TMI Blog2023 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... all the documents before the AO. The AO shall pass order after giving opportunity of being heard to the assessee. Therefore, of the Revenue for the A.Y. 2010-11, 2011-12 2012-13 is allowed for statistical purposes. Employee s Contribution towards PF - AO has disallowed us.36(1)(va) - AO has observed that the assessee had not deposited the employee s contribution towards Provident Fund within the due date mentioned in the The Employees Provident Funds and Miscellaneous Provisions Act, 1952 - HELD THAT:- The issue of delayed payment of employee s contribution of Provident fund has been decided by Hon ble SC in the case of Checkmate Services (P.) Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] held that the employee s contribution towards PF has to be deposited before the due date mentioned in the respective statute. In this case it is an admitted position by the assessee in the Audit Report that the amount was not deposited before the due date mentioned in The Employees Provident Funds and Miscellaneous Provisions Act, 1952. Hence, the impugned amount has been rightly disallowed by the AO. Disallowance on Account of Management Services - TPO for determination of Arm s le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RI MAHAVIR SINGH, VICE-PRESIDENT AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER For the Assessee : Shri S.P.Chidambaram AR For the Revenue : Shri Hema Bhupal - JCIT ORDER PER DR. DIPAK P. RIPOTE, AM: These are six appeals filed by assessee and revenue for A.Y.2010-11, 2011-12 2012-13 against the common order passed by ld.CIT(A)-4, Chennai vide order dated 18/09/2018 for AY 2010- 11, 2011-12, 2012-13 2013-14. The grounds of appeal are as under : 1.1 The assessee in IT(TP)A No.84/CHNY/2018 for A.Y.2010-11 has raised the following grounds of appeal: 1. The Order of the Commissioner of Income-Tax Appeals -4, Chennai (CIT(A) ) is erroneous and contrary to law, facts and circumstances of the case. 2. Transfer Pricing grounds - Downward adjustment to arm s length price 2.1 The Commissioner of Income Tax (Appeals) /the Transfer Pricing Officer (hereinafter referred to as the CIT(A) / the TPO) erred in making an adjustment of Rs.40,00,000/- to the value of international transactions being import of goods from AE. 2.2 The CIT(A) TPO erred in not considering customs valuation of imported goods as the Arm s Length Price (ALP) given that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the nature of management services received by the Appellant and treating the same as duplicative and routine in nature. 2.8 The CIT(A) /TPO erred in concluding that the services received from the AE are in the nature of stewardship activities. 2.9 The CIT(A) /TPO erred in his conclusion that the AE has not rendered services without appreciating the fact that Appellant had produced documentation to substantiate that the management services were received and the Appellant has actually benefitted from the same. 2.10 The CIT(A) /TPO erred in not appreciating the nature of Management Services received by the Appellant from its AE. 2.11 The CIT(A) /TPO erred in facts and law by questioning the need for availing the services from AE specifically when the technology is owned by AE. 2.12 The CIT(A) /TPO failed to appreciate the detailed submissions and relevant workings submitted by the Appellant justifying the payment of management fees to its AE during the year. 2.13 The CIT(A) /TPO erred in not appreciating the benefits accruing to the Appellant owing to such management services provided by its AE during the year. 2.14 The CIT(A) /TPO having a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees contributions under the relevant statutes considering that application of Section 36(l)(va) read with Section2(24)(x) alone is the proper course and any other interpretation would only defeat the object and scope of both the provisions viz.,43B and 36(l)(va). 9. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored. 3. We have heard these appeals together and disposing by this common order. 4. For the sake of convenience appeal for A.Y.2010-11 is treated as lead case and facts are discussed. Assessee for A.Y.2010-11 filed return of income on 14.10.2010 admitting loss of Rs.10,96,38,333/-. The case was selected for scrutiny. After giving opportunity to the assessee, the Assessing Officer(AO) i.e.DCIT, Company Cirlce-1(1), Chennai passed assessment order for A.Y. 2010-11 on 02.05.2014 making following additions: 1) Disallowance u/s.14A Rs. 1,250/- 2) Depreciation on ETP Rs.3,51,56,694/- 3) Depreciation on Non-complete Fee Rs. 10,90,000/- 4) Transfer Pricing Adjustment Rs. 40,00,000/- 4.1 During the assessment proceedings for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Shaji P Jacob, was the learned DR who had argued the appeal in the case of M/s. Medicorp Tech. India Ltd. (supra). His arguments were discussed by the Tribunal, in detail, in its order dated 16.01.2009. In fact, one of us was the author of that order. The facts of the case in the present appeal are identical and therefore, we follow the precedent and allow this ground. 7.1 Therefore, respectfully following the ITAT Chennai Bench s decision in assessee own case for A.Y.2001-02 we hold that assessee is eligible for depreciation on non-compete fee. Accordingly, as far as ground regarding non-compete fee is concerned, the Revenue s Ground No.5 for A.Y.2010-11, 11-12 and 2012-13 is dismissed. Depreciation on Effluent Treatment Plant: 8. It is observed that ld.CIT(A) discussed the said issue in para 10 to 15 of the order. It is also observed that ld.CIT(A) has admitted additional evidence. The ld.DR submitted that ld.CIT(A) has admitted additional evidence without giving opportunity to the AO. On perusal of the ld.CIT(A) s order, it is observed that ld.CIT(A) has not called for any remand report from the AO. It is an admitted fact by the AR that the assessee had sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date. Unquote. 