9911796707
TMI Blog2015 (9) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... ables for the purpose of determination of the arms' length price (ALP). He submitted that the assessee had entered into international transactions with its Associated Enterprises (AEs) for basic development and the application development of starter motors and alternators. Thus, according to him, the activity falls under the category of research and development of machinery. He submitted that in the TP study, the assessee has adopted TNMM as the Most Appropriate Method (MAM) and thereafter after making a detailed search for the comparable companies in the Databases 'Prowess' as well as 'Capitaline' has arrived at 8 companies as comparables and the arithmetical mean margin of these 8 companies was 6.44% and since the assessee's margin of 10.01% was more than the average arithmetical mean of the comparable companies, the assessee treated the international transaction to be at arms' length. On a reference to the TPO for determination of the ALP, the TPO also accepted TNMM to be the most appropriate method (MAM). Thereafter, he accepted the companies selected by the assessee as comparables except for Esquire Engineers and consultants Ltd., and Gilcon Project Services Ltd., and rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) against consideration of the same as comparable company. He submitted that the assessee cannot take different stand before different authorities according to his convenience. As regards, M/s. Alpha Geo (India) Ltd., is concerned, the learned departmental representative submitted that the assessee was into research and development work as in the case of M/s. Alpha Geo (India) Ltd., and that the area of work may be different but since the functions are similar, the said company has been rightly chosen as the comparable company to the assessee. He, therefore, prayed that the assessee's grounds may be rejected. 3.5. Having regard to the rival contentions and the material on record, we find that the assessee had filed a copy of the development agreement between the assessee and its AEs which is placed at page 5 of the paper book filed by the assessee. As is evident from this agreement, the object of the agreement is to carry out the basic development and the application development of starter motors and alternators. Thus it is clear that the research and development is for the components of automobiles. During its TP study, the assessee had considered 705 companies and accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... food processing and power. RITES Limited RITES Ltd. is an internationally recognized leading consultant with operational experience of over 50 countries in Africa, South East Asia, Middle East and Latin America. Most of the company's foreign assignments are for national governments and other apex organizations. In India, the clients range from state Governments, public sector undertakings and corporations to industrial establishments and private enterprises. The company provides services such as preproject planning involving project identification, feasibility studies and project appraisal, project support activities comprising surveys, environmental impact assessment, technical and other investigations, project preparation activities of detailed engineering, design, tender documentation, bid evaluations etc and also economic and financial evaluations. Vimta Labs Limited Vimta Labs Ltd provides testing and analytical services. This includes activities such as sample preparation, data generation and other testing activities. Water and Power Consultancy Services (India) Limited (WAPCOS) WAPCOS provides consulting services in the domestic and international water and power sector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry while the Alpha Geo is involved in research in seismic services. Therefore, there is no functional dissimilarity. The next criteria to be considered are the assets used and the risks assumed and also the industry to which the assessee belongs to for determining market comparability and economic condition of the industry. In the case before us, assessee has conducted functional analysis by adopting the companies performing similar functions and activities without any similarity of products or industry. We find that M/s. Alpha Geo Ltd., is also in the business of research and development of seismic data, functions similar to the functioned performed by the assessee herein. There is no human interface or involvement in any of the activities above. The assessee has not brought out any difference in the assets employed or risks assumed by Alpha Geo. Therefore, we do not see any reason to interfere with the order of the CIT(A) on this issue. 3.6 As regards Vimta Labs is concerned, we find that Vimta Labs is a research and development company researching into effects of various drugs on human beings. Though the function is similar i.e. research and development, there is involveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the rival submissions. Sec. 80-O of the Act as it existed prior to its amendment w.e.f 1-4- 98 allowed deduction in respect of any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of technical or professional services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee, and such income is received in convertible foreign exchange in India.... The portions in bold letters were omitted w.e.f. 1-4-98 and therefore any consideration received for use outside India in respect of the aforesaid items would not be eligible for deduction u/s.80-O of the Act. The nature of services rendered by the Assessee in the present appeal upto AY 97-98 would clearly fall within any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without Bosch's prior permission/agreement. The agreement also provides that any results arising from or in connection with the development agreement which incorporates an invention, a patent and /or utility model in India shall be applied for in the name of the Assessee or in the name of Bosch. In case the application is made in the name of Bosch, the Assessee was to give the necessary endorsement for such application. The agreement also provides that after a period of 8 weeks from the date of application for any such patent and/or utility model in India, Bosch was free to use and/or exploit such invention and may, at its sole discretion, apply for patents and/or utility models in any country outside India and is free to maintain or lapse any property rights arising therefrom including those in India. The 11 compensation for such rights is included in the compensation paid by Bosch to the Assessee under the agreement. The terms of the agreement nowhere talks of any design to be developed by Assessee and given to Bosch. 17. In the proceedings before the AO after remand by the Tribunal, the emphasis of the Assessee has been more on supply of design. In this regard it is worthwhil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and calls for no interference. 20. The Agreement between the Assessee and Bosch for carrying out development started in the year 1991. The claim of the Assessee for deduction u/s.80-O of the Act in AY's prior to AY 98- 99, as we have already observed, would have been sustainable upto AY 97-98 because of the larger coverage of activities for which deduction was allowed u/s.80-O of the Act. There is every reason to suspect that the Assessee has attempted to camouflage its claim for deduction u/s.80-O of the Act for AY 2001-02, so as to be in conformity with the amended provisions of law, though the nature of services remained the same as it existed prior to AY 98-99. We are also conscious of the fact that the present proceedings are pursuant to the order of remand by the Tribunal and the scope of such proceedings is limited to the directions of the tribunal. But our conclusions that the Assessee is not entitled to deduction u/s.80-O of the Act, is based on the fact that the Assessee has failed to establish its claim for deduction on the basis of the conditions contemplated by the amended provisions of law." Respectfully following the same, this ground of appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
