Search Results For: 92C


Kaypee Electronics & Associates Pvt. Ltd vs. DCIT (ITAT Bangalore)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: April 21, 2017 (Date of pronouncement)
DATE: April 21, 2017 (Date of publication)
AY: 2010-11
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: An international transaction can be clubbed / aggregated with other international transactions if such transactions are closely connected with each other. The onus is on the assessee to establish the justification for clubbing the transactions. If the TPO has not applied TNMM at the entity level and has bench marked the royalty payment on standalone basis and not subjected the cost of production or other transactions to bench marking, the contention that when TNMM is applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted

The only issue that arises for consideration before us is whether the TPO was justified in making the ALP adjustment in respect of royalty payment made to M/s. Falco Limited in the given facts of the present case. The royalty payment is made to M/s. Falco Limited for manufacturing electronic components by using technology, expertise and knowhow of Falco and marketing and selling components under the brand name of Falco in India as well as abroad by the assessee company. In consideration of same, royalty at the rate of 8% of sales was made by the appellant to M/s. Falco Limited. No doubt the law is settled to the extent that an international transaction can be clubbed / aggregated with other international transactions provided such transactions are closely connected with each other. In the cases cited by the ld. counsel for the appellant, this proposition of law was reiterated. But in the present case, the TPO had not applied TNMM at entity level. The TP study report submitted by the assessee company had been rejected by the TPO. This action of the TPO is confirmed by the Hon’ble DRP. But the TPO proceeded to bench mark the transaction of the royalty payment on stand alone basis. In the process, the cost of production or other transactions are not subjected to bench marking by the TPO. Therefore the contention of the ld. counsel that when the TNMM was applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted

Posted in All Judgements, Tribunal

CIT vs. ALSTOM Projects India Limited (Bombay High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: September 14, 2016 (Date of pronouncement)
DATE: December 14, 2016 (Date of publication)
AY: 2006-07
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing adjustment has to be done only in respect of International Transactions with Associated Enterprises. The fact that the assessee has chosen entity level PLI to benchmark the AE transactions and that it has not maintained segmental accounts is irrelevant. If segmental accounts are not available, proportionate adjustments have to be made only in respect of the international transactions with Associated Enterprises

One must not lose sight of the fact that the transfer pricing adjustment is done under Chapter X of the Act. The mandate therein is only to redetermine the consideration received or given to arrive at income arising from for International Transactions with Associated Enterprises. This is particularly so as in respect of transaction with non Associated Enterprises, Chapter X of the Act is not triggered to make adjustment to considerations received or paid unless they are Specified Domestic Transactions. The transaction with non Associated Enterprises are presumed to be at arms length as there is no relationship which is likely to influence the price. If the contention of the Revenue is accepted, it would lead to artificial increase in the profits of transactions entered into with non Associated Enterprises by applying the margin at entity level which is not the object of Chapter X of the Act. Absence of segmental accounting is not an insurmountable issue

Posted in All Judgements, High Court

Alpha Nipon Innovatives Ltd vs. DCIT (Gujarat High Court)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: November 16, 2016 (Date of pronouncement)
DATE: December 8, 2016 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: As per CBDT's Instruction No.3/2016 dated 10.03.2016, the AO is required to give an opportunity to the assessee to show cause why the reference should not be made to the TPO and thereafter pass a speaking order while making a reference to the TPO. The failure to do so renders the reference void

No speaking order has been passed by the Assessing Officer while making a reference to the TPO, which is a requirement as per the Instruction No.3/2016 dated 10th March, 2016, issued by the CBDT. Before making a reference to the TPO, the assessee is required to be given an opportunity to show cause why the reference may not be made to the TPO and thereafter a speaking order is required to be passed by the Assessing Officer while making a reference to the TPO

Posted in All Judgements, High Court

Sara Lee TTK Ltd vs. DCIT (ITAT Mumbai)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: August 24, 2016 (Date of pronouncement)
DATE: September 21, 2016 (Date of publication)
AY: 2007-08
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: The assessee is obliged to carry out a bench-marking exercise with independent comparables and prove that its transactions with AEs are at arms length. Mere fact that the transaction is approved by the RBI and Govt is not sufficient

The RBI approval/FIPB approval is not determinative of ALP and cannot be considered to be a valid CUP. Automatic route under which FIPB approvals or RBI approvals are granted have been devised for the “ease of doing business”. These approvals emanate from other legislation or policy and are not in relation to determination of Arm’s Length Price. The purpose of the RBI approval/FIPB approval is entirely different and cannot be equated with the arm’s length principle. The approvals of rates given by the DIPP and the RBI are for different purposes, like for promotion of industries, management of foreign exchange etc. and it varies in accordance with the business practices prevalent at different times which are clear from the RBI approvals themselves. Going by the relevant TP provisions as enshrined under the Act and relevant Rules, it is mandatory that the appellant has to independently benchmark its international transaction with independent comparables so as to arrive at arm’s length price

Posted in All Judgements, Tribunal

ITO vs. Intertoll ICS India Private Limited (ITAT Mumbai)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL: ,
DATE: May 25, 2016 (Date of pronouncement)
DATE: May 30, 2016 (Date of publication)
AY: 2003-04
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: Arbitrary action of the AO in treating the payment by the assessee to the AE as "excessive/ unreasonable" deplored. Whims and fancies of an AO cannot decide tax liability of an assessee. Either the AO was ignorant of the TP provisions or he was adamant to make the disallowance at any cost. Either way, his action cannot be endorsed

