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2014 (9) TMI 276 - AT - Income TaxTransfer pricing adjustment - Software development services – Held that:- The application of CUP method has been rejected by the TPO as the most appropriate method and a corroborative internal TNMM by relying on the view taken by him in the preceding year – as decided in assessee’s own for the earlier assessment year, it has been held in Hughes Systique India Pvt. Ltd. Versus ACIT, Circle 12(1), New Delhi [2013 (8) TMI 812 - ITAT DELHI] - the internal CUP should be applied and if, for any reasons the CUP method cannot be applied, then TNMM should be resorted to - the CUP method can be used only if the products or services of the assessee are comparable to those of the other uncontrolled transaction - it is of utmost importance to first precisely determine the nature of services offered by the assessee to its AEs in order to make an effective comparison with the services rendered by it to the non-AEs - Unless the nature of services rendered by the assessee to its AEs and non-AEs is accurately ascertained, there can be no question of making a meaningful comparison – thus, the matter is to be remitted back to theAO/TPO for a fresh determination of the ALP of the international transactions – Decided in faovur of assessee. International transaction in the nature of ‘Marketing support services’ – Held that:- The Tribunal for the immediately preceding two AYs restored the matter to the file of AO/TPO for a fresh determination of ALP under this segment as well - The directions given by the tribunal were common to both the segments, namely, Software development services segment and Marketing support services – the matter is remitted back to the AO/TPO for fresh determination – Decided in favour of assessee. Excess claim of depreciation on computer UPS and other peripherals – rate of depreciation to be @ 60% or 15% - Held that:- Following the decision in CIT Vs BSES Rajdhani Powers Ltd. 2010 (8) TMI 58 - DELHI HIGH COURT] - UPS and other computer peripherals are eligible for depreciation @ 60% - Decided in favour of assessee. Addition u/s 40(a)(ia) - Management fees paid – Article 12 Indo-US DTAA - Held that:- In order to make a disallowance by invoking section 40(a)(i), it is sine qua non that apart from other things, the amount which is paid to the person outside India should be the one on which tax is deductible at source and such tax has not been deducted or not paid after deduction - unless the amount paid by the assessee in India is not chargeable to tax in the hands of the resident of other country, there can be no question of invoking section 195 and consequently section 40(a)(i) of the Act - consideration for ‘Managerial services’ is chargeable to tax in India as per Expl.2 to section 9(1)(vii) - the foreign AE rendered services in USA, which were consumed there itself - By rendering such services, nothing was made available to the assessee for use in future - As the foreign AE has not made available any technical knowledge, experience, skill etc. to the assessee for use in present or in future, the consideration for such services cannot be brought within the ambit of ‘making available’ of anything to the assessee, so as to considered as ‘Fees for included services’. The provisions of the DTAA or the Act, whichever are more beneficial to the assessee, are to be applied - the amount is chargeable to tax as per section 9(1)(vii) of the Act in the hands of the foreign AE on standalone basis, but going by Article 12(4) of the DTAA, it is clear that the payment cannot be considered as ‘Fees for included services’ so as to be charged to tax in the hands of foreign AE - once the amount is not chargeable to tax in India as per Article 12 of the DTAA, there can be no question of imposing any liability on the payer assessee to make deduction of tax at source – thus, the provisions of sec. 40(a)(i) cannot be invoked – Decided in favour of assessee.
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