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TMI Blog2025 (2) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... & D services agreement and accordingly, the grounds raised in both the appeals should be dismissed as withdrawn. 3. In so far as ground No. 1 & 2 of Revenue's appeal are concerned, it relates to a Transfer Pricing adjustment of Rs. 7.41 crores w.r.t. Research and Development (R&D) services (referred to as provision of Scientific and Technical services) to its AE (Unilever Plc.). 4. The brief facts are that the assessee operates two segments; (a) Scientific and Technical Services segment providing contract Research and Development Services; and (b) Information Technology Enabled Services (ITES) segment providing business process outsourcing services. There is no dispute with respect to the ITES/BPO segment. Insofar as the Scientific and Technical Services / Research and Development (R&D) segment is concerned, the Assessee and Unilever Plc (AE) have entered into a Research Agreement dated 16 November 2000 providing that the Assessee would be remunerated at cost + 5% for the services rendered by it. During the year under consideration the Assessee billed Unilever Plc Rs 51.65 crores and reported an operating profit of Rs. 9.34 Cr which translates to operating profit (OP) to operatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing aggrieved by the ld. DRP's Directions upholding the attribution of royalty earned by Unilever Plc., to the assessee; and the Revenue filed the present appeal being aggrieved by the deletion of Rs 7.41 crores by ld.DRP in arriving at the computation of margin for the purposes of TNMM benchmarking. Similar adjustments were made in the assessee's hands for AY 2011-12 to 2014-15 and the cross appeals were pending before this Tribunal. 7. It has been informed that during the pendency of the cross appeals, the assessee invoked the Mutual Agreement Procedure ("MAP") on 3 February 2015 with respect to the adjustments made under the R&D services segment for AY 2010-11 to AY 2014-15. Pending MAP resolution, the Assessee also entered into a Bi-lateral Advance Pricing Agreement (BAPA) on 28 March 2022 where under the revenue authorities of both countries agreed that the OP/OC arm's length margin for the services provided under the R&D Services segment by the assessee to Unilever Plc. would be 16.7%. The copy of Bi-lateral agreement dated 28/03/2022 has also been filed before us. It is seen that given the BAPA, Indian Revenue Authority conveyed to Her Majesty's Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that disallowance should be restricted to the extent of exempt income earned i.e. Rs. 11,250/-. Accordingly, the disallowance u/s. 14A is restricted to the extent of exempt income of Rs. 11,250/- and this issue now stands covered by the judgment of the Hon'ble Bombay High Court in the case of Nirved Traders Pvt. Ltd. vs. DCIT in ITA No. 149 of 2017 dated 23/04/2019 and also this issue stands covered by the decision of the Tribunal in assessee's own case for A.Y.2012-13 wherein disallowance has been limited to the extent of exempt income. Accordingly, ground Nos. 7-11 are partly allowed. 11. In so far as ground Nos. 12 to17 relating to disallowance of consultation charges amounting to Rs. 49,27,292/-, the brief facts are that the assessee made payment to consultants / institutions for consultancy services rendered by them. These expenses were incurred by the assessee under the Research Agreement dated 16 November 2000 and the expenses formed a part of the cost base which was recovered (recharged) from Unilever Plc. with a markup of 5%. The ld. AO relying on the stand of the Revenue of treating these expenses as capital in nature in the earlier years inter alia AY's 2004-05 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, these grounds are dismissed as withdrawn. 15. In Ground Nos.2.4 to 2.9, assessee has challenged the transfer pricing adjustment with respect to purchases of equipment of Rs. 47,50,308/- which was on account of purchases of following laboratory equipment by the assessee from its AE- Unilever UK Central Resources Limited. Particulars Invoice Date Qty. Amount in GBP a. Fabric Flow Cell 10.12.2013 1 38,229 b. Softness Meter 13.06.2013 2 7,940 (3,970 Each) 16. Before the ld. TPO in response to the query, assessee submitted the copies of invoices vide letter dated 14/08/2017. The ld. TPO without giving any further clarification held that since bills produced by the assessee were not for the equipment purchased by the assessee, ALP of the transaction was treated as 'nil' and adjustment of Rs. 47,50,308 was 'nil'. 17. The ld. DRP held that insofar as the bill for Fabric Flow Cell was concerned, the TPO had erroneously observed that the invoice issued was not in the name of the assessee. Insofar as the invoice for Softness Meters was concerned, the assessee had filed a clarification that the invoice was erroneously in the name of Hindustan Unilever Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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