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TMI Blog2024 (12) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's own case for AY 2013-14 [ 2018 (6) TMI 1859 - ITAT MUMBAI] has considered the issue of taxability of export commission paid to the foreign agents Tribunal has given the finding that the export commission is not liable for tax deduction at source since the same is paid for procuring export order and payment was made outside India and therefore, there cannot be any disallowance under section 40(a)(i). The nature of export commission paid by the assessee for the year under consideration is similar and we also notice that the AO has made the disallowance of export commission to the same parties in Korea and Indonasia. Therefore in our view the ratio that the export commission for services rendered outside India is not taxable India is applicable for the year under consideration also. Revenue has not brought in any new material on record to deviate from the above view taken by the coordinate bench except that the job description in the agreement includes consultancy services. Accordingly, we hold that the export commission paid by the assessee towards sales, marketing and customer support services rendered outside India by the foreign agents cannot be treated as FTS and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge margin of 12% and accordingly the assessee considered that the transaction of providing sales and marketing support services is at Arms Length - HELD THAT:- We notice from the perusal of the annual accounts of the company that the company is mainly into Research Services which are high-end services. Therefore, we see merit in the argument in the ld. AR that the company is not functionally comparable with the marketing and support services provided by the assessee to the AE. We therefore, direct the TPO to exclude Majestic Research Services and Solutions Ltd. from the list of comparable and recomputed the ALP accordingly. AO not considering the revised return filed by the assessee while arriving at the assessed income of the assessee - From the report of the AO, we notice that the assessee has made an application for condonation of delay before CBDT for filing the revised return belatedly and that the assessee is yet to receive order from the CBDT condoning the delay. Therefore we see merit in the contention of the Ld DR that the revised return cannot be considered until the delay is condoned. Accordingly we remit the issue back to the AO with a direction to consider the income d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed is barred by limitation Ground No.1 (1.1 and 1.2) - Disallowance of export commission for non-deduction of tax at source u/s. 40(a)(i) Ground No.2 (2.1 2.2) - T.P. Adjustment towards provision of product development and other IT Services Ground No. 3 ( 3.1 3.2) Ground No.1 T.P. Adjustment towards provision of sales and marketing supporting services. Ground No.4 (4.1 4.2) Ground No.2 3 Non-grant of credit for foreign tax credit Ground No.4 Levy of interest under section 234A, 234B 234C Ground No.5 Initiating penalty proceedings under section 270A of the Act. Ground No.5 Ground No.6 Non scrutinizing the revised return of income Ground No. 6 (6.1 6.2) Non granting credit for advance tax and TDS Ground No. 7 8 Not granting interest under section 244A on refund due Ground No.9 ITA.No. 2461/Mum/2022 AY 2017-18 3. The assessee filed the return of income for AY 2017-18 on 30.11.2017 declaring an income of Nil after setting off the brought forward losses to the tune of Rs. 2,82,60,650/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee has international transaction with its Associated Enterprises (AE) a reference was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a disallowance under section 40(a)(i) on the export commission paid to the foreign agents in Korea and Indonesia. The DRP confirmed the disallowance made by the AO. 6. The ld. AR submitted that the foreign agents of the assessee do not render any consultancy services to the assessee and are rendering sales, marketing and customer support services only. The ld. AR in this regard drew our attention to the recitals in the agreement entered into with the foreign agents as extracted in AO's order. The ld. AR further submitted that the income earned by the foreign agents by way of export commission are Business Income in the hands of the foreign agents and since these agents do not have any Permanent Establishment (PE) in India they are not taxable in India warranting any tax deduction at source. The ld. AR also submitted that the AO has treated the payment as consultancy services merely for the reason that it is stated in the job description of the agreement without appreciating the actual nature of services rendered by the foreign agents to the assessee. The ld. AR submitted that the issue is covered by the decision of the co-ordinate bench in assessee's own case for AY 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing observations:- 6. It is clear from the order of the CIT(A) that after applying various judicial pronouncements, he reached to the conclusion that payment to M/s. Columbus Travel Media Ltd., and Zagat Survey LLC cannot be treated as royalty u/s. 9(1)(vi) of the Act. Hence, assesses was not required to deduct tax u/s. 94 of the Act, accordingly, no disallowance can be made u/s. 40(a)(i)of the Act. 7. With regard to export commission paid to the foreign agents, the CIT(A) recorded a clear finding that commission has been paid for procuring export order and payment was made outside India. After relying on the CBDT Circular No.23 of 1969, 786 of 2000 and 7 of 2009, the CIT(A) held that no tax is deductible in respect of such export commission. The CIT(A) also relied on the decisions of ITAT Delhi in case of Welspring Universal, Madras High Court in case of Faizen Shoes (P) Ltd., which has been accepted by the Department and no SLP has been filed. