| 2017-TII-INSTANT-ALL-501 | 04 November 2017 |
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NOTIFICATION India-New Zealand DTAA - Third Protocol notified CASE LAWS DCIT Vs MAGNETI MARELLI POWERTAIN INDIA PVT LTD: SUPREME COURT OF INDIA (Dated: November 3, 2017) Income Tax - Sections 92C(1), 92CA, 92F, 144C & rule 10B(4) Keywords: technical assessment fee - independent examination - royalty - computation of ALP - composite transaction - TNMM - CUP method - entity level approach & lump sum payment The Revenue Department preferred present appeal challenging the judgment, whereby the High Court had held that an amount claimed by assessee could not be allowed merely on the basis that such a substantial amount had to be necessarily paid, it was a commercial decision dictated by the need for technology & on a specific query, the assessee contended that later profits justified it, the same has potential to preclude scrutiny. The High Court in its impugned judgment further held that, having accepted TNMM as the most appropriate for computing ALP in case of entire international transactions entered into by the assessee, it was not open for the TPO to subject only one particular element, i.e payment of technical assistance fee, to an entirely different CUP method. Having heard the parties, the Supreme Court condoned the delay and dismisses the SLP thus concurring with the opinion of High Court on the issue of adoption of most appropriate method. Revenue's SLP dismissed CIT Vs JAIPUR SILVER JEWELS PVT LTD: RAJASTHAN HIGH COURT (Dated: September 6, 2017) Income tax - Section 92A(2) Keywords - international transaction - associated enterprise The Revenue Department preferred present appeal challenging the action of ITAT in holding that M /s India Gem & Beads inc was not an AE, without appreciating that the AO had mentioned that in this case provisions of section 92A (2) (m) were also involved & accordingly the assessee and M/s India Gem & Beads Inc was having mutual interest and therefore was an AE. On appeal, the HC held that, Whether provision of Section 92A(2)(m) can be invoked in case of sister concern, treating them as 'associated enterprise' - NO: HC + the counsel for Revenue contended that CIT(A) and Tribunal both have wrongly interpreted the provisions of S.92A of the Income Tax Act and the same requires consideration. For the purpose of Section 92A(2)(i), (j), (m) & (f), associated enterprises means other then established associated enterprise. However, while considering the same, counsel for Assessee pointed out that the Tribunal and the CIT(A) has rightly considered the statutory rules which are applicable and followed the same. Taking into consideration that sister in law is not associated nor relative under the Income Tax Act, in that view of the matter, the provision of Section 92A (2)(m) is wrongly interpreted by the AO, whereas the Tribunal and CIT(A) have rightly interpreted the same. Revenue's appeal dismissed CIT Vs KGK ENTERPRISES: RAJASTHAN HIGH COURT (Dated: September 18, 2017) Income tax - Section 92CA(3) Keywords - ALP - international transaction - benefit of margin The Revenue Department preferred present appeal challenging the action of ITAT in deleting the addition of Rs. 14,24,76,886/- made on account of ALP adjustment u/s 92CA(3) as worked out by the TPO, excluding all the eight entities chosen as comparables by the TPO like M/s Vishindas Holaram without the Respondent proving that these entities dealt in high quality diamonds, and so should have been excluded from the list of comparables adopted for determining ALP. On appeal, the HC held that, Whether companies in an international transaction, are entitled to benefit of +/-5% range in view of second proviso to Section 92CA(2) - YES: HC + the ITAT has observed that dispute is regarding transfer pricing adjustment in respect of export sales made by the assessee to the associate enterprise. The method applied for bench marking the international transaction is TNMM on which there is no dispute between the parties. The margin shown by the assessee is 2.16%. The mean margin of the comparable selected by the TPO is 6.84%. The AR for the assessee has not disputed the mean margin of 6.84% computed by the TPO. It has only been requested that the assessee may be allowed the benefit of +/-5% as per law and adjustment should be limited to only international transaction and should not be made to the entire sales. The request of the assessee is quite reasonable. CIT(A) in the appellate order has given detailed working, in which it has been made clear that no adjustment is required even if the mean margin of 6.84% as taken by the TPO is accepted as the assessee is entitled to benefit of +/-5% range. We are of the opinion that the Tribunal has not committed any error in giving benefit of all plus or minus for internal transactions in view of second proviso to Section 92CA(2). Revenue's appeal dismissed |
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