Feedback   New User   Subscription   Demo   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Extracts
Home List
← Previous Next →

Spicer India Private Limited, (Formerly known as Spicer India Limited) Versus The Assistant Commissioner of Income Tax, Circle-10, Pune

2018 (2) TMI 975 - ITAT PUNE

Disallowance of management services fees - Held that:- Management service fee paid by assessee to Asia Investment Pvt. Ltd is allowable. As decided in assessee's own case [2017 (4) TMI 908 - ITAT PUNE] where there is nexus between the expenditure incurred and the purpose of business, then the revenue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable.The expenditure incurred by the assessee on management fees in order to facilitate smooth ru .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is warranted on this count. Accordingly, the claim of assessee is thus, allowed. In any case, the jurisdiction and power of TPO is to determine arm's length price of Royalty and the order of TPO holding that the assessee had not derived any benefit under the said Agreement is beyond the scope of TPO while benchmarking the international transaction for the purpose of determining arm's length price - Decided against revenue - Warranty provision applicability - Held that:- DRP has given categor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

And ITA No. 826/PUN/2016 - Dated:- 9-2-2018 - SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri R.D. Onkar For The Revenue : Shri Rajeev Kumar, CIT ORDER PER VIKAS AWASTHY, JM These cross appeals by the assessee and the Department are directed against assessment order dated 26.02.2016 passed u/s.143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The brief facts of the case as emanating from records are: The assessee company is e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

14,54,45,173/- in respect of Royalty payment to its AE, Dana Corp., USA. The TPO held that the assessee has failed to show any advantage from the services rendered by Dana Corp., USA, therefore, payment of royalty is not justified and took the ALP of royalty payment as Nil . The Assessing Officer in line with the order of TPO passed draft assessment order on 30.03.2015. Further, the Assessing Officer made addition of ₹ 2,25,00,000/- on account of warranty provision and disallowed managemen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

led objections before the Dispute Resolution Panel (DRP). The DRP vide directions dated 30.12.2015 deleted the transfer pricing adjustment in respect of royalty payment, as well as, addition made by the Assessing Officer in respect of warranty provision. However, in respect of management services fees ₹ 14,54,45,173/- paid to Asia Investment Pvt. Ltd, Indian Associate of the assessee, the DRP confirmed the disallowance. In line with the directions of DRP, the Assessing Officer passed impug .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ound Nos. 1 to 4 are directed towards deleting addition on account of payment of Royalty to Dana Corp., USA. In grounds nos. 5 and 6, the Revenue has assailed deleting of addition on account of warranty provision. 4. Shri R.D. Onkar appearing on behalf of assessee submitted at the outset that grounds raised by assessee in its appeal and ground No. 1 to 4 raised by the Department against allowing of payment of royalty to Dana Corp., USA are squarely covered by the decision of Tribunal in cross ap .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for assessment year 2009-10 and 2010-11. The ld. AR stated at the Bar that there has been no change in the facts and circumstances of the assessment year under appeal. The nature of transactions are identical and are emanating from same set of agreements between assessee and AEs. 4.2 In respect of ground No. 5 and 6 raised in appeal by Department, the ld. AR submitted that the assessee is engaged in the business of manufacture of fully assembled light axles and drive shafts and components there .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made during the relevant previous year. The ld. AR asserted that assessee qualifies the test laid down by Hon'ble Supreme Court of India in the case of Rotork Controls India P. Ltd Vs. CIT reported as 314 ITR 62. The DRP has granted relief to the assessee by following the law laid down in the case of Rotork Controls India P. Ltd (supra). 5. On the other hand, Shri Rajeev Kumar representing the Department vehemently supported the findings of TPO in making adjustment in respect of Royalty paym .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n its appeal has assailed disallowance of management services fees ₹ 14,54,45,173/- paid to Asia Investment Pvt. Ltd. We find that identical ground was raised by assessee in its appeal in ITA No. 251/PUN/2014 (supra). It is an undisputed fact that facts and circumstances in the present appeal are identical to the facts in assessment year 2009-10. Management services fees has been paid under Corporate Services Agreement dated 14th December, 2004 and renewed thereafter, to be effective till .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

