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2019 (10) TMI 302 - AT - Income TaxAccrual of income in India - TP Adjustment - profit attributed to the Indian subsidiary - characterization of income - attribution of income - PE in India - 'Royalty’ or ‘Fee for Technical Services’ or even as ‘Business profits - India-Israel Tax Treaty - HELD THAT:- We find that the issue that where the attribution of profits to the Indian subsidiary of the assessee i.e M/s Celltick Mobile Media (India) Pvt. ltd. was found to be adequate and justified on the basis of the transfer pricing analysis, then, no further income could be attributed to it is squarely covered by the order of the Tribunal in the assesses own case for A.Y 2012-13. Apart there from, we find that the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. Ltd. had for A.Y. 2015-16 to A.Y 2019-20 entered into an ‘APA’ with the CBDT. As is discernible from the ‘APA’, the functions of the subsidiary company inter alia included “marketing and sale of various software solutions” of the assessee company. As per the ‘APA’ the operating profit margin of M/s Celltick Mobile Media (India) Pvt. Ltd. up to its revenue of ₹ 50 crore was to be taken at 7% of its ‘Operating revenue’. Admittedly, the FAR analysis and overall functions of the subsidiary company i.e M/s Celltick Mobile Media (India) Pvt. ltd. had remained the same during the period covered by the ‘APA’ and that for the year under consideration i.e A.Y 2014-15. Though, the APA in the case of the assessee had been entered into for the period spread over A.Y. 2015- 16 to A.Y 2019-20, however, as held by the ITAT, Mumbai in the case of 3i India Pvt. Ltd. Vs. DCIT [2016 (9) TMI 1320 - ITAT MUMBAI] a subsequent ‘APA’ would also have a bearing on the earlier years. Accordingly, we find that the ALP of the transactions covered by the ‘APA’ up to INR 50 cr. was to be taken @ 7% of its operating revenue. As such, as the operating revenue of M/s Celltick Mobile Media (India) Pvt. Ltd. during the year under consideration viz. A.Y 2014-15 was ₹ 32,71,03,165/-, therefore, the ALP of the covered transactions @ 7% worked out at ₹ 2,30,20,874/-. As against the aforesaid ALP, the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. Ltd. had shown a profit of ₹ 3,65,52,479/- as per its profit and loss account for the year under consideration. Accordingly, we are of the considered view that as the income disclosed by M/s Celltick Mobile Media (India) Pvt. Ltd. is higher than the ALP as per its ‘APA’ for the succeeding years, therefore, no further income on the said count also could be attributed to it. Finding ourselves to be in agreement with the view taken by the Tribunal in the assesses own case for A.Y 2012-13, thus, conclude that now when the amount remunerated by the assessee to M/s Celltick Mobile Media (India) Pvt. Ltd. is found to be satisfying the ‘arms length’ principle, therefore, no further profits could be attributed to the assessee in India even if it was to be held that the latter had a PE in India. Accordingly, we delete the addition made by the A.O by attributing the same to the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. Ltd. - Decided in favaor of assessee.
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