9911796707
TMI Blog2025 (1) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 2002-2003 in case the Revenue succeeds its appeal for the Assessment Year 1993-94 before the Hon'ble High Court/Hon ble Supreme Court and the deduction for securities losses in disallowed. Tribunal erred in directing the verification of the CPA Certificate and allocation key for the TPA related to the Assessment Year 2002-03 - TPO had proposed Transfer Pricing Adjustments on the ground that the Assessee had failed to satisfy the benefit test. Since the TPO had rejected the claim at the very threshold, there was no occasion for the TPO to benchmark the cost allocated by taking into account the CPA Certificate furnished by the Assessee. Further, perusal of Assessment Order clearly shows that the TPO/Assessing Officer had clearly taken a stand that in absence of relevant documents/details the benefit derived from the Indian operations could be determined and therefore, benchmarking of cost allocation could not be done. Thus, we reject the contention of the Assessee that the authorities below had verified the CPA Certificate furnished by the Assessee for benchmarking the cost allocation. We are alive to the fact that the Tribunal being the final fact-finding Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L MEMBER: 1. These are two Miscellaneous Applications preferred by the Assessee. By way of MA.No.208/Mum/2024 the Assessee is seeking rectification of the common order, dated 15/03/2024, passed by the Tribunal disposing off the appeal preferred by the Assessee for the Assessment Year 2002-03 [ITA No.1683/Mum/2019] whereas by way of MA.No.201/Mum/2024 the Assessee is seeking rectification of the common order, dated 15/03/2024, passed by the Tribunal disposing off the appeal preferred by the Assessee for the Assessment Year 2003-2004 [2839/Mum/2019]. MA No.208/Mum/2024 2. We would first take up MA No.208/Mum/2024 pertaining to the Assessment Year 2002-03. The prayer clause of the aforesaid application reads as under: 11. In view of the above, the Applicant prays that the Hon'ble ITAT may be pleased to: (a) rectify the present order in accordance with the direction issued by this jurisdictional tribunal in Applicant's own case for AY 2001-02 and provide direction/clarification as sought by your Applicant with respect to recoveries made against securities losses for the AY 2002-03; (b) rectify the present order and allow ground No. 2 of the appeal following its Order dated 15.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeds of INR.10,68,03,977/- realised during the relevant previous year cannot be brought to tax and the same should be offset against such unrecovered loss. The Assessing Officer and the CIT(A) rejected the aforesaid contention and taxed the recoveries made in the hands of the Assessee. Subsequent to filing of the appeal for the Assessment Year 2002-03 before the Tribunal, vide order, dated 27/07/2023, passed in appeal preferred by Revenue for Assessment Year 1993-94, the Tribunal had allowed deduction for the security losses. Therefore, considering the aforesaid order, during the course of hearing before the Tribunal, it was submitted that the Assessee did not wish to press Ground No.6 pertaining to non-taxability of recovery made against securities losses. It is submission of the Assessee that the Assessee had sought direction to the effect that in case the Department s appeal against the order, dated 27/07/2023, passed by the Tribunal for Assessment Year 1993-94 is allowed, then the Ld. Assessing Officer be directed not to tax the recoveries made against the said losses in AY 2002-03. However, the aforesaid direction was not given by the Tribunal and this constituted a mista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Hon'ble High Court/Hon ble Supreme Court and as a result the deduction for securities losses claimed in Assessment Year 1993-94 is disallowed. 5. According to the Assessee the second mistake apparent on record that crept into the order, dated 15/03/2024, passed by the Tribunal pertains to directions given by the Tribunal in paragraph 56 of the said order while disposing off Ground No.2 raised by the Assessee in appeal for the Assessment Year 2002-03. Paragraph 56 of the order dated 15/03/2024 reads as under: 56. It was held that the intra group services should have provided and such services must be at Arm s Length Price. As per OECD, allocation of cost based on approved allocation key and certified by the CPA certificate is relevant. The revenue cannot reject the CPA certificate since the same are specific and authenticated. As per Rule 10D(2)(A), the document must be supported by authentic documents, which includes authentication by the CPA. Therefore, the certification of allocation key and the same was authenticated by the CPA is proper documents as per Rule 10(2)(A) of the I.T. Rules. Respectfully following the above decision, we observe that in the given case also, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to the Transfer Pricing Officer (TPO) under Section 92CA(3) of the Act for determining the Arm s Length Price (ALP) of the total cost allocation of INR.76.94 Crores. The TPO accepted the cost allocation of INR.41.97 Crores. However, the ALP of the balance cost allocation of INR.34.97 Crores was treated as Nil by the TPO as the Assessee had only provided details and supporting documents pertaining to 60% of the cost allocation for demonstrating the benefit derived by the Indian operations. Thus, TPO accepted cost allocation of INR.41.97 Crores without any adjustment whereas in relation to the balance cost allocation of INR.34.97 Crores the TPO concluded that the Assessee has failed to meet the benefit test and in the absence of details/supporting the benefit derived by the Indian operations could not be demonstrated by the Assessee. Therefore, the ALP for the 40% of cost allocation was determined as Nil by the TPO and transfer pricing adjustment of INR.34.97 Crores was proposed. The Assessing Officer confronted the Assessee with the aforesaid transfer pricing adjustment proposed by the TPO. Further, the Assessing Officer also asked the Assessee to show cause why deduction for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... key and relevant allocation of the cost to the Indian entity. Therefore, we rely on the above decision and findings of the Coordinate Bench in assessee s own case, we are inclined to allow the Ground No.2 raised by the assessee with the above direction. 5.7. First contention raised by the Assessee is that the finding returned by the Tribunal that the tax authorities did not take cognizance of the CPA Certificate and allocation keys during the assessment proceedings is factually incorrect. It was submitted on behalf of the Assessee that the TPO and Assessing Officer had applied mind to the CPA Certificate and verified the same during the assessment proceedings. In this regard, we note that it is admitted fact that the Assessee had only filed supporting documents and details for 60% of the cost allocated before the TPO and the Assessing Officer. This becomes clear on perusal of letter dated, 16/02/2005, filed by the Assessee before the TPO in response to notice, dated 25/01/2005 [placed at Page 145 to 152 of the Factual Paper Book]. In paragraph 37 of the order, dated 15/03/2024, passed by the Tribunal, the relevant extract of the aforesaid letter has been reproduced by the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auditor has vouched for correctness of cost allocated to India. By disallowing part of expenses, in a way, AO try to conclude that certificate. By issuing Auditor certificate is partly incorrect without providing any cogent reason for the same. Detailed Submissions (I) Disallowance of Rs. 34.97 crores on the basis of the transfer pricing adjustment. 1. The Appellant submits that the Assessing Officer (AO) erred in denying the deduction for the cost Rs. 34.97 crores by accepting the findings given in the order u/s. 92CA(3). Further, even TPO erred in treating the ALP for the expenses of Rs. 34.97 crores at 'nil'. 2. The AO/TPO ought to have considered followings: Of the total expenses incurred by SCB (HO), expenses incurred during the year 2001 which are attributable to the operations carried out in India were allocated at Rs. 76.94 crores. These expenses are directly attributable to its operations in India and hence should be allowed as a deduction. Hence, when the total expenses of Rs. 76.94 crores were allocated to SCB-India (Assessee/ Appellant) on scientific basis and substantiated by audit certificate issued by M/s KPMG Audit Plc - UK there is no reason for AO/ TPO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not yield benefits to the Appellant. Since AO has disallowed part of the expenses (Rs. 34.97 cr.) related to Group Technology cost, Hong Kong / Singapore Direct cost, the same is dealt with hereunder. xx xx xx xx ✓ Such costs are allocated to India operation and the bases of allocations are certified by KPMG. Even the AO/TPO have accepted such basis of allocation since they have accepted part of such allocated cost. ✓ Benefits derived by Appellant with reference to entire expenses were explained to the AО/ТРО. Hence, it is submitted that the action of AO/ TPO to treat ALP for part above referred expenses at 'nil' is baseless. The entire expenses are attributable to Appellant's operations in India and the same should be allowed as a deduction. 