while deciding this issue in favour of assessee for assessment year 2009-10 held as under: 23.We have heard the rival contentions and perused the record. The corporate issue raised by the assessee is against the disallowance of management fees paid by the assessee. The assessee had entered into an agreement with AIPL dated 14.12.2004. The said concern was engaged in providing professional and management services to the assessee. The assessee has enlisted benefits received by it by making the sa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Setting-up and deploying the Operating Engineering Model concept across SIPL. • Business Development, Marketing and Distribution: Services like conducting presentations on latest technologies at client location, meeting with key customers to generate opportunities for SIPL, supporting in participation at various business events etc. This support from AIPL resulted in increased turnover year on year as well as boost in aftermarket sales as provided vide submission dated 26 March 2013 before .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rect Tax Laws and various other laws, AIPL supported in advising from time to time with regard to changes which helped SIPL to comply with all the laws and regulations. • Operational overview: AIPL conducted periodic operation review meetings to drive the performance of SIPL and supported for excelling the operations. In addition to that, advisors drawn from diverse fields were available for advising SIPL in the matters of strategic issues, key business decisions, organizational market deve .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er facilities like transit facilities for the stay of employees of client companies etc. • Support in New Manufacturing Facility Set-up and expansions: AIPL supported in setting up new facilities for SIPL in terms of preparation of feasibility study, effective planning and execution for new project / manufacturing facility, monitoring controlling on capital spent and in executing cost effective contracts, etc. • Government liason: Assisted SIPL to have effective interaction with variou .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

environment policies which laid down the actions expected from employees and various green initiatives. • Standards of services with business code of conduct: AIPL deployed Business code of conduct in confirmation with standards of services and made available ethics helpline to report non-compliances. 24. In the facts of the present case, the assessee was paying Royalty to Dana Corporation @ 2.85% and was also paying management fees to AIPL for rendering several types of services at remuner .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing on of the business by the assessee and were incurred for the purpose of business. The assessee is the best judge to decide the expenditure it needs to incur for smooth carrying on of its business. The Assessing Officer cannot sit in judgment of businessman position in incurring any expenditure. The Hon ble Supreme Court in Hero Cycles (P) Ltd. Vs. CIT (supra) have applied the ratio laid down by the Apex court in S.A. Builders Ltd. Vs. CIT(A) and another (2007) 288 ITR 1 (SC) and upheld the s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable. Applying the above said proposition laid down by the Hon ble Supreme Court, we hold that the expenditure incurred by the assessee on management fees in order to facilitate smooth running of its business is an allowable expenditure in the hands of assessee. Similar expenditure has been allowed in the hands of assessee in preceding year. Another aspect of the issue is that the said managem .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o Asia Investment Pvt. Ltd is allowable. Thus, the ground No. 1 and 2 raised by assessee in appeal is allowed. 7. Now, adverting to the appeal by the Revenue, the ground Nos. 1 to 4 are against deleting of addition on account of payment of Royalty ₹ 14,54,45,173/- to Dana Corp., USA. The Co-ordinate Bench of Tribunal in the ground raised by assessee assailing the addition of entire Royalty paid to AE i.e. Dana Corp., USA in assessment year 2009-10 held as under : 48. We have heard the riva .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sessee had received the benefits and assistance from its associate enterprises in relation to the Royalty transaction on account of technical assistance, design, process review and technical know-how, which are placed at pages 201 to 210 of the Paper Book. It was pointed out that associate enterprises supports the assessee in technology upgradation by bringing the latest technology in drive train systems to India. The Assessing Officer referred the issue of computation of arm's length price .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ake the Royalty payment at 8% on exports and 5% on domestic sales without any restriction on the duration of Royalty payments. Thereafter, this rate was reduced to 2.85% by the RBI. The case of the assessee before the TPO was that since the Royalty payments were in terms of approval granted by SIA and RBI, the same were at arm's length price and the assessee placed reliance on CUP method for benchmarking the said transaction of payment of Royalty in this regard. The plea of assessee that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be not at arm's length. The first issue which has been raised before us is against justification of Royalty payment vis-à-vis benefits received by the assessee and whether it was beyond the scope of TPO while determining the arm's length price of said transactions. The second issue raised before us was that the transactions undertaken by the assessee on account of Royalty payment were at arm's length or not. 50. The first aspect of the issue is that the assessee has been payi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ength price. The Hon ble Bombay High Court in CIT Vs. SGS India Pvt. Ltd. (supra) has held so. The said proposition has also been laid down by the Mumbai Bench of Tribunal in ACIT Vs. M/s. Dow Agrosciences India Pvt. Ltd. (supra) and it has been held that where the Royalties were paid in terms of approval granted by SIA / RBI, then the same are to be considered at arm's length rate. Following the said proposition laid down by the Hon ble Bombay High Court in CIT Vs. SGS India Pvt. Ltd. (supr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version