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TMI Blog2018 (7) TMI 2348X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... ny of TP USA Inc. ("TP USA"), engaged in the business of providing voice-based call centre services to the customers. In the aforesaid appeal, the applicant has challenged the action of the Assessing Officer/ Dispute Resolution Panel in holding that in terms of 'Intangible and Proprietary Property Licensing agreement' ("the Agreement") dated 02-01-2002 entered by the applicant with its associated enterprise, royalty was required to be paid only on the proportionate sales made to unrelated third parties. The applicant craves leave to place on record Addendum to Intangible and Proprietary Property and Licensing agreement (hereinafter referred to as "the Addendum"), by way of additional evidence. The said Addendum effective 02nd January, 2002 seeks to set out in unequivocal and unambiguous terms, the understanding between the parties and the actual conduct of business as undertaken between them. The reasons for filing the aforesaid document as additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 ('the Rules') are briefly stated hereunder: In terms of the foreign collaboration agreement dated 02-01-2002 entered into with TP USA, the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces rendered to unrelated third parties holding as under: (i) The royalty amount payable to AE is proportionately only to sales to third parties and not to payable in respect of sales to AEs. In this regard, you are directed to furnish: (a) The detail of royalty paid to the AE during the year. (b) This royalty apportioned in the ratio of revenue receipt of the taxpayer from AE and non AE. Submit also evidences in respect of sales receipt from AE and non-AE. Hon'ble DRP, in its directions interpreted the following clauses of the royalty agreement while sustaining addition made by the TPO. The said clauses reads as under: "3. ROYALTY PAYMENT 3.1 Compensation: a. Payment of Annual Royalty. Subject to Section 3.2 below, as consideration for the rights granted under this Agreement, TP India shall pay to TP USA an annual royalty (the "Royalty") payable in monthly instalments in an amount equal to two percent (2%) (the "Royalty Rate) of the aggregate Accumulated Gross Revenues of TP India. The Royalty shall be paid to TP USA within ten (10) days following the end of each month, based upon the aggregate Accumulated Gross Revenues of TP India from the immediately pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd parties from TP USA. Since the services are rendered to third parties, notwithstanding that the revenues are received from TP USA, the same are considered as part of 'accumulated gross revenues' on which royalty is calculated. It would therefore be appreciated that royalty is to be paid by the applicant on direct sales by the applicant to third parties as well sales to third parties (who are customers of TP USA) for and on behalf of TP USA. In other words, the entire revenues of the applicant are from sale of services to third parties - whether such third parties are direct customers of the applicant or customers of TP USA to whom services are directly rendered by the applicant. It would be appreciated that the parties to the agreement, viz., TP USA and the applicant are ad idem that royalty needs to be paid on sale of services rendered by the applicant to third party customers of TP USA. In the understanding of the two contracting parties, it was always the intention that royalty has to be paid for use of intangible property, knowhow, customer relationship management (CRM) services, etc. with respect to entire sale revenues of the applicant, including sales to third party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies with the Tribunal to admit additional evidence in the interest of justice once the Tribunal affirms the opinion that doing so would be necessary for proper adjudication of the matter. This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo moto action of the Tribunal. The aforesaid rule is made enablins the Tribunal to admit the additional evidence in its discretion if the Tribunal holds the view that such additional evidence would be necessary to do substantial justice in the matter. It is well settled that the procedure is handmade of justice and justice should not be allowed to be choked only because of some inadvertent error or omission on the part of one of the parties to lead evidence at the appropriate stage. Once it is found that the party intending to lead evidence before the Tribunal for the first time was prevented by sufficient cause to lead such an evidence and that this evidence would have material bearing on the issue which needs to be decided by the Tribunal and ends of justice demand admission of such an evidence, the Tribunal can pass an order to that effect." (emphasis supplied). Reliance is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his rival submissions, the learned CIT DR although supported the order of the AO but could not controvert the aforesaid contention of the learned counsel for the assessee. 6. We have considered the submissions of both the parties and perused the material available on record. It is noticed that an identical issue having similar facts was a subject matter of the assessee's appeal for the earlier assessment years 2008-09 and 2009-10 in those years also assessee furnished the additional evidences as has been done in the year under consideration. This Bench of the ITAT in assessee's own case for the aforesaid assessment years 2008-09 and 2009-10 while deciding the identical issue in ITA Nos. 5930/Del/2012 and 1630/Del/2014 has restored the issue back to the file of the AO / TPO. The relevant findings have been given in para 7.1 to 9 which read as under:- "7.1 As far as the assessee's plea regarding adjustment in respect of royalty is concerned, we have duly considered the assessee's application for admission of additional evidence which has been filed under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and looking to the facts and circumstances, it is our considered op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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