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2022 (4) TMI 1574 - AT - Income TaxTP adjustment in relation to intra-group services - Payment of Global Client Management Fee - partial adjustment in respect of international transaction pertaining to Payment of Global Client Management Fee - HELD THAT:- It is clear beyond doubt that similar international transaction pertaining to Payment of management service fees undertaken by assessee with same AE in subsequent assessment years was accepted by TPO and no adjustment was made. There is no change in facts and circumstances in the subsequent assessment years. Thus, in view of the above legal and factual position, we hold that ALP of international transactions pertaining to Payment of Management Service Fees cannot be determined at NIL and adjustment made by TPO and confirmed by DRP is directed to be deleted. As regards the international transaction of Payment of Global Client Management Fee, it is also evident that TPO in subsequent assessment years has partially accepted the assessee’s submission of rendition of service by AE and made ad-hoc adjustment without applying any prescribed method under section 92C(1) of the Act. Further, it is also unrebutted that receipt of service from AE has resulted in growth of assessee’s business as the revenue and profitability has increased over the years. The Revenue could not controvert any of the facts nor could place any material on record to the contrary to suggest that Revenue is aggrieved by part relief granted by the DRP. As no method u/s 92C(1) of the Act was followed by TPO/ DRP for upholding partial adjustment in respect of international transaction pertaining to Payment of Global Client Management Fee and same was done merely on ad-hoc basis, TPO is directed to delete the transfer pricing adjustment of Rs. 3,66,71,462/- in respect of Payment of Global Client Management Fee. Rejection of AE as tested party while conducting benchmarking analysis - HELD THAT:- TPO in subsequent assessment years has accepted the transfer pricing analysis submitted by assessee in respect of transaction of payment of Management Service Fees and in respect of intra-group services i.e. payment of Global Client Management Fee granted partial relief. There is no bar in treating foreign A.E as tested party. The only condition is that the tested party should be the least complex entity. It is pertinent to note that in the subsequent assessment years i.e. AY 2015-16, 2016-17 and 2017-18, there was no change in assessee approach of conducting its benchmarking analysis for intra-group services by treating AE as a tested party, as in the assessment year under our consideration. Revenue has failed to give any plausible reason to disturb the tested party selected by the assessee in the impugned assessment year, Thus, maintaining consistency, we direct the TPO to consider AE as a tested party. Disallowance of expenses u/s 14A r.w.r. 8D(iii) - HELD THAT:- It is now well settled that section 14A of the Act will not apply if no exempt income is received or receivable during relevant previous year. Reliance in this regard can be placed in the case of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] and in Pr. CIT v. M/S Ballarpur Industries Ltd. [2016 (10) TMI 1039 - BOMBAY HIGH COURT] - In the present appeal, it is clearly evident from the Schedules to the financial statements that no dividend / exempt income was received by the assessee during the relevant previous year. Thus, in the light of settled legal position, we direct the AO to delete the disallowance made u/s 14A r/w Rule 8D. Accordingly, corporate tax grounds in assessee’s appeal are allowed. Deemed dividend u/s 2(22)(e) - AO treated the loan from subsidiary as deemed dividend - AO submitted that interest bearing loans/advances were taken by the assessee from group companies and thus, the provision of section 2(22)(e) of the Act would not be applicable in present case - HELD THAT:- It is not in dispute that interest bearing loans / advances were accepted by the assessee from other group companies for business exigencies and the same were also repaid during the year alongwith interest @ 12% per annum. Decision of Pradip Kumar Malhotra [2011 (8) TMI 16 - CALCUTTA HIGH COURT] as followed in SANGITA JAIN [2016 (3) TMI 1202 - ITAT KOLKATA] and ZENON (INDIA) PVT. LTD. [2015 (6) TMI 1119 - ITAT KOLKATA] wherein addition made by AO under section 2(22) (e) of the Act on account of interest bearing loan received by taxpayer was deleted. In view of the facts of the case and aforesaid judicial pronouncements, we hold that the addition under section 2(22)(e) of the Act is un-sustainable. We, therefore, direct the AO to delete the same.
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