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TMI Blog2024 (2) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... ent) on following accounts: * Payment of fees for time and hilling software-Rs..2,64,23,881 * Provision of regional co-ordination services- Rs..3.11.195 * Information Technology Cost allocation (IT Cost allocation) - Rs..4,25,00,327 3. Aggrieved, Assessee filed objections before the Dispute Resolution Panel ("Ld.DRP") against the draft assessment order dated 26.02.2014 passed by the Assessing Officer incorporating the TP Adjustments proposed by the Ld. TPO. The Ld. DRP confirmed the additions proposed in the draft assessment order vide DRP Directions dated 28.11.2014. In pursuance to the Ld. DRP's directions, the Assessing Officer passed the final assessment order dated 22.11.2015 making total additions of Rs..6,92,35,403/-. 4. Aggrieved, the Assessee is in appeal before us raising following grounds in its appeal: - "1. On the facts and in the circumstances of the case and in law, the learned Deputy Commissioner of Income tax 3(3) (2) ('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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing." 5. Further, assessee has raised following additional grounds: - "8. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer erred in not granting deduction in respect of Education Cess and Secondary and Higher Education Cess payable on the income tax payable for AY 2010-11 while computing the Income from Business and Profession. 9. On the facts and in the circumstances of the case and in law, the final assessment order dated 22 January 2015 passed by the Learned Assessing Officer (Ld. AO) under section 143(3) read with section 144C(13) of the Act is barred by limitation and therefore, is void-ab-initio, bad in law and is liable to be quashed." 6. At the outset, Ld. Counsel for the assessee submitted that the above additional grounds of appeal are purely legal grounds, however, 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made following submissions: - "2.5. In the course of TP proceedings, the Assessee submitted all the relevant documents to demonstrate the rendition need and benefit of the time & billing software. Further, the Assessee also submitted the relevant reports of the independent expert in support of its benchmarking analysis. 2.6. The list of documents submitted by the Assessee in the course of TP proceedings is as under: * Form 3CEB- (Pg No. 142 of the PB) * TPSR containing functional and economic analysis of the transaction - (Pg No. 224 to 227 of the PB) * Technology Licensing and Assistance Agreement between BCG USA and BCG India dated 1 January 2005 Annexure C1 to submissions dated 11 October 2013- (Pg No. 409 to 415 of the PB) Apart from the above, it was submitted before us that further documents were filed with the Ld. TPO as Annexure C to its submissions dated 11 October 2013 (Pg No. 409-410 of the PB): * 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 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us are reproduced below: - "3.1. During the year under consideration the Assessee paid an amount of Rs. 4,25,00,327 to BCG USA towards IT Cost allocation. BCG USA acts as a hub for providing centralized licensing network & project management and other aspects of Information Technology. 3.2. These costs were charged by BCG USA to all the beneficiary companies including the Assessee on cost-to-cost basis without any mark-up. 3.3. During the year under consideration BCG USA provided various services such as Information Technology Services, Information Technology Infrastructure, Information Technology Software, WAN Costs, Information Technology Projects, Factiva etc. to the Assessee (Refer Pg No. 115-116 of the PB). 3.4. The IT Support provided by BCG USA benefitted the Assessee in increasing its efficiency, expansion, accessibility, and service quality. 3.5. BCG USA has dedicated personnel 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the sake of clarity, the submissions of the Ld.AR are reproduced below: - "4. Assessee 's submissions with respect to Ground No. 1 and 3: 4.1. At the outset, the Assessee humbly submits that it has provided detailed documentation to demonstrate need-benefitrendition of the impugned services. However, the Ld. TPO and DRP having taken cognizance of the documents, erred in rejecting the benchmarking analysis conducted by the Assessee for both the services. 4.2 In the instant case, as mentioned above, the Ld. TPO has determined the ALP as NIL for the services received by the Assessee from its AE without following any of the prescribed methods u/s. 92C of the Act read with Rule 10B of the Income Tax Rules, 1962 (the Rules"). 