9.3 Thus, the Hon ble SC has held that the employee s contribution towards PF has to be deposited before the due date mentioned in the respective statute. In this case it is an admitted position by the assessee in the Audit Report that the amount was not deposited before the due date mentioned in The Employees Provident Funds and Miscellaneous Provisions Act, 1952. Hence, the impugned amount has been rightly disallowed by the AO. Accordingly, the Ground No s.7 8 of the Revenue for AY 2012-13 are allowed. Assessee s Appeals: Disallowance on Account of Management Services. 10. The Ld.AR submitted that this issue is only for A.Y.2011-12 and 2012-13. 10.1 The Assessing Officer had made a reference to transfer Pricing officer (TPO) for determination of Arm s length price of the international transactions. The TPO analyzed the International transaction of Management Services in the Order u/s 92CA for AY 2011 -12. 10.2 The assessee has made payments of Rs.1,28,59,880/- to its Associated Enterprise (AE) AB Mauri (UK) Limited for AY 2011-12 for Management Fees . 10.3 It is mentioned in the TP Order and assessee s submission that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SDN BHD 1,085,93,210 7 Interest expense on ECB loans Associated British Foods Plc 86,63,236 8 Reimbursement receivable Associated Britis Foods Plc 70,07,953 AB Enzymes GmbH 33,26,144 AB Mauri Vietnam Pvt Ltd 23,76,276 9 Reimbursement payable AB Mauri China East Pacific 2,91,610 AB Mauri South West Asia (Pty) Ltd. 25,36,035 AB Mauri Malasia SDN BHD 21,12,881 Total 34,80,71,222 The assessee has clubbed all the international transactions and applied Transactional Net margin Method (TNMM) for benchmarking the International Transactions. Gist of TPO s Order : 10.5 For AY 2011-12 the TPO rejected the TNMM as the Most Appropriate Method for benchmarking the International Transaction of Management Fee for the reason discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritical for each type of work. It can be seen that no assistance was availed from AEs for routine accounting entries. Assistance was availed only With respect to specialised services like capital budgeting analysis for NOW Plant, assistance in identifying the feasibility of setting up of new plant in India, preparation of capex documents, analysis of financial implications of Sikandarabad ETP plant etc. Human Resources does not merely include employee training on soft skills. It also includes support with respect to recruitments, rolling out HR. policy documents (including safety alerts) etc. In this regard, it is pertinent to note that evidence regarding employee safety alerts were produced as sample evidence. TPO erred in concluding payment towards professional and consultancy charges is entirely towards TAXATION. Professional and consultancy charges includes various services like statutory audit, internal audit, tax services, certifications, legal services like drafting of agreements etc. The payment of INR 183,54,000 in India relates to services availed from local professional relating to Statutory audit, Tax filing, representation, tax audit, legal support etc. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding party) and 16 (receiving parties).All pages of this agreement are not signed by any party. Only the second last page contain signature of Providing party and last page contain signature of some person on behalf of Indian entity. The said Agreement is not registered nor it is notarized. There are no page numbers. The assessee has not produced any original agreement before us to prove the genuineness of this agreement. It is a self serving document as it is prepared by parent company and the subsidiaries had to agree. 13.1 As mentioned there are 16 receiving parties located at different geographical locations. However, it is presumed in the agreement that all of them have requirement of the so called services mentioned in the agreement irrespective of the geographical difference. 13.2 The services provided were to be billed at a fee Calculated at Budgeted Cost plus 5% mark up. 14. It is important to mention here that the assessee has not provided any documents to prove the budgeted cost. Rather the assessee has not provided What was the budgeted cost for various services separately We have gone through the invoices which are enclosed in the paper book, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract and send us the final copy after your signatures Vijayan Please advise the status of this Has it been signed and issues to the consultant? I want to get this work going Thanks Regards Geoff, Thanks. I am on travel next week, so I am marking this to Vijayan, who will arrange for advance payment also. Vijayan will also arrange to have this signed by Binu at Chennai next week. {should this be returned to you at Malaysia .............................. or can this be sent to supplier) ............................... Please confirm this again to Vijayan. regards Anand Anand Please find attached a proposal to conduct an Cogeneration study and a contract for same The contract needs to be signed by an officer of AB Mauri India The cost is INR 150,000 plus costs of travel to Chiplun, as per offer Can you please get the someone to sign this contract and return to me sc that we can proceed with the work asap Thanks Regards Dear Sir, Please find attached in first attachment the policy cover details, I am also sending the signed copy of contract document. 