TMI Blog2022 (4) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... the education cess is an allowable deduction while computing the income from business and profession. However, in the Finance Bill, 2022 introduced in the Parliament an amendment to Section 40 was proposed by insertion of Explanation 3 with retrospective effect from 01.04.2005 clarifying that tax shall include any surcharge or cess by whatever name called . Since the legislature proposed an amendment to Section 40 with retrospective effect clarifying that cess is part of tax we are of the considered view that this issue has to be examined by the Assessing Officer in the light of the proposed amendment and also keeping in view various decisions on the issue. Thus, we restore this ground to the file of the Assessing Officer to decide afresh in accordance with law. - I.T.A. Nos. 29 & 30/DDN/2020 - - - Dated:- 17-3-2022 - SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER And SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For the Appellant : Ajay Vohra, Sr. Adv. and Manisha Sharma, Adv. For the Respondents : Sanjay Pandey, CIT-DR ORDER Per C N Prasad JM These two appeals are filed by the Assessee against the orders of the Assessing Officer passed u/s. 143(3)/144C(13)/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and in facts in treating only that portion of Appellant's expenditure which is approved by the JOB under the PSC as a CUP for the services received from its AE in utter disregard of Rule 10B of the Rules. 7. The Ld. TPO/AO/DRP has erred in law and facts in questioning whether any services have been rendered to the Appellant by BGIL as the same is beyond the purview of the powers of the Ld. AO/TPO/DRP. 8. The Ld. TPO/AO/DRP has erred in law and facts in questioning the commercial rationale of the Appellant in making payments to BGIL and in ignoring the intricacies and skill level required in oil and gas industry. 9. The Ld. TPO/AO/DRP has erred in law and facts in ignoring the fact that payments made by the Appellant to BGIL merely represented costs associated with services rendered by BGIL without any element of mark-up. 10. The Ld. TPO/AO/DRP has erred in law and facts in not giving due consideration to the fact that the cost only recharge by BGIL was also certified by statutory auditor of BGIL viz M/s. Price Waterhouse Coopers as well as an independent external consultant viz M/s. Lancaster MacLean, and that all costs allocated to the Appellant were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. The Ld. TPO/AO/DRP has erred in law and facts in disallowing the payments made by the Appellant to BGIL on account of general and administrative charges (including third party charges of INR 1,51,54,714) amounting to INR 11,05,79,417. 19. The Ld. TPO/AO/DRP erred in not appreciating the fact that the payment made towards services in the nature of intra-group services are intrinsically and closely linked to Appellant's main business operations of prospecting, exploration and production of crude oil and natural gas; and erred in analyzing the said transacts separately for determination of arm's length price ('ALP'). 20. The Ld. TPO/AO/DRP has erred in law and facts in ignoring that the Appellant had, in adherence with Rule 10C(1) of the Income-tax Rules, 1962 and in light of the facts and circumstances of the case, adopted the Transactional Net Margin Method ('TNMM') as the most appropriate method in its transfer pricing study to benchmark the international transactions pertaining to payments made to BGIL for services availed and that the Appellant had earned an operating margin of 66.64% on gross revenues vis- -vis an arithmetic mean margin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32.16% earned by the comparable companies. 29. The Ld. TPO/AO/DRP has erred in law and facts in holding that the Comparable Uncontrolled Price Method ('CUP') is the most appropriate method for benchmarking payments made by the Appellant for availing services from BGIL. 30. The Ld. TPO/AO/DRP has erred in law and in facts in treating only that portion of Appellant's expenditure which is approved by the JOB under the PSC as a CUP for the services received from its AE in utter disregard of Rule 10B of the Rules. 31. The Ld. TPO/AO/DRP has erred in law and facts in questioning whether any services have been rendered to the Appellant by BGIL as the same is beyond the purview of the powers of the Ld. AO/TPO/DRP. V. Payments made on account of business auxiliary services to BG Gas India Pvt. Ltd. ('BGIL') 32. The Ld. TPO/AO/DRP has erred in law and facts in disallowing the payments totaling to INR 18,79,80,857, made by the Appellant to BGIPL on account of receipt of business auxiliary services. The aforesaid services include: - Legal services - Assistance incorporate and strategic affairs - Business development - Other assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same in the hands of the Appellant amounts to double taxation. 