9911796707
TMI Blog2024 (2) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] and Kodak India Pvt .Ltd [ 2016 (7) TMI 677 - BOMBAY HIGH COURT] mentioned hereinabove is squarely applicable to the facts of the case. Therefore, following the same we are inclined to allow the grounds Nos. 1 and 3 raised by the assessee. Provisions of regional coordination services - Comparability - assessee has benchmarked this transaction selecting Nine (9) comparables out of which Transfer Pricing Officer has selected four (4) comparables and rejected other comparables in particular Vatika Marketing Limited as this comparable has earned Income from reality Commission which is like broking income. Assessees do not have any such activity - HELD THAT:- As at the time of proceedings before Ld. DRP the assessee has filed annual reports of this comparable substantiating the reasons for selecting this comparable in their study. Since Ld. DRP has not considered the above submissions and not given a clear finding in this regard. In our considered view, this issue may be analysed afresh by the TPO - we remit this issue back to the file of TPO to consider the additional submissions/documents made by the assessee - Ground No. 2 is allowed for statistical purpose. Short granting inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;the learned AO')/ the learned Additional Commissioner of Income-tax Transfer Pricing II(5) ('the learned TPO"), under the directions of the Hon'ble Dispute Resolution Panel-II ('the Hon'ble DRP'), erred in holding the arm's length price of the Appellant's international transaction of payment of license fees for time and billing software at Nil instead of Rs. 2,64,23,881 as determined by the Appellant. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 2. On the facts and in the circumstances of the case and in law, the learned AO/TPO, under the directions of the Hon'ble DRP, erred in holding the arm's length price of the Appellant's international transaction of provision of regional co-ordination services at Rs. 29,10,539 instead of Rs. 25,99,344 as determined by the Appellant and thereby making an adjustment of Rs. 3,11,195. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 3. On the facts and in the circumstances of the case and in law, the learned AO / ΤΡΟ, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, he submitted that the additional ground no.1 is not pressed at this stage due to subsequent amendments in the provisions of the Act and with regard to additional ground no.2, the assessee has good case on merit, hence not pressed at this stage. Requested to keep the issue alive. 7. Considered rival submissions and the issue under consideration, we proceed to admit the above additional grounds and dismiss the additional ground no.1 as not pressed and the other additional ground no.2 is not adjudicated at this stage as the same are not pressed, at the same time, requested to keep this issue open, accordingly the second additional ground is kept open without any adjudication at this stage. 8. Coming to the main grounds of appeal, at the time of hearing, Ld.AR of the assessee submitted that Ground No. 1 and 3 are of similar nature. He submitted that similar directions may be required from the Bench and accordingly, he brought to our notice relevant facts of each ground. 9. Relevant facts relating to Ground No. 1 which is in respect of TP adjustment on account of payment of fees for time and billing software are, The Boston Consulting Group (BCG) has developed a state-of-thear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ): • Screenshots of the system to demonstrate its functionalities and benefits thereto to the Assessee. • Employee wise break-up basis which license fee payments have been made by the Assessee to BCG USA. • Report obtained from the independent expert dated May 2009 certifying the valuation of royalty for time and billing system. • Confirmation from the independent expert dated 26 July 2010 confirming the validity of the earlier report for AY 2010-11. • Emails/correspondence demonstrating the assistance received by the employees of the Assessee Annexure IB to submissions dated 23 December 2013-Pg No. 445 of the PB: 2.7. Without prejudice to the Assessee 's contention that the benchmarking analysis conducted by the Assessee was proper, the Assessee submitted additional benchmarking analysis vide letter dated 23 December 2013 before the TPO [Refer Pg no. 110 of the appeal set (TPO order Page 9-11) and Pg No. 445-446 of the PB). 2.8. The Assessee carried out a benchmarking analysis on an external database namely Royalty Stat and identified certain comparable agreements. The additional benchmarking analysis as per Royalty Stat showed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnel for providing these services across the globe to all its group companies. 3.6. In the TPSR, the Assessee considered CUP as the most appropriate method and since the costs were charged without any mark-up, the transaction was held to be at arm's length (Refer Pg No. 233 of the PB). B. Submissions before the Ld. TPO and the Ld. DRP: 3.7. In the course of TP proceedings, the Assessee submitted all the relevant documents to demonstrate the rendition, need and benefit of the various services provided by BCG USA under IT Cost allocation. A list of these documents is provided as under for ease of reference: • Form 3CEB-Pg No. 147 of the PB • TPSR containing functional and economic analysis of the transaction - Pg No. 231 to 233 of the PB • Cost Allocation agreement entered into with BCG USA dated 1 January 2007 for Information technology cost allocation - Pg No. 419 to 422 of the PB. Apart from the above, following documents were filed with the Ld. TPO as Annexure E to submissions dated 11 October 2013 (Pg No. 409-10 of the PB): Details of expenditure incurred world-wide, and expenditure allocated to India with respect to a) Information Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marking and provided additional comparables, however, the Ld. TPO and DRP rejected all the submissions made by the Assessee without providing any valid reason and arbitrarily made the TP Adjustment of Rs. 2,64,23,881 and the same is in contravention to provisions of the section 92C of the Act r.w. Rule 10B of the Rules 4.4. With respect to IT Cost allocation, the Assessee humbly submits that since the actual cost is allocated to the Assessee without any mark-up no adjustment can be made. Without prejudice to this, the Assessee humbly submits that on the one hand Ld. TPO has alleged that the software applications provided