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the disallowance made in respect of export commission paid to the foreign agents. 8. Nothing was brought on record by learned DR to persuade us to deviate from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reason that the comparables are functionally not comparable to that of the assessee. Accordingly the AO recomputed the average margin of the balance 7 comparables to arrive at a median of 17.34% and made a T.P. Adjustments of Rs. 24,14,138/-. Though the assessee raised grounds pertaining to the exclusion of the 6 comparables of those excluded by TPO, during the course of hearing the ld AR presented arguments only with respect to inclusion of the following 3 comparables and submitted that if these comparables are included, the inclusion of the rest of the comparables will not be pressed. (i) Isummation Technologies Pvt. Ltd. (ii) Sagar Soft (India) Ltd. (iii) Yudiz Solution Pvt. Ltd. 11. The ld. AR submitted that the above three comparables are functionally similar to the functions of the assessee and therefore the TPO should not have excluded these comparables on the ground that they are functionally dissimilar. The ld. AR drew our attention to the financial statement of the comparables to submit that they are rendering services similar to that of the assessee. The relevant extract from the submissions of the ld. AR are extracted below: Isummation Technologies Pvt. Ltd. Fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the perusal of the financial statement it is clear that there is only one business segment from which the company is deriving income i.e. software development. Therefore, we do not see any merit in the findings given by the TPO that the said company is not functionally comparable to the assessee. We also notice that the TPO while rejecting the comparable has relied on the data from website of the company and has not given any other material finding as to why the comparables is excluded. Therefore, we are not inclined to agree with the view of the TPO that Isummation Technologies Pvt. Ltd is to be excluded on functional dissimilarity ground. 14. The TPO while excluding Sagar Soft India Ltd. has relied on the company website to hold that it is functionally dissimilar compared to the assessee. However, from the perusal of the annual accounts of a company we notice that the company is into software development and consultancy services and the revenue is primarily derived from rendering software services. Therefore, in our considered view the TPO is not correct in excluding the company without recording any other reason except functional dissimilarity. 15. While excluding Yudiz Solut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity etc. The company offers a wide spectrum of innovative research tools and end-to-end research service offerings. (Page 2311, 2312, 2355 and 2314 of PB) These services are in the nature of research services and therefore considered as High-end services and functionally different from the marketing support services provided by the Appellant Diversified Business operations and no segmental data available: Further, the comparable operates in a single segment namely, market research services and therefore there are segmental details available which can be compared to the Appellant's MSS segment (Note 28 on Page 2375 of PB) Thus, it is submitted that Majestic is engaged in providing high-end research and a diversified bucket of services wherein segmental data is not available. 20. The ld. DR submitted that the assessee itself has included the above comparable in the TPSR and therefore, the assessee is not correct in now seeking exclusion on the ground that the said company is functionally dissimilar. 21. We heard the parties and perused the material on record. We notice from the perusal of the annual accounts of the company that the company is mainly into Research Services which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the delay received from CBDT while re-computing the income as per the directions in this order. 27. Ground No. 7 8 pertain to non-granting of credit for advance tax and TDS. We notice that the AO has not given the credit for the reason that the advance tax and the TDS are paid in the name of merged entity. Since the belated return filed by the assessee including the income and taxes of the merged entity is pending for condonation of delay by CBDT, we direct the AO to consider the advance tax and TDS paid in the name of merged entity post the delay being condoned by CBDT whereby the revised return in which such claim is made effective. It is ordered accordingly. 28. Ground No.9 with regard to interest under section 244A is consequential not warranting any separate adjudication. ITA.No.2474/Mum/2022 AY 2018-19 29. For AY 2018-19, out of the exclusions done by the TPO in the adjustment done towards provision of product development and other IT Services, ld AR during the course hearing pressed for Inclusion of Isummation Technologies Pvt. Ltd, Sagar Soft (India) Ltd and Yudiz Solution Pvt. Ltd. In this regard we notice that the TPO has excluded these comparables on the ground that they ..... X X X X Extracts X X X X X X X X Extracts X X X X
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