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2016 (6) TMI 125 - ITAT CHENNAITransfer pricing adjustment - exclusion of income from annual maintenance charges from the total income - treatment to expenditure for earning the annual maintenance income - Held that:- TPO has proposed to exclude the income from annual maintenance charges from the total income. Once the income was excluded, the expenditure for earning the annual maintenance income also needs to be excluded. As rightly submitted by the Ld. D.R., it is not clear either from the assessment order or TPO’s order. This aspect was not considered by the Dispute Resolution Panel in their order. Therefore, this Tribunal is of the considered opinion that the matter needs to be verified by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to refer the issue of expenditure for maintenance charges to the Dispute Resolution Panel. In such reference, the DRP shall examine whether the expenditure said to be incurred by the assessee for earning income from annual maintenance is to be excluded or not? The Assessing Officer after receiving the report from the DRP, shall pass order in conformity with the direction of the DRP as provided in Section 144C(13) of the Act. Disallowance towards sales commission - Held that:- On perusal of the direction of the Dispute Resolution Panel, it shows that the assessee has not produced the details of the service rendered, the names and address of the commission agents and the details of the commission paid, etc. Even before this Tribunal, the details of the agents, the payment of commission are not available. The assessee claims a lump sum payment of ₹ 10,50,000/-. In the absence of any details with regard to names and address of commission agents and the commission paid, this Tribunal is of the considered opinion that the disallowance has rightly been made. It is not in dispute that an identical disallowance was made in the earlier assessment year 2010-11 on identical set of facts. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed. - Decided against assessee TDS u/s 194-I - non deduction of tds - Disallowance under Section 40(a)(i) - Held that:- This Tribunal is of the considered opinion that since the payment does not partake the character of interest, it would naturally be a business profit for the parent company. In the course of its business activity, the parent company of the assessee gives guarantee to Indian customers for performance in case the assessee-company fails to perform its obligations. The agreement, namely, performance guarantee agreement, is silent in respect of dispute resolution. An Indian company or customer naturally cannot be expected to travel all the way to Denmark for enforcing this guarantee. This guarantee agreement does not provide for any arbitration in India. Therefore, it has to be examined whether the guarantee said to be given by the parent company is enforceable in India? If it is not enforceable in India, whether such kind of agreement is for business purpose or not? It also needs to be examined when the parent company gives guarantee to Indian customers in respect of the product sold by the assessee-company in India, whether the assessee-company can be considered as permanent establishment in India in respect of the income earned by the assessee in the form of guarantee performance fee? These aspects were not considered either by the Transfer Pricing Officer or by the Dispute Resolution Panel. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, the orders of the lower authorities are set aside. The issue of performance guarantee fee is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter to the DRP. The DRP shall examine the issue in the light of the material available on record and thereafter decide the issue after giving reasonable opportunity to the assessee. Thereafter, the Assessing Officer shall pass necessary order under Section 144C(13) of the Act. - Decided partly in favour of assessee for statistical purposes.
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