TMI Blog2014 (1) TMI 1700X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the contention of the Ld. AR has force. In the facts and circumstances of the case we restore this issue to the file of AO with a direction to verify the claim of the assessee after giving the assessee a reasonable opportunity of hearing, the appropriate relief should be granted to the assessee as per provisions of law. We direct accordingly. This ground is considered as allowed for statistical purposes in the manner aforesaid. - I .T.A. No. 7720/MUM/2012 - - - Dated:- 23-1-2014 - SHRI I.P. BANSAL, JM AND SHRI SANJAY ARORA, AM For the Petitioner : Shri M.P. Lohia For the Respondent : Shri Maurya Pratap ORDER PER I.P.BANSAL,J.M: This is an appeal filed by the assessee. It is directed against assessment order dated 10/10/2012 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act). 2. In ground NO.1 to 16 the assessee is challenging transfer pricing adjustment of ₹ 18,39,718/-. During the course of hearing it was submitted by Ld. AR that the effective grounds are Ground No.11,12 16. It was also submitted that if ground No.11 12 are accepted then assessee s margin will be within the safe harbour and no ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f three years. In following two tables the position is described by TPO as under: S. No. Nature of Transaction PLI No. of Comparables As per TP Report (%) Updated PLI for FY 2007-08 PLI of the assessee (%) 1. Provision of promotion marketing services OP/OC 8 3.12 6.65 14.25 PLI is computed based on 5 comparable companies. S. No. Name of the comparable company PLI as per TP report (%) Updated PLI for FY 2007-08(5) 1. Besant Raj International Limited -13.16 Not comparable 2. Capital Trust Limited (Segmental) - 7.92 Not comparable 3. Cyber Media Events Limited 8.43 Not comparable 4. Educational Consultants (India) Limited (segmental) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98.26 0 14.56 9. ORG Informatics Ltd. (Seg) Prowess 13.61 77.02 1 2.78 10. Rites Ltd. (Seg) Prowess 353.13 84.43 3.49 25.77 11. Technicom Chemie (India) Ltd. Prowess 1.97 94.42 0 7.32 12. Vapi Waste Effluent Mgmt. Co. Ltd. Prowess 19.9 79.85 0 18.53 13. WAPCOS Ltd. Capitaline 81.97 97.55 0 40.37 Average 20.04 The TPO adopted 20.04% mean margin of the aforementioned 13 comparables as against 14.25% shown by the assessee and an addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 631,186 522,962 3. Recovery of expenses 145,957,063 Cost reimbursement 126,222,339 Total 175,816,136 152,713,033 4. Determination of ALP: (S.No.2) Availing of managerial services : ₹ 0.06 crore PGI India has received managerial services from PGI UK in the course of running business of providing promotion and marketing services. As a consideration, PGI India has paid consideration to PGI UK amounting of ₹ 631,186/-. The said fees is recovered by PGI India with a markup of 14.5%. The assessee has adopted the following methodology for determining the ALP of this transaction. The Assessee had adopted overall TNMM. PLI is the Operating Profit/Operating cost (OP/OC) The assessee is the tested party 17 companies were adopted as comparables. The assessee has earned a PLI of 14.74%, as against the Arithmetic Mean PLI of the 17 comparables of 14.82% reported in the TP report. A show case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.85 12.85 3. Choksi Laboratories 29.20 29.20 29.20 29.20 4. Genins India 9.22 9.22 9.22 9.22 5. ICRA Management 4.18 4.18 4.18 4.18 6. IDC India 15.48 15.48 15.48 15.48 7. India Cements 30.91 30.91 30.91 30.91 8. Indus Technical 14.56 14.56 14.56 14.56 9. ORG Informatics 2.78 2.78 2.78 2.78 10. Rites Ltd. (Seg) 25.77 25.77 Engineering services and turnover of 325 crores Engineering serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration and after that if assessee s margin fall within the range of safe harbour then no addition on account of this international transaction should be made. We direct accordingly. Ground No.11 and 12 are considered to be allowed for statistical purposes in the manner aforesaid and other grounds taken in this regard are not adjudicated at the request of Ld. AR for the reason that they will be rendered academic in view of the relief given to the assessee in respect of Ground No.11 12. 7. Coming to Ground No.16, this ground relates to international transaction pertaining to professional fees which is a sum of ₹ 5,22,962/-. The entire sum of ₹ 5,22,962/- is added by TPO on the ground that for claiming such payment the assessee has to prove that it had requested for services to AE and the services were actually rendered and the payment for the services was at market rate. The assessee was required to show cause as to why ALP of these transactions should not be taken at nil as assessee has failed to furnish the evidences to prove that the services were requested by the assessee and services were actually rendered. In reply the assessee submitted a letter date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CEO of PGI UK, Mr. James Courage who is also director on the Board of PGI India. These services consist of review and supervision of the promotional programs conducted by PGI India and provision of overall guidance and strategic advisory. During the said year, Mr. James Courage also visited India for the overall supervision of the India International Jewellery show, India Summer planning meeting and various sponsors visit to India. The service fee payable to PGI UK is determined on the basis of the cost of the actual time spent by Mr. James Courage on the India related work and an arm s length mark up thereon. Further, this charge is grossed up for Indian taxes. Accordingly, PGI India has incurred a sum of ₹ 522,962 which comprised of (1) the invoice raised by PGI UK for the said fees ₹ 434,084 (enclosed as Annexure 2) and (2) income tax thereon ₹ 88878. Thus it was submitted by Ld. AR that as the assessee had adopted 14.5% mark up to the cost, the same should be considered at arms length and no adjustment is required. 9. On the other hand, Ld. Dr submitted that the assessee had failed to prove the required services and actually providing of the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utation of income filed by the assessee then further addition of ₹ 33,319/- will be double addition. 13. We have heard both the parties on this issue and we are satisfied with the contention of Ld. AR. In view of addition of ₹ 1,96,050/- to the income of the assessee the separate addition made by AO of a sum of ₹ 33,319/- is required to be deleted. Therefore, we delete this addition and this ground of the assessee is allowed. 14. The next ground argued by Ld. AR was ground No.18, which reads as under: Ground No.18: not granting credit of Minimum Alternate Tax of ₹ 2,12,141/- paid by the Appellant in A.Y 2007-08. 15. It is the submission of Ld. AR that till the final order has passed by the AO the assessee cannot come to know that whether or not the relief has been granted to the assessee in respect of minimum alternate tax which was charged in respect of assessment year 2007-08. A sum of ₹ 2,28,410/- was stated to be charged in the assessment proceeding for A.Y 2007-08 on account of minimum alternate tax as computation that year was done under MAT. Ld. AR has taken us through the relevant documents showing the charges of MAT of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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