2016-TII-291-ITAT-MAD-TP

TITAN INDUSTRIES LTD Vs ACIT: CHENNAI ITAT (Dated: May 12, 2016)

Income tax - Sections 37, 43B, 80HHC, 80IB, 92 & 92B.

Keywords - ALP - AE - contract manufacturer - DEPB receipts - export turnover - interest free advertisement advances - overseas advertisement expenditure - reimbursement of expenses.

Whether services in connection with advertisement cost which was incurred by an AE abroad and the benefit was accrued to only to such AE, the parent company in India cannot claim any of such expenditure or the benefits of their AE's business - YES: ITAT

Whether non-charging of interest upon outstanding advances made to an AE, attracts TP provisions and it is appropriate to charge interest at least LIBOR plus 2% rate - YES: ITAT

Whether the claim of deduction u/s.80-IB in respect of profits earned by an eligible business division of an entity can be denied, on the ground that it is only a notional profit and such entity uses the products of the said division for its captive consumption - NO: ITAT

Case remanded

2016-TII-290-ITAT-BANG-TP

DCIT Vs SUNQUEST INFORMATION SYSTEMS INDIA PVT LTD: BANGALORE ITAT (Dated: MAy 27, 2016)

Income tax - ALP - AE - functional dissimilarity - foreign exchange adjustment - operational income - software development services - TNMM & turnover filter.

Whether an entity having turnover range of less than 50 Crore can be compared to the entities having turnover above than Rs 500 Crore - NO: ITAT

Whether mere non-adjudication of a matter by the CIT(A) can be a reason for sending it back to him, when the facts are clearly on record - NO: ITAT

Whether the fact that the assessee had itself proposed a company as comparable, should be the basis on which the said company should be retained as a comparable, when factually it is shown that the said company is functionally dissimilar - NO: ITAT

Whether foreign exchange adjustment once allowed as operational in nature, should also be considered while working out the operating margin of the comparables - YES: ITAT

Case remanded

2016-TII-134-ITAT-BANG-INTL

TNT EXPRESS WORLDWIDE UK LTD Vs DDIT: BANGALORE ITAT (Dated: April 29, 2016)

Income tax - Sections 9(1)(vi), 143(3), 144C & 195.

Keywords - bifurcation of payment - composite contract - foreign remittance - management & administrative services - provision for know how - PE - permanent establishment - royalty & TDS

Whether perusal of a mere nomenclature of MAS services, can by itself ascertain whether the provision of such services are in the nature of imparting knowledge, experience, information concerning industrial, commercial or scientific experience or skill - NO: ITAT

Whether where any payment is received by a non-resident entity for development of a design, model or plan that does not already exist, then the development of such design or plan by using its own experience, skill & know-how, would not constitute as imparting the knowledge or know-how, and therefore cannot be said to be 'royalty' - YES: ITAT

Whether where such payment is received to supply the existing information or reproducing the existing material, then the same will constitute imparting of information so as to fall under the purview of 'royalty' - YES: ITAT

Whether where there is a composite agreement between a non-resident assessee and it Indian AE for various services and the assessee is unable to provide bifurcation of the payment relating to each kind of services, then the other part of the services can also be given the tax treatment as given to one part of the services provided, which constitute the principal purpose of the contract falling under the purview of royalty - YES: ITAT

Assessee's appeal dismissed