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TMI Blog2016 (8) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... o the scheme of the Act and would result in overlapping jurisdictions. As our day to day experience shows, the TPOs not only examine what is stated in the contract but also what has happened on the ground. In view of these discussions, and for the short reason that the payments for international transactions in question, i.e. payment of technical services fee to the AEs, have been held to be at ALP by the Transfer Pricing Officer, the impugned disallowances were wholly unsustainable in law. In any case, we have perused the nature of evidences for the rendition of services and we are satisfied that it is not a case in which services are not rendered by the AE. - Decided in favour of assessee - I.T.A. No.238/Del/16, I.T.A. No.1679/Del/08 - - - Dated:- 25-7-2016 - Pramod Kumar AM and Beena A Pillai JM For The Revenue : Amrendra Kumar For The Assessee : Deepak Chopra, along-with Mansvini Bajpai ORDER Per Pramod Kumar, AM: 1. These cross appeals are directed against the order dated 25th February 2008 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2003-04. 2. It was, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue and is now being contested for the assessment year 2007-08. If our appeal for the AY 2003-04 is not admitted then this being the base year, revenue s case would be permanently prejudiced for all subsequent years also. 4. Learned counsel for the assessee, on the other hand, vehemently opposes the condonation petition. He submits that there are no facts stated in the condonation petition except for the admission that it is indeed a delayed appeal. As for the reasons for the delay, according to the learned counsel, the petitioner has nothing to say except reliance on certain inferences drawn. He contends that the fact that the interests of the revenue will be prejudiced for the subsequent year cannot have any bearing on the condonation of delay by the appellant. There is nothing more than the impact on revenue s appeals for the subsequent years which is stated to be reason for which the delay should be condoned, but that, according to the learned counsel, is wholly irrelevant in the present context. The possibility of mishap and the possibility of only set of papers having been inadvertently filed is a hypothetical possibility, and not the true reason for delay in filing of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consequences of delay, but then, at the cost of repetition, consequences of delay, howsoever material, cannot be reason enough to condone the delay itself. In view of these discussions, in our considered view, the condonation petition does not deserve to be accepted. We reject the same. The appeal is dismissed as time barred. Having held so, we may also add that even on merits grievance of the Assessing Officer is that On the facts and in the circumstances of the case and in law the order passed by the CIT(A) is erroneous and the learned CIT(A) has erred in deleting the addition of ₹ 31,82,614 made by the AO on account of payment of technical fees pursuant to parent company and failed to appreciate that: (a) the parent company being 100% shareholder of the company, the payment of technical fees is essentially payment to self, and, therefore, disallowance is made under section 37(1) of the Act . Such a grievance is wholly ill conceived inasmuch as there is no bar on deductions in respect of payments made to even wholly owned subsidiary companies or, for that purpose, in recognition in incomes from the wholly owned subsidiaries. The grievance raised by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such payment is covered under the royalty agreement . In plain words, the case of the Assessing Officer was that since the assessee had paid royalty to YKK Corporation Japan, there was no need to make separate payments towards fees for technical services. It was also noted that in the relevant previous year itself, the assessee had paid ₹ 2,33,30,274 and that this huge amount of royalty payment made to licensor is only in lieu of certain facilities which are to be provided by the licensor . The Assessing Officer further took note of assessee s submissions to the effect that the YKK Holding Asia Pte Ltd was a support centre for production planning and implementation and that the services received by the assessee were in the nature of assistance in marketing and procurement, support in research and development activities of the assessee, informational technology support services (such as infrastructure support, implementation of WAVE System for production planning and control, implementation of WAVE system, helpdesk and technical support for AS400, NT Server, Lotus notes etc etc) and assistance and support in administrative, secretarial, accounting and finance function. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these expenses cannot be said to be genuine expenses. As far as expenses of ₹ 13,24,702 on sales support on tapes and plastics, the CIT(A) did acknowledge that the reports under the head internal quality audit and management review, various charts on different aspects were placed by the assessee but he was of the view that these things donot evidence rendition of services, and that in any event, as the TP study states YKK India s marketing strategy is essentially driven through relationship marketing whereby company s marketing personnel maintain regular contact and goodwill with its dealers and direct customers and that YKK India does not resort to significant advertising on the brand as the YKK is already a strong and recognized brand , it is clear that the appellant follows a specific marketing strategy and there is no apparent reason for making a separate payment to YHA for sales support . Similarly, the payment of ₹ 5,17,195 for administration/ HR cost, was also held to be without basis as no services were established to have been rendered. Accordingly, the CIT(A) confirmed the disallowance to the extent of ₹ 60,89,599. The assessee is aggrieved and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to say that even though transaction value is held to be an at ALP by the TPO, the ALP can be reduced on account of actual rendition, or non-rendition, of services. Once an international transaction is reported by the assessee, and held to be an ALP by the TPO, it cannot be open to the Assessing Officer to make the ALP adjustment, in the garb of disallowance under section 37(1), on the basis of assumption that the services are not rendered. That is clearly contrary to the scheme of the Act and would result in overlapping jurisdictions. As our day to day experience shows, the TPOs not only examine what is stated in the contract but also what has happened on the ground. In view of these discussions, and for the short reason that the payments for international transactions in question, i.e. payment of technical services fee to the AEs, have been held to be at ALP by the Transfer Pricing Officer, the impugned disallowances were wholly unsustainable in law. In any case, we have perused the nature of evidences for the rendition of services and we are satisfied that it is not a case in which services are not rendered by the AE. 10. The appeal of the assessee is thus allowed. 11. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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