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TMI Blog2025 (3) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the assessee. The assessee, Philips India Limited, is a subsidiary company of the Netherlands-based Koninklijke Philips N.V. (KPNV). The company business segment comprises of (a) Personal Health (b) health care systems which includes development services. The company has manufacturing facilities in Pune, Maharashtra and software development center in Bangalore. The company exports Healthcare equivalent under contact manufacturing. The company sells its products in India through independent distributors and modern trade. The ld. AO observed that the assessee had entered into international transactions u/s 92 of the Act and accordingly, reference was made to the Transfer Pricing Officer to determine the Arms Length Price u/s 92CA of the Act. The Transfer Pricing Officer accordingly, computed the TP adjustment of Rs. 59,26,41,000/- on account of software developments and the ld. AO in the draft assessment added the same after brushing aside the reply of the assessee. 05. In the ld. DRP proceedings, the ld. Dispute Resolution Panel also confirmed the order of the ld. Transfer Pricing Officer on this issue and accordingly, the ld. AO passed the final assessment order dated 29.07.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fineon Technologies India (P.) Ltd. vs. Deputy Commissioner of Income-tax [2024] 159 taxmann.com 245 (Bangalore - Trib.)[10-01-2024] iii. Mavenir Systems (P.) Ltd. vs. Deputy Commissioner of Income Tax [2023] 152 taxmann.com 655 (Bangalore - Trib.)[23-03-2023] iv. Infor (India) (P.) Ltd. vs. Assistant Commissioner of Income-tax [2022] 143 taxmann.com 68 (Hyderabad - Trib.)[25-08-2022] 08. Similar in the case of Sasken Technologies Ltd., the assessee submitted that the same should not be considered as comparable for the following reasons: "Functionally not comparable - Sasken is engaged in providing diversified services such as product engineering and digital transformation providing concept-to-market, chip-to- cognition R&D services. Engaged in R&D activities and owns intangible property The company is consistently investing in technology and innovation. During the year, the company has invested to explore the emerging technologies such as computer vision, artificial intelligence, machine learning, blockchain etc. Further, company owns intangible assets in the nature of computer software, unlike the Appellant who does not own any such intangibles. Lack of segmental infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parable to the assessee for the reason that the same is not functionally comparable and is engaged in the R&D activities and owns intangible properties which is not there in the case of the assessee. Moreover, the comparable lacks, the segmental information. The case find support from the decision of Mavenir Systems (P.) Ltd. vs. DCIT (supra), wherein the Hon'ble ITAT has held that the company is not functionally comparable due to its having R&D activities and own huge patents which is not akin to captive service provider and the relevant paras no. 4.4 to 6.3 of the same are extracted below:- "4.4 Sasken Communication Technologies Ltd. 4.4.1 It is submitted that this comparable has been excluded by the Ld.TPO as it is involved in R&D activities and owns huge patents. We have hereinabove excluded Infosys Ltd., L&T Infotech Ltd. for the reason that they are into research and development activities and owns huge intangibles which is not akin to a captive service provider. Applying the same principle, we do not find any infirmity in exclusion of Sasken Communication Technologies Ltd. by the Ld.TPO. Accordingly, we reject this comparable sought for exclusion by assessee. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced reliance upon decision of Hon'ble Delhi Tribunal in case of Bechtel India (P.) Ltd. v. Dy. CIT [2016] 66 taxmann.com 6 which subsequently upheld by Hon'ble Delhi High Court vide order dated 21/07/16 in ITA No. 379/2016, also upheld by Hon'ble Supreme Court vide order dated 21/07/17, in CC No. 4956/2017." 010. We note that in case both the above comparables are excluded out of the comparable companies, the average mean of the comparable companies will work out to 11.66%, whereas the margin of the appellant is 9.44% which falls within 3% and therefore, no TP adjustment is required to be made. Accordingly, we direct the ld. Transfer Pricing Officer/ AO to exclude these two companies. The ground no.2 is allowed. 011. The issue raised in ground no.3 is against the transfer pricing adjustment of Rs. 108,79,48,589/- on account of Intra Group Services ('IGS') received by the assessee. 