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2022 (12) TMI 244 - AT - Income TaxTP adjustment - MAM selection - arm's length price of the appellant's international transaction of payment of royalty - method used for benchmarking the royalty transaction by separately benchmarking it under profit split method - HELD THAT:- The facts in the present assessment year 2016-17 are identical with issue covered by the decision of co-ordinate Bench in the assessee's own case for the assessment year 2013-14 [2022 (4) TMI 1443 - ITAT BANGALORE] it is clear from the above OECD guidelines that in order to determine the profits to be split, the crux is to understand the functional profile of the entities under consideration. Although the comparability analysis is at the 'heart of the application of the arm's length principle', likewise, a functional analysis has always been a cornerstone of the comparability analysis. In the present case the assessee leverages on the use of technology from the associated enterprises and does not contribute any unique intangibles to the transaction. It may be true that the assessee aggregated payment of royalty with the transaction of manufacturing as it was closely linked and adopted transactional net marginal method but that does not mean that the transactions are so interrelated that they cannot be evaluated separately for applying profit split method. Further, the assessee does not make any unique contribution to the transaction, hence profit split method in this case cannot be applied. Therefore, we are of the view that transactional net marginal method is the most appropriate method in the case of the assessee.The Tribunal has upheld transactional net marginal method as most appropriate method from the assessment years 2007-08 to 2011-12. In those assessment years the dispute was whether transactional net marginal method or comparable uncontrolled price was the most appropriate method. It is for the first time in the assessment year 2013-14 that the Revenue has sought to apply profit split method as most appropriate method. In the given facts and circumstances, we are of the view that transactional net marginal method is the most appropriate method and the learned Assessing Officer is directed to apply the said method in determining the arm's length price, after affording opportunity of being heard to the assessee. The grounds of appeal of the assessee are treated as allowed. TDS u/s 195 - disallowance of reimbursement of salary of seconded employees on account of non-deduction of tax at source - HELD THAT:- Respectfully following the above views expressed in cases Abbey Business Services India Pvt. Ltd. [2020 (12) TMI 570 - KARNATAKA HIGH COURT], Advance Rulings in Cholamandalam MS General Insurance Co. Ltd.[2009 (1) TMI 19 - AUTHORITY FOR ADVANCE RULINGS], Marks and Spencer Reliance India P. Ltd. [2013 (11) TMI 317 - ITAT MUMBAI], HCL Info systems Ltd. [2004 (1) TMI 16 - DELHI HIGH COURT], IDS Software Solutions India P. Ltd.[2009 (1) TMI 363 - ITAT BANGALORE-A], Faurecia Automative Holding [2019 (7) TMI 402 - ITAT PUNE] and Burt Hill Design (P.) Ltd. [2017 (3) TMI 1515 - ITAT AHMEDABAD] we are of the view that the reimbursement made by the assessee in India to Toyota Corporation, Japan, towards the seconded employees cannot be regarded as 'Fees for technical services' and therefore not taxable under section 195 - We therefore direct the AO to delete the disallowance made under section 40(a)(i). Nature of expenditure - treatment of payment towards plant layout charges - revenue or capital in nature - HELD THAT:- We note that the alleged expenditure has been claimed as plant layout charges to improve utilisation of resources, besides improvement in quality and safety. AR however alternatively prayed that, in the event the said expenditure is upheld to be capitalised, depreciation may be granted. We note that the assessee has not provided any details in respect of the expenditure incurred towards layout of plant, and why was it necessary to be incurred. In our view this issue needs to be revisited based on the evidence filed by the assessee having regard to the principles laid down by the hon'ble Supreme Court in the case of Ballimal Naval Kishore [1997 (1) TMI 3 - SUPREME COURT] of Dispute Resolution Panel order. Accordingly, we direct the assessee to file all relevant details in support of the claim which would be verified by the Assessing Officer in accordance with law. Non-granting of credit for advance tax paid - HELD THAT:- The assessee is directed to furnish requisite evidences in respect of the advance tax paid. The learned Assessing Officer is directed verify the same and to grant credit for the advance tax paid by the assessee.
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