to the Assessee by BCG USA are available at cheap and competitive prices, however, on the other hand, he has not brought any comparable on record and proceeded to treat the ALP as NIL. and making an adjustment of Rs. 4,25,00,327 without following any of the prescribed methods u/s 92C of the Act. 4.5. At this stage, the Assessee humbly submits that the provisions of the section 92C of the Act read with Rule 10B of the Rules have provided the list of the prescribed methods to be used for determination of ALP. The Assessee as well as the Ld. TPO are bound by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted to the file of TPO and reliance is placed on the decision of the Hon'ble Jurisdictional High Court in case of CTT v. Kodak India Pvt Ltd. (ITA No. 15 of 2014) (Bom HC) which affirms the decision of the Jurisdictional Tribunal in case of Kodak India (P.) Ltd v. ACIT (155 TTJ 697) wherein the Tribunal apart from holding that the TP adjustments ought to be deleted where the TPO has not followed any of the prescribed methods, it was further held that there is no requirement to restore the matter back to the file of the TPO. The relevant para is reproduced as under: "69. We also cannot agree with the DR that the issue be restored to the TPO because the methods, as prescribed by the Legislature are mandatory, not directory. When mandatory provision is either superseded or ignored, it straightaway affects the jurisdiction. In the instant case, we have to mention that it was a case of suo moto reference to the TPO and it is the case of the revenue authorities, to import the provisions of Chapter X. In this circumstance, since the TPO did not adhere to the prescribed methods consciously, another innings to rectify the mistake cannot be allowed, as the TPO infringed the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.17 crores made and taxable income consequent to the adjustment made on account of technical knowhow/consultancy agreement. On further appeal, the Tribunal upheld the submissions of the respondent-assessee and recorded further the fact that no transfer pricing exercise was done by the AO/TPO to determine the value of the services received by the respondent-assessee in respect of the 3 services which it had availed from its AE before holding that the ALP in this case is Rs.40 lacs. The Tribunal further held that "consideration payable for the services availed of by the respondent-assessee to determine the ALP was not carried out". On appeal by the Revenue, the Hon'ble Bombay High Court held that : "Consequently, the finding of the Assessing Officer attributing nil value to nine of the services listed in the agreement which were not availed of by the RespondentAssessee in the present facts was not justified. Moreover, not adopting one of the mandatorily prescribed methods to determine the ALP in respect of fees of technical services payable by the Respondent-Assessee to its AE, make the entire Transfer pricing Agreement unsustainable in law." In M/s Johnson & Johnson Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.; Merck Ltd.; Johnson & Johnson Ltd. and Kodak India Pvt .Ltd. mentioned hereinabove is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal." 18. Respectfully, following the above decision, we observe that the facts in the present case are exactly similar and hence, we are inclined to allow the grounds Nos. 1 and 3 raised by the assessee. 19. With regard to Ground No. 2 the relevant facts relating to provisions of regional coordination services are, the various functions performed by the assessee in this regard are as below: • Assistance with maintaining and developing client relationships at a regional level • Providing co-ordination and support on matters such as regional training and conferences • Providing co-ordination and support on recruitment and compensation related matters within the region • Providing co-ordination and support on executive and operational matters concerning the Asia Pacific Region. • Assistance on other support and co-ordination matters pertaining to Asia Pacific Region 20. In this regard, it was submitted that BCG GmbH compensates the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer. 23. On the other hand, Ld. DR objected to the above submissions and relied on the orders of lower authorities. 24. Considered the rival submissions and material placed on record, we observe that assessee has benchmarked this transaction selecting Nine (9) comparables out of which Transfer Pricing Officer has selected four (4) comparables namely Akruti Center Infotech Ltd., Greenacre Holdings Ltd., The Hindustan Housing Co. Ltd., Lancor Maintenance & Services Ltd. Transfer Pricing Officer has rejected other comparables in particular Vatika Marketing Limited by observing as under : - "5.2.1 Vatika Marketing Limited: This comparable selected by the assessee is not comparable. This comparable is in the business of Building Maiantainace. This activity is not at all functionally comparable to the activity of the assessee. The FAR is not comparable. Also this comparable has earned Income from reality Commission which is like broking income. Assessees do not have any such activity. Therefore, the FAR of this comparable is not comparable with that of the assessee. Hence it is rejected as comparable." 25. However, at the time of proceedings before Ld. DRP the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.3.2011 has decided a similar issue in favour of the assessee by referring to an unreported judgement of the Hon'ble Bombay High Court in the case of Citi Bank vs. CIT in ITA No. 6 of 2001 dated 17.7.2003, wherein the claim of the assessee for interest was upheld upto the date when the Pay Order is "actually received by the assessee pursuant to the order sanctioning the refund". Therefore, following the aforesaid precedents, in our view, the assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 6.4.2010. Thus, on this aspect, assessee succeeds." 30. Respectfully following the above decision, the issue raised by the assessee is allowed with the direction that the Assessing Officer may consider extending the benefit to the assessee upto the date of actual receipt of refund. Accordingly, Ground No. 5 raised by the assessee is allowed. 31. With regard to Ground No. 6 which is in respect of incorrect interest computation under section 234D of the Act, at the time of hearing, Ld.AR of the assessee submitted that this ground is not pressed, accordingly, the same is dismissed. 32. With regard to Ground No. 7 which is in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
