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2015 (5) TMI 645 - AT - Income TaxTransfer pricing adjustment - allocation of expenses for receipt of technical services from AE - Held that:- Though the TPO/Assessing Officer has the power and jurisdiction to verify the price paid by the assessee at arm’s length, however, instead of examining whether the price paid by the assessee is at arm’s length, the TPO proceeded on the premise that the assessee was not in need of the services and the services was not actually availed by the assessee. When the assessee has produced the sufficient evidence that the said services was an inevitable part of the business activity of the assessee then the action of the TPO is not sustainable. Accordingly, we set aside the orders of authorities below qua this issue. Since the assessee has produced the invoices which is based on the per hour charges actually spent by the engineer for providing the services to the assessee, therefore, the test of cost sharing arrangement between the assessee and AE as contended by Ld. DR are not at all relevant on this point because the assessee was charged specifically for the hours spent by the engineer for providing the services. It is not a case of performing the composite activities of the assessee and AE by the common staff and then sharing the cost . The cost was incurred by the AE exclusively for providing the services to the assessee then the principle and test as contended by the Ld. DR would not be applicable. The assessee has also produced the comparative cost charged by the AE from other group concerns. In the absence of any contrary record brought by the TPO/Assessing Officer to show that the price paid by the assessee is not at arm’s length we allow the claim of the assessee. - Decided in favour of assesse. TP adjustment on account of commission for securing the contract in India - Held that:- On principle, we do agree with the claim of the assessee that he said amount of commission was obligation of the AE (Malaysia) for securing the project and once the project was transferred to the assessee for execution and in turn the assessee has earned a handsome revenue from the said project then the liability of payment of commission was fastened on the assessee being a contractual obligation. Therefore, denial of the claim of the assessee is not justified which in total disregard of the evidence produced by the assessee. The assessee has also produced the evidence of actual payment of amount in question after deduction of TDS. The only question which remains unanswered is whether the amount in question was in turn paid by the Malaysian AE to the agent. The assessee has not produced any evidence in this respect that the amount was finally paid to the third party being LTC technical works. Hence he accept the claim of the assessee subject to the verification of corresponding payment by the Malaysian AE to the agent namely LTC technical works. Accordingly, the Assessing Officer/TPO is directed to verify this fact from the record to be filed by the assessee and then consider the claim in the light of above observation - Decided in favour of assesse for statistical purposes. Disallowance of depreciation on software - Held that:- There is no element of any mark up or profit by the parent company of the assessee. It was a mere reimbursement of the cost of the software in question. So far the need and benefit of the software in question for the assessee’s business activity is concerned, the assessee has brought on record how the software was useful for day to day business of the assessee as not only it is useful but it is inevitable for certain activities to have the access to the drawings provided by the clients which is used as source information by the assessee to start with the project. It is pertinent to note that without knowing the details of the project, the assessee could not even participate in the tender. Therefore, the software which enables the assessee to open the graphics/design and drawings of the projects is very much essential for day to day business activity of the assessee. Thus, we are of the view that the disallowance of depreciation by the DRP is only on the basis of assumptions by disregarding the relevant facts as well as the evidence brought on record by the assessee. Accordingly, we set aside the orders of authorities below on this issue and allow the claim of depreciation. - Decided in favour of assesse. TP adjustment on account of Travel expenses - Held that:- Visit and stay of Mr. Stan Wojicierczk, in India was along with Managing Director of the assessee Mr. Raj Lakhani. The assessee furnished the complete details and vouchers in respect of the expenditure. Further the payment details were also furnished which show that the expenses were initially incurred by Mr. Stan Wojicierczk. Therefore, when the entire expenditure was incurred for hotel stay and travel of both Mr. Stan Wojicierczk and Mr. Raj Lakhani then reimbursement of 50% of the expenses does not involve any payment to the AE but it was reimbursement of expenses. Since the Assessing Officer/TPO has disallowed the claim and treated the ALP at nil for want of details and evidence, therefore, in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of Assessing Officer/TPO to consider the evidence furnished by the assessee and then decide the same after giving an opportunity of hearing to the assessee. Decided in favour of assesse by way of remand.
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