TMI Blog2022 (5) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... CA reveals that the AO may refer the computation of the ALP in relation to the international transaction, with the previous approval of the Commissioner. Where a reference is made to the TPO, he will allow the assessee to produce the evidence in support of the computation made by the assessee of the ALP of the international transaction. After hearing such evidence etc. and after taking into account all relevant materials, the TPO shall pass an order in writing determining the ALP in accordance with Section 92C(3) and send a copy of his order to the AO and to the assessee. The decision of Bangalore Bench of Tribunal in Herbalife International India (P) Ltd. [ 2015 (10) TMI 2794 - ITAT BANGALORE] applies with full force to the case at hand before us. The crux of the matter is that once the transaction is undisputedly subject matter of chapter X 'Special Provisions relating to Avoidance of Tax' of the Act, then other general provisions of the Act cannot be applied simultaneously. We, therefore, hold that the arguments of the Ld. DR is bereft of any legal substance.Perusal of the appellate order of the Ld. CIT(A) extracted in para 4 above reveals that the Ld. CIT(A) recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary of EMCOR Facilities Services Group Ltd., UAE ( EMCOR Group ), the ultimate holding company of the assessee. The assessee deals in Specialist Engineering Services. The assessee undertakes annual maintenance contract of all utility equipment either through the Original Equipment Manufacture or by self-performance. The assessee has a capability to self-perforce Electrical Panel, Transformer, Air Handling, Units, Pumps, Water Treatment Plant, Cooling Tower, Ductable AC Units etc. 3.1. The assessee filed its return of income declaring a loss of ₹ 4,78,16,076/- on 29.11.2013. The case was selected for scrutiny through CASS. Statutory notices alongwith questionnaire were issued which were duly responded by the assessee. The assessee submitted details/documents which were placed on record of the Ld. Assessing Officer ( AO ). The books of accounts of the assessee were called for and examined by the AO on test check basis. 3.2. During the previous year relevant to the assessment year 2013-14 the assessee entered into the following international transactions with its Associated Enterprises ( AEs ):- S. No. Type of Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econdment 34,11,787.50 Intra Group Service-Executive time 84,20,984.08 Cost Recharge for Expenses-with Mark-up 6,08,907.17 Total 3,11,06,565.00 Over and above the addition of ₹ 46,41,736/- as proposed by the Ld. TPO, the Ld. AO further made an addition of ₹ 3,11,06,565/- on account of disallowance of support service charges paid by the assessee to EMCOR Group by observing, inter alia that the assessee has failed to prove with evidence that the expenditure for support service charges has been incurred by the assessee for the purposes of its business and that the ultimate holding company (EMCOR Group) has actually rendered services to the assessee. 4. On appeal the Ld. CIT(A) deleted the addition of ₹ 3,11,06,565/- made by the Ld. AO in respect of support service charges by recording the following findings:- 3.1 I have considered the TP Order, the assessment order, the TP study of appellant and the submissions of appellant. The appellant has produced detailed agreements, invoices and debit notes towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into an agreement with EMCOR Group, whereby' EMCOR Group had seconded its employee to work with EFS India to facilitate transition from DIPL, under the ownership of Dalkia International, to EFSI, under the ownership EFS Group. Further, the seconded employee is also to assume the position of Financial and Commercial Manager of EFSI. An agreement (Secondment agreement) has been entered into between EFS India and EMCOR Group for the secondment of Mr. Ashish Bhatia. This agreement is of date September 21, 2012 and is annexed to the statement. Article 1 of the agreement relates to the purpose of the agreement reads as under (relevant part): 1.1 Whilst seconded on a full time basis, seconded may continue to work for EFS 1.2 The Seconded employee shall be based at EFS's office at New Delhi. Article 3 relates to the employment situation/subordination. Relevant portion of the article provides as under: During the time of its secondment, the seconded employee shall continue to be paid his salary by EMCOR Article 6 related to the consideration for the seconded employee which EMCOR Group will charge from EFS India: EMCOR shall, in turn, invoice EF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India is not an allowable expense in any assessee. It is not possible for this office to decide whether the non-resident have any permanent establishment in India or not. This can only be decided by the respective assessing officer in India. The assessee also failed to establish what tax treatment have been done by those non-residents while filing their income tax return in India. So I have no other option other than to proceed based on the facts and material available on the records and disallow TDS in the hand of assessee being income tax liability of the non-resident i.e. M/s. Emcore Facilities Services Group Limited u/s. 40(a) of the Act. - The Hon'ble Mumbai ITAT in case M/s. Bob Cards Ltd., Mumbai vs. Department Of Income Tax on has held that We have heard the rival submissions and perused the material placed before us in the case under consideration. AO has admitted that from the agreement entered into between the assessee-company and the Master/VISA Card agencies, the assessee company had to bear the tax liability. Payment of TDS was made in pursuance of the agreement entered in to between the assessee company and the VISA/Master card International. In our o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of ₹ 34,11,787/- and business restructuring of ₹ 12,29,949/-, these issues should not have been re-examined by the assessing officer afresh. Considering the above discussion and judgments quoted by the appellant, assessing officer is directed to delete the disallowance of ₹ 3,11,06,565/-. The ground of appeal is allowed. 