4. Benefits to the Appellant xx xx 5. The Appellant submits that the action of TPO of not accepting ALP of entire expenses of Rs. 76.94 crores is not tenable, particularly when the Appellant had substantiated the expenses of Rs. 41.97 crores, which is more than 60% of the total expenses, by filing various contemporaneous evidences and details, and such details demonstrated the benefits de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CPA Certificate furnished by the Assessee. Further, perusal of Assessment Order clearly shows that the TPO/Assessing Officer had clearly taken a stand that in absence of relevant documents/details the benefit derived from the Indian operations could be determined and therefore, benchmarking of cost allocation could not be done. Thus, we reject the contention of the Assessee that the authorities below had verified the CPA Certificate furnished by the Assessee for benchmarking the cost allocation. The finding returned by the Tribunal that the authorities below had not taken cognizance of the CPA Certificate is supported by the material on record which has been referred to by the Tribunal in its order. 5.9. Further, a perusal of the submission field before the CIT(A), reproduced in paragraph 5.7 above also shows that the Assessee had submitted before the CIT(A) that the action of TPO of not accepting ALP of entire expenses of INR.76.94 Crores was not tenableas as the Assessee had substantiated the expenses of INR.41.97 Crores, which is more than 60% of the total expenses, by filing various contemporaneous evidences and details, and such details demonstrated the benefits derived by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has been determined by the directors of the Bank. Under the terms of our engagement letter, our responsibility is to form an opinion on whether the aggregate costs of the Bank as shown on the attached Schedules have been accurately extracted from the books and records kept by the Bank and have been allocated in accordance with the Bank's allocation policy, on the basis of the work performed, and report to the Bank. Our report has been prepared for the Bank solely in connection with the completion of Standard Chartered Bank India Branch local tax return. It has been released to the Bank, on the basis that our report shall not be copied, referred to or disclosed, in whole (save for the Bank's own internal purposes) or in part, without our prior written consent. We hereby consent that the Bank make available our report to the Deputy Director of Income Mumbai India. xx xx We have examined the records of the Bank and carried out such tests and received such explanations from management, as we consider necessary work we have performed is to enable us significantly less in scope than an audit and hence provides to form our of assurance than an audit. We were not required to, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the CPA Certificate. In our view, the authorities below did not object to the allocation policy or computation of cost allocation solely for the reason that the contention of the Assessee that the cost allocated resulted in benefit to Indian operations/branch was rejected at the threshold by the authorities below on account of failure of the Assessee to furnish supporting documents. Vide order dated 15/03/3024, the Tribunal had accepted the contention of the Assessee that the entire cost allocation cannot be rejected on account of non-submission of original vouchers and agreement/invoices, and thereby provided another opportunity to the Assessee to establish that the cost allocation was at ALP. Equity also required that Revenue should also be granted opportunity to verify the allocation/computation of the cost said to have been incurred outside India for the purpose of Indian operations. Thus, we reject the contention of the Assessee that the directions issued by the Tribunal in paragraph 56 of the order, dated 15/03/2024, constituted mistake apparent on record. Further, before parting we would like to observe that formation of view by the Tribunal that an issue should be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities losses would not be taxed during the Assessment Year 2003-2004 in case the Revenue succeeds its appeal for the Assessment Year 1993-94 before the Hon'ble High Court/Hon ble Supreme Court and the deduction for securities losses in disallowed. However, no change would be require to be made in paragraph 73 of the order dated 15/03/2023, in view of the language thereof (reproduced herein below): 73. Coming to the appeal relating to A.Y. 2003-04, since facts and grounds in this case are mutatis mutandis, therefore the decision taken in assessee's case for the A.Y. 2002-03 are applicable to this assessment year also. With regard to Ground No. 7 relating to premium paid to acquire the retail loan portfolio, we have decided the issue on the basis of deferred revenue expenditure, the same is directed to be allowed to the assessee at 1/5th of the premium paid on acquisition of portfolio. Therefore, this ground is partly allowed. All other grounds raised are similar to the grounds raised in A.Y. 2002-03, the same are disposed off mutatis mutandis to other grounds in A.Y. 2002-03. Accordingly, the appeal filed by the assessee is partly allowed. 10. In result, both the Misce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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