Income Tax Appellate Tribunal – Cochin
M/S.Us Technology Resources P. … vs The Dcit, Trivandrum on 23 May, 2018 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri Chandra Poojari, AM & Shri George George K, JM IT(TP)A No.475/Coch/2016 : Asst.Year 2012-2013 IT(TP)A No.134/Coch/2016 : Asst.Year 2011-2012 & SA No.08/Coch/2018 (Arising out of ITA No.475/Coch/2016) SA No.25/Coch/2016 (Arising out of ITA No.134/Coch/2016)
M/s.US Technology The Dy.Commissioner of
Resources Private Limited Vs. Income-tax, Circle – 2(1)
721/722, NILA, Trivandrum.
Techno Park Campus
Trivandrum-695 581.
PAN : AAACU6085C. (Appellant) (Respondent) Appellant by : Sri.Raghunathan S., Advocate Respondent by : Sri. Santham Bose, CIT-DR Date of
Date of Hearing : 17.05.2018 Pronouncement : 23.05.2018 ORDER

Per Chandra Poojari, AM These two appeals by the assessee, one for the
assessment year 2012-2013 is directed against the order of
the Dy.Commissioner of Income-tax, Circle 2(1), Trivandrum,
dated 19.08.2016, which was passed in consequent to the
direction of the Draft Resolution Panel-2, Bangalore, (DRP)
u/s 144C(5) of the Income-tax Act, 1961, dated 05.08.2016,
and the other appeal of the assessee for assessment year
2011-2012 is directed against the order of the
Asst.Commissioner of Income-tax, Circle 1(1), Trivandrum,
dated 28.01.2016, which was passed in consequent to the
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direction of the DRP-2, Bangalore u/s 144C(5) of the I.T.Act,
dated 28.12.2015. Since common issues are involved in both
the appeals, they are being heard together and disposed off by
this consolidated order, for the sake of convenience.

2. Grounds of appeal raised in ITA No.475/Coch/2016 are
reproduced below:-

“The grounds stated hereunder are independent of, and without prejudice to one another. The Appellant submits as under:

Ground No.1 – Erroneous levy of income tax and interests thereon 1.1 The learned DCIT and DRP erred in law and on facts in:

(i) Determining the total income of USTRPL for the year at Rs.50,05,47,9820;

(ii) Levying income tax of Rs.21,84,59,250 (including interest under section 234B of the Income-
tax Act, 1961 (`the Act’) amounting to Rs.5,60,56,510); and (iii) Raising a net demand payable of Rs.20,55,69,980 upon the Appellant. Ground No.2 – Assessment and reference to Transfer Pricing Officer are bad in law.

2.1 The draft order issued by the Assistant Commissioner of Income Tax Circle 1(1) Trivandrum (`Assessing Officer’ or `AO’) having concurrent jurisdiction over the case, is bad on facts, and is in violation of the principles ;of natural justice and is
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otherwise arbitrary and thus bad in law as well as
void ab-initio;

2.2 The AO has erred in making a reference to the
Assistant Commissioner of Income-tax, (Transfer
Pricing) (,TPO’), inter alia, since the TPO has not
recorded an opinion that any of the
conditions in section 92C(3) of the Act, were satisfied
in the instant case. Accordingly, the order
passed by the TPO is without jurisdiction.;

2.3. On the facts and in the circumstances of the
case and in law, the learned TPO and accordingly,
the
learned AO erred in not demonstrating that the
motive of the Appellant was to shift profits outside
of India by manipulating the prices charged in its
international transactions, which is a pre-requisite
condition to make any adjustment under the
provision of Chapter X of the Act 2.4 The draft order passed by the AO is without
jurisdiction, inter alia, insofar as it purports to give
effect to an invalid order of the TPO.

Ground No.3 – Non-issuance of show cause notice
prior to the issue of TP order by the TPO.
3.1 The TPO has not issued any show cause notice
nor provided any opportunity of being heard- to the
assessee before passing the TP order. This act of the
TPO is a gross violation of principles of natural
justice.

Ground No.4 – Erroneous disallowance of
reimbursement of expenses under section 40(a)(ia) 4.1 On the facts and in the circumstances of the
case, the DCIT and DRP have erred in disallowing an
amount of Rs.34,94,59,683 under section 40(a)(ia),
being reimbursement of salary costs and related
rentals borne by US Technology International Pvt.
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M/s.US Technology Resources Pvt.Ltd.

