TMI Blog2017 (10) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Addition on account of Royalty expenses - no tangible benefit had accrued to the assessee on account of payment of Royalty - Held that:- It is undisputed fact that the issue relating to payment of royalty in assessment year under appeal is arising from same set of facts in assessee’s own case in assessment year 2009-10.. The royalty paid by the assessee to Dana Corporation, USA during the period relevant to assessment year 2010-11 is germinating from same agreement which was subject matter of dispute in assessment year 2009-10. The detailed reasons have been given by the Co-ordinate Bench in assessment year 2009-10 for allowing the payment of royalty. Following the decision of co-ordinate Bench, we hold that the payment of royalty paid by the assessee to its AE is justified and is at arm’s length price. We find no merit in the grounds raised by the Revenue. - ITA No.1321/PUN/2015, ITA No.1350/PUN/2015 - - - Dated:- 27-10-2017 - SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM Assessee by : Shri R.D Onkar Revenue by : Shri Rajeev Kumar ORDER PER VIKAS AWASTHY, JM These cross appeals by the assessee and the Revenue are directed against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2010-11) : 4. The assessee has raised following grounds of appeal against the order of Commissioner of Income Tax (Appeals) : 1. The learned CIT A erred in confirming the disallowance of the entire management services fees paid ₹ 11,24,11,686/- when the said revenue expenses were incurred by the appellant wholly and exclusively for the legitimate purposes of its business and claimed accordingly by the appellant under Section 37 of the Income Tax Act, 1961. The learned CITA further erred in confirming the disallowance of the said expenses by simply brushing aside the voluminous compilation of copies of email communications, presentations and reports and information and other documents on record substantiating the said services received by the appellant and in giving an adverse finding that the appellant did not establish its case on facts. 2. The learned CITA failed to appreciate that management as an intangible process is practiced throughout business organization from top to middle to operational levels and is management of day to day business affairs. The learned CITA further failed to appreciate that the only condition was that the revenue expenditure s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment year 2009-10 had assailed the findings of Commissioner of Income Tax (Appeals) against disallowance of management service fees of ₹ 8,11,62,596/-. The Co-ordinate Bench of the Tribunal after analysing the facts of the case held that once commercial expediency of expenditure is established, then the same is to be allowed as business expenditure. The relevant extract of order of the Tribunal dated 10.02.2017 on the issue is 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 said payment of management fees to AIPL which are as under:- Human Resource: AIPL consistently provided Human resource services like education / trainings services with the intention of developing a talent pool, by educating, training, and developing a chain of employees who are slated to take over the baton of future leader ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 activities. Environment, Health and Safety : AIPL supported in forming group 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, allowed. 8. We find that facts in the present appeal are similar to the one adjudicated by the Co-ordinate Bench in the assessee s own case in immediately preceding assessment year i.e. 2009-10. The ld. DR has not been able to controvert the findings of the Co-ordinate Bench of the Tribunal. In the absence of any distinguishing feature, we see no reason to take a divergent view. Following the reasoning and decision of Coordinate Bench in assessee s own case, we allow ground No. 1 and 2 raised by the assessee in present appeal. 9. In the result, appeal of the assessee is allowed. ITA No. 1350/PUN/2015 ( Revenue s Appeal) ( A.Y.2010-11) : 10. The Revenue in its appeal has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds: 1.Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in deleting the addition on account of Royalty expenses amounting to ₹ 11 ,24,11,686/-, ignoring the findings of the TPO and the AO that the said technology transfer agreement Which was signed 15 years ago from relevant A.Y, has become obsolete? 2. Whether on the facts and circumstances of the case the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that identical issue had came up in assessee s own case in assessment year 2009-10 and the Tribunal allowed the claim of assessee. 12. Shri Rajeev Kumar representing the Department vehemently supporting the order of Assessing Officer/Transfer Pricing Officer submitted that assessee has signed Technology License Agreement for the first time in 1993. No justification has been given by the assesse for payment of royalty even after elapse of such a long period. The ld. DR further submitted that the assessee has not submitted any document to establish that during the period relevant to assessment year under appeal, the assessee has derived any benefit or has received any technical assistance. However, the ld. DR fairly admitted that identical issue has been adjudicated by the Co-ordinate Bench of the Tribunal in assessee s own case in assessment year 2009-10. 13. We have perused the order of Tribunal in assessee s own case for assessment year 2009-10. We find that the issue relating to payment of royalty by assessee to Dana Corporation, USA has been dealt by the Tribunal in assessee s own case in assessment year 2009-10. The Coordinate Bench has given detailed findings on this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pricing. The TPO stressed that no proper documentation had been brought on record to justify the benefits 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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