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TMI Blog2018 (6) TMI 1717X X X X Extracts X X X X X X X X Extracts X X X X ..... , functional, Asset and Risk ( FAR‟) profile of the assessee and the AEs. We direct accordingly. Transfer pricing adjustment in respect of transactions pertaining to taxability of reimbursement of expenses and taxability of reimbursement for purchase of fixed assets - taxability of reimbursement for purchase of fixed assets - HELD THAT:- As decided in own case [ 2018 (6) TMI 359 - ITAT MUMBAI] Reimbursements paid being backed by third party invoices without any element of markup, cannot be benchmarked at NIL as done by TPO. Accordingly, we delete the addition so made by the AO. Short credit of taxes deducted at source - HELD THAT:- AO is directed to give effect for short TDS credit granted to the assessee, after due verification. We direct accordingly. - ITA No.7117/Mum/2012, ITA No.1680/Mum/2014, ITA No.922/Mum/2015, ITA No.1832/Mum/2016 - - - Dated:- 27-6-2018 - Shri R.C.Sharma, AM And Shri Amarjit Singh, JM Assessee by: Shri Mukesh Butani Shri Shreyash Shah Revenue b: Shri Jayant Kumar ORDER R.C.Sharma (A.M): These are the appeals filed by the assessee against the order of DRP-II, Mumbai dated 30/07/2012 passed u/s. 144C(5) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was contended by learned AR that the assessee has entered in to an APA (Advance Pricing Agreement),on August 30,2016 with the Central Board of Direct Tax ('CBDT). The APA is applicable to five consecutive years for AY 2014-15 to AY 2018-19 and also applies to four consecutive rollback years for AY 2010-11 to AY 2013-14. The modified return of income was filed in pursuance to section 92CD of the Income Tax Act, 1961 ('the Act ) r.w. Rule 10RA of the Income Tax Rules 1962. He further invited our attention to the fact that the APA has laid down the application of the Most Appropriate Transfer Pricing Method and the Arm's Length Price for the captioned transactions. The APA has discussed, in detail, the Functions performed, assets employed and risk undertaken (FAR Analysis) by the Assessee and its Associated Enterprises (AEs). 11. Learned AR also placed on record the order of Co-ordinate Bench in case of AE of the assessee in the case of Spencer Stuart International B.V. ('SS1 BV or AE of the Assessee') [ITA. No 1696/Mum/2016], the Hon'ble Mumbai Income Tax Appellate Tribunal) vide order dated 01/06/2018 has examined the aforesaid APA and held the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. Accordingly, we allow assessee to withdraw these grounds for the A.Y.2008-09 and 2009-10 in so far as these grounds are covered by the APA, the principle laid down in the APA for benchmarking analysis in respect of the international transactions being guidance value since there is no change in the said assessment years in the nature of international transactions. We also direct the Department to pass an order giving effect u/s.92 CD (5) of the Act in the A.Y. 2010-11 2011-12. Whereas for A.Y.2008-09 and A.Y.2009-10, we observe that the principles laid down in the APA for benchmarking/comparability analysis in respect of the international transactions shall have a guidance value since there is no change in the said Assessment Years in the nature of the international transactions, functional, Asset and Risk ( FAR‟) profile of the assessee and the AEs. We direct accordingly. 14. Vide ground No.5 in the A.Y.2009-10, 2010-11 and 2011-12, assessee has agitated transfer pricing adjustment in respect of transactions pertaining to taxability of reimbursement of expenses and taxability of reimbursement for purchase of fixed assets. In the A.Y.201112 vide ground No.6, assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferencing charges, insurance, reimbursement for purchase of fixed assets and other miscellaneous expenses, that the reimbursement of the expenses were supported by third-party invoices, that the reimbursements related to service agreement behveen the assessee and SSIPL for sharing the company services,that the services provided by the assessee were purely passed on as reimbursement of actual cost without any markup. We hold that marketing services are primarily in the nature of travel and stay abroad for Indian employees visiting overseas for global meetings, that Insurance coverage for employees is totally unrelated to search fees, that reimbursement of software license cannot be linked to search fees, that the QUEST NT software formed pan of LA and the license fees were already offered to tax as royalties., that a confirmation letter dated 6/3/2014 submitted to the AO by SSIPL pertaining to purchase of fixed assets amounting to ₹ 16,58,018 is part of the PB. In our opinion, reimbursement of expenses would not constitute FTS as per Article 12 of the tax treaty. Here, we would also like to refer to the judgment of AP Mollar(supra).Facts of that case were that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the agents to co-ordinate cargos and ports of call for its fleet were findings of fact. Once these were accepted, by no stretch of imagination, could the payments made by the agents be treated as fees for technical services. The payments were in the nature of reimbursement of cost whereby the three agents paid their proportionate share of the expenses incurred on these said systems and for maintaining those systems. Neither the Assessing Officer nor the Commissioner (Appeals) had slated that there was any profit element embedded in the payments received by the assessee from its agents in India. Once the character of the payment was in the nature of reimbursement of the expenses, it could not be income chargeable to tax. Moreover, freight income generated by the assessee in the assessment years in question was accepted as not chargeable to tax as it arose from the operation of ships in international waters in terms of article 9 of the DTAA. Once that was accepted and it was also found that the Maersk net system was an integral pan of the shipping business which was allowed to be used by the agents of the assessee as well in order to enable them to discharge their role more effec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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