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| The Tax Publishers2020 TaxPub(DT) 2385 (Bang-Trib) INCOME TAX ACT, 1961
Section 92C
Where assessee-company was engaged in the business of marketing of software license of its AE in USA and assessee made payment to its AE towards maintenance services relating to software licenses, TPO was not justified in restricting the payment made to AE in relation to maintenance charges to 10%, instead of 40% as remitted by assessee, and viewing maintenance services as separate from the distribution activity.
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Transfer pricing - Computation of ALP - TPO, whether justified in viewing maintenance services as separate from distribution activity. -
Assessee company was engaged in the business of marketing of software license of its AE, sales support service, maintenance of software, consulting and training activities. It purchased software licences from its AE in USA for resale in India. It also entered into maintenance services with its customers who purchased the software licenses. Assessee remitted 40% of the sales realisation and maintenance charges collected from customers to its AE towards the cost of purchase of software. TPO restricted the payment made to AE in relation to maintenance charges to 10% by holding that 10% shall be the ALP of the transactions. Held: Assessee was distributor of software licenses of its AE. Thus, there should not be any dispute that core technical problems could only be resolved by its AE. Unless proper and appropriate maintenance services were provided to its customers, it would be difficult to market the software licences. There was merit in the contentions of assessee that the distribution of software licenses and their maintenance were inter-linked. Accordingly, TPO was not justified in viewing maintenance services as separate from the distribution activity.
REFERRED : Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC).
FAVOUR : In assessee's favour.
A.Y. : 2011-12
IN THE ITAT, BANGALORE BENCH
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