Ltd. (“USTIPL”) on behalf of the Appellant, in respect
of employees deputed by USTIPL to the Appellant,
pursuant to Deputation and Support Service
Agreement.
4.2 The DCIT and DRP have erred in not
considering the settled position of law that the
provisions of Chapter XVII-B of the Act does not
apply to a payment on a cost-to-cost basis, without
any element of profit therein.

4.3 The DCIT and DRP have thus, erred in
contenting that tax is deductible under section 194J
and 194I for such reimbursement of salary costs and
rentals, respectively.

4.4 The DC IT and DRP have erred in not
considering the notwithstanding provisions laid out
under section 190 of the Act wherein it is clarified
that the tax is deductible at source under
Chapter XVII-B, only in respect of payments of “income” or “any sum” comprising an element of
Income.
4.5 The DCIT and DRP have failed to consider the
fact that tax had already been deducted by USTIPL
at the time of payment of such salaries and rentals
as instructed in section 192 and 194-1 of the
Chapter XVII-B of the Act.
Ground No. 5-Erroneous disallowance of
reimbursements without considering that the law
prescribed under second proviso to section 40(a)(ia)
of the Act is curative in nature 5.1 The DCIT and DRP have erred in law by
disregarding the substantive compliance undertaken
by the USTIPL and USTRPL, as required under
second proviso to section 40(a)(ia) of the Act with
respect to such reimbursement of expenses.
5.2 The DCIT and DRP are not justified in law in
disregarding the fact that deduction of tax is only one
mode of recovery of tax, and once the tax is recovered
by a particular mode, then additional recovery of tax
is not permissible. Such additional recovery will
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amount to taxing the same income twice i.e. once in
the hands of the deputed employees or vendors and
then again in the hands of the USTRPL
5.3 The DCIT and DRP have erred in not
considering the fact that the payee (USTIPL) had
already offered such receipts while filing its return of
income for the relevant A Y as evidenced by the Form
26A furnished in this regard during the assessment
proceedings. Hence, no disallowance is
warranted in law, in the case of the Company, as
mandated under second proviso to section 40(a)(ia)
of the Act.

5.4 The DCIT and DRP have erred in principle by
disregarding the contention of the Assessee that the
amendment to section 40(a)(ia) of the Act, by way of
introduction of second proviso thereto, vide
Finance Act 2012 is curative in nature intending to
avoid undue hardships to assesses. It is settled
legal position that when an amendment in law,
inserts a remedy to make the section workable, then
such amendment ought to be in operation from the
inception of the section itself, so that reasonable
interpretation can be given to the section as a whole.

5.5 The DCIT and DRP have erred in holding that
the second proviso to section 40(a)(ia) of the Act is
prospective in nature without considering the
jurisdictional Cochin ITAT ruling in the case of
G.K.Granites v. ACIT (ITA No.24/Coch/2015),
wherein it is held that the second proviso to section
40(a)(ia) being declaratory and curative in nature,
has retrospective effect from 01 April 2005.

