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2024 (6) TMI 811 - AT - Income TaxIssues Involved: 1. Transfer Pricing Adjustment on Brokerage Commission 2. Payment of Royalty/Branding Fees 3. Payment of Indirect Costs 4. Addition of Outstanding Securities Transaction Tax (STT) 5. Disallowance of Transaction Charges u/s 40(a)(ia) 6. Disallowance of OASYS Global STP Charges u/s 40(a)(ia) 7. Levy of Interest u/s 234B and 234D Summary: 1. Transfer Pricing Adjustment on Brokerage Commission: The assessee challenged the rejection of the Transfer Pricing (TP) analysis and the application of the Comparable Uncontrolled Price (CUP) method over the Transactional Net Margin Method (TNMM) for determining the arm's length price (ALP) of brokerage commissions received from associated enterprises (AEs). The Tribunal held that TNMM is the most appropriate method for determining the ALP, consistent with previous years' decisions, and allowed the grounds raised by the assessee. 2. Payment of Royalty/Branding Fees: The assessee contested the rejection of the CUP analysis and the corroborative TNMM analysis for determining the ALP of royalty/branding fees paid to Credit Lyonnais Securities Asia B.V. The Tribunal upheld the TNMM method as the most appropriate method, following earlier decisions in the assessee's case, and allowed the grounds raised by the assessee. 3. Payment of Indirect Costs: The assessee argued against the rejection of the TNMM method for determining the ALP of indirect costs reimbursed to CLSA Hong Kong. The Tribunal noted that the AO/TPO did not apply any prescribed methods to determine the ALP and had made an ad-hoc addition. The Tribunal directed the AO to delete the impugned addition, allowing the grounds raised by the assessee. 4. Addition of Outstanding Securities Transaction Tax (STT): The assessee challenged the addition of outstanding STT to its total income. The Tribunal, following its decision in the assessee's case for A.Y. 2006-07, held that the liability of STT is not on the assessee but on the stock exchanges. The Tribunal directed the deletion of the disallowance made u/s 43B(a) of the Act, allowing the ground raised by the assessee. 5. Disallowance of Transaction Charges u/s 40(a)(ia): The assessee contested the disallowance of transaction charges paid to Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) for not withholding taxes u/s 194J. The Tribunal, following the decision of the Hon'ble Apex Court in CIT vs. Kotak Securities Ltd., held that no TDS is deductible on such payments. The Tribunal deleted the disallowance, allowing the grounds raised by the assessee. 6. Disallowance of OASYS Global STP Charges u/s 40(a)(ia): The assessee argued against the disallowance of STP charges paid to NSDL and a Singapore entity. The Tribunal, consistent with its decision on transaction charges, held that no TDS is deductible on such payments. The Tribunal deleted the disallowance, allowing the grounds raised by the assessee. 7. Levy of Interest u/s 234B and 234D: The assessee contested the levy of interest u/s 234B and 234D. The Tribunal noted that this ground is consequential in nature and dismissed it as infructuous. Additional Ground: The assessee raised an additional ground regarding the computation of tax payable u/s 115-O in accordance with the DTAA between India and Netherlands. The Tribunal dismissed this additional ground, following the decisions in Dy. CIT vs. Total Oil India (P.) Ltd. and Assessing Officer (International Taxation) vs. Nestle SA. Conclusion: The appeal filed by the assessee was partly allowed, with the Tribunal providing relief on several grounds related to transfer pricing adjustments, payment of royalty/branding fees, indirect costs, and disallowances u/s 40(a)(ia).
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