5. Aggrieved, the Revenue is in appeal before us challenging order of the Ld. CIT(A) for the deletion of disallowance/addition of ₹ 3,11,065,565/- made by the Ld. AO. 5.1. The Ld. DR defended the action of the Ld. AO in making the impugned addition. He submitted that the Ld. CIT(A) admitted the evidence of the agreements (i.e. License agreement and Secondment agreement between the assessee and EMCOR Group) ( Agreements ) without allowing an opportunity to the Ld. AO to examine the same. He vehemently argued that by making reference to the TPO, the Ld. AO is not debarred from applying any of the provisions of the Act to determine the correct tax liability of the assessee. The Ld. DR alleged that the Ld. TPO did not apply his mind to the payment of ₹ 3,11,06,565/- by the assessee to EMCOR Group. 5.2. The Ld. AR assailed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AO added back the said amount of ₹ 46,41,736/- to the income of the assessee under section 92CA(4) of the Act. It is also observed that during the course of assessment proceedings, the assessee submitted the Agreements which were perused by the Ld. AO (para 4.3 of the Ld. AO's order) who took notice of the nature of services (support services and other specialised services) rendered to the assessee by the recipient of the impugned amount of ₹ 3,11,06,565/- namely EMCOR Group. However, the Ld. AO disallowed the said expenditure for the reason that he was not satisfied that it was incurred for the purposes of business of the assessee and that the services were actually rendered to it. 6.1. In the backdrop of the above factual matrix we do not find any substance in the arguments advanced by the Ld. DR that the Ld. CIT(A) admitted evidence of Agreements without affording opportunity to the Ld. AO as the same were already on the records of the Ld. AO which he duly mentioned in his assessment order. We are also unable to convince ourselves that the Ld. TPO did not apply his mind to all the international transactions entered into by the assessee with its AEs while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision reveals that the AO may refer the computation of the ALP in relation to the international transaction, with the previous approval of the Commissioner. Where a reference is made to the TPO, he will allow the assessee to produce the evidence in support of the computation made by the assessee of the ALP of the international transaction. After hearing such evidence etc. and after taking into account all relevant materials, the TPO shall pass an order in writing determining the ALP in accordance with Section 92C(3) and send a copy of his order to the AO and to the assessee. 6.4. Sub-section (4) of section 92CA is substituted in the statute book w.e.f. 1.6.2007. Prior to its substitution sub-section (4) read as under:- (4) On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C having regard to the arm's length price determined under sub-section (3) by the Transfer Pricing Officer. The amended sub-section (4) provides that on receipt of the order of the TPO, the AO shall proceed to compute the total income of the assessee under section 92C(4) in conformity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly suggested to Employees Secondment of ₹ 34,11,787/- and Business Restructuring of ₹ 12,29,949/- and therefore, these issue should not have been re-examined by the AO afresh. We entirely agree with above findings of the Ld. CIT(A). We are of the view that the Ld. CIT(A) has deleted the impugned addition of ₹ 3,11,06,565/- made by the Ld. AO after recording cogent reasons backed by precedents. We, therefore, decline to interfere with the order of the Ld. CIT(A). 8. In the result, the appeal of the Revenue for assessment year 2013-14 fails and is dismissed. 9. We now take up the Revenue's appeal for assessment year 2014-15. It relates to disallowance of Support Service charges of ₹ 2,56,09,858/- paid by the assessee to its ultimate holding company (EMCOR Group) and consequent addition to the income of the assessee. For this year the Ld. AO did not make reference to the TPO and made the impugned addition following his order of the preceding year. On appeal, the assessee submitted that assessee availed the various services from EMCOR Group and made payment of ₹ 1,78,33,609/- being Technical Support Fee and payment of ₹ 77,76,249/- being I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollaboration agreement to provide technical know-how but not to furnish any secret or patented process to assessee or to allow assessee to use, collaborators' trade mark or name were to be treated as revenue expenditure. Also, the assessee has deposited TDS on the same. Considering the above, the expenses can be regarded for business use and held to be revenue in nature. 2.2 With respect to Intra Group Services Executive time, based on the documents provided by the appellant, EFS India required a comprehensive range of management skills and other specialized services for ensuring reliable and continuous supply of services to its clients in India. Thus, EMCOR Group agreed to provide EFS India with such management and other specialized services so as to help EFS India in carrying out its operations effectively in India. These services include: a. Management and Personnel Management b. Information Systems c. Financial and Accounting advice d. Advice and technical support e. Credits and risk f. Marketing Services Considering the nature of services availed by EFS India and the fact that TDS has been deposited on the expense, the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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