Ground No.6 – Determination of arm’s length price in
relation to Management support services
6.1 TPO/ AO erred in rejecting the TP
documentation maintained by the appellant and
erred in non- acceptance of the benchmarking
followed in relation to the management service fees
(aggregated with software development activity )
paid by the appellant to its associated enterprise for
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the service rendered. The TPO has erred in not
considering the fact that even after paying the
management service fee the Assessee still earns an
overall NCP margin which is higher than the
margin earned by the comparable. The Ld AO erred
in upholding the contentions of TPO.
6.2 TPO/ AO failed to understand that the payment
of the management fee was in connection with the
software development activity of the Company.
Instead the TPO has considered the payment of
management fee and the software development
activity of the company as two different functions
performed.
6.3 The TPO in her order concluded that comparable
uncontrolled price (‘CUP’) was the most
appropriate method for benchmarking without
providing any details of the CUP used.
6.4 The TPO failed to understand the business
requirement of making the management fee payment
and went beyond her jurisdiction in denying the
payment out-rightly, whereas, the role of the TPO is
limited to determining the ALP using one of the
prescribed method.
6.5 The TPO/ AO erroneously concluded that no
services were received by the assessee, without
appreciating the business realities of the Company
and the evidences provided during the course
of the TP assessment.
6.6 TPO / AO has ignored the fact that 92.31 % of
the revenue was earned on account of the client
services by USTRPL who has customer relationship
with UST Global Inc. The revenue earned by
the company has increased by 33% and this was on
account of the assistance from the marketing
team of UST Global Inc. and acquisition of new
clients.
Ground No. 7- Without prejudice, Management
Services cannot be categorized as “Fees for included
Services” and hence not taxable in India as per the
Double Taxation Avoidance Agreement (‘DTAA’)
between India and United States of America
7.1 Without prejudice to Ground 5, on facts and
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circumstances of the case, the learned DCIT and DRP
have erred in law by alleging that the payment made
by the Appellant to US Technology Global Inc
(“USTG”) the erstwhile US Technology Resources LLC
(“USTR”), as payment made for technical
service and hence “Fees for included Services” for the
purpose of India US DT AA.
7.2 The DCIT and DRP have failed to consider the
fact that the services provided by USTG to USTRPL
are primarily in the nature of management services
i.e. assistance in decision making involving areas
such as sales and marketing, legal matters, public
relation activities, treasury services and risk
management services
7.3 The DCIT and DRP have failed to consider that
the management services rendered are neither
technical services nor consultancy service and have
wrongly adopted a position that the said payment
has been made for technical knowledge, experience
and processes rendered by USTG.
7.4 The learned DCIT and DRP have arbitrarily
concluded that the services are technical in nature
and have failed to take cognizance of the relevant
facts in this regard.

7.5 The learned DCIT and DRP have failed to
consider the fact that the management services are
not covered in the ambit of “Fee for included Services”
(“FIS”) prescribed in Article 12 of the India-USA
Double Tax Avoidance Agreement. The sequence
chart encapsulating the ambit of FIS is attached as
Exhibit 1. On consequence, such management fees
would assume the character of business profits of
USTG under Article 7 of the India-USA DTAA which
would be taxable in India only if the same is
attributable to a Permanent Establishment (PE) of
USTG in India. In the absence of a PE of USTG in
India, the said amount would not be taxable in India
as business profits. In view of the same, the said
amount of management service charges would not be
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chargeable to tax in India in the hands of USTG, in
light of the provisions of section 90(2) of the Act.

7.6 On the facts and in the circumstances of the case, the learned ACIT and DRP have erred in law by confirming the disallowance of management fees paid by the Appellant to USTR, under section 40(a)(i) of the Act, on the grounds of perceived non- withholding of tax at source under section 195 of the Act, without considering the fact that the said amount is not chargeable to tax in India under the provisions of the India-USA DTAA.

7.7 Without prejudice, the DCIT and DRP have erred in facts by proposing disallowance of entire Rs 8,12,12,725 under section 40(a)(i), when the actual expense incurred by the Appellant is only Rs 4,06,06,362. The DCIT and DRP has failed to consider the fact that 50% of such management fees payable for the captioned A Y, had been reversed by the Appellant. The AO in this respect, has disregarded the directions mentioned in Circular No. 7/2007 dated 23 October 2007.

Ground No. 8- Consequential levy of interest under
section 234B of the Act.

8.1 On the facts and circumstances of the case, the
learned DC IT and DRP have erred confirming the
consequential levy of interest under section 2348 of
the Act at Rs.5,60,56,5l0.

Ground No.9 – Consequential levy of interest under
section 2340 and 244A of the Act.
9.1 On the facts and circumstances of the case, the
learned DCIT has erred in levying interest under
section 234D of the Act at Rs 57,06,057 and
recovering interest of Rs.40,75,752 under section
244A of the Act.
Ground No.10 – Relief
10.1 The Appellant prays that directions be given to
grant all such relief arising from the above grounds
and also all relief consequential thereto; and 10.2 The Appellant craves leave to add to or alter, by
deletion, substitution, modification or otherwise,
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the above grounds of appeal, either before or during the hearing of the appeal.”
3. Ground Nos.1 to 3 and its sub-grounds were not pressed
by the learned Counsel for the assessee. According the same
are dismissed as not pressed.
4. Ground No.4 and its sub-grounds are in respect of
erroneous disallowance of reimbursement of expenses u/s
40(a)(ia) of the Income-tax Act, 1961.
5. The brief facts of the case are that the assessee, a
domestic company with its operations at Technopark Campus
Thiruvananthapuram had entered into an agreement with US
technology International Private Limited (USTIPL) another
domestic company functioning from the same premises. Both
the companies are majority owned subsidiaries of UST Global
Corporation BVI, the holding company incorporated in British
Virgin Islands. USTRPL is engaged in the domestic sales of
software developed by them whereas USTIPL is an Export
Oriented Unit. The agreement dated 151 day of April 2007
entered into between USTRPL and USTIPL which continues to
remain in force for the A Y 2012-13 is that “USTRPL shall
engage USTIPL to depute resources and provide other
administrative support to manage its project requirements
with its clients and in consideration for the services rendered,
USTRPL shall reimburse all expenses incurred by USTIPL on
the resources deputed to USTRPL and the apportioned cost of
specific support services received from USTIPL as mutually
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agreed.

