TMI Blog2018 (5) TMI 1578X X X X Extracts X X X X X X X X Extracts X X X X ..... d payment shall constitute business receipts in the hands of the recipient companies - in the nature of compensation received for loss of business - the foreign company does not have permanent establishment in India - thus payments are not liable for taxation in their hands in India and no TDS shall be deducted u/s 195 - decided in favor of assessee - I.T.A. No. 506/Mum/2016 And I.T.(TP).A. No. 1261/Mum/2017 - - - Dated:- 22-5-2018 - Shri B.R. Baskaran (AM) And Shri Ramlal Negi (JM) For The Assessee : Shri M.P. Lohia And Shri Hemen Chandariya For The Department : Shri Jayant Kumar ORDER Per B.R. Baskaran (AM) : Both the appeals filed by the assessee are directed against the order passed by the Assessing Officer in pursuance of direction given by learned DRP and they relate to A.Ys. 2011-12 and 2012-13. Both the appeals were heard together and are being disposed of by this common order, for the sake for convenience. 2. The common issue urged in both the appeals relates to the Transfer Pricing adjustment made to the license fee paid by the assessee. The facts relating thereto are that the assessee is engaged in the business distribution of softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt integrated approach for determining arm s length price as held by Hon'ble Punjab Haryana High Court in the case of Knorr-Bremse India (P) Ltd vs. ACIT (2016) 380 ITR 307. Accordingly, the learned DR submitted that the issue may be restored to the file of the Assessing Officer/TPO for examining it afresh, as held by Coordinate Bench of Tribunal in assessee s own case for A.Y. 2008-09 2010-11. 6. We have heard the rival contentions on this issue. We noticed that the Coordinate Bench of the Tribunal has restored an identical issue to the file of the Assessing Officer/TPO in A.Y. 2008-09 in ITA No. 6842/Mum/2012 dated 24.4.2016 with following observations :- 15. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant paper books filed before us. The undisputed facts are that the TPO has not given any reasons for rejecting the CUP/RPA methods adopted by the assessee in respect of royalty and other international transactions. It is also a fact that the TPO travelled in the wrong presumption that the assessee used TNMM method for benchmarking the transaction as evident from the language used in the order of the TPO. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in A.Y. 2010-11 in ITA No. 1598/Mum/2015. Even though learned AR submitted that the order passed by learned DRP in A.Y. 2013-14 may be followed, yet we prefer to follow the decision rendered by the Coordinate Bench in A.Y. 2008-09 2010-11. Accordingly, we set aside the order passed by the Assessing Officer on this issue and restore the same to the file of the Assessing Officer/TPO with identical direction as given in A.Y. 2008- 09. 8. In A.Y. 2012-13, the assessee is also contesting the decision of the learned CIT(A) in confirming the disallowance of ₹ 184.73 lakhs made u/s. 40(a)(ia) of the Act. The Assessing Officer noticed that the tax auditor has reported a sum of ₹ 375.83 lakhs as the amount disallowable u/s. 40(a) of the Act. The Assessing Officer noticed that the assessee has disallowed only ₹ 191.09 lakhs and did not disallow following amount paid to non-residents: Name of party Amount SAS Portugal 173.81 lakhs SAS Romania 3.12 lakhs SAS Institute Inc 7.80 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid above said compensatory amount to non-resident in order to provide support services to the customers who use this software in their territory. Accordingly, the Assessing Officer took the view that the assessee has made payment for the purpose of providing technical services to the customers and accordingly held that the assessee should have deducted tax at source on the above said payment of ₹ 183.73 lakhs and in the absence of tax deduction at source, the Assessing Officer disallowed the same u/s. 40(a)(ia) of the Act, learned DRP also confirmed the same. The Ld DRP also confirmed the same. 11. The Learned AR submitted that the assessee has not availed any technical services from these foreign companies. The above said payment was made to the foreign companies as compensatory payment as per the agreement entered into between the assessee and its parent company. This compensatory payment constitutes business receipts in the hands of the recipient and hence they are not liable for taxation in India, as those foreign companies do not have permanent establishment in India. Accordingly, the learned AR submitted that the assessee was not liable to deduct tax at source from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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