9911796707
TMI Blog2023 (4) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Dispute Resolution Panel ("DRP") further erred in upholding the transfer pricing adjustment of Rs.5,899,019 pertaining to reimbursement of out of pocket expenses and reimbursement of software maintenance expenses to its Associated Enterprise ("AE"), alleging the same is not at arm's length in terms of the provisions of Sections 92C(1) and 92C(2) of the Income-tax Act, 1961 ("Act") read with Rule 10D of the Income-tax Rules, 1962 ("the Rules"). 2. That on the facts and circumstances of the case and in law the Ld. AO/ TPO/ DRP grossly erred in ignoring the facts and materiality of third party invoices submitted to the Ld. AO TPO and in adjusting an amount of Rs.2,867,592 towards reimbursement of out of pocket expenses to its AE. 3. That on the facts and circumstances of the case and in law the Ld. AO/ TPO/ DRP erred in not considering the evidence and submissions made by the Appellant in a correct perspective and in adjusting an amount of Rs.3,031,427 towards reimbursement of software maintenance expenses. 4. That on the facts and circumstances of the case and in law the Ld. AO/ TPO/ DRP erred in not considering the principle of res judicata as reimbursement of softw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Out of Pocket Expenses to AE [For non-submission of third party invoices] pertaining to travel, accommodation, freight etc. incurred by Woolworths Limited, Australia on behalf of the Appellant] 28,67,592/- 2 Reimbursement of IT Connectivity Charges/ Software Maintenance Charges to Woolworths Limited [Lack of supporting third party invoice /documents] 30,31,427/- Total 58,99,019/- 5. In addition to the above transfer pricing adjustments, in the Draft Assessment Order, dated 23.02.2015 the Assessing Officer also proposed corporate tax disallowances of INR.50,43,085/- being lease rental payments made during the relevant previous year, and the software maintenance expenses of INR 97,89,384/-. The Appellant filed objections to the Draft Assessment Order, dated 23.02.2015, in relation to the aforesaid proposed additions before DRP which were rejected by the DRP, vide order dated 22.10.2015. The Assessing Officer passed the Final Assessment Order, dated 30.11.2015, on the basis of the aforesaid order/directions of DRP making the disallowances/additions: (a) Addition of INR 58,99,019/- on account of Transfer Pricing Adjustment (b) Disallowance of deduction of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In appeal preferred by the Appellant for the Assessment Year 2008-09 identical issue has been decided in favour of the Appellant and the addition has been deleted. The relevant extract of the decision of the Tribunal passed in ITA No. 7718/Mum/2012 on 13.10.2022 reads as under: "18. We have heard the rival submissions and perused the material on record. While we are not inclined to accept the contention advanced on behalf of the Appellant that an assessee cannot be directed to produce bills/supporting documents pertaining to entire amount of expenses claimed as deduction, we are also alive to the possible burden an assessee would be subjected to during the assessment proceedings in case such a direction is issued to the assessee. However, in cases where the bills and/or supporting documents called for during the assessment proceedings are not furnished, or have been furnished but the same are not found to be sufficient or satisfactory by the assessing officer, the assessing officer would in our view, be justified in calling for any/all details and/or bills & supporting documents as the Assessing Officer may deem fit. We note that the Appellant is under obligation to maintain pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 18 of the order of the Tribunal for the Assessment Year 2008-09 reproduced hereinabove, we delete the transfer pricing addition of INR 15,37,812/- made in relation to reimbursement of out of pocket expenses to AE. Accordingly, Ground No. 2 raised in the appeal is allowed." 11. There is no change in the facts and circumstances in the present assessment year. The Appellant had not furnished third-party invoices or other supporting documents for 22% out of pocket expenses reimbursed. The TPO/Assessing Officer has not pointed out any defect/discrepancy in the bills/supporting documents furnished .by the Appellant as the same have been examined and accepted. Accordingly, adopting the reasoning given by the Tribunal in the order of the Tribunal for the Assessment Year 2008-09 [ITA No. 7718/Mum/2012 on 13.10.2022] reproduced hereinabove and following the decision of the Tribunal for the Assessment Year 2010-11 [ITA No.2297/Mum/2015], we delete the transfer pricing addition of INR 28,67,592/- made in relation to reimbursement of out of pocket expenses to AE. Accordingly, Ground No. 2 raised in the appeal is allowed. Ground No. 3 & 4 12. Ground No. 3 is directed against the transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity in respect of which rates were prescribed in the Project Closure Report issued by M/s. Telstra Corporation Limited. He submitted that the connectivity charges were incurred for taking dedicated lease lines. He submitted hat identical issue had also arisen in the Assessment Year 2010-11. 15. Per Contra, the Learned Departmental Representative relied upon the order passed by the TPO/DRP. 16. We note that this issue has been decided in favour of the Appellant vide order, dated 23.11.2022, passed by the Tribunal while disposing off the appeal for the Assessment Year 2010-11 [ITA No.2297/Mum/2015]. The relevant extract of the decision of the Tribunal reads as under: "41. We have considered the rival submission and perused the material on record including Annexure 10 and 11 to submission dated 25.11.2013 filed by the Appellant before TPO and the Project Closure Report. The Project Report is dated 10.10.2006. During the hearing the Learned Authorised Representative for Appellant had relied upon Section 2 to the said report giving „Cost and Pricing Summary‟ to contend that total amount of USD 5,440/- reflected at the bottom on the column with heading „Months 1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the rival contention and perused the material on record. We note that the Appellant is in the business of wholesale cash and carry and it has taken warehouse on lease from DHL. Some of the relevant clauses of the Lease Agreement are as under: Definitions:: Management Services' means the management of the facility and resources to achieve the Service as outlined in Schedule 4, reporting as outlined in schedule 5 and day to day operations to the Standard Operating Procedures as detailed in schedule 7. xx xx "Service" means the service with respect to Goods that Provider is to provide in the Territory under this agreement as described in schedule 3, and as may be amended in writing by Woolworths India and Provider from time to time. xx xx 2. Provisions of services and equipment 2.1 Provider provides Services: During the Term, Provider shall, subject to and in accordance with this agreement, provide the Service in the Territory to Woolworths India with respect to Goods, as and when Woolworths India requests. xx xx 5.1 Services provided from premises: Provider shall provide the services to Woolworths India from the Premises. 5.2 Adequacy of Premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INR 6,25,000/- 52. We have perused the orders passed by the Assessing Officer and DRP on this issue. The Appellant had itself contended before the authorities that the Lease Agreement was in the nature of finance lease and therefore, the discussion proceeds on that premise. 53. It is admitted position that lease payment of INR 1,00,59,112/- were made by the Appellant to DHL and had also claimed deduction for the same in the computation of taxable income. In appellate proceedings before us, it has been contended that on behalf of the Appellant that the warehouse not been taken on finance lease and the aforesaid amount is allowable as revenue deduction under Section 37(1) of the Act having been incurred wholly and exclusively for the purpose of business. However, we note that in cash flow statement lease rent paid on finance lease of INR 1,00,59,111/- has been shown under the head 'cash flow from the financing activity'. Under Schedule 15 - 'Operating and Administrative Expenses forming part of financial statement for the previous year relevant to the Assessment Year 2009-10, rent is shown as INR 5,50,82,263/-, and warehouse and facility charges are shown at INR 3,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
