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TMI Blog2024 (4) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... , the registry is directed to list these cases for hearing on 18.06.2024 for adjudicating the assessee s ground of appeal no. from 8 to 11.5 and Department s ground no. 9 to 12.5 as requested by the assessee in the miscellaneous application as discussed above. Both the parties have been informed about the aforesaid date of hearing, therefore, no separate notice will be required to be issued for the hearing fixed for adjudicating the remaining ground of appeal. Therefore, the miscellaneous application is allowed to the limited extent for statistical purposes. - SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER For the Appellant : Porus Kaka a/w Manish Kanth For the Respondent : Anil Sant ORDER PER AMARJIT SINGH (AM): Both these miscellaneous application filed by the assessee are directed against the order of the ITAT passed on 07.11.2023 vide ITA No. 2413/Mum/2021 ITA No. 2477/Mum/2021. In the miscellaneous application the assessee submitted that it has raised 13 grounds of appeal, however, the ground of appeal relating to Transfer Pricing issue from serial no. 8 to 11.5 were not adjudicated. The assessee also submitted that para 4 of the Miscellaneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Pricing Documentation Report maintained by the appellant in good faith and with due diligence. 9. Provision of software consultancy services 9.1 Re-characterization of international transaction The ld. CIT(A) erred in law and on facts of the case in not accepting the Appellant as the tested party even though the international transaction during the year under reference was provision of services by the Appellant to its AEs. 9.2 Disregarding the legally binding agreements between the Appellant and its AES The ld. CIT(A) erred in law and on facts, in disregarding the contractual terms of the legally binding agreement/s between the Appellant and the AE(s). 9.3 Rejection of the functional and economic analysis carried out by the Appellant The ld. CIT(A) erred in law and on facts, in rejecting the functional and economic analysis carried out by the Appellant and in considering the AEs as the least complex entity. 9.4 Disregarding the benchmarking analysis The ld. CIT (A) erred in law and on facts, in disregarding benchmarking analysis undertaken by the Appellant in Transfer Pricing Documentation report. 9.5 Selection of the comparable companies Without prejudice to the above, even if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the TPO? 9.2 Whether on the facts and circumstances of the case and in law, the Ld CIT(A) while holding the treatment of AEs as tested party as adopted by the TPO as correct on the rationale of AEs being the simpler party as compared to the complex nature of functions performed by the assesse, is right in holding that for the purposes of TNMM, GP/Sales is the appropriate PLI as against OP/VAE adopted by TPO, without considering the fact that the benchmarking exercise was as to see whether the AEs abroad retained more revenue for their functions compared to the foreign comparables and so, the appropriate PLI should be on cost base and cannot be on revenue base, as revenue retained is tested whether it is tainted and thus the direction of Ld. CIT(A) violates the basic principles of adopting PLJ, that too when Ld. CIT(A) upheld the adoption of AEs as tested party? 9.3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), while upholding the treatment of AEs as tested party as adopted by the TPO on the rationale of AEs being the simpler party compared to the complex nature of functions performed by the assessee, is right in holding that for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned by the tested party on the functions performed is required to be considered and not the margin earned on the cost of services, thereby recognizing the concept of pass-through cost , suggesting that while computing the Net Cost plus Margin or Cost Plus margin, pass-through cost should not be considered in the denominator or cost base? 9.7 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in ignoring the para 2.92 and 2.93 of OECD guidelines (Review of Comparability and Profit methods Revision of Chapters I to III of TP Guidelines of OECD dated 22 July 2010) which make it clear that the costs which do not provide any value addition should be excluded from the operational margin computation? 9.8 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in ignoring the facts that as regards the AEs, the payment which is passed onto the assessee is not an operational cost for them and it is a cost which is remitted in pre decided manner upon the determined revenue share and the same simply passes through the bank account of the AEs and the AEs do not have the wherewithal to do the work that is actually relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) is correct in failing to see that AE had no credit-worthiness and financial capacity to service its own loan and in such a situation assessee standing guarantee for the loan, it had to be remunerated at arm's length as per section 92F(ii)? 10.7 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in ignoring the decision in the case of Tecnimont ICB Pvt. Ltd vs DCIT TS-251-ITAT- 2013(Mum) TP, wherein the Hon'ble ITAT upheld the addition made by the TPO for higher guarantee commission at 3% on the ground that the taxpayer has not submitted any contradictory evidence to suggest that the rate applied by the TPO was not appropriate? 10.8 Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is correct in ignoring the decision in the case of Technocraft Industries (Ind) Ltd Vs Addl. CIT TS-3- ПАТ-2014 (Mum)-TP, wherein the Hon'ble ITAT upheld the higher corporate guarantee fee rate of 2.08% being the average of rates charged by various banks? 12. On the issue of Performance / Lease Guarantee: 11.1 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Tata Sons Ltd is the legal owner of the brand TCS and TATA CONSULTANCY SERVICES and that if at all the brand royalty is assessable, it is to be considered in the hands of Tata Sons Ltd. and not in the hands of the assessee, ignoring the following vital facts: (i) As per the scheme of arrangement the TCS division of M/s Tata Sons Limited was corporatized into M/s Tata Consultancy Services Limited (the assessee) under the approval of Hon'ble High Court of Bombay sanctioned vide its Order dated 09.05.2003 w.e.f 01.04.2003 and all the Assets and liabilities including all tangible and intangible assets/registrations and certificates pertaining to the IT services division of M/s Tata Sons Limited stood transferred to the assessee for a consideration of Rs. 2300 Crores inclusive of all trademarks related to the IT business division which is very clear from Clause 1(K)(ii) of page 4 of the said Scheme approved by Hon'ble High Court, thereby the assessee is the legal owner of all trademarks without any limitation and thus, Tata Sons Ltd. claiming any legal ownership on the trademarks is violative of the Court Order and that the CIT(A) relying on the Agreements entered into and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red herring prospectus as it is only a draft and that Tata Sons Ltd cannot be the legal owner after the Court Order dated 09.05.2003 and that the assessee being the economic owner of the brand? 12.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in observing that payment of royalty by assessee to Tata Sons Ltd. @ 0.25% has been accepted by the AO and so there is no case that the brand ownership lies with the assessee', by ignoring the following facts: (i) After the said Court Order dated 09.05.2003, the payment of royalty by the assessee to Tata Sons Ltd. @ 0.25% could be construed only towards TATA owned by Tata Sons Ltd and not towards TCS and TATA CONSULTANCY SERVICES . (ii) TCS and TATA CONSULTANCY SERVICES if at all appearing in any Agreements between the assessee and Tata Sons Ltd. entered into after the date of the Court Order (09.05.2003) needs to be ignored giving credence to substance over form, economic reality over legal form and conduct of parties over contracts for evaluating the transaction from transfer pricing angle. (iii) The brand royalty charged Rs.1187.06 crores is for the exclusive use and exploitation of the brand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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