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St. Jude Medical (Hongkong) Ltd. Versus The ADIT, (Int. Taxation) -2 (1) , Mumbai

2015 (10) TMI 1887 - ITAT MUMBAI

Attribution of profits out of the sales made by the head office - CIT(A) confirming the action of AO of attributing the profit on the direct sales made in India by the Head Office of the Appellant as the profit of the Indian Branch - Held that:- Decision of the Tribunal in assessee’s own case for earlier assessment years 1999-2000 & 2000-01, wherein the coordinate bench had accepted the estimate of gross profit attribution at 10% in place of 20%. We have also perused the TP report and the comput .....

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espect of direct sales by the Head Office - Held that:- As decided in earlier AY's the fact which remains uncontroverted by the revenue authorities and the DR are that the assessee in the year under consideration was covered under the TP regulations and in those proceedings, the factum of management fee has dealt with extensively and in the process, the TPO found the receipt of management fee by the India Branch from SJMH related to services provided to both SJMI & SJMH. It is evident from the a .....

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is preferred against the order of the Ld. CIT(A)-11, Mumbai dt. 31.1.2010 pertaining to Assessment year 2005-06. 2. The assessee has raised 5 substantive grounds of appeal which read as under: 1 : 0 Re.: Attribution of profits out of the sales made by the head office: 1 : 1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer of attributing the profit on the direct sales made in India by the Head Office of the Appellant as the profit of the Indian .....

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e-compute its total income accordingly. Without prejudice to the foregoing: 2 : 0 Re.: Estimation of gross profit: 2 : 1. The Commissioner of Income tax (Appeals) has erred in upholding the action of the Assessing Officer of estimating 20% of the direct sales made by the Head Office in India as part of the total income of the Indian Branch of the Appellant. 2 : 2. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the stand of th .....

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not directing the Assessing Officer to reduce the management fee offered to tax by the Appellant in its return of income in respect of direct sales by the Head Office. 3 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, in case it is held that direct sales made in India by the Head Office of the Appellant are attributable to the Indian Branch the management fees offered to tax by the Appellant ought to be reduced and the Co .....

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ant submits that considering the facts and circumstances of its case and the law prevailing on the subject no disallowance whatsoever is called for u/s. 40(a)(ia) of the Income tax Act, 1961 and the Commissioner of Income tax (Appeals) ought to have held as such. 4.3. The Appellant submits that the Assessing Officer be directed to delete the addition so made by him and to re-compute its total income accordingly. 5.0. Re.: Non consideration of additional evidence admissible in terms of Rule 46A o .....

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peal. 3. The assessee is engaged in the business of marketing and selling of medical products. The assessee is 100% subsidiary of St. Jude Medical Inc. of United States of America (SJMI). SJMI was was earlier selling its products in India through an independent third party distributor located in Hongkong. The Hongkong distributor had in turn appointed certain sub distributors to market and sell products of SJMI in India. Subsequently, SJMI set up a wholly owned subsidiary in Hongkong viz., St. J .....

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explained that the Head Office had entered into an agreement with the Indian Branch for providing marketing support for the sales made by the Head Office directly in India for which the branch has received a management fees of ₹ 37,80,857/- in respect of the sales. 3.3. The Head Office has sold the same medical products directly in India amounting to USD 9,59,774/-. The assessee explained that the branch has no role to play in such sales and therefore the profits from such sales are not a .....

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iven by his predecessor in earlier assessment years and confirmed the findings of the AO. 5. Aggrieved, the assessee is before us. 6. At the very outset, the Ld. Counsel for the assessee brought to our notice the decision of the Tribunal in assessee s own case for earlier assessment years in ITA Nos. 2228/M/07, 1902/M/07, 4623/M/07, 4941/M/07, 6922/M/07 and 7193/M/07 dated 13.5.2014 read with Miscellaneous application No. 349 to 351/M/14 dt14.10.2014. It is the say of the Ld. Counsel that the is .....

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2000-01, wherein the coordinate bench had accepted the estimate of gross profit attribution at 10% in place of 20%. We have also perused the TP report and the computation, wherein, the TPO has accepted the gross profit rate declared at 8.81%. In such a situation, acceptance of gross profit attribution of India Branch @ 20% does not inbspire confidence. 30. We, therefore, accept the gross profit margin declared by the assessee for the year under consideration. 8.1. Further at para-39 to 42, the T .....

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ded 31.3.2002. The AR pointed out that the assessee had declared the same in the TP report in identification of revenues, which showed that ₹ 79,20,240/pertained only to SJMH and SJMI. It was also pointed out that it was declared and the same was accepted by the TPO vide order u/s. 92CA(3) dated 28.2.2005 and found the same to be correct, and no adjustment was called for. 40. The AR, therefore, submitted that management fee pertained to SJMH and SJMI and hence no addition was called for. 4 .....

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