Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (4) TMI 908 - ITAT PUNETransfer pricing adjustment - arm's length price in relation to international transactions - selection of comparable - Held that:- The assessee was engaged in the business of manufacture and sale of drive train components namely propeller shafts, universal joints, axles and components thereof which constitute heart of the transmission system. The assessee had set up units to manufacture different components at different places. Thus companies dissimilar with that of assessee in functionality will be deselected for final list of comparable. Working of operating profit margins of the assessee - rectification application - Held that:- In view of our decision in holding that there is a mistake in working out the PLI of assessee company, we direct the Assessing Officer to adopt the figure as adopted in order passed under section 154 read with Rule 13 of the DRP Rules dated 26.09.2014. The Assessing Officer is directed to verify the said claim of assessee and determine the refund due to the assessee along with interest as per the Act. The ground of appeal raised by the assessee is thus, allowed. Disallowance of Management Fees - Held that:- Where there is nexus between the expenditure incurred and the purpose of business, then the revenue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable. Applying the proposition laid down in S.A. Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT ]we hold that the expenditure incurred by the assessee on management fees in order to facilitate smooth running of its business is an allowable expenditure in the hands of assessee. Similar expenditure has been allowed in the hands of assessee in preceding year. Another aspect of the issue is that the said management fees is to be taxed in the hands of recipient and even the service tax has been paid by the recipient, evidence of which is placed in the Paper Book. Once the commercial expediency of expenditure is established, then the same is to be allowed as business expenditure in the hands of assessee. - Decided in favour of assessee Royalty paid by the assessee to its associate enterprises - TPA - Held that:- where the Royalties were paid in terms of approval granted by SIA / RBI, then the same are to be considered at arm's length rate. Following the said proposition laid down in CIT Vs. SGS India Pvt. Ltd. (2015 (11) TMI 1619 - BOMBAY HIGH COURT) and ACIT Vs. M/s. Dow Agrosciences India Pvt. Ltd. (2016 (12) TMI 936 - ITAT MUMBAI ), we hold that where the payment of Royalty by the assessee to its associate enterprise Dana Corporation is @ 2.85%is liable to be considered at arm's length rate and no addition is warranted on this count. Accordingly, the claim of assessee is thus, allowed. In any case, the jurisdiction and power of TPO is to determine arm's length price of Royalty and the order of TPO holding that the assessee had not derived any benefit under the said Agreement is beyond the scope of TPO while benchmarking the international transaction for the purpose of determining arm's length price. Accordingly, we hold so.- Decided in favour of assessee
|