TMI Blog2018 (2) TMI 975X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 categoric finding that provision of warranty made by assessee are based on scientific analysis of the past data and represents a reliable estimate of obligation arising out of sales made during the relevant previous year. The ld. DR has not been able to controvert the findings of DRP. In Rotork Controls India P. Ltd.(2009 (5) TMI 16 - SUPREME COURT OF INDIA) has held that where provision for warranty is made on scientific basis, the same is to be allowed.- Decided against revenue - ITA No. 376/PUN/2016 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement services fees. Against the assessment order dated 26.02.2016 and findings of the DRP, both, the assessee and the Revenue are in appeal before the Tribunal. 3.1 The assessee in its appeal has raised two grounds. Both the grounds are directed towards single addition i.e. on account of disallowance of management services fees ₹ 14,54,45,173/-. The Department in its appeal has raised six grounds. The ground 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 appeals in assessee s own case i.e. ITA No.251/PUN/2014 and ITA No.1327/PUN/2014 for assessment year 2009-10 decided on 10.02.2017. 4.1 The ld. AR submitted that identical issues had come up in cross appeal before the Tribunal in assessment year 2010-11 i.e. ITA No. 1321/PU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised 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 31st December, 2015. The said agreement is at page 229 to 237 of the paper book. The assessee under the said agreement availed support services in respect of human resources, environment, health safety, business development, marketing, finance, legal and taxation and secretarial etc. Management services fees is paid to Asia Investment Pvt. Ltd at the rate 2.85% of sales. It has been contented that tax at source has been deducted in respect of said payment. The Co-ordinate Bench of Tribunal 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of market/ customers, focus flow, stable production across all tiers, less fluctuated delivery requests etc. Facilities: SIPL used facility set up of AIPL which is well equipped for their board meetings and meetings with overseas visitors and also other 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 various Government agencies, Ministry and Trade Chambers of Commerce etc. Corporate relations and communications: Continuous corporate communication department with contracts with media and brought out a quarterly corporate publication which helped SIPL in branding and publicity. Strategic sourcing: Supported in vendor development and defining strategy for sourcing commodities or materials through various activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 management fees is to be taxed in the hands of recipient and even the service tax has been paid by the recipient, evidence of which is placed in the Paper Book. Once the commercial expediency of expenditure is established, then the same is to be allowed as business expenditure in the hands of assessee. We hold so. The ground of appeal No.5 raised by the assessee is thus, allowed. Following the decision of Co-ordinate Bench on identical set of facts, we hold the management service fee paid by assessee to 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 rival c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits received by the assessee against payment of Royalty and hence, the Royalty transaction was held to be not at arm's length. The first issue which has been raised before us is against justification of Royalty payment vis- -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 paying the said Royalty payment from year to year, which has been allowed in the hands of assessee by the TPO without making any adjustment in assessment years 2005-06 to 2008-09. The Assessing Officer had also allowed the claim of assessee. Further, in assessment year 2010-11, it has been allowed by the CIT(A) and in assessment year 2011-12, allowed by the DRP. The second aspect is that whether the rate of Royalty approved by SIA / RBI would constitute CUP data and the transaction is at arm's length price. The Hon ble Bombay High Court in CIT Vs. SGS India Pvt. Ltd. (supra) has held so. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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