Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2012 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (10) TMI 177 - AT - Income TaxArms Lenth Price - Allocation of 80% of unbilled hours to the Associated Enterprise - assessee submission that he suffered losses in the aftermath of bomb attack on World Trade Centre on 9/11 in US - Held that:- CIT (A) even though accepts the fact that the difference in man hours paid to the AE and billed to the clients is due to recession and slump in software industry after the 9/11 incident, he nevertheless making his own interpretation of the agreement came to a conclusion that assessee can be allowed benefit at 20% out of the loss arising from payment made for extra 3500 man hours as the AE had four times risk in the transactions.The aforesaid conclusion of the CIT (A) is without a reasonable basis. When the assessee has paid to the AE for a minimum of 25 persons as per the terms of the agreement whereas it could bill its client for 10 persons the CIT (A) was not justified in coming to the conclusion that the assessee could be given benefit of 20% out of the loss arising on account of excess payment made for 3500 man hours. It is a fact that assessee's business suffered due to recession as result of 9/11 incident and assessee ultimately had to close down its operations. The CIT (A) also does not dispute this fact. Thus finding force in assessee's contention that assessee's income being exempt there was no need on its part to transfer its income to its AE whose profit was taxable. The assessee has demonstrated before us the ALP at Rs.12,99,42,172/- after deducting cost of 1370 man hours @61.39USD and the payment made by it to the AE to be within +/-5% of the ALP range which are inclined to accept. Thus the order of CIT (A)is set aside and AO is directed to verify the invoices raised by the assessee on its clients and invoices raised by the AE on the assessee to find out the actual unbilled hours lost in November, 2001. If the assessee's claim will be found to be correct, then no addition can be made under the Transfer Pricing Regulations - in favour of assessee for statistical purposes.
|