9911796707
TMI Blog2016 (8) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case, the Assessing Officer was not justified in making an arm's length price adjustment of Rs. 8,40,95,610, in respect of the management support service that the assessee received from its associated enterprises (AE) abroad. For the sake of completeness, however, grounds of appeal, as set out in the memorandum of appeal, are as follows: 1 That on facts and in law, the order passed by the Additional Commissioner of Income Tax, Transfer Pricing Officer-2(2), New Delhi ('Learned TPO'), the final assessment order passed by the Deputy Commissioner of Income Tax, Circle 16(2), New Delhi ('Learned AO') pursuant to the directions of the Hon'ble Dispute Resolution Panel -1, New DRP ("Hon'ble DRP") are bad in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily determined the arm's length price of payment of intra group services to certain associated enterprises as 'Nil'. d. by contending that an independent service recipient would be willing to pay for a service only upon receipt of certain tangible benefit. e. by disregarding last year approach of accepting the TP analysis carried out by the Appellant for the same transactions in AY 2010-11 f. in failing to understand that payment made to associated enterprises were duly recovered by the Assessee from the associated enterprises as a part of service fee for provision of IT enabled services alongwith a mark-up of 20 percent g. in failing to understand that the adjustment is contrary to the provisions of Section 92(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 That on facts of the case and in law, the AO has grossly erred in initiating penalty proceedings under section 271(1)(c) of the Act in relation to transfer pricing adjustment. 11 That on the facts and circumstances of the case and in law, the learned AO has grossly erred in charging interest under section 234A, 234B, and section 234D of the Act. The above grounds of appeal are mutually exclusive & without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. The Appellant prays for appropriate relief based on the said grounds of appeal and the facts and circumstances of the case. 3. The issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as well. However, when the matter was carried before the DRP, while the DRP deleted the adjustment of Rs. 13,24,13,508 on account of rendition of IT enabled services, the DRP confirmed the ALP adjustment of Rs. 8,40,95,610 in respect of intra group services by upholding action of the TPO in treating ALP of these services at NIL. Interestingly, the DRP also seems to have suggested that the said expense will have to be removed from the cost base of the assessee inasmuch as the DRP observed that "the taxpayer's objection that intragroup services having been reduced to zero should be reduced from the operational cost in computing OP/TC margin is valid, and the TPO is directed to compute the margin consistently with the treatment accorded to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion at that level was, from this perspective, could have been justifiable inasmuch as the ALP margin was taken at 29.53%, as against 20% taken by the assessee, and, therefore even after removing something from the cost base, due to increase in the mark-up rate, ALP of the services rendered could still be higher vis-àvis the amount chargeable after including intra group services in the cost base. Once DRP deletes the adjustment in the mark-up rate on cost plus basis, such a possibility ceases to exist. Therefore, in the present circumstances, any ALP adjustment in the consideration for intra group service, which is includible in the cost base, paid by the assessee will actually result in erosion of tax base. The reduction in ALP of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asmuch as the revenue of the assessee from the IT enabled services will reduce correspondingly, and infact 20% more than the adjustment- as a result of loss of mark up as well. The ALP adjustment of Rs. 8,40,95,610 by the revenue authorities is, therefore, essentially required to be coupled with reduction of 10,09,14,732. That would erode our tax base, rather than augmenting it. The computation of income from international transactions on the basis of arm's length price, in the given situation, would result in lowering the income of the assessee vis-à-vis the income "computed on the basis of entries made in the books of accounts in respect of the previous year in which the transactions were entered into". In the light of this factual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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