TMI Blog2018 (4) TMI 1579X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 3,52,45,624/-. The return was initially processed u/s 143(1) of the IT Act. Subsequently it was noticed that the assessee has entered into international transactions with its AEs. Therefore, the M/s DQ Entertainment (International) Ltd, Hyderabad. determination of Arms Length Price of such transactions was referred to the TPO u/s 92CA of the IT Act. The TPO passed an order u/s 92CA(3) of the IT Act on 29.01.2015 proposing an adjustment of ₹ 6,91,84,554/-. The draft assessment order was accordingly passed, against which, the assessee preferred its objections before the DRP. DRP issued the directions vide order at 28.12.2015. In accordance with the DRPs direction, the final assessment order passed, against which, the assessee is in appeal before us by raising the following grounds of appeal: 1. The Learned Dispute Resolution Panel (DRP) / Assessing Off icer (AO) are erroneous in law and on the facts of the case. 2. The Ld. DRP/AO are not legally justif ied in making an adjustment of ₹ 3,00,05,103/- as prof it attributable to the appellant company under the Profit Split Me thod in connection with the absolute sale of intangible asset to AE when such reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch intangible asset after such sale. We find that this issue had first arisen during the A.Y 2010-11 and the Tribunal, at para 15 of its order, has considered the issue at length and has held as under: 15. Considered the submissions of both the parties and perused the material f acts on record as well as the orders of revenue authorities. The f acts are, the assessee had sold IP (Jungle Book) to its AE on 30/09/2009 at the development stage. It was not f ully developed to generate revenue immediately. As per ld. AR, AE was in a position to generate revenue in the last quarter of 2009-10 i.e. Jan-March, 2010. But TPO adopted the whole revenue generated by AE in the whole year to arrive the prof it arithmetically to the Indian Entity. The main issue bef ore us is, whether the TPO justified to determine the profit attributable to Indian entity (assessee) when he himself determined the sale consideration of IP (Jungle Book). When the TPO ITA No. 151 /Hyd/2015 D.Q. Entertainment (International) Ltd. agreed that there is a outright sale, there ends the international transaction. Now, TPO is trying to go beyond sales and making TP adjustments. We are asking ourselves, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 307 to its AE at Mauritius towards Management Consultancy services received. The assessee had claimed that the payment was made to the Board of Directors of the AE as they were rendering invaluable advice and guidance to the assessee company. The TPO however, held that the assessee failed to furnish any evidence in support of the receipt of the benefitf or which the payment was made by the assessee to its AE and hence computed the ALP at Nil and suggested the adjustment. We find that very same issue had arisen in the assessee s own case for the A.Y 2008- 09 in ITA No.62/Hyd/2013 dated 30th October, 2015 and at Paras 6.2 to 6.7 the Tribunal has held as under: 6.2. As can be seen from the above, the TPO analysed the accounts of DQ Entertainment Plc and DQE Mauritius in analyzing the nature of payment. Out of the total amount of US$ 7,99,000 paid, the actual Management Consultation Charges were only US$ 4,27,000 along with administrative and audit fee of US$ 14,000. As per the agreement, there is a markup of 5%. This expenditure only can be considered, in our view, as the Management Consultancy Service Fee, whereas the foreign exchange loss of US$ 3,21,000 cannot be considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining to 'special considerations f or intra group services'. Considering the assessee's agreement with DQE Mauritius which in turn has an agreement with DQ Entertainment Plc, and the reimbursement of cost from one company to another, we agree with the TPO's observation that foreign exchange loss in financial transactions cannot be considered as 'service charge' for the intra group and therefore, we after considering the facts of the M/s DQ Entertainment (International) Ltd, Hyderabad. case, restrict the amount to the actual management fees charged by the DQE Mauritius along with other cost of administration and audit and mark up at 5% . 11. Since the facts and circumstances are the same for the A.Y before us, respectf ully following the decision of the Coordinate Bench (to which both of us are signatories), we allow the assessee s ground of appeal. 6.1. Since the facts and circumstances before us for the relevant assessment year also the same, respectfully following the decision of the coordinate Bench this ground of appeal is allowed. 7. As regard ground No. 5, we find this issue also has arisen before the Tribunal in the assessee s own case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of its AE DQE (Ireland) towards travel expenses and other expenses. It was submitted that, Reimbursement of travel and other expenses were incurred solely on behalf of DQE Ireland, This transaction did not impact the P L of DQ India and that it was at cost and did not amount to any service rendered. It is submitted that the assessee raised bills against DQE (Ireland) at cost, and submitted that it is in general practice among group companies to incur expenses on behalf of group companies and to recover the same at cost, and that these transactions have no impact on profit loss account. 26.1 Ld. AR submitted that despite the submissions made Ld TPO applied mark -up on reimbursement of travel and other expenses @ 10%, stating that the same was reasonable which any independent party would be willing to pay. It is submitted that it is only reimbursement of expenses incurred by assessee on behalf of AE and there is no services rendered This resulted in an adjustment of ₹ 7,73,699/- to the prof it of the assessee company. 26.2 Ld. AR submitted that according to Black's Law reimburse means to pay back, to make restoration, to repay that expended, to indemnif y or make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of business of assessee. These are the services rendered by outsiders for the AE's and only payment was made by assessee and got reimbursement from AE . Since there is no element of service by the assessee, adding markup on these kind of transactions are not justified. As held in the case of M/s Cognizant Technologies Solution (spra), the additions made were deleted by Chennai Bench of ITAT. Accordingly, the grounds raised by the assessee are allowed. 7.1. Since the facts and circumstances before us are the same, also for the assessment year before us, the ground of appeal No. 5 is allowed. 8. As regards Ground No. 6, the Ld. Counsel for the assessee submitted that there is a computation error while computing the eligible amount of deduction u/s 10A of the Act. We, therefore, deem it fit and proper to remit this issue to the file of the A.O for verification and if the assessee s contention is found to be correct, the same shall be rectified by the A.O. Accordingly, this ground of appeal is treated as allowed for statistical purposes. 9. In the result, the appeal filed by the assessee is partly allowed. Pronounced in the open court on 06th April, 2018. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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