5.1 The Assessing Officer observed that during the previous
year relevant to A Y 12-13 also, USTRPL has debited an
amount of Rs. 34,94,59,683/- under the head ‘Subcontracting
charges ‘on payments made to USTIPL. The expense of Rs.
34,94,59,683/- debited represents the reimbursement of
salary and related costs of employees deputed to the company
by US Technology International (P) Ltd., a UST Group
company. In the course of assessment proceedings, the
assessee was required to furnish the details of expenses under
the head “sub-contracting charges” and whether such
payments were subjected to TDS. In reply to this query, it was
informed vide letter dated 04/02/2016 that the payments are
in the nature of pure reimbursement and that there is no
profit element in those payments. Further, they had stated
that the portion pertaining to salary and other allowance
claimed to be reimbursement were directly made to the
employees by USTIPL instead of USTRPL and that tax has
been deducted from these payments included in the sub-
contracting charges, by USTIPL. When the assessee was asked
to explain why tax was not deducted by USTRPL from the sub-
contracting charges as a whole paid to USTIPL, the assessee
relying on various judicial precedents contended that payment
by way of reimbursement of expenses incurred on behalf of a
group concern, on a cost to cost basis, without any element of
profit therein, should not be subject to TDS. However the
findings of this office in this regard are discussed below.
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5.2 From the clauses of agreement entered by assessee with
USTIPL, following points are to be noted:
(a) USTIPL provides customer specified software product
development and services to its customer. Thus in present
case such services have been provided to the assessee by
USTIPL.
(b) USTIPL has deputed its resources with the assessee and
in addition providing administrative support to manage its
project requirements with its (assessee’s) clients.
(c) For the above purpose consultants have been made
available by USTTPL to the assessee.
(d) The assessee is required to compensate USTIPL by way
of all expenses incurred by USTIPL on the resources deployed
and in addition apportioned cost of specific support services
received from STIPL as mutually agreed. Thus the agreement
does not specify in clear terms the additional amount to be
paid by assessee as the same has not been spelt out in the
agreement.

e) TIPL shall bear all taxes relating to income arising to it
under the agreement on a net income basis. Thus agreement
acknowledges the fact that income will arise to
USTIPL on account of this agreement.

5.3 The A.O. further noted that in commercial terms, one
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would enter into such an agreement only with the motive of
making profit as no additional advantage is being conferred
on USTIPL by the assessee vide this agreement. This
agreement also has a non-compete clause which prohibits
USTIPL from offering any services directly or indirectly to
clients of assessee or in the markets in which assessee is
actively offering services.

