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DATE: April 21, 2017 (Date of pronouncement)
DATE: April 21, 2017 (Date of publication)
AY: 2010-11
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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

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 17, 2016 (Date of publication)
AY: 2004-05 to 2007-08
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CITATION:
Conduct of the Counsel in making selective reference to the Tribunal’s order in “very deceitful manner” is “highly deplorable”. Attempt to re-argue matter is “clear case of abuse of process of court” and is condemned “in no uncertain terms as it resulted in colossal waste of valuable time of this Tribunal”. Verdict in Dr. T.K. Dayalu (202 TM 531 (Kar) on taxability of development agreements is “not good law” in view of CIT vs. N. Vemanna Reddy (Kar)

We highly deplore the attempts of the petitioner to knock the doors of the Tribunal again in the guise of seeking rectification of order alleging that additional ground of appeal was not decided. As mentioned supra, the additional grounds have been specifically adjudicated and a specific finding had been rendered vide para.9 of the impugned order. Attempts made by the petitioners is nothing but clear case of abuse of process of court and in breach of principles of Res Judicata. We condemn this conduct of petitioner in no uncertain terms as it resulted in colossal waste of valuable time of this Tribunal

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DATE: February 5, 2016 (Date of pronouncement)
DATE: March 3, 2016 (Date of publication)
AY: 2009-10, 2010-11
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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

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DATE: September 28, 2015 (Date of pronouncement)
DATE: October 9, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 48: In computing "capital gains" the AO is not entitled to substitute the "market value" for the actual "consideration" received by the assessee. He also cannot disregard the valuation report without cogent material

It is settled position of law that in the case of sale, the Assessing Officer has no power to replace the value of the consideration agreed between the parties. A report of a valuer is an important piece of evidence and the same cannot be discarded without there being any cogent material on record showing that the report of the valuer is not correct

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 40(a)(ia)/ 194A/ 197A(1A): If payer obtains declarations in Form 15G/ 15H, tax is not deductible at source. Failure to furnish such declarations to CIT may attract penalty u/s 272A(2)(f). However, disallowance u/s 40(a)(ia) cannot be made

The assessee has received such Forms as prescribed from those persons to whom interest was paid/being paid and accordingly no deduction of tax was to be made in such cases. The default for non-furnishing of the declarations to the Commissioner of Income-tax as prescribed may result in invoking penalty provisions under section 272A(2)(f), for which separate provision/procedure was prescribed under the Act. However, once Form 15G/ Form 15H was received by the person responsible for deducting tax, there is no liability to deduct tax. Once there is no liability to deduct tax, it cannot be considered that tax is deductible at source under Chapter XVII-B as prescribed under section 40(a)(ia)

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DATE: April 22, 2015 (Date of pronouncement)
DATE: July 27, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 41(1)/ 68: Unclaimed liabilities to creditors, even if fictitious and bogus, cannot be assessed u/s 41(1) in the absence of a write-back. The bogus credits can be assessed u/s 68 only in the year the credits were made and not in the year they are found to be not payable

Applying the ratio in the cases mentioned supra, the amount in question cannot be brought to tax in the year under appeal under the provisions of Section 41(1) of the Act. It is trite law that an addition under Section 68 can be made only in the year in which credit was made to the account of the creditors in the books of account maintained. Admittedly, in this case the credit to the account of creditors was made in the earlier years and therefore, the amount even cannot be brought to tax under Section 68 in the year under appeal. However, it is open to the Department to levy tax on such amount by resorting to the remedies available under the provisions of Act by duly following the procedure known to the law

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DATE: July 15, 2015 (Date of pronouncement)
DATE: July 21, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 68: If the assessee has furnished the details of the creditors with their PAN, the onus is on the AO to examine their credit-worthiness and source of payment to assessee

If at all the A.O. or CIT(A) had any doubt with regard to creditworthiness of the creditors, it should have triggered an enquiry by the A.O. to find out the real facts. When the identity of the creditors along with their income tax particulars including PAN and assessment details were available with the A.O. it would not have been difficult on the part of the A.O. to verify their bank accounts and other details to ascertain whether the advances were from explained sources. Even the A.O. could have taken up the issue with the concerned A.Os with whom the creditors are assessed

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DATE: July 10, 2015 (Date of pronouncement)
DATE: July 20, 2015 (Date of publication)
AY: 2003-04
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CITATION:
Transfer Pricing: For the purpose of benchmarking the international transactions, the effect of underutilization of capacity/excess fixed costs has to be eliminated while computing the operating margins of the assessee

Under-utilization of production capacity in the initial years is a vital factor which has been ignored by the authorities below while determining the ALP cost. The TPO should have made allowance for the higher overhead expenditure during the initial period of production. The claim of the assessee with respect to idle capacity adjustment during the relevant period while determining the ALP cost. Economic adjustment on account of under capacity utilization when the assessee was in start up phase has to be considered

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DATE: July 8, 2015 (Date of pronouncement)
DATE: July 20, 2015 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on taxability of "fees for technical services" under the "make available" clause of the DTAA explained

Services can be said to ‘make available’ technical knowledge etc, where such technical knowledge is transferred to the person utilizing the service (i.e. the appellant in the instant case) and such person is able to make use of the technical knowledge etc, by himself in his business or for his own benefit and without recourse to the performer of services (i.e OlofGranlund) in the future. The mere fact that provision of service may require technical knowledge by the person providing the service would not per se mean that knowledge has been made available

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DATE: June 30, 2015 (Date of pronouncement)
DATE: July 8, 2015 (Date of publication)
AY: 2011-12
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CITATION:
S. 2(15)/ 11: Important principles of what is a "charitable purpose" and the scope of the proviso to section 2(15) of the Act explained

As regards the proviso to Section 2(15) of the Act, it is clearly discernible from the CBDT’s Circular No.11 of 2008, dated 19.12.2008 and speech of the Hon’ble Finance Minister that the intention of Parliament in introducing the proviso to Section 2(15) of the Act is to deny exemption to those organizations or entities, which are purely commercial or business in nature or the commercial business entities, which wear the mask of a charity. The genuine charitable organizations are not affected in any way

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