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2018 (11) TMI 255 - AT - Income TaxTPA - ALP determination - disallowance of cost incurred by assessee - whether the payments made by assessee or cost incurred by the assessee for the shared services was justified or not? - Held that:- The assessee had availed services from its associated enterprises for which cost was incurred and on the other hand, the assessee had provided said services to various Eaton entities and was being remunerated on cost plus markup at 8%. The TPO had not disturbed the margins of assessee but on the other hand has disallowed cost incurred by assessee to be not at arm's length price. In order to make earnings, the corresponding costs have to be allowed; the assessee had incurred cost on Oracle Implementation provided by Eaton Ltd., UK and said Oracle platform was used by assessee to integrate its operations of APSSC unit in order to provide back office accounting services to Eaton entities. Once the transaction is closely and intrinsically linked to the business operations carried on by the assessee, then the same cannot be segregated and arm's length price of said transaction could not be taken at Nil. We find no merit in the approach adopted by TPO in this regard. Accordingly, we hold that there is no merit in disallowance made by TPO, which was upheld by CIT(A) Selection of comparables by assessee / TPO - Held that:- Referring to functions performed by assessee of providing marketing support services companies functionally dissimilar with that of assessee need to be deselected from final list. Where the comparables selected are not functionally comparable to the tested party, then the margins of such concern cannot be utilized for determining the arm's length price of international transactions undertaken by tested party. In view thereof, we direct the TPO to exclude margins of Agrima Consultants International Ltd. while benchmarking international transactions of assessee in both the segments pertaining to marketing and business support services and computer the arm's length price of international transactions after including Times Innovative Media Ltd. in market support services segment. The additional ground of appeal raised by assessee is thus, allowed. Non granting due credit of advance tax paid - rectification application before the Assessing Officer under section 154 - Held that:- AS Authorized Representative for the assessee before us has pointed out that the said rectification application has not been disposed of till now. We direct the Assessing Officer to dispose of rectification application after due verification of the claim of assessee.
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