4.3. With respect to time and billing software, the Assessee has obtained a report from an independent expert, conducted additional benchmarking 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industry International Gmbh v. DCIT (ITA No. 1240/Mum/2021 (Mum. Trib)] * Rolls-Royce Marine India Pvt. Ltd v. DCIT [ITA No. 689/Mum/2017 (Mum. Trib)], etc. 4.10. Further reliance is placed on the following decisions separately submitted in the course of hearing: * ACIT vs. Caparo Engineering India (P.) Ltd (91 taxmann.com 330 (Delhi. Trib)] * CLSA India (P.) Ltd vs. DCIT [152 taxmann.com 255 (Mumbai. Trib)]" 14. On the other hand, Ld. DR objected to the submissions of the Ld.AR of the assessee and agreed that Ld TPO has not applied the CUP method properly and prayed that these issues under consideration may be remitted back to AO/TPO to redo the bench marking as per law. 15. In the rejoinder, Ld AR objected to the submissions of the Ld. DR to remit the issue back to the file of TPO and submitted that it need not be remitted 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 ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 12 fields as indicated therein for a consideration of Rs.1.57 crores. The respondentassessee availed services of its AE during the subject year (AY 2003-04) only in 3 out of 12 fields listed in the agreement. The TPO, therefore, proceeded to hold that the entire consideration of Rs.1.57 crore is attributable to the 3 technical services which the respondent- assessee availed of and held that no consideration was payable in respect of 9 services provided for in the agreement. Thus the entire payment of Rs.1.57 crore was attributable only to the 3 services availed out of the 12 listed out in the agreement. It further held that only Rs.40 lacs could be considered as ALP attributable to 3 services and made adjustment of Rs.1.17 crore resulting in its addition to the taxable income. In appeal, the CIT(A) upheld addition of Rs.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-assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) In view of the above, as the Revenue has not acted in accordance with the clear mandate of law, the questions as proposed does not give rise to any substantial question of law. Thus, not entertained." In M/s Kodak India Pvt. Ltd. (supra), the above position of law is reiterated by the Hon'ble Bombay High Court. As mentioned earlier, we notice that the TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation. In view of the above factual scenario, we are of the considered view that the ratio laid down by the Hon'ble Bombay High Court in Lever India Exports Ltd.; 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 allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit 181349 OP/OC 7.499977 OP/OC of Comparables 20.37 Arms' Length Profit 492545.4 Arm's Length Value of transaction 2910539 5% of International transaction 129967.2 Difference in the Actual Value and Arm's length value 311195.4 22. Aggrieved, assessee preferred objection before Ld. DRP and before Ld. DRP assessee has submitted the annual reports of the various comparables selected by the assessee. However, it was submitted that Ld. DRP has not considered the same before disposing off the objections raised by the assessee. It was prayed that this issue may be remitted back to the file of the Transfer Pricing Officer to consider the submissions and additional informations submitted by the assessee relating to Vatika Marketing Limited which was excluded by the Transfer Pricing 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 Infotec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) and decided the issue in favour of the assessee, observing as under: - "7. We have carefully considered the rival submissions. Notably, the only issue in dispute is the period for which assessee is entitled to interest u/s 244A of the Act. According to the assessee, the CIT(A) erred in granting interest upto the date of issuance of refund voucher, i.e. 29.3.2010 whereas as per the assessee, it is entitled to interest upto April, 2010 (i.e. upto the date of receipt of refund voucher on 6.4.2010). In this context, we find that the Hon'ble Bombay High Court in the case of Pfizer Limited, 191 ITR 626 (Bom) has held that assessee is entitled to interest upto the date of receipt of the refund order. Similarly, our coordinate bench in the case of M/s. Novartis India Limited, ITA No. 1249/Mum/2010 dated 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 refu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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