TaxTMI 
TaxTMI 
2010 (1) TMI 614
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....nagement Inc. of USA. The assessee has set-up a Technical Support Centre in Chennai to provide support services to end users of the software products on behalf of the CA Management Inc. The business activity of the assessee company summarily can be put as under:- (i) Licensing mainframe midrange and system infrastructure software products of CA Inc; (ii). Software that can be generally deployed "Out of box" or with customer/ industry specified adaptations; (iii) Development software that can allow technologies and programmes to write custom applications and create new categories of packaged applications. The Assessee-company files the return of income for the assessment year 2002-03 declaring total loss of Rs 14,55,99,340/-. The return of income filed by the assessee was selected for scrutiny. It was seen by the Assessing officer that the assessee had certain international transactions with Associate Enterprises / concerns (AE). So far as the issue before us is concerned, it is in respect of royalty payable to CA Management Inc, USA. Assessing Officer, therefore, referred the matter to the Transfer Pricing Officer (in short TPO) u/s 92A(1) of the Act for determining Arms Length....
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....e was available with the licensor on monthly basis. (iii) Once the decision of write off of bad debts for the invoices raised during the current year was taken on 07.03.2002. This amount would get reflected as amount non-receivable in the monthly reports, which would be available with the licensor. If such reports were available with the licensor for the amount of invoices raised during the year and written off during the year, the licensor should not have claimed royalty on such amounts written off, in the debit note raised on 31.03.2002. (iv) From the documents filed by the company substantiating its claim of write off for the Bad Debts, it is seen that one the customer Global E-Secure vide their fetter dated 27.03.2002 addressed to the company complained regarding the non-working of the software in their environment and it contested that as per the implied condition of the agreement, the software was to work any environment. This indicated that, in some cases, there have been problem with the working of software in certain environments. (v) The invoices were raised in the same year and written off during the same year and hence no royalty amounts were payable annually. (vi)&....
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....ered by the Independent Parties, while entering into distributor agreement and non payment of royalty, on non realisation of the proceeds would certainly be a condition in agreement entered at arm's length. In view of the above, the Arm's Length Price of Royalty corresponding to invoices raised and written off during the year is computed at NIL as against transaction value reported of Rs. 4,709,755/-." 5. Following the TPO's order, the Assessing Officer made the adjustment to the ALP to the International transactions by reducing the value of the royalty payment/payable which was of Rs. 47,09,755/-. The assessee challenged the same before the Learned CIT (A) but without success. Now, the assessee is in appeal before us. 6. We have heard the rival submissions of the parties. The Learned Counsel vehemently argued that the jurisdiction of TPO is restricted to determine the ALP of any International transaction in view of the power vested in him u/s 92CA(3) of the Act. The Learned Counsel took us thorough the TPO's order passed u/s 92CA(3) and argued that write off of the bad debts cannot be the subject matter for determining the ALP so as to power of the TPO is concerned. Merely beca....
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.... or paid in an international transaction has not been determined in accordance with sub-sections (1) and (2); or (b) any information and document relating to an International transaction have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or (c) the information or data used in computation of the arm's length price is not reliable or correct; or (d) the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub-section (3) of section 92D, the Assessing Officer may proceed to determine the arm's length price in relation to the said international transaction in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him: Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the arm's length price should not be so determined on the basis of material or information or document in the possession of the....