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2016 (5) TMI 277 - AT - Income TaxTransfer pricing adjustment - payments for technical fees and alleged reimbursement of group IT expenditure to the AEs - Held that:- No doubt that assessee has to establish receipt of benefits on account of services rendered by its AEs and these were compensated on a level comparable to payments that would have been made if similar services were received from unrelated parties or in an uncontrolled transaction. At the same time, it is not open for the TPO to consider that there was no benefit whatever received by the assessee without verifying the documentation submitted by the assessee. As per the assessee, it had evidence to show that there was considerable correspondence between the AE and itself which could amply prove rendering of services by the AEs to the assessee . The facts and circumstances of the case as described above show that the question of bench-marking the value of such services requires a fresh look by the AO / TPO. We therefore set aside the orders of the AO / TPO and remit the issues relating to alleged payments for technical fees and alleged reimbursement of group IT expenditure to the AEs back to the file of the AO / TPO for consideration afresh in accordance with law. Assessee is free to produce any evidence to show that services were indeed received by it from the AE. Assessee is also duty bound to bench-mark such services by comparing it with uncontrolled transactions by independent enterprises where similar services are received. - Decided in favour of assessee TDS u/s 195 - disallowance of reimbursement of IT expenditure to SKF Data Services, Sweden for nondeduction of tax at source, applying Section 40(a)(ia) of the Act - Held that:- AO had in the draft assessment order noted that assessee had not deducted tax at source on payments effected to SKF Data Services, Sweden. As per the AO no supporting evidence was filed by the assessee to show that these were reimbursement of expenditure. AO also noted that assessee was selling its entire product line in India and there could not be any services rendered by M/s. SKF Data Services in Sweden, for such business operations. According to him, payments were unrelated to business of assessee in India. What we find is that none of the lower authorities had carefully looked into the “make available” clause in Article 12(4) of the DTAA between India and Canada which was called into operation by the assessee. Lower authorities did not look into the applicability of the DTAA in relation to the alleged cost sharing passed on by M/s. SKF Data Services, Sweden, to the assessee for the IT related services. Question whether any technical services were rendered by M/s. SKF Data Services, Sweden, to the assessee and how far the “make available” clause was or was not satisfied were never verified either by the TPO or the DRP. In our opinion, this aspect also requires a fresh look by the AO. We set aside the orders of the authorities on the aspect of disallowance u/s.40(a)(ia) of the Act also and remit it back to the file of the AO for consideration in accordance with law. - Decided in favour of assessee for statistical purpose. Disallowance of expenditure towards group IT services were considered twice, once u/s.40(a)(ia) of the Act and again u/s.92CA - Held that:- What we find is that bench marking of the international transactions u/s.92CA of the Act, is entirely different from allowance of disallowance of an expenditure u/s.37 of the Act. We have already set aside the issue regarding bench marking of group IT services rendered by SKF Data Services, Sweden, to the assessee, back to the file of the AO / TPO for consideration afresh. Irrespective of any addition made, under ALP pricing provisions, application of Section 40(a)(ia) of the Act can definitely be done by the AO. Since these two provisions apply in altogether different independent spheres, we do not find any merit in this ground taken by the assessee.
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