5.4 Thus from above, it becomes evident that STIPL is
rendering managerial, technical and consultancy services to
the assessee by providing services of technical or other
personnel. Thus the services come within purview of section
9(1)(vii) explanation 2 and provisions of section 194J are
attracted in this case. Here it is important to note that for
assessee, recipient of payment is USTIPL and not its
employees as they are paid salary by USTIPL. Since for USTIPL
payment received by it is not chargeable under the head salary
but business income, so such payment will not be covered
under exclusion clause of explanation 2. As regards rent for
premises being charged separately, the same would be covered
by provisions of section 1941. Thus the payments so made are
covered by provisions of section 194J/194I. However no tax at
source was deducted by the assessee by claiming that the
amount paid are mere reimbursement and so no element of
income was there in such payments. So provisions of section
40(a)(ia) are clearly attracted.
5.5 Another important factor to be noted is that the section
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194J uses word “any sum” in comparison to section 195
which uses term ‘any other sum chargeable under
the provisions of this Act’. Thus section 194J presumes that
some income is there in every sum paid and so it further says “deduct an amount equal to ten percent of such sum as
income tax on income comprised therein”. Thus, based on
the facts of the present case, where there is a specific
agreement between assessee and USTIPL and the payment is
being made for specified services by assessee, the tax at
source was required to be deducted. The CBDT Vide circular
No: 715, dated 8.8.1995 has also clarified that Sections 194C
and 194J refer to any sum paid. Thus as TDS is to be
deducted on ‘any sum paid’; hence it does not make any
difference as to whether the slim is paid as a reimbursement
or as a pay merit for rendering services for establishing TDS
liability. Hence the payments to USTlPL is disallowed by
invoking provisions of section 40(a)(ia) of the Act. In this
context, it is also relevant that the addition made on this
ground was upheld by Hon’ble DRP for A Y 2011-12
in this case.
5.6 In this regard, the assessee has submitted that “USTIPL, the payee has filed its return of income in which it
has offered to tax, the sub-contracting charges paid by
USTRPL “. The assessee has also submitted a certificate in
Form 26A as mandated by section 201 (1) of the Act. However
the same cannot be considered as the 2nd proviso
to section 40(a)(ia) is applicable w.e. f. 1-4-2013, i.e. from A Y
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2013-14.This is also clarified in the explanatory
memorandum to Finance bill, 2012.

5.7 The A.O. further observed that since no TDS has been
made by USTRPL from the ‘subcontracting charges’, they will
be hit by the disallowance under section 40(a)(ia). Therefore
expenses of Rs.34,94,59,683/- under the head “subcontracting charges” was disallowed by the Assessing
Officer u/s 40(a)(ia) of the IT Act.

6. Against the above order of the Assessing Officer, the
Draft Resolution Panel (DRP) has given a direction that USTIPL
is rendering managerial, technical and consultancy services to
the assessee by providing services of technical or other
personnel. Thus the services come within purview of section
9(1)(vii) explanation 2 and provisions of section 194J are
attracted in this case. Here it is important to note that for
assessee, recipient of payment is USTIPL and not its
employees as they are paid salary by USTIPL. Since for USTIPL
payment received by it is not chargeable under the head salary
but business income, so such payment will not be covered
under exclusion clause of explanation 2. As regards rent for
premises being charged separately, the same would be covered
by provisions of section 194-I. Thus the payments so made are
covered by provisions of section 194J/194I. However no tax at
source was deducted by the assessee by claiming that the
amount paid are mere reimbursement and so no element of
income was there in such payments. So provisions of section
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40(a)(ia) are clearly attracted. Another important factor to be
noted is that the section 194J uses words `any sum’ in
comparison to section 195 which uses term `any other sum
chargeable under the provisions of this Act’. Thus section
194J presumes that some income is there in every sum paid
and so it further stays “deduct an amount equal to ten per
cent of such sum as income tax on income comprised therein”.
Thus, in the facts of the present case, where there is a specific
agreement between assessee and USTIPL and the payment is
being made for specified services by assessee, the tax at
source was required to be deducted. So, the AO has rightly
disallowed all these payments by invoking provisions of
section 40(a)(ia) of the Act. The CBDT vide circular No.715
dated 8.8.1995 has also clarified that sections 194C and 194J
refer to any sum paid. Thus as TDS is to be deducted on `any
sum paid’; hence it does not make any difference as to
whether the sum is paid as a reimbursement or as a payment
for rendering services for establishing TDS liability. Thus
reimbursements cannot be deducted out of the bill amount for
the purpose of tax deducted at source. In the case of Arthur
Andersen & Co. [94 TTJ 736 (Mum.)] the Mumbai Tribunal
held that where the cost of services is charged and recovered
by way of reimbursement, even without any profit element,
TDS will be applicable. In case of Cochin Refineries (1996) 222
ITR 354 (Ker.), HNS VSAT Inc 95 ITD 157 (Del ITAT) and
Hindalco 94 ITD 242 (Mum) also this was held that TDS is
applicable on mere reimbursement of expenses also. So
objection of the assessee cannot be accepted.
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7. In conformity with the direction of the lower authorities,
the Assessing Officer passed the final order.

