Festo Controls (P.) Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 0807 (Bang-Trib) : (2013) 022 ITR (Trib) 0574 INCOME TAX ACT, 1961 --Transfer pricing--Computation of ALP Jurisdiction of TPO--Assessee-company entered into international transaction with its associate enterprise for SAP services. Under section 92CA, assessing officer referred the determination of ALP in respect of transaction to TPO. TPO proceeding on the assumption that no services were rendered by Festo, Germany for which SAP charges were paid by assessee and also for the reason that no comparable instances had been provided by assessee, treated the entire payment as not at arm's length. Assessee disputed that TPO had no jurisdiction to hold that no services were rendered by him and considering ALP as nil. *Held:* Assessee was directed to file the TP study in accordance with the provisions of the Act and substantiate that the price paid by it to Festo, Germany was at arm's length, therefore, issue was remitted back to TPO for fresh consideration in accordance with law. Income Tax Act, 1961, Section 92C In The ITAT, Bangalore a Bench N. Barathvaja Sankar &N. V. Vasudevan, J.M. Festo Controls (P.) Ltd. v. Dy. CIT IT (TP) Appeal No. 969 (Bang.) of 2011 A.Y. 2007-08 4 January, 2013 Appellant by : Chavali Narayan Respondent by : S. K. Ambastha ORDER *N. V. Vasudevan, J.M.* This is an appeal by the assessee against the order dated 23-9-2011 passed by the Dy. Commissioner of Income Tax, Circle 11(3), Bangalore under section 144C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' in short'). 2. The grounds of appeal raised by the assessee reads as follows : '1. The order of the learned assessing officer and directions of the Honble DRP are based on incorrect interpretation of law and therefore are bad in law. '2. On the facts and in the circumstances of the case and in law and based on the directions of DRP, the learned assessing officer erred in assessing the total income at Rs. 507,107,387 as against returned income of Rs. 484,241,580 computed by the Appellant. '3. The learned assessing officer/Transfer Pricing Officer ('TPO') erred in making an addition of Rs. 22,865,807 to the total income of the appellant on account of adjustment in the arms length price ('ALP') of one of the international transactions entered by the appellant with its associated enterprises. '4. The learned assessing officer/TPO have erred, in law and in facts, by not accepting the transfer pricing analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules, conducting a fresh economic analysis for the determination of the ALP for the impugned international transaction, and holding that the assessees impugned international transaction is not at arms length. '5. The learned assessing officer/TPO have erred, in law and in facts, by concluding that the Appellant has not been able to prove substantially that the SAP services have actually been rendered to it, that the Appellant has not derived any economic benefit from the SAP services received from the AE, and thereby holding that the ALP of the SAP service charges is Nil. The Honble DRP, in turn, has erred by overlooking the Appellants objections on the subject and in concluding that the benefit derived by the Appellant was remote or indirect. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0807 (Bang-Trib) : (2013) 022 ITR (Trib) 0574

INCOME TAX ACT, 1961

--Transfer pricing--Computation of ALP Jurisdiction of TPO--Assessee-company entered into international transaction with its associate enterprise for SAP services. Under section 92CA, assessing officer referred the determination of ALP in respect of transaction to TPO. TPO proceeding on the assumption that no services were rendered by Festo, Germany for which SAP charges were paid by assessee and also for the reason that no comparable instances had been provided by assessee, treated the entire payment as not at arm's length. Assessee disputed that TPO had no jurisdiction to hold that no services were rendered by him and considering ALP as nil. Held: Assessee was directed to file the TP study in accordance with the provisions of the Act and substantiate that the price paid by it to Festo, Germany was at arm's length, therefore, issue was remitted back to TPO for fresh consideration in accordance with law.

Income Tax Act, 1961, Section 92C

In The ITAT, Bangalore a Bench

N. Barathvaja Sankar &N. V. Vasudevan, J.M.

Festo Controls (P.) Ltd. v. Dy. CIT

IT (TP) Appeal No. 969 (Bang.) of 2011

A.Y. 2007-08

4 January, 2013

Appellant by : Chavali Narayan

Respondent by : S. K. Ambastha

ORDER

N. V. Vasudevan, J.M.

This is an appeal by the assessee against the order dated 23-9-2011 passed by the Dy. Commissioner of Income Tax, Circle 11(3), Bangalore under section 144C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' in short').

2. The grounds of appeal raised by the assessee reads as follows :

'1. The order of the learned assessing officer and directions of the Honble DRP are based on incorrect interpretation of law and therefore are bad in law.

'2. On the facts and in the circumstances of the case and in law and based on the directions of DRP, the learned assessing officer erred in assessing the total income at Rs. 507,107,387 as against returned income of Rs. 484,241,580 computed by the Appellant.

'3. The learned assessing officer/Transfer Pricing Officer ('TPO') erred in making an addition of Rs. 22,865,807 to the total income of the appellant on account of adjustment in the arms length price ('ALP') of one of the international transactions entered by the appellant with its associated enterprises.

'4. The learned assessing officer/TPO have erred, in law and in facts, by not accepting the transfer pricing analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Rules, conducting a fresh economic analysis for the determination of the ALP for the impugned international transaction, and holding that the assessees impugned international transaction is not at arms length.

'5. The learned assessing officer/TPO have erred, in law and in facts, by concluding that the Appellant has not been able to prove substantially that the SAP services have actually been rendered to it, that the Appellant has not derived any economic benefit from the SAP services received from the AE, and thereby holding that the ALP of the SAP service charges is Nil. The Honble DRP, in turn, has erred by overlooking the Appellants objections on the subject and in concluding that the benefit derived by the Appellant was remote or indirect.