Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (12) TMI 146 - AT - Income TaxTransfer Pricing ("TP") Adjustment - economic analysis - determination of the arm's length price (ALP) - selection of the comparable companies - differences in idle capacity, working capital and risk profile between the Appellant and the comparable companies - foreign exchange gain - benefit of 5 percent range - Held that:- idle capacity from the total expenditure incurred by the taxpayer while determining ALP is required to be excluded - TPO directed to decide afresh after due verifications of the details given by the taxpayer qua idle capacity adjustments in the light of the decisions rendered by the coordinate Bench of the Tribunal in taxpayer’s own case Accrual of income - functions performed by the fixed place Permanent Establishment (PE)/Service PE/ Supervisory PE - transactions between HO and BO - Held that:- No activities have been performed by the BO on behalf of the HO as presumed by the AO. Moreover, the taxpayer has specifically explained the functions performed and risk undertaken by the HO and BO in its TP study, relevant pages 558 to 590 of the paper book, showing activities of the BO being restricted to basic design and engineering services. Furthermore, HO was otherwise responsible for its own market development research and negotiation for contract. Nature of activities carried out by the expatriate Director stationed at Gurgaon - Held that:- AO observed that, he has played a major role in supervising market research to find out customers, procuring orders, contract negotiations, etc. It has come on record that there is no evidence on record brought forward by the AO to support his contention regarding doing aforesaid work by the Director in India in market research and related jobs. Merely because of the fact that expatriate Director was present in India, no nexus can be held to be established between HO and BO. Aforesaid addition made by the AO/DRP qua attribution of profits to HO from direct supplies and services to customers in India to PE in India i.e. BO is not sustainable, hence ordered to be deleted. Attribution of profit to PE - Held that:- when transaction between the HO and BO has otherwise been held at arm’s length by taking into account the risk bearing functions, no further profit to the BO can be attributed. Rate of Tax - AO applied surcharge and cess over the tax rate of 10% - Held that:- Under Article 2(3) of the DTAA, tax includes Income-tax and surcharge thereon and as such, surcharge is included in the income-tax and the tax rate of 10% for fee for technical services as prescribed in Article 12 is deemed to be included surcharge as cess is nothing but an additional surcharge, so only tax rate of 10% under DTAA is applicable.
|