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2019 (3) TMI 1579 - AT - Income TaxTP adjustment on account of payment of management service fees - case of AO / TPO / DRP was that services have not been provided by Sandvik AB, Sweden and also no tangible benefits were derived by the assessee from such services - HELD THAT:- Tribunal in [2017 (6) TMI 1290 - ITAT PUNE] had considered evidences filed by assessee in the form of e-mails and have come to a finding that services have been provided by Sandvik group entities in accordance with terms of agreement and were actually rendered by associated enterprises. CIT(A) has also acknowledged the services being rendered by group companies other than Sandvik AB. He has also commented that the services were not in the field of managerial but were technical in nature. In such scenario, we find no merit in the orders of authorities below and reversing the same, we hold that no addition is warranted in the hands of assessee on account of transfer pricing adjustment on the aforesaid transaction of payment of managerial services to Sandvik AB and Sandvik Middle East FZE, UAE. The grounds of appeal raised by assessee are thus, allowed. Adjustment made in the Distribution Segment - assessee was applying TNMM method in all the different segments and for each of the segments, segmental details were prepared and filed to justify the arm's length price of international transactions undertaken in each of the segment - HELD THAT:- The perusal of order of DRP reflects that the findings of DRP are based on the findings of DRP in assessee’s own case for assessment year 2010-11. The Revenue however, did not file any appeal against the findings of DRP in assessment year 2010-11 vis-à-vis inclusion of TIL Ltd. and The Yamuna Syndicate Ltd. and exclusion of Solitaire Machine Tools Ltd. The necessary documents in this regard have been filed on record; where the said companies were held to be functionally comparable and there is no change in their functionality, then the said concerns are to be included as comparables. In view thereof, there is no merit in the grounds of appeal No.1 and 2 raised by Revenue and the same are dismissed. Working capital adjustment - TPO had rejected the claim of working capital adjustment on the ground that the assessee had not claimed the same - HELD THAT:- Referring to plea of assessee before the DRP was that it had vide submissions dated 29.01.2015 requested the TPO to grant working capital adjustment as the same was also allowed in preceding year. The DRP has allowed the claim of assessee, however, directed the Assessing Officer to examine the computation of working capital adjustment worked out by the assessee and adopt the method of working capital adjustment as provided in Annexure to Chapter III of OECD Transfer Pricing Guidelines, 2010. We find no error in the directions of the DRP in this regard and dismiss the ground of appeal No.3 raised by Revenue. TDS u/s 195 - purchase of software - Disallowance u/s 40(a)(i) - HELD THAT:- Invoices raised for providing support services and it is not case of payment of royalty as alleged by the Assessing Officer in this regard. Further, we have also decided similar issue in the case of John Deere India Pvt. Ltd. Vs DDIT (International Taxation) [2019 (3) TMI 458 - ITAT PUNE] as held since the provisions of DTAA overrides the provisions of Income Tax Act and are more beneficial and the definition of “royalty‟ having not undergone any amendment in DTAA, the assessee was not liable to deduct tax for payments made for purchase of software. In such scenario, the assessee cannot be held to be in default and the demand created under section 201(1) and interest charged under section 201(1A) of the Act is thus, cancelled. - Decided in favour of assessee Comparable selection - non inclusion of Modern India Ltd., a concern selected by assessee but rejected by both the TPO and DRP on the ground that it was loss making concern - HELD THAT:- in the significant accounting policies, it is reported that sales of traded goods are recognized and the revenue and expenses have been identified to segment, on the basis of their relationship to the operating activities of the segment. As part of significant accounting policies under clause 14, the segment information is provided for the year under consideration. In view of such information being readily available, then there is no merit in the stand of authorities below in rejecting the said concern as not comparable. Under clause 17, the Auditor of the said concern had provided the information in respect of goods traded and out of total turnover of ₹ 126 crores, ₹ 111 crores is attributable to sale of sponge iron / sheets and pipes. The said segment is comparable to the business carried on by the assessee and hence, segmental details are to be applied for computing the margins of comparable. Accordingly, we direct the Assessing Officer to include the margins of Modern India Ltd. as part of final list of comparables and benchmark the arm's length price of international transactions undertaken by the assessee.
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