to be deselected. Expenditure incurred towards management service fee and trade mark license fee - HELD THAT - Considering the similarity of the issue and view taken in the earlier assessment year by a Co-ordinate Bench in assessee s own case, we are of the considered opinion that the interest of justice would be met by restoring this issue to the file of the AO for fresh factual verification as per law by directing the assessee to submit all the relevant material before the learned AO. Ground is accordingly allowed for statistical purposes. Allow depreciation on software license fee at 60% instead of capitalizing the same and allowing 25% as depreciation - HELD THAT - On a perusal of the orders in assessee s own case from assessment year 2008-09, we find that the Co-ordinate Benches allowed the depreciation at 60% on the software purchased by the assessee for their business purpose and it is evident from order 2015 (5) TMI 45 - ITAT HYDERABAD Even in the order for the assessment year 2011-12 (supra), this issue was dealt with and decided in favour of the assessee. Hence, while following the consistent view, we allow this ground of appeal.

Summary

Issues involved:
1. Determination of Arms Length Price (ALP) in international transactions.
2. Inclusion/exclusion of comparables in transfer pricing analysis.
3. Treatment of management fee, trade mark license fee, and software license fee.

Detailed Analysis:
1. The case involved the determination of Arms Length Price (ALP) in international transactions conducted by the assessee. The Transfer Pricing Officer (TPO) suggested an upward adjustment based on a fresh analysis, leading to a dispute resolution process. The Dispute Resolution Panel (DRP) upheld the TPO's order, resulting in the impugned order by the Assessing Officer. The assessee appealed against this order, challenging various aspects of the ALP determination.

2. The issue of inclusion/exclusion of comparables in transfer pricing analysis was significant. The TPO benchmarked the entire transaction at the entity level, rejecting the economic analysis conducted by the assessee. The DRP retained certain comparables, leading to specific challenges by the assessee regarding the inclusion of Eclerx Services Ltd. and Infosys BPO Ltd. The arguments focused on the functional comparability and the nature of services provided by these entities compared to the assessee.

3. The treatment of management fee, trade mark license fee, and software license fee was also contested. The assessee challenged the disallowance of management fee and trade mark license fee, along with the capitalization of expenditure on software license fee. The arguments revolved around the substantiation of expenses, functional comparability, and the evidentiary requirements for claiming deductions. The Tribunal considered past decisions and consistent views on similar issues to make determinations on these grounds.

Overall, the judgment addressed complex transfer pricing issues, including ALP determination, comparables selection, and the treatment of various fees and expenses. The Tribunal's decision was based on detailed analysis, past precedents, and the specific facts and arguments presented by the parties involved, ultimately resulting in a partial allowance of the assessee's appeal for statistical purposes.