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TMI Blog2023 (2) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... l Ground 1. erred in passing the final assessment order dated 31 July 2022 as this order has been passed in contravention of Faceless assessment procedures laid down under section 144B of the Act read with various orders/ notifications/ circulars issued by Central Board of Direct Taxes in this regard and hence, the order is bad in law and therefore void-ab-initio. Transfer Pricing Grounds 2. erred in making a transfer pricing adjustment of Rs. 66,26,894 to the total incomes of the Appellant on the premise that the international transaction of recovery of reimbursement of expenses paid by Associated Enterprise (AE) to Appellant were not at arm's length; Reference made to the Transfer Pricing Officer 3. erred in referring the Appellant's case to the Learned Transfer Pricing Officer (TRO) under Section 92CA(1) of the act without satisfying the conditions specified therein Adjustment made to international transaction of comment of ass given by AE to Appellant 4. erred in making a transfer pricing adjustment of Rs. 66,26,894 in relation to the international transaction of reimbursement of expenses received by the Appellant from the AE disregarding the fact that these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount had been deposited before the due date of filing the return of income. Erroneous computation of interest under Section 234C of the Act 13. erred in erroneously computing interest under Section 234C at Rs. 1,99,842 as against Rs. 1,65,731; Penalty Proceedings 14. erred in initiating penalty proceedings under Section 274 read with section 270A of the Act. Each of the above ground of appeal is without prejudice to and independent of one another. The Appellant craves leave to add, alter, amend or delete the above ground of appeal at or before the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law." 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are: the assessee company is a wholly owned subsidiary of M/s. Ness Technology Inc, USA (Ness US). Ness group is one of the largest IT services & solutions provider in Israel and it is a leading global information technology services firm. The assessee is an off shore-centric technology solutions group with four units in Bangalore, Mumbai and Hyderabad. The assessee has been providing software developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up before the Tribunal by way of filing present appeal. 7. We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto. Grounds No.1, 2 &3 8. During the course of argument the Ld. A.R. for the assessee has not pressed grounds No.1, 2 & 3 raised in this appeal, hence the same are dismissed. Grounds No.4, 6, 7 & 8 9. By raising grounds No.4 to 8 the assessee has challenged the TP adjustment of Rs. 66,26,894/- qua the international transaction of reimbursement of expenses received by the assessee from its AE. It is the case of the assessee that in case of reimbursement of aforesaid expenses there was no service/income element and expenses are reimbursed on cost to cost basis and the same are not expenses of the assessee having not routed through profit & loss account. The assessee has also challenged the profit element of 10% in the international transactions of recovery of expenses and the Ld. TPO has not adopted one of the methods prescribed under section 92C read with rule 10B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was also before the lower authorities. At the time of hearing, the Ld. Representative for the assessee had also referred to page 613 to 645 of the Paper Book, wherein are placed copies of assessee's arrangement with the associated enterprises and also the sample agreements between the associated enterprises and the ultimate clients, which prescribe that all impugned travel and related expenses are separately chargeable on a cost to cost basis. All this material clearly brings out a pertinent feature that in the entire transaction involving payment of expenditure by the assessee, its recovery from the associated enterprises, which-in turn recovers it from the end clients, there is no involvement of any profit-element in the hands of the associated enterprises. Therefore, it would be wrong on the part of the income tax authorities to take a position and infer notionally about recovery of mark-up or profit element in the hands of assessee. It has also been brought out that it is a standard practice in the I.T. Industry to recover out of pocket expenses incurred during the course of providing services for the clients on a cost to cost basis. Under these circumstances, in our view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions rendering services by the assessee to its AEs, for which it is to be compensated on cost + mark up basis have already been benchmarked separately, the day to day pocket expenses incurred by the assessee during rendering of such services are to be reimbursed on cost to cost basis. Incurring of such expenses has not been disputed by the Revenue Department. When there is no element of profit or mark up in the hands of the AE in incurring the day to day pocket expenses the same is not to be bench marked. 13. Moreover, in view of section 92(1) of the Act income arising from an international transaction is liable to be computed for the purpose of ALP as prescribed under section 92C of the Act. However, the Ld. TPO has considered the ALP at 10% of expenses recovered on adhoc basis without conforming to the methods prescribed under section 92C(1) of the Act. So in view of the matter and following the order passed by the co-ordinate Bench of the Tribunal adjustment made by the TPO/AO to the tune of Rs. 66,26,894/- qua international transaction of reimbursement of expenses received by the assessee from its AE is not sustainable in the eyes of law, hence ordered to be deleted. So grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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