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TMI Blog2014 (4) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the said expenditure is a personal expenditure. Ground No.2 relate to the issue of disallowance of Rs.29,89,812 being technical assistance and training fees for the reason that the same is capital expenditure. Ground No.3 to 3.4 relate to the transfer pricing adjustments made u/s 92CA of the Act. Ground No.4 to 6 challenges the manner in which the orders have been passed by the Assessing Officer/TPO. 3.1 Brief facts in relation to the case are as follows: The assessee is a company engaged in the business of manufacture, sale and servicing of fibre glass reinforced plastic rotor blades for windmill turbine generator. For the concerned assessment year, return of income was filed on 29.11.2006 declaring income of Rs.44,84,34,040. The assessment was taken up for scrutiny and in the course of the assessment proceedings, reference was made to the Transfer Pricing Officer (TPO) u/s 92CA(1) of the I.T Act to determine the Arms' Length Price (ALP) of the international transaction which the assessee had with its Associate Enterprise (AE). An order u/s 92CA was passed by the TPO on 30.10.2009 determining the ALP price of the international transaction by way of management fees at Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of assessment and has held the expenses to be an inseparable part of the knowhow transfer as per the agreement between LM Glass Fibre A/S (LM), Denmark and the assessee company. The AO has therefore, held the expenditure to be a capital expenditure. Having regard to the facts of the case and the relevant agreement between the assessee and LM Glass Fibre A/S (LM), Denmark, the Panel is of the view that the AO was justified in holding the expenditure to be a capital expenditure. However, the AO is directed to allow depreciation u/s 32 of the IT Act 1961 on the same at the prescribed rate". (iii) Transfer Pricing Adjustment: (At page 7 of DRP's order) "The Panel is also in agreement with the findings of the TPO in determining the ALPs of the international transactions relating to payment of management fees and selling commission at nil for the detailed reasons recorded in the TPO's order. With reference to the assessee's contention that the TPO has not furnished the names of the tangible comparables adopted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of commission would have been made to an independent party under similar circumstances and the TPO was justified in taking the ALP of the selling commission paid at Nil". 3.2 The assessee being aggrieved by the directions of the DRP is in appeal before us. The learned Counsel for the assessee at the very outset submitted that the issues of transfer pricing adjustments u/s 92CA of the Act and disallowance of expenditure of technical assistance and training fees as capital expenditure was duly considered by the Tribunal in assessee's own case for the assessment year 2007-08 and the Tribunal vide its order dated 20.07.2012 in ITA No.1091/Bang/2011 and order dated 17.05.2013 in M.P. No.50/Bang/2013 in ITA No.1091/ Bang/2011 had restored these two issues to the Assessing Officer/TPO for de nova consideration. Hence it was prayed that these two issues namely Transfer Pricing Adjustment u/s 92CA and the disallowance of technical assistance and training fee as capital expenditure may be restored to the Assessing Officer for fresh consideration as it was done by the Tribunal for the assessment year 2007-08. 3.3 The learned DR strongly objected to the remand of the matter to the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Panel is also of the view that the additional evidence filed before the Panel which were not filed earlier before the TPO inspite of sufficient opportunity allowed, does not conclusively establish that the assessee's AE rendered the services for which management fees has been paid and does not show that there was any correlation between the services and the payments made. As per clause 7 of the agreement entered on 1.1.2002 between the assessee and its AE in Denmark, the AE was required to maintain the record of expenses incurred in connection with the provision of management of services to the assessee, but no such evidence could be produced by the assessee before the TPO or before the Panel. The evidence produced by the before the Panel is mainly in the form of e-mails, relating mostly to the blade manufacturing process covered by the technical knowhow agreement for which the assessee has paid royalty separately which has been held to be at Arm's Length by the TPO. The document filed also do not establish that the payments made by the assessee for the intra group services are the charges that could reasonably be expected to be paid by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Panel. Further, the payment receipt has also been filed before the Dispute Resolution Panel. In numerous judgments, entrance fees paid for corporate membership of clubs has been allowed as an admissible business expenditure. Reliance ion this regard is placed on the following cases: * Dy. CIT v. General Mills India (P.) Ltd. [IT Appeal No. 6324 (Mum) of 2008, decided on December 20, 2010). * Citi Financial Consumer Finance India Ltd v. Addl. CIT [2009] 33 SOT 414 (Delhi)". 4.3 We have heard the rival submissions and perused the relevant material on record. It is a case of the assessee that necessary materials have been produced before the Assessing Officer as well as before the DRP with regard to nature of payment. However, the Assessing Officer and the DRP have stated that no documentary evidences were produced before them to take a positive view in favour of the assessee, hence the issue was decided against the assessee company. We notice that there is number of judgments of various High Court's in favour of the assessee. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n compliance with the provisions of section 92D of the Income Tax Act ('The Act') read with rule 10D of the Income Tax Rules, 1962 ('The Rules'). 3. That the learned Assessing Officer and the learned Panel erred in upholding the approach of the TPO of questioning the commercial rationale behind the transactions of payment for management fees, sales commission and information technology fees and has thereby exceeded the jurisdiction bestowed upon the TPO under the Act which is restricted to determining the arm's length price of the transactions. 4. That the learned Assessing Officer and the learned Panel erred in disregarding the conditions prescribed under section 92C(3) of the Act for determining the arm's length price in relation to the international transactions of payment of management fees, sales commission and information technology fees. 5. That the learned Assessing Officer and the learned Panel erred both in facts and law in confirming the action of the learned TPO of making an adjustment to the transfer price of the Appellant in respect of the payment of management fees by Rs.78,801,771, payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Panel erred in disallowing information technology fees amounting to Rs.1,71,77,094 as unreasonable payment to related party u/s 40A(2) of the Act. 8. Consequently, the learned Assessing Officer erred in charging interest u/s 234B of the Act. 9. Consequently the learned Assessing Officer erred in charging interest u/s 234D of the Act". 5.2 Ground No.1 to 5.5 relates to the transfer pricing issue. With reference to Ground No.7 mentioned above, no argument was raised by the assessee in the course of hearing, hence Ground No.7 is dismissed. Ground Nos. 8 & 9 relates to the levy of interest u/s 234B and 234D of the Act. Levy of interest u/s 234B and 234D are mandatory and consequential, hence Ground Nos. 8 and 9 are dismissed. 5.3 The learned Counsel for the assessee submitted that the transfer pricing issues raised in Ground No. 1 to 5.5 and the issues raised in Ground No.6 regarding the disallowance of expenditure incurred by the assessee company on technical assistance and training fees of Rs.42,46,654 by treating the same as capital expenditure are identical to the issues considered by the Tribunal for assessment year 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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