TMI Blog2015 (9) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... ings and the margin would definitely depend on the result from such research and development involving human interface. Therefore, the said company cannot be considered as comparable to the assessee herein, particularly since the TPO himself has rejected the said company as a comparable to the assessee in the subsequent assessment year i.e. 2005-06. We are therefore inclined to direct the TPO/AO to exclude this company from the final list of comparables and direct the AO to re-determine the ALP in accordance with law. - Decided partly in favour of assessee. Disallowance of deduction for provision made towards interest payable to Central Excise Department and Sales Tax Department - Held that:- This issue stands covered by the decision of this bench of the Tribunal in the assessee’s own case for assessment years 1994-05, 1999-00, 2000-01 and 2001-02 wherein the action of the CIT(A) in disallowing interest payable to Central Excise Department has been upheld by the Tribunal. - Decided against assessee. Disallowance of deduction u/s 80-O - Held that:- Claim for deduction u/s.80-O are within the exclusive knowledge of the Assessee. It is for the Assessee to let in cogent evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . IT(TP)A No.670/Bang/2011 (Assessee s appeal): 2. The assessee has raised as many as 10 ground of appeal out of which ground of appeal Nos.1 and 10 are general in nature and need no adjudication. 3. Ground No.2 to 7 are against the transfer pricing (TP) adjustment made by the Transfer Pricing Officer (TPO) u/s 92CA of the Income-tax Act, 1961 [ the Act for short]. 3.1 At the time of hearing, the learned counsel for the assessee submitted that the assessee is seeking exclusion of only 2 comparable companies i.e. Alpha Geo (India) Ltd., and Vimta Labs from the final list of comparables for the purpose of determination of the arms length price (ALP). He submitted that the assessee had entered into international transactions with its Associated Enterprises (AEs) for basic development and the application development of starter motors and alternators. Thus, according to him, the activity falls under the category of research and development of machinery. He submitted that in the TP study, the assessee has adopted TNMM as the Most Appropriate Method (MAM) and thereafter after making a detailed search for the comparable companies in the Databases Prowess as well as Capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Labs was into research and development of various drugs involving human beings. He has drawn our specific attention to various documents filed by the assessee in support of his contention and submitted that this company should be excluded from the final list of comparables as the activities of Vimta Labs for the relevant financial year were also the same. 3.4 The learned departmental representative, on the other hand, supported the orders of the authorities below and submitted that the assessee itself had included Vimta Labs in its TP study and had not raised any specific ground before the TPO or the CIT(A) against consideration of the same as comparable company. He submitted that the assessee cannot take different stand before different authorities according to his convenience. As regards, M/s. Alpha Geo (India) Ltd., is concerned, the learned departmental representative submitted that the assessee was into research and development work as in the case of M/s. Alpha Geo (India) Ltd., and that the area of work may be different but since the functions are similar, the said company has been rightly chosen as the comparable company to the assessee. He, therefore, prayed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, civil structural engineering, environmental engineering and project management. Gilcon Project Services Limited Gilcon Project Services Ltd. is engaged in the provision of consultancy services such as site investigation, feasibility studies, detailed designs and working drawings, tender and contract document preparation. Mahindra Acres Consulting Engineers Limited Mahindra Acres Consulting Engineers Ltd was incorporated in 1993, and is a part of the Mahindra Mahindra group. The company is engaged in the provision of technical and engineering services in the fields of environmental engineering, solid waste management, agro and food processing and power. RITES Limited RITES Ltd. is an internationally recognized leading consultant with operational experience of over 50 countries in Africa, South East Asia, Middle East and Latin America. Most of the company s foreign assignments are for national governments and other apex organizations. In India, the clients range from state Governments, public sector undertakings and corporations to industrial establishments and private enterprises. The company provides services such as preproject planning in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erformed by entities to ascertain their comparability. For this purpose, the economically significant activities and responsibilities which affects the price charged in a transaction become relevant and as basis for determination of ALP. Such functions add more value to the transaction and therefore are expected to fetch higher returns for the entity performing such functions. Therefore the focus should be only on identifying the maximum number of functions but on identification of critical functions performed by the related parties which, includes Research and development. In the case before us, the assessee is carrying on the research and development activity in the field of automobile industry while the Alpha Geo is involved in research in seismic services. Therefore, there is no functional dissimilarity. The next criteria to be considered are the assets used and the risks assumed and also the industry to which the assessee belongs to for determining market comparability and economic condition of the industry. In the case before us, assessee has conducted functional analysis by adopting the companies performing similar functions and activities without any similarity of products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessee s claim for deduction of ₹ 64,28,890/- u/s 80-O of the Act, is concerned, the learned counsel for the assessee has submitted that this issue is also covered against the assessee by the decision of the Tribunal in the assessee s own case for the assessment year 2001-02. A copy of the said order is filed before us at pages 230 to 241 of the case-laws paper book. 5.1. After going through the decision of the Tribunal in ITA No.102/Bang/2011 dt.18/07/2012 for assessment year 2001-02, we find that the Tribunal has extensively considered the issue of the allowability of deduction u/s 80-O of the Act. At para 13 to 20, the Tribunal has held as under: 13. We have given a careful consideration to the rival submissions. Sec. 80-O of the Act as it existed prior to its amendment w.e.f 1-4- 98 allowed deduction in respect of any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and Bosch, which we have alrleady set out in the earlier part of this order, it is clear that the Assessee was required to carry out some development work for Bosch. The agreement contemplates that the manner in which the work is to be conducted would be in accordance with separate individual schedules and specifications which Bosch may stipulate and the Assessee might agree. Bosch agreed to provide all technical information necessary for conducting specific work. It is also provided in the agreement that in case the Assessee becomes aware of property rights which may be relevant in connection with the development to be conducted by the Assessee, then the Assessee should inform Bosch and shall not use such rights without Bosch s prior permission/agreement. The agreement also provides that any results arising from or in connection with the development agreement which incorporates an invention, a patent and /or utility model in India shall be applied for in the name of the Assessee or in the name of Bosch. In case the application is made in the name of Bosch, the Assessee was to give the necessary endorsement for such application. The agreement also provides that after a period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing on record to establish the ownership of the Assessee over these drawings. Apart from the above, the Assessee has not been able to link payments with the right to use any particular design or patent. Despite repeated request by the AO to file such link, the Assessee failed to comply with the request of the AO. 19. In our view facts with regard to the claim for deduction u/s.80-O are within the exclusive knowledge of the Assessee. It is for the Assessee to let in cogent evidence to substantiate its claim. The Assessee in our view has failed to do so and in the circumstances, the revenue authorities were justified in not allowing the claim for deduction. The conclusions of the CIT(A) in our view were therefore justified and calls for no interference. 20. The Agreement between the Assessee and Bosch for carrying out development started in the year 1991. The claim of the Assessee for deduction u/s.80-O of the Act in AY s prior to AY 98- 99, as we have already observed, would have been sustainable upto AY 97-98 because of the larger coverage of activities for which deduction was allowed u/s.80-O of the Act. There is every reason to suspect that the Assessee has attempted to c ..... 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