8. Against the above order, the assessee is in appeal before
us. Before us, the learned Counsel for the assessee submitted
that this is only a reimbursement of expenses, which does not
include any element of profit so as to deduct TDS on the said
payment. For that purpose, he relied on the order of the
Hyderabad Bench of the Tribunal in the case of Bhagyanagar
Gas Ltd. v. ACIT [(2013) 29 taxmann.com 220 (Hyd.Trib.)],
wherein the Tribunal held as under:-
“11. GAIL and HPCL deputed their personnel who worked under the control and management of JVC. The employees were carrying out the work of the Assessee as its employees not carrying out the work on behalf of GAIL or HPCL. Salary, cost of these employees are a charge on the profits of the Assessee. Payment by way of salary would not constitute Fees for technical services. Nor can the transaction be viewed as a works contract performed by GAIL and HPCL. Merely because the companies had in an agreement agreed to depute their employees would not mean that it is a works contract. Further the Assessee paid only the salaries of the persons who worked under the control and supervision of the Assessee. Instead of paying the amount to the employees directly, the Assessee reimbursed the amount to GAIL and HPCL who had paid the amount to the employees. This can be viewed as a financial arrangement under which GAIL and HPCL pay to the deputed employees on behalf of the Assessee and the Assessee reimburses the same. It is a reimbursement of amount spent by GAIL and HPCL in payment of persons in the employ of the
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Assessee and payment for any services rendered by GAIL and HPCL.
12. In our opinion such payment cannot be considered as payment towards work executed by GAIL and HPCL in the course of work contract. In the Case of United Hotels Ltd. v ITO [2005] 2 SOT 267 (Delhi) under similar circumstances, the IT A T, Delhi has held that reimbursement of salary to the deputed personnel would not attract deduction of tax at source. We find that these decisions are squarely cover the issue on appeal. In the following cases it has been held that reimbursement of expenses are not subject to tax deduction at source. The following decisions also support the case of the assessee: (1) CIT v. Industrial Engineering Projects (P.) Ltd. [1993] 202 ITR 1014 (Delhi).
(2) CIT v. Siemens Aktiongesellschaft [2009] 310 ITR 320 / 177 Taxman 81 (Bom.).
(3) CIT v. Dunlop Rubber Co. Ltd. [1982] 10 Taxman 179 (Cal.)
13. Respectfully following the decision of the co- ordinate bench, we delete the addition made by the AO under Section 40(a)(ia).”

9. Without prejudice to the above, the learned Counsel
submitted that the amended first proviso to section 40(a)(ia) to
be applied retrospectively, though it was introduced by the
Finance (No.2) Act, 2010 with effect from 01.04.2010. For this
purpose, he relied on the judgment of the Hon’ble Supreme
Court in the case of CIT v. Calcutta Export Company [(2018) 93
taxmann.com 51 (SC)] in Civil Appeal Nos.4339-4340 of 2018
and Others, order dated 24th April, 2018.
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10. The learned Departmental Representative, on the other
hand, relied upon the orders of authorities below.

11. We have heard the rival submissions and perused the
material on record. In our opinion, the judgment relied on by
the assessee’s Counsel in the case of Bhagyanagar Gas Ltd.
(supra) cannot be applied to the facts of the present case. In
that case, the payment was directly made to its employees of
the contracting company. However, in the present case, the
payment has been made to USTIPL and not to its employees as
they are paid salary by USTIPL itself. Since for USTIPL,
payment received by it is not chargeable under the head salary
but it has been charged under the head business income.
Being so, such payment will not be covered under exclusion
clause of explanation 2 to section 9(1)(vii) of the I.T.Act.
Further, there was a payment of rent for which the provisions
of section 194-I is applicable. Hence it cannot be considered as
reimbursement of expenditure. Thus, the payments so made
are covered by the provisions of section 194J/194I, as may be
applicable in the present case.

12. Coming to the alternative contention of the learned
Counsel that the second proviso to section 40(a)(ia) should be
applied, in principle, we are agreeing with the contention of
the assessee’s Counsel that if the recipient has paid tax on the
income received by them by filing the return of income within
the due date specified in sub-section (1) of section 139, such
payment shall be allowed as a deduction while computing the
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income in which tax has been paid. This view is fortified by the
judgment relied by the assessee’s Counsel in the case of
Calcutta Export Company (supra), wherein the Hon’ble
Supreme Court held as under:-

