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2019 (11) TMI 1438 - AT - Income TaxTP Adjustment - low end marketing support service provider V/S high end service provider - Recharacterizing of services rendered - CIT (A) has treated the services rendered by the taxpayer to its AE as high end - HELD THAT:- Recharacterizing the services rendered by the taxpayer under the master service agreement as “high end” by deviating from the earlier view taken by the Revenue confirmed by the Tribunal, we fail to find out any reason as to why the ld. CIT (A) has not followed the decision rendered by the Tribunal in taxpayer’s own case for AY 2006-07 [2014 (12) TMI 757 - ITAT DELHI] Ld. CIT (A) has treated the services rendered by the taxpayer to its AE as high end on the half-baked reasons which have been duly replied with decided by the coordinate Bench of the Tribunal in paras 13 & 14, in favour of the taxpayer. Following the decision rendered by the coordinate Bench of the Tribunal in AYs 2006-07 and 2007-08 [2015 (7) TMI 243 - ITAT DELHI] it is held that the taxpayer is a low end marketing support service provider on cost plus mark up basis by creating customer awareness for the Microsoft products and also in certain cases, training and back up for the use of such products and software and not creating any market intangibles for its AE. So, the view taken by the TPO that the taxpayer is into providing high end marketing services leading to creation of high end tangibles for its AE is not sustainable. Comparable selection - CRISIL exclusion from the final set of comparables - Decision rendered by the coordinate Bench of the Tribunal in taxpayer’s own case [2020 (9) TMI 185 - ITAT DELHI] in the similar facts and circumstances wherein there is no change in the business model and taxpayer is providing services under the same master service agreement, Crisil being owner of huge intangibles having been employed in order to achieve its target and that it is a high risk profile entity cannot be a suitable comparable vis-à-vis the taxpayer who is a non-risk bearing routine marketing service provider to its AE working on cost plus mark up basis, hence ordered to be excluded. ICRA is not a suitable comparable vis-à-vis the taxpayer on ground of functional dissimilarity but being into providing advisory services which is no match to the company providing actual marketing support services, hence ordered to exclude ICRA from the final set of comparables. WAPCOS is into providing distinct services and is a 100% Government owned company, being not driving by profit motive and following the decision of the coordinate Bench of the Tribunal in taxpayer’s own case for AY 2006-07 [2014 (12) TMI 757 - ITAT DELHI] it cannot be a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded. Rites being into providing engineering and consultancy services and is an international recognised company engaged in transport infrastructure has been excluded by the ld. DRP in taxpayer’s own case for AY 2007-08 on ground of functional dissimilarity being in niche area engineering consultancy and following the order passed by the coordinate Bench of the Tribunal in AY 2006-07 in taxpayer’s own case is not a suitable comparable vis-à-vis the taxpayer who is a routine low end marketing support services provider on cost plus mark up basis, hence ordered to be excluded. Vimta excluded from the final set of comparables on ground of functional dissimilarity vis-à-vis the taxpayer, hence ordered to be excluded from the final set of comparables. Disallowance of deposit made to MTNL and security deposit for rental premises written off as business loss u/s 28 read with section 29 - addition on the ground that the taxpayer has not provided exact details as to when the relatable credit entries were passed resulting into income of the taxpayer and order passed in the AY 2002-03 - HELD THAT:- Advances/deposits have been made by the taxpayer to carry out the business activities in the normal course of business but to claim the same as business losses, the condition laid down u/s 36 (2) of the Act has to be fulfilled. There is not even a whisper in the assessment order as well as not brought on record during the argument that conditions u/s 36(2) of the Act have been fulfilled - same cannot be allowed as bad debt as argued by the ld. AR for the taxpayer. So far as the claim of the ld. AR for the taxpayer that the same should be alternatively allowed as business loss, we are of the considered view that the issue is required to be remitted back to the AO to give an opportunity to the taxpayer to substantiate as to how the same can be allowed as business loss. AO shall also determine the year of allowability if otherwise proved - corporate grounds are allowed for statistical purposes.
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