9911796707
TMI Blog2017 (12) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... e by adjustment to arm lengths price with respect to the international transaction entered into by the assessee with its Associate Enterprise (A.E) , the TP additions made by the AO in the assessment order were in turn based upon orders dated 28.10.2010 passed by Transfer Pricing Officer(TPO) u/s. 92CA(3) , wherein an adjustment of Rs. 33.10 crores was proposed by TPO to the Arms Length Price of International Transaction entered into by the assessee with its AE's with respect to the investment banking services rendered by the assessee. It is claimed by the assessee that it is part of Lehman Brothers group, headquartered in New York, and had offered financing and advisory salutations to its clients in India in the field of Investment Banking Division. It is claimed that the Investment Banking Division (IBD) serve Corporate, Institutional and Government clients. It serves the clients capital-raising needs through specialized product groups in underwriting, private placements, leveraged finance and other activities associated with debt and equity products. With respect to its investment banking division transaction with its AE, the assessee claimed to have submitted its transfer prici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: SI. No. Name of the company 2006-07 1 B 2 K Corp. Pvt. Ltd. NA 2 B N R Udyog Ltd. 30.73 3 CMC Limited t 32.91 4 Cosmic Global Ltd. 11.31 5 Datamatics Technologies Ltd. 4.03 6 Fortune Infotech Ltd. 12.82 7 Galaxy CommerciaIs Ltd 14.22 8 HCL Technologies Ltd. 20.06 9 KPIT Cummins Global Business Solutions Ltd 19.93 10 T S R Darashaw Ltd. 44.64 - --. Arithmetical mean 21.18 It was also claimed by the assessee that it is the first year of operations in India and there are certain extra ordinary expenses such as start up cost and non-recurring expenses which were incurred by the assessee such as signup bonuses , relocation expenses, recruitment expenses etc. which need to be factored in while computing ALP. It was also claimed that the assessee has not operated at full capacity during the previous year relevant to the impugned assessment year as the assessee was in the process of employing new employees being the first year of operation and the costs were incurred for recruitment charges as also there are premises lying vacant which could not be used due to non employment of employees being first year of operations . It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... integrated, inter-connected and seamless wherein several entities across globe of Lehman Brothers Group collaborate along with clients and banks to complete transaction in IBD segment wherein Revenue split method is the most appropriate method for benchmarking and computation of ALP of its international transactions with AE. It was submitted that this was a first year operation and the assessee was engaged in investment banking business, and the transfer pricing was done worldwide by Lehman Brothers Group by following global policy uniformly and consistently wherein Revenue split method is adopted to compute ALP of international transactions with AE. It was submitted that the transfer pricing methodology of Revenue split adopted by Lehman Brothers globally since several years consistently and uniformly was also applied the case of assessee which was rejected by TPO as well by learned CIT(A) and instead TNMM was applied. It was submitted that the business model of the assessee is unique being investment banking , there are no comparable available. It was submitted that there was an amendment in 2012 wherein legislature has introduced Rule 10AB by the IT (Sixth Amendment) Rules , 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no proper representation before the authorities below during assessment proceedings as well before learned CIT(A) as information could not be collated due to collapse of Lehman Brothers, there could be an open ended set aside to the file of the A.O/TPO wherein all the contentions/issues can be left open including any fresh issue which may arise for consideration by TPO/AO during de-novo proceedings, and TPO/AO can decide the issue's afresh denovo on merits in accordance with law including considering the most suitable method for computing ALP w.r.t. its international transactions with AE. The learned CIT-DR on the other hand submitted that as per Rule 10B(1)(d) of Income-tax Rules, 1962, only profit split method is acceptable to compute the ALP . It was submitted that there is no such Revenue Split method as adopted by the assessee which is accepted in Indian TP jurisprudence and combined net profit of the group globally is to be split for which no details were furnished by the assessee .It was submitted that the assessee did not submitted due information and evidences during assessment proceedings as well before learned CIT(A) and hence the TPO applied TNMM method to compute ALP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee could not make proper representations before the authorities below owing to collapse of Lehman Brother Group which led to its liquidation in 2009 and the employees of the group left the organisation, which made it difficult to collate information as desired by the authorities below during assessment/first appellate stage. The assessee had submitted that the Profit/Revenue split method is the most appropriate method to bench mark international transactions with its AE as the transactions were integrated, inter-connected and seamless wherein various Lehman Brother entities across globe participate along with bankers and client to successfully conclude the transactions and hence Revenue Split was claimed to be most appropriate method to bench mark its international transactions with its AE and the said method was claimed to be consistently and uniformly applied since 1999-00 by Lehman Brother Group worldwide across all its entities . The assessee claimed that the assessee business model is unique one and there are no comparable companies available in the segment in which the assessee is engaged into. It was submitted by the assessee before the TPO that the functions performed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8% to the total cost of Rs. 55.7 crores(after excluding certain extra-ordinary start up costs) which led to the additions to the tune of Rs. 33.10 crores being made by the AO vide assessment order dated 18.02.2011, which was later confirmed by learned CIT(A) vide its appellate orders dated 12.04.2012 . The assessee has relied upon several cases laws cited above in preceding paras and tried to justify that the assessee business is integrated , inter-connected and seamless business of investment banking wherein several Lehman Brothers entities globally participate along with banks and clients to successfully complete the transactions and the Revenue split method is the most suitable. Reference is made to an amendment brought in by amendment in 2012 wherein legislature has introduced Rule 10AB by the IT (Sixth Amendment) Rules , 2012 w.e.f. 01-04-2012 under the sub head "Other method of determination of ALP" to justify the methodology adopted by the assessee for benchmarking international transactions by adopting Revenue Split Method instead of Profit Split Method or other specified methods as are acceptable in Indian TP jurisprudence . We have observed based on material on record tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
