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2016 (2) TMI 1340 - AT - Income TaxTP Adjustment - ALP determination - whether rate approved by the RBI prior to 1994 and cannot be considered for the purpose of Arms Length Price? - HELD THAT:- Commissioner of Income Tax (Appeals) has directed the Assessing Officer to calculate royalty at Arms Length Price @0.75% rejecting the determination by TPO. The ld. Authorised Representative explained the provisions and conditions of agreements and approval of the RBI - We on perusal of the documentary evidence filed by the Authorised Representative and also judicial decisions approving the royalty payments which the RBI prescribed, found the approval of Government of India and RBI was in 1994 and as per the terms royalty rate is calculated. The assessee company substantiated their grounds with financial statements and comparable statements. We perused the RBI letter and follow the decision in the case of Owens Corining Industries (India) Ltd . [2014 (10) TMI 651 - ITAT HYDERABAD] where it has been held that RBI approval of the royalty rates paid by assessee itself implies that the payments were at Arm’s Length. So considering the apparent facts and circumstances the ld. Commissioner of Income Tax (Appeals) has examined the issue and verified the statements and material filed and viz a viz explanations of the assessee. We, therefore are not inclined to interfere with the order of the CIT(A) on this ground. Accordingly, this ground of the Revenue is dismissed. Price variation of Arms Length Price transaction is at higher and volatile - HELD THAT:- Revenue has not brought any evidence to show that price variation is on higher side and impact on the Arms Length Price. Though ld. Authorised Representative justified his arguments with the submissions and judicial decisions. Considering the summary of module and agreements entered by the assessee company with Associated Enterprise, we find the order of Commissioner of Income Tax (Appeals) is in order and we do not interfere with the findings and uphold the findings of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the addition. This ground of the Revenue is dismissed. TDS u/s 195 - addition on account of foreign sales commission as assessee failed to deduct TDS - HELD THAT:- As perused the material on record and judicial decisions and Double Taxation Avoidance Agreements. The assessee has paid foreign commission to outside foreign agencies who do not have business establishment in India and liable for taxation in their respective countries. We rely on the Coordinate Bench decision in the case of ACIT vs. Euro Leder Fashions Ltd [2016 (1) TMI 75 - ITAT CHENNAI] as held assessee has not established the facts on record that the non-resident has rendered services at abroad and there is no business connection in India by producing relevant records, viz., either agreement entered into by the assessee with them or correspondence took between the parties. Without examining these details, we are not in a position to decide the nature of services rendered by the non-resident agent. Therefore, it is appropriate to remit the entire issue back to the file of the AO with direction to the assessee to prove that it was sales commission towards procurement of orders from abroad. Accordingly, the entire issue is remitted back to the file of the AO for fresh consideration and the AO is directed to make necessary enquiry regarding the nature of services rendered by the non-resident agent and the payments made there of - we remit the issue to the file of Assessing Officer for verification and examination and the appeal of the Revenue is partly allowed for statistical purpose. Lab analysis fees paid to non residents of US, UK and Germany - HELD THAT:- Since the services rendered outside India and payments made outside Country and does not attract TDS provisions. Alternatively u/sec.9(1)(vii) fees for technical services, the lab analysis fees will not fall into category of technical fees and also there is no permanent establishment in India to charge such income to tax. The ld. Authorised Representative demonstrated the DTAA clauses with USA, UK and Germany and such payments are outside the purview and not chargeable as per provisions of DTAA. On the other hand, the ld. Departmental Representative relied on the findings of the Commissioner of Income Tax (Appeals) that the know how was available and there was site inspection and reference was made in Audit Report on verification of training programme. We after considering the matrix of facts, judicial decisions and Audit report observed in assessment order which indicates the services are rendered in India and report was obtained in India. Therefore, we remit the issue to the Assessing Officer for limited purpose to verify the working system of Audited and consultancy work or inspection was carried by the Auditors on lab analysis and we set aside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to consider the issue and pass the order after providing adequate opportunity of hearing before passing the order on merits. In the result, the appeal of the assessee is partly allowed for statistical purpose.
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