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30-10-2019, Giesecke & Devrient India, Section 92C(3), 40(a)(i), Tribunal Delhi

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1 week 3 days ago #11299 by amit
Section - 92C(3), 40(a)(i), 195(1), 234B, 234D, 271(1)(c), 271AA
Order Date - 30-10.2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Giesecke & Devrient India Pvt. Ltd.
Respondent - DCIT
Justice - Sudhanshu Srivastava JM & Dr. B. R. R. Kumar AM
Citation - 1119Taxpundit42
Appeal No. - ITA No. 1431/Del/2016
Asstt. Year - 2011-12

Order

PER : Dr. B. R. R. Kumar

The present appeal has been filed by the assessee against the order dated 29 12.2015 passed by the AO u/s 144C r.w.s. 143(3) of the Income Tax Act, 1961.

2. Following grounds have been raised by the assessee:

“A. Software Development Segment [Rs.1,63 ,08 ,413]

1. On the facts and in law, the Ld. TPO / AO and Hon’ble DRP erred in determining the adjustment of Rs.1 ,63,08 ,413/- to the value of international transactions pertaining to So ftware Development Services Segment.

2. That on facts and in law, the Hon’ble DRP and Ld. TPO/AO failed to appreciate the business model and business realities of the Appellant and its Associated Enterprises (“AEs”) while conducting the trans fer pricing analysis and adopted an entirely flawed approach to reach a conclusion that the Appellant is not compensated at arm’s length for its Software Development Services Segment.

3. On the facts and in law, the Ld. TPO erred in not discharging his statutory onus to establish that any of the conditions specified in clause (a) to (d) of section 92C(3) of the Income Tax Act, 1961 (“Act”) have been satisfied be fore disregarding the arm’s length price determined by the Appellant and proceeding to determine the arm’s length price himself.

4. On the facts and in law , the Hon’ble DRP and Ld. TPO/AO have erred in re jecting the economic analysis undertaken by the Appellant without proper justification and conducting a fresh search using arbitrary filters for identifying companies comparable to the Appellant.

5. On the facts and in law, the Ld. TPO / AO and Hon’ble DRP grossly erred in not accepting the comparable companies proposed by the Appellant, as the said comparable companies met the FAR (functions performed, assets employed and risk assumed) test stated under Rule 10B(2) of the Income Tax Rules, 1962 (“the Rules”).

6. On facts and in law , the Ld. AO/ TPO erred in violating the provisions of Rule 10B(2) of the Rules by introducing new comparables without considering the dif ferences in the functions per formed, assets employed and risks assumed by such companies vis-a-vis the Appellant, thereby resorting to cherry picking o f comparables.

7. On facts and in law , the Ld. AO/ TPO erred in incorrectly computing the operating margins o f the comparable companies by treating certain items as operating / non-operating.

8. On facts and in law, the Ld. AO/ TPO and Hon’ble DRP erred in not providing the benefit envisaged under section 92C(2) o f the Act.

9. On the facts and in law , the Ld. TPO and Ld. AO erred in not allowing a risk ad justment to the Appellant thereby contravening the provisions of Rule 10B(1)(e)(iii) and Rule 10B(3) o f the Rules.

10. On facts and in law the Ld. TPO, Ld. AO and the Hon’ble DRP erred in using the data for the current year (i.e. financial year 2010-11) which was not contemporaneous and which was not available in the public domain at the time of preparing the TP documentation by the Appellant, thereby grossly misinterpreting the requirement of ‘contemporaneous’ data in the Rules to necessarily imply current year data , thereby breaching the pr nciples o f natural justice and ‘impossibility o f performance’ . Corporate Tax Grounds

A. Disal lowance u/s 40(a)(i) [Rs. 20 ,83,040]

11. On the facts and in law, the Ld. DRP/AO have erred in disallowing Rs. 20,83 ,040 for non-deduction of tax at source under section 40(a)(i) o f the Act by concluding that the reimbursement of expenses by the assessee to its overseas group companies was liable to withholding tax provisions u/s 195(1) of the Act.

12. On the facts and in law , the Ld. DRP/AO grossly erred in holding that the reimbursement o f expenses were payments in the nature o f Fee for Technical Services (FTS) / Fees for Included Service (FIS) and were thus sums chargeable to tax in the hands o f the recipients.

13. On the facts and in law , the Ld. DRP/AO grossly erred in passing a non-speaking order , without granting suf ficient opportunity o f hearing.

14. On the facts and in law, the Ld. AO and the Hon’ble DRP erred in concluding that the payment of training expenses amounting to Rs. 4,28 ,377 out of

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