TMI Blog2017 (2) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... ds payment made to its parent company on an adhoc basis cannot be justified - case the entire confusion has arisen because the assessee company has not submitted the evidence for the service rendered by the parent company to the assessee company against which the payments are made to the parent company by the assessee company. With these observations we remit the matter back to the file of TPO for fresh considerations - Appeal of assessee is allowed for statistical purposes Comparable selection - consideration of risk related adjustment fpr comparable selection - HELD THAT:- In two wheelers space the company’s major customers are TVS, Bajaj Auto and Hero Moto. In the Four wheeler segment, the company’s customers are Tata Motors, Mahindra and Mahindra, Hyundai, Ford and General Motors. The major exports customers are General Motors, Suzuki and Piaggio. Being so, the AO required to reexamine the claim of risk adjustment and replacement adjustment claimed by the assessee and suitable adjustments to be given after apprising the TP documents submitted by the assessee. With this observation, we remit the issue to the file of AO for the purpose of determination of risk adjustment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule. 7. TPO/DRP erred in not considered the working capital adjustment for determination of ALP by the TPO. 8. TPO/DRP erred in not considering the power related adjustment for providing for economic differences in determination of ALP. 9. The AO omitted to consider advance tax payment of ₹ 12,000,000/- while passing the final order. 10. The appellant prays consequential relief of interest u/s.234B and 234C of the Act. 2.1 At the time of hearing, the ld. AR submitted that the assessee is not interested to press ground Nos.4, 6, 7 8. Accordingly, these grounds are dismissed as not pressed. 3. Now, the Ground No.2 for our consideration is that the TPO/DRP erred in disallowing the Technical and Management costs to the extent of ₹ 20,463,035/-. 4. The brief facts of the issue are that during the assessment year 2012-13, the assessee had incurred payments to it s A.E a sum of ₹ 20,463,035/- towards the Technical Services Fees. Based on the details of services and various documentary evidences furnished, the TPO considered part of such sum at arm s length. However, TPO refused to consider the following categories of services from the top ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrative services. It is seen from the record that the submission of the assessee before this Panel is similar in substance as made before the TP0. It is observed that the assessee has claimed expenditure amounting to ₹ 1.54,17.137 for Technical Service and ₹ 3,24.54,364 for Royalty separately in the P L account. The DRP was of the opinion that firstly it will be relevant to examine the main features of the Technical Assistance Agreement between the assessee and the AE, M/s.Infac Corporation, Korea dated 1St January 2011, whose terms and conditions govern all the transactions between them. 4.4 Thus, it is seen that various articles in agreement specify the nature of service and support to he rendered by the AE to the assessee and the related terms for payment in return by the Indian company. Article 1.1 lists out licensed products ( Exibit A) for which the assessee gets right to manufacture, produce, USC and sell utilizing the technical information and Industrial Property Rights. Article 1 .2. defines Technical Information meaning technical knowledge, knowhow, standard calculations, data and information developed/available with Licensor (Exibil 13) perta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue came for consideration before this Tribunal in assessee's own case for assessment year 2010-11 in ITA No.745/Mds./2015 dated 12.08.2015. The Tribunal observed as follows:- 6. After hearing both sides, we are of the considered view that the entire matter has to be remitted back to the file of Ld. TPO for denovo consideration because both the assessee as well as the Revenue has not examined the issue with respect to the correct factual matrix. Management services and Technical services false under different field and the nature of work involved both these services are different. Further, when the assessee has made payments to its parent company it has to establish and justify the nature of payment and the nature of service received for the purpose of determining Arms length price in Transfer pricing matters. The onus is on the assessee to substantiate its claim. Just because the operating cost incurred by the assessee company is less than the operating cost of the comparable companies, the claim of expenses incurred towards payment made to its parent company on an adhoc basis cannot be justified. In modern management and technical field there are sufficient ways and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it is into supply of automotive products (4 wheelers) to SINGLE ORIGINAL EQUIPMENT MANUFACTURER (OEM), where as SUPRAJIT ENGINEERING LTD is having products scatted into both automotive and non automotive markets to many OEM(s) and others. The non automotive segment command higher margins. Further, according to ld.A.R, the assessee is NOT into REPLACEMENT MARKET and there are no dealers of its products and supplies only to, where as SUPRAJIT ENGINEERING LTD is having more than 200 stockists/ dealers (160 dealers in 2009 to 300 in 2013) . The replacement market commands a higher profit. REF: A. Assessee s TP DOCUMENTATION: REFER PAPER BOOK 2 OF 2 PAGE NO 118 (PARA NO 6.7) 131-132 (SEEKING RISK ADJUSTMENT OF 5% AND ADJUSTMENT IN RESPECT OF REPLACEMENT MARKET 5%) B. TPO S ORDER: PAPER BOOK 1 OF 2 PAGE 52-53 (PARA 4.1- INTERNAL PAGE NO: 5-6) AND PAPER BOOK PAGE 59 (PARA 5-INTERNAL PAGE NO: 59) C. DRP S ORDER: PAPER BOOK 1 OF 2 PAGE 40 (PARA 9.1- INTERNAL PAGE NO 12 OF The ld.A.R also submits that (i) copy of the Research Report of KM GLOBAL FINSERV INVESTMENT RESEARCH- 24TH FEB 2012- GROWTH IN HIGH MARGIN NON AUTOMOTIVE AND REPLACEMENT MARKET- providing that Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not removing the Loss on Forex fluctuation amounting to ₹ 30,403,593/- from the Operating Expenditure, which has arisen due to reinstatement of foreign currency done accordance with the accounting standards. 12. The facts of the issue are that according to ld.A.R this is an extraordinary non-operating expenditure. The ld.A.R submitted that out of ₹ 3,04,03,592, debited as Foreign exchange Loss during the year, a sum of ₹ 1,52,78,072 is unrealized (arising out of year end translation of the Creditors for foreign supplies). Further, ld.A.R relied on the judgement of the Tribunal, BANGALORE in the case of AIRBUS INDIA OPERATIONS PRIVATE LTD (ITA NO: IT(TP)A NO 35/BANG/2014) dated 10.10.2014. 13. On the other hand, ld.D.R submitted that the issue was squarely covered in the case of Perofac Engineering Services India (P.) Ltd., Vs. ITO in [2014] 46 Taxmann.com 126 (Chennai-Trib) wherein hled that in case of international transactions entered into by assessee with its AE, foreign exchange gain/loss is a relevant factor in computation of assessee s ALP. The Madras High Court in the case of CIT Vs. Pentasoft Technologies Ltd. [2012] 347 ITR 578 held that gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at: In order to allow a claim under section 10A of the Act, what all is to be seen is whether such benefit earned by the assessee was derived by virtue of export made by the assessee. The exchange value based on upward or downward of the rupee value is not in the hands of the assessee. In other words, the assessee does not determine the exchange value of the Indian rupee. It has to be remembered but for the fact that the assessee is an export house, there was no question of earning any foreign exchange. Therefore, when the fluctuation in foreign exchange rate was solely relatable to the export business of the assessee and the higher rupee value was earned by virtue of such exports carried out by the assessee, there is no reason why the benefit of section 10A should not be allowed to the assessee. In view of the above, we are inclined to decide the issue against the assessee holding that foreign exchange loss is a part of operating expenditure. Further, in view of above judgement of Madras High Court cited supra, we are not in a position to follow the Order of Tribunal, Bangalore Bench in the case of M/s.Airbus India Operations Pvt. Ltd. for assessment year 2009-10 vide o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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