42. The Ld. TPO/AO/DRP has erred in law and facts in contending that no service has been received by the Appellant and concluding that the additional documentation/supporting does not convey any specific evidence of services received by the Appellant. VI. Disregarding the directions issued by the office of Hon'ble DRP and Hon'ble Income Tax Appellate Tribunal ('ITAT') in the Appellant's own case for the subsequent years. i. The Ld. TPO/AO/DRP erred in passing the transfer pricing order completely disregarding the directions issued by the office of the Hon'ble DRP in the Appellant's own case for the subsequent years i.e. AY 2009-10 and AY 2010-11. ii. The TPO/AO/DRP erred in passing the transfer pricing order completely disregarding the ruling of the Hon'ble Delhi ITAT in the Appellant's own case for the subsequent years i.e. AY 2009-10 to AY 2012-13. VII. Short grant of interest under section 244A of the Act The Ld. AO erred in not granting interest of INR 75,59,882 for the period April 2009 to June 2009 under section 244A notwithstanding that refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Associated Enterprises (AE). 3. At the time of hearing, Ld. Sr. Counsel of the assessee has submitted that an identical issue has been considered by this Tribunal in assessee's own case for the AYs 2013-14 and 2014-15. He has also pointed out that the DRP while passing the directions has also followed the earlier directions of the DRP for the AY 2013-14 and 2014-15. Ld. Counsel has submitted that this issue is covered by the decision of this Tribunal in assessee's own case for the AYs 2010-11 to 2014-15. 4. On the other hand, Ld. DR has relied upon the order of the Assessing Officer and fairly admitted that for the preceding assessment years, the Tribunal has decided identical issue in favour of the assessee. 5. Having considered the rival submissions and on careful perusal of the relevant record, we note that an identical issue has been considered by this Tribunal in assessee's own case for the AYs 2010-11 to 2014-15. Thus, it is clear that this Tribunal has taken a consistent view on this recurring issue. In the latest decision for the AY 2013-14 and 2014-15 vide order dated 03.04.2019, the Tribunal has considered and decided this issue in para 14 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee submits that the Assessing Officer erred in not granting interest of ₹ 75,59,882/- for the period April, 2009 to June, 2009 u/s. 244A though refund was determined in March, 2009 while passing the intimation u/s. 143(1), whereas the interest was granted only from 26.06.2009. Therefore, it is submitted that necessary directions may be issued to the Assessing Officer to correctly compute the interest u/s. 244A of the Act. The DR has no serious objection for such directions. On hearing both the sides, we direct the Assessing Officer to look into the plea of the assessee and decide the same in accordance with law. This ground is allowed for statistical purpose. 9. Ground no. (VIII) relates to deduction in respect of education cess paid. The Ld. Counsel for the assessee submits that this issue also was decided in favour of the assessee by the Tribunal in its order in ITA No. 07/DDN/2021 dated 14.12.2021 for the AY 2016-17 and, therefore, the same may be allowed. 10. Heard rival submissions and perused the order of the Tribunal. We noticed that the Tribunal following the decision of the Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in not appreciating the fact that the payment made towards services in the nature of intra-group services are intrinsically and closely linked to Appellant's main business operations of prospecting, exploration and production of crude oil and natural gas; and erred in analyzing the said transactions separately for determination of arm's length price (ALP) 4. The Ld. TPO/AO/DRP has erred in law and facts in ignoring that the Appellant had, in adherence with Rule 10C(1) of the Income-tax Rules, 1962 and in light of the facts and circumstances of the case, adopted Transactional Net Margin Method ('TNMM') as the most appropriate method in its transfer pricing study to benchmark the international transactions pertaining to payments made to BGIL for services availed. 