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2023 (3) TMI 1219 - AT - Income TaxTP adjustment - international transaction pertaining to fees received for marketing of fixed income products - difference in the price achieved by the marketer and the price quoted by the trader - As per DR benchmarking analysis undertaken by the assessee is not based on Profit Split Method as provided under the Rules - HELD THAT:- Lower authorities failed to appreciate that in the entire transaction, the sales/marketing function and its activities (such as trading) cannot be separated from the other functions, all of which together are necessary elements for the assessee to realise income on these transactions. Therefore, it is necessary to take into consideration the functions performed, assets employed and risks assumed by the trader-associated enterprises, while allocating the commission. The entire ‘local spread’, i.e. the markup earned by the marketer either over the price offered by the trader to sell or lower than the price quoted by the trader to buy the product, is entirely allocated to the marketer. Accordingly, find no merits in upholding the transfer pricing adjustment on this issue. Hence, the TPO/AO is directed to delete the transfer pricing adjustment in respect of international transaction of fees receipt for marketing of fixed income products. As a result, grounds No. 1 – 3 raised by the assessee are allowed. Income from securities as capital gain - exemption under Article 13(6) of the India Switzerland Tax Treaty - PE in India - attraction principle enshrinest in Article 7(1) of the DTAA with Switzerland, the income of assessee form trading in security as FII being similar to the investment activities carried by the branch of assessee in India, was also liable to be taxed as income - HELD THAT:- As in assessee’s own case in the immediately preceding assessment year [2018 (8) TMI 2111 - ITAT MUMBAI] by following the judicial precedents in assessee’s own case decided a similar issue in favour of the assessee as held that income of a FIl from sale and purchase of securities is liable to be taxed as 'Capital Gains'. The second facet of the dispute is the taxability of such income, which has been held to be non- taxable in India under Article 13(6) of the India-Switzerland Tax Treaty by the Tribunal in the aforestated precedents. The Tribunal, in Assessment Year 2009-10 [2016 (6) TMI 1462 - ITAT MUMBAI] held that banking branch of the assessee in India would not constitute a PE qua the aforesaid income. Thus, the aforesaid decisions of the Tribunal in assessee's own case, and which continue to hold the field as they have not been altered by any higher authority, fully cover the aforestated Grounds raised by the Revenue before us. It is evident from the record that the issue is recurring in nature and has been decided in favour of the assessee in preceding assessment years. Also evident from the assessment orders passed in the subsequent assessment years that decisions of the coordinate bench have been accepted by the Revenue and no further appeal has been filed.As a result, grounds raised by the Revenue are dismissed.
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