1 would like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right British Sugar pfc All Rights Reserved Registered Office: Weston Centre 10 Grosvenor Street London Andrea - Confirmation for KC Vijayan.doc Dear all Please can we use these conference call details for our call later today. I will be the leader Kind regards Ian Thanks and Regards Apoorv Verma AB MAURI INDIA PVT LTD. Plot no. 218 219/ Bommasandra Jigani Link Road, Bangalore - 560105, India, Hi Vijayan Please find the attachment this time, many apologies. Kind regards, Andrea Hi Please find attached car booking confirming for 19 July 2011. You will be picked up at 1755pm and dropped off at Marriott Hanbury Manor Hotel where a room has been booked for you. I hope that this is okay. Kind regards Andrea Confirmation for KC Vijayan.doc Thanks and Regards Apoorv Verma AB MAURI INDIA PVT LTD. Plot no. 218 219/ Bommasandra Jigani Link Road, Bangalore - 560105, India, Dear all Please can we use these conference call details for our call later today. I will be the leader Kind regards Ian Alix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page number 101 to 116 are related to some Services to be provided by Energetic Consulting Pvt Ltd, Thane Maharashtra India to the assessee. The assessee has not explained the role of the AE in this context. This particular service contract is with an Indian local entity. Assessee is Indian. Contract is with Indian entity. Assessee failed to explain role of AE situated in UK for this contract Therefore, we are of the opinion that these emails are not evidence of the services provided by AE. 16.6 Emails at page 117, 118, 119, 120 are saying only Chiplun debottle necking and ETP This sentence does not give any evidence of any service provided by AE to the assessee. 16.7 Page 124 is regarding car booking. We do not understand for whom the car was booked. Anyway this does not explain any service provided by AE to the assessee. 16.8 Page 121, 122 are not legible. 16.9 Email at page 123 talks about some attachment. The responded has replied that there are no attachments. This is definitely not an evidence for the services provided by the AE. 16.10 Email at page 125, 126,127,128 are instruction for some conference call and how to join the conference. From this email ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services are actually rendered by the AE. But the assessee had failed to discharge this onus lying upon it despite being asked to do so by the TPO. The TPO had especially invited the assessee company to produce the proof in support of the services rendered by AE. The appellant only had tried to prove this by producing some correspondence which does not prove that the services are actually rendered. The failure by the assessee to discharge the onus can be presumed that the assessee had no evidence to establish that services of management support are rendered by its AE in consideration to payment of Rs.26,22,19,000/-. This presumption can be drawn even as per the provisions under section 86 of Indian Evidence Act. The submission that the TPO had impliedly accepted the rendition of services cannot be accepted as there was no finding given by the TPO that services are actually rendered. In fact, the TPO while summarizing this observation vide page No. 30 of his order vide column No.6 had specifically mentioned that the assessee had failed to prove that the services are actually rendered by AE. Furthermore the finding of the TPO that the invoice was raised much after the closure of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... My Trip India (P) Ltd., (2017) 87 taxmann.com 284 (Delhi) has held that difference of opinion between the parties, as to the appropriateness of one or the other methods to calculate arm s length price, cannot per se be a ground for intereference and the appropriateness of the method unless shown to be contrary to the Rules specially 10B and 10C are hardly issues that ought to be gone into under Section 260A of the Act. 8. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal and the same is accordingly dismissed. Unquote. 19. Therefore, respectfully following Hon ble Delhi High Court and ITAT Bangalore, we uphold the order of the TPO on the issue of Management Services .Thus, the Ground No.2 in IT(TP)A No.85 of 2018 for the A.Y.2011-12 is dismissed. Ground No.1 in IT(TP)A No.85 of 2018 is general in nature and does not need any adjudication hence dismissed as not adjudicated. 19.1 Our findings in IT(TP)A No.85 of 2018 regarding Ground No.2 Management Charges paid shall apply mutatis-mutandis to the Ground No.2 in IT(TP)A No.86 of 2018 for the A.Y.2012-13 for Management Charges paid of Rs.2,43,07,267/-. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was less than the average of comparable, the TPO held that the transaction was not at Arm s Length and proposed adjustments. 21.1 Before, us the Ld AR submitted that the loss was due to expansion and it was not operative loss. The Ld.AR also submitted that the TPO failed to consider the Foreign exchange gain. The Ld.AR submitted that the Foreign exchange gain/loss was part of operating profit as it was related to Packing credit. 21.2 However, it is observed that the TPO has not discussed these issues in the order properly. The TPO has vaguely mentioned that the Foreign exchange gain is related to ECB. However, TPO has not specified how much was the foreign exchange gain, how much was related to ECB, how much was related to packing credits or any other operative activity. Therefore, in the interest of Justice, we set aside this issue to the file of the AO/TPO for proper working of PLI. Opportunity shall be granted to the assessee. Assessee shall provide all the details. Accordingly the assessee s grounds of TP adjustments in A.Y.2010-11 in IT(TP)A No.84/CHNY/2018 are allowed for statistical purpose. IT(TP)A No s.84, 85 86/CHNY/2018 (Assessee) : 22. To sum up, app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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