012. We note that this is a recurring issue in the case of the assessee which has been decided by the co-ordinate Bench in favour of the assessee in ITA No. 226/KOL/2021, vide order dated 06.09.2022 for A.Y. 2016-17. The operative part of the decision is as under:- "3. Issue raised in gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016. Considering the facts of the instant assessment year being similar to ones as decided by the co-ordinate Bench in assessee's own case, we hold that the advertisement, marketing and promotion expenses do not an international transaction and accordingly, the TP adjustment made by the ld. Transfer Pricing Officer/ AO is directed to be deleted. The ground is accordingly allowed. 017. Ground no.5 is general in nature which is qua the Rule of consistency and does not require any specific adjudication. 018. Ground no. 6 is in regard to the determination of arms' length price in respect of the provisions of Contract, Research & Development Services (CRDS) to the Associated Enterprises (AE). It was submitted by the Ld. AR of the assessee that the assessee is engaged in the provisions of CRDS to this AE. It provides service based on the specification provided by the AE. The assessee applied cost plus mark up 9.59% as per the service agreement as compensation for its services. The TPO and the DRP when adjudicating the issue had considered seven companies as comparable, which are as under: Sr. No. Name of the company Appellant/TPO comparable Margin (OP/OC) 1 Aurigene Discover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the assessee and the same would be within the acceptable variation and consequently, the transfer pricing adjustment was liable to be deleted. 021. In reply, the Ld. DR vehemently supported the order of the DRP. It was the submission that the two comparable which are being objected to by the assessee were very much comparable in so far as both the companies were also undertaking research and they were also in the same line as the medical field. It was the submission that the submissions of the assessee have already been considered by the TPO and the DRP and the same have already been rejected and nothing new has been pointed out by the assessee, which would call for any modification to the order of the TPO or DRP. It was the submission that the adjustment as made is liable to be upheld. 022. We have considered the submissions of both the parties. The assessee admittedly, doing contract, research and development for medical devices. ADTL, as has been mentioned in its Annual Report is undertaking research relating to contract discovery for its customers and licensing of the intellectual property rights in respect of researched drug discovery. This has nothing to do with any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. Besides the case of the assessee find support from the decisions of PCIT Vs. Era Infrastructure (India) Ltd. [2022] 141 taxmann.com 289 (HC Delhi), Syama Prasad Mookerjee Port Vs. DCIT [2024] 162 taxmann.com 122 (Kolkata-Trib.), DCIT Vs. SP Port Maintenance (P) Ltd. [2024] 164 taxmann.com 752 (Mumbai-Trib.), ACIT VS. Mitsui & Co. India (P.) Ltd. [2023] 155 taxmann.com 19 (Delhi- Trib.). Considering the above decisions, we are inclined to direct the ld. AO to delete the addition. Hence, ground no.7 is allowed. 026. The issue raised in ground no.8 is against the direction of ld. Dispute Resolution Panel confirming the addition of Rs. 27,08,766/- by the ld. AO in the draft assessment order u/s 41(1). 027. The facts in brief are that the ld. AO observed during the course of assessment proceedings that assessee has written off creditors but has not shown the corresponding income as deemed income u/s 41(1) of the Act in the return of income. Accordingly, the assessee was issued notice u/s 142(1) dated 15.12.2021, which was replied on 07.02.2023. In the said reply the assessee submitted that Rs. 6,24,98,886/-, pertained to provisions/liabilities which are no longer required and have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Resolution Panel direction and direct the ld. AO to delete the addition. Accordingly, the ground no.9 is allowed. 032. The issue raised in ground no.10, is against the disallowance of deduction u/s 80G of the Act. 033. The facts in brief are that during the year the assessee claimed deduction u/s 80G of Rs. 4,84,70,669/-. Accordingly, the ld. AO called upon the assessee to furnish the details thereto which was supplied by the assessee vide his submission dated 31.01.2022, wherein the assessee furnished all the details in respect of the donations made. The ld. AO observed that the assessee has incurred expenses amounting to Rs. 11,00,15,130/- on account of corporate social responsibility in accordance with Companies Act, 2013, out of this amount, the assessee has claimed deduction 4,84,70,669/- u/s 80G of the Act. According to the ld. AO, CSR expenses are not allowable as claimed either directly or indirectly and therefore, the said claim was disallowed, which was affirmed by the ld. Dispute Resolution Panel in his direction. 034. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered in favour of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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