It is said that rights and duties are two sides of the same coin. In other words, rights demand that a person using his rights should also observe his duties. In taxation matters discretionary powers have been given to the AO’s but they are expected to use the power in a fair and just manner. State as an institution can levy and collect only due taxes from its subjects. So, if the AOs determine the tax liability in an unfair manner and if the demand is not of the DUE taxes appellate authorities are expected to allow relief to the assessee. He very well knew that the assessee had objected to the ad hoc disallowance and rejection of the CUP method. But, he stuck to his guns while submitting the remand report and supported the estimated disallowance. His approach goes against the very basis of the TP provisions. Either he was ignorant of the TP provisions or he was adamant to make the disallowance at any cost. But, his action cannot be endorsed. Why was the transaction entered in to by the AE with MIT Hungary could not be a basis for arriving at ALP was never discussed by the AO. The assessee has discharged his burden of proof. After that onus had shifted to the assessee and in our opinion he has failed miserably to prove that his action of making disallowance was supported by any logical argument or scientific basis. Whims and fancies of an AO cannot decide tax liability of an assessee

Posted in All Judgements, Tribunal

DCIT vs. Alstom Projects Ltd (ITAT Mumbai)

COURT:
CORAM: ,
SECTION(S): , , ,
GENRE: ,
CATCH WORDS: , ,
COUNSEL:
DATE: October 28, 2015 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2007-08 & 2008-09
FILE: Click here to view full post with file download link
CITATION:
(i) Important law laid down on applicability of transfer pricing provisions to non-AEs, Law on (ii) deductibility of unpaid service-tax u/s 43B and (iii) carry forward of losses of amalgamating company u/s 72A and Rule 9C explained

Disallowance of unpaid service tax could not be made under section 43B where the assessee did not claim the same in its Profit and Loss account. Where the assessee fulfilled all the conditions prescribed under Section 72A read with Rule 9C, the AO could not deny the claim of carry forward of losses pertaining to the amalgamating company

Posted in All Judgements, Tribunal

GE Money Financial Services Pvt Limited vs. ACIT (ITAT Delhi)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: May 2, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 2006-07, 2007-08, 2008-09
FILE: Click here to view full post with file download link
CITATION:
S. 92(2): Important principles of law laid down with regard to the “Need Test”, “Evidence Test” or “Rendition Test” to evaluate the ALP of intra-group services rendered by an Associated Enterprise and whether the TPO has the right to determine the ALP at ‘Nil’

Rendering of services must be seen from the view point of the assessee and further assessee cannot be asked to keep and maintain evidences of services rendered by AE higher than which is expected from a businessman receiving services from an unrelated provider. Therefore, we reject the view point of Ld. TPO and Ld. DRP that assessee has not shown the receipt of the services. In view of above we are of the view that assessee has justified the receipt of services and satisfied the rendition test

Posted in All Judgements, Tribunal

Topsgrup Electronic Systems v ITO (ITAT Mumbai)

COURT:
CORAM: ,
SECTION(S): , , ,
GENRE:
CATCH WORDS:
COUNSEL:
DATE: February 19, 2016 (Date of pronouncement)
DATE: April 5, 2016 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing - alleged excess investment in share capital of wholly owned subsidiary cannot be termed as loan and notional interest charged thereon

The Tribunal deleted TP addition on account of a) alleged excess consideration paid on investment in share capital of wholly owned subsidiary re-characterized as loan b) and notional interest thereon on the ground that i. Chapter X of the Act is inapplicable to an international transaction on capital account which does not result in income chargeable to tax

Posted in All Judgements, Tribunal

Denso India Limited vs. CIT (Delhi High Court)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , , ,
COUNSEL:
DATE: February 29, 2016 (Date of pronouncement)
DATE: March 3, 2016 (Date of publication)
AY: 2003-04
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: Even if TNMM is found acceptable as regards all other transactions, it is open to the TPO to segregate a portion and subject it to an entirely different method i.e. CUP if the assessee does not provide satisfactory replies to his queries

The narrow controversy which this Court is called upon to decide is as to whether the adoption of the CUP method by the revenue authorities was justified. What the assessee urges essentially is that whereas the TP report furnished by it applied the TNMM method which was found acceptable as regards all other transactions/business activities, it was not open to the revenue to segregate a portion and subject it to an entirely different method, i.e. CUP. The assessee relies upon paras 3.6, 3.9 and 3.10 of the OECD guidelines in support of its contentions. It also relies upon certain rulings of different Benches of the ITAT to urge that such sequential segregation and setting portion of the TP exercise – so to say, to break with the integrity is unjustified and unsupported by the text of the law, i.e. Section 92C of the Income Tax Act. The assessee also relies upon Rule 10E of the Income Tax Rules, which guide the proper approach of the TPO in such matters

Posted in All Judgements, High Court

Essilor India Pvt.Ltd vs. DCIT (ITAT Bangalore)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: February 5, 2016 (Date of pronouncement)
DATE: March 3, 2016 (Date of publication)
AY: 2009-10, 2010-11
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: The existence of an "international transaction" w.r.t. AMP Expenditure cannot be assumed. The onus is on the TPO to prove such transaction. There is no machinery provision to ascertain the price to promote the AE's brand values. The AMP Expenditure should be treated as operating cost to apply TNMM and determine ALP of transactions with AE

The operating profit cost to the total operating cost was adopted as Profit Level Indicator which means that the AMP expenditure was not considered as a part of the operating cost. This goes to show that the AMP expenditure was not subsumed in the operating profitability of the assessee-company. Therefore, in order to determine the ALP of international transaction with its AE, it is sine qua non that the AMP expenditure should be considered as a part of the operating cost

Posted in All Judgements, Tribunal