Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 845 - AT - Income TaxTP Adjustment - payment of technical knowhow fees - benchmarking of the transaction - HELD THAT:- As assessee substantiated that for carrying out business of the assessee, and as assessee is part of MNE, which is providing such services worldwide, to remain in sync with that, the assessee would have needed the identical platform, structure. The services provided by the associated enterprises are supported with the agreement wherein the identified obligations and rights of the parties are crystallized along with the remuneration structure. As the intra-group services availed by the assessee is intertwined in each of the activities of the assessee, apparently, the assessee has received those services. Had these intragroup services not availed by the assessee, the assessee has shown that it would not have received the financial benefit and operational benefit that it has received. Further, when the assessee was not earning profit, even after provision of these services, no amount was charged by the associated enterprises. Benchmarking of the transaction - The assessee has benchmarked using the transactional net margin method computed is not rocket margin at 9.47%, which is found to be, higher than the arithmetic mean of net profit margin of comparable companies. Against this, the learned transfer-pricing officer has adopted the other method and computed the arm’s-length price of this international transaction at nil. Further, when the issue reached before the learned dispute resolution panel, the learned dispute resolution panel abdicated its duty to benchmark the international transaction and merely followed its own direction in earlier years. As the intra-group services utilized by the assessee are supporting the core activities of the assessee, we do not find any infirmity in the assessee adopting transactional net margin method as the most appropriate method. In view of this, we do not find any reason to sustain the transfer pricing adjustment made by the lower authorities. Also perused the orders of the coordinate bench of earlier years wherein the transfer pricing adjustment has been deleted for the single reason that the learned transfer-pricing officer has failed to adopt any of the method as the most appropriate method. However, for this year TPO has adopted the other method as the most appropriate method therefore all those decisions does not have any relevance for deciding the issue for this year. Intragroup services or for that matter any international transaction is required to be benchmarked each year based on the facts and circumstances prevailing in that year considering the economic conditions. Therefore, the findings of the previous year will have only persuasive value, if any, while deciding the transfer pricing adjustment for any year. Incorrect computation of the markup of 3.34% on recovery of expenses by the appellant from its associated enterprises - Assessee has made payment to 3rd parties on behalf of its associated enterprises which are in the nature of airline payments, export facilitation et cetera. The assessee did not benchmark the impugned transaction as it was claimed that it is on cost-to-cost basis - TPO stated that no independent party would have made such payment on behalf of any person and therefore the assessee should have benchmarked this transaction with the margin - HELD THAT:- We find that repeatedly for several assessment years, the coordinate benches have deleted the addition with respect to the markup on reimbursement of expenditure. Naturally, it needs to be tested whether independent party would have incurred these expenditure or not. Because of the concurrent finding by the coordinate benches in assessee’s own case for earlier years, we are constrained to take the similar view. In view of this, respectfully following the decision of the coordinate bench, we also direct the learned TPO to delete the above adjustment. Though, the arguments led by the learned departmental representative have some force in that, however even if the alternative argument is accepted of benchmarking this transaction in the transactional net margin method, even then no adjustment could have been made as the assessee has better margins compared to the comparable companies. Interest on dividend distribution liability - DR vehemently stated that the assessee has wrongly mentioned the assessment year therefore, there is no fault on the part of AO in not granting credit of dividend distribution tax paid and accordingly the interest is correctly charged - HELD THAT:- In fact the assessing officer should have passed the draft of the assessment order complete involve respect wherein even the computation of tax should have been made, if that is not made therefore such issue has arisen. However, in the present case it has happened due to the mentioning of the wrong assessment year by the assessee. In view of this we set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to 1st get the assessment year corrected in the challan and then learned assessing officer should grant credit of the same. There is no claim with respect to the interest under section 234C though mentioned in ground number 5. Accordingly, ground number 5 of the appeal of the assessee with respect to dividend distribution tax is allowed with above direction. Short grant of tax deducted at source - As this issue was not before the learned assessing officer at the time of passing of the draft assessment order, we restore this issue back to the file of the learned assessing officer with a direction to the assessee to reconcile form number 26AS with the tax return, the learned assessing officer after verification may grant the due credit to the assessee of tax deduction at source
|