5. The Ld. TPO/AO/DRP has erred in law and facts in holding that the Comparable Uncontrolled Price Method ('CUP') is the most appropriate method for benchmarking payments made by the Appellant for availing services from BGIL. 6. The Ld. TPO/AO/DRP has erred in law and in facts in treating only that portion of Appellant's expenditure which is approved by the JOB under the PSC as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in disregarding the evidences furnished by the Appellant in relation to the receipt of technical services from BGIL. 17. The Ld. TPO/AO/DRP has erred in law and facts in not giving due consideration to the evidences furnished by the Appellant in relation to receipt of technical services from BGIL. 18. Without prejudice, the Ld. AO/TPO/DRP ought to have allowed deduction for the taxes deposited by Appellant with the tax authorities on account of services received from BGIL. Payments made on account of management and service unit charges to BGIL (forming part of Total MSU charges) 19. The Ld. TPO/AO/DRP has erred in law and facts in disallowing the payments made by the Appellant to BGIL on account of management service and unit charges amounting to INR 42,50,36,004. The aforesaid cost recharges include: - Information management ('IM') recharges - Executive Vice President ('EVP') expense allocation - Human Resource International - International Accounting - Insurance - Taxation - Marketing - ICDN, cost control and finance services - Others (strategy, communications, etc.) 20. The Ld. TPO/AO/DRP has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules. 29. The Ld. TPO/AO/DRP has erred in law and facts in questioning whether any services have been rendered to the Appellant by BGIL as the same is beyond the purview of the powers of the Ld. AO/TPO/DRP. 30. The Ld. TPO/AO/DRP has erred in law and facts in not giving due consideration to the project specific SSAs furnished by the Appellant in relation to receipt of specific call out technical services from BGIL. 31. Without prejudice, the Ld. AO/TPO/DRP ought to have allowed deduction for the taxes deposited by Appellant with the tax authorities on account of services received from BGIL. IV. Payments made on account of reimbursement of expenses to BGIL 32. The Ld. TPO/AO/DRP has erred in law and facts in disallowing expenses reimbursed by the Appellant to BGIL amounting to INR 2,70,95,526 on account of receipt of specific call out technical services incurred by BGIL. 33. The Ld. TPO/AO/DRP erred in not appreciating the fact that the payment made towards services in the nature of intra-group services are intrinsically and closely linked to Appellant's main business operations of prospecting, exploration and production of crude oil and natural g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in ignoring that the Appellant had, in adherence with Rule 10C(1) of the Income-tax Rules, 1962 and in light of the facts and circumstances of the case, adopted the TNMM as the most appropriate method in its transfer pricing study to benchmark the international transactions pertaining to payments made to BGIPL for services availed. 42. The Ld. TPO/AO/DRP has erred in law and facts in holding that CUP is the most appropriate method for benchmarking payments made by the Appellant for availing proprietary services from BGIPL. 43. The Ld. TPO/AO/DRP has erred in law and in facts in treating only that portion of Appellant's expenditure which is approved by the JOB under the PSC as a CUP for the services received from its AE in utter disregard of Rule 10B of the Rules. 44. The Ld. AO/TPO/DRP has erred in law and facts in questioning whether any services have been rendered to the Appellant by BGIPL as the same is beyond the purview of the powers of the Ld. AO/TPO/DRP. 45. The Ld. TPO/AO/DRP has erred in law and facts in questioning the commercial rationale of the Appellant in making payments to BGIPL for services availed by the Appellant. 46. The Ld. TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment on account of intra-group services. Similar grounds have been adjudicated by us for the AY 2007-08 in the above paragraphs in favour of the assessee following the order of the Tribunal in Assessee's own case. For the reasons given therein the decision taken by us for AY 2007-08 applies mutatis mutandis to the grounds raised by the assessee on adjustment made towards intra group services for AY 2008-09. We order accordingly. Grounds (II) to (VI) are allowed. 13. Ground no. (VII) relates to deduction of education cess while computing the income of the Assessee. We have restored this issue to the file of the Assessing Officer for denovo adjudication, keeping in view the amendment inserted in the Finance Bill, 2022 and also various decisions on the issue while disposing of the appeal of the AY 2007-08. For the reasons mentioned therein this ground is restored to the file of the AO for fresh adjudication in accordance with law. This ground is allowed for statistical purpose. 14. In ground no. (VIII) the assessee contends that AO erred in considering refund of ₹ 21.32 crores as already been granted to the assessee on 24.03.2010, whereas the assessee has not recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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