“17. However, it has caused some genuine and apparent hardship to the assesses especially in respect of tax deducted at source in the last month of the previous year, the due date for payment of which as per the time specified in Section 200 (1) of IT Act was only on 7th of April in the next year. The assessee in such case, thus, had a period of only seven days to pay the tax deducted at source from the expenditure incurred in the month of March so as to avoid disallowance of the said expenditure under Section 40(a)(ia) of IT Act.
18. With a view to mitigate this hardship, Section 40(a)(ia) was amended by the Finance Act, 2008 and the provision so amended read as under:- “40. Notwithstanding anything to the contrary in Sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head “profit and gains of business or profession (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contactor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or after deduction has not been paid- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139; or
20 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

(B) in any other case, on or before the last day of
the previous year;
Provided that where in respect of any such sum, tax
has been deducted in any subsequent year,
or has been deducted (A) during the last month of the previous year but
paid after the said due date; or
(B) during any other month of the previous year but
paid after the end of the said previous year, such
sum shall be allowed as a deduction in computing
the income of the previous year in which such tax
has been paid.”

19. The above amendments made by the Finance
Act, 2008 thus provided that no disallowance under
Section 40 (a) (ia) of the IT Act shall be made in
respect of the expenditure incurred in the month of
March if the tax deducted at source on such
expenditure has been paid before the due date of
filing of the return. It is important to mention here
that the amendment was given retrospective
operation from the date of 01.04.2005 i.e., from the
very date of substitution of the provision.
20. Therefore, the assesses were, after the said
amendment in 2008, classified in two categories
namely; one; those who have deducted that tax
during the last month of the previous year and two;
those who have deducted the tax in the remaining
eleven months of the previous year. It was
provided that in case of assessees falling under the
first category, no disallowance under Section
40(a) (ia) of the IT Act shall be made if the tax
deducted by them during the last month of the
previous year has been paid on or before the last day
of filing of return in accordance with the
provisions of Section 13 9(1) of the IT Act for the said
previous year. In case, the assessees are falling
under the second category, no disallowance under
Section 40(a)(ia) of IT Act where the tax was
deducted before the last month of the previous year
21 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

and the same was credited to the government
before the expiry of the previous year. The net effect
is that the assessee could not claim deduction
for the TDS amount in the previous year in which the
tax was deducted and the benefit of such
deductions can be claimed in the next year only.

21. The amendment though has addressed the
concerns of the assesses falling in the first category
but with regard to the case falling in the second
category, it was still resulting into unintended
consequences and causing grave and genuine
hardships to the assesses who had substantially
complied with the relevant TDS provisions by
deducting the tax at source and by paying the same
to the credit of the Government before the due date of
filing of their returns under Section 139(1) of the
IT Act. The disability to claim deductions on account
of such lately credited sum of TDS in assessment of
the previous year in which it was deducted, was
detrimental to the small traders who may not be in a
position to bear the burden of such disallowance in
the present Assessment Year.
22. In order to remedy this position and to remove
hardships which were being caused to the
assessees belonging to such second category,
amendments have been made in the provisions of
Section 40(a) (ia) by the Finance Act, 2010.
23. Section 40(a)(ia), as amended by Finance Act,
2010, with effect from 01.04.2010 and now reads
as under:
“4(a)(ia) any interest, commission or brokerage, rent,
royalty, fees for professional services or
fees for technical services payable to a resident, or
amounts payable to a contractor or sub-contractor,
being resident, for carrying out any work (including
supply of labour for carrying out any work), on which
tax is deductible at source under Chapter XVII-B and
such tax has not been deducted or; after deduction,
has not paid on or before the due date specified in
22 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

sub-section (1) of Section 139:
Provided that where in respect of any such sum, tax
has been deducted in any subsequent year,
or has been deducted during the previous year but
paid after the due date specified in sub-section (1) of
section 139, such sum shall be allowed as a
deducted in computing the income of the previous
year in which such tax has been paid.”
24. Thus, the Finance Act, 2010 further relaxed the
rigors of Section 40(a)(ia) of the IT Act to
provide that all TDS made during the previous year
can be deposited with the Government by the
due date of filing the return of income. The idea was
to allow additional time to the deductors to
deposit the TDS so made. However, the
memorandum explaining the provisions of the
Finance Bill, 2010 expressly mentioned as follows: “This amendment is proposed to take effect
retrospectively from 1st April, 2010 and will,
accordingly, apply in relation to the Assessment Year
2010-11 and subsequent years.”
25. The controversy surrounding the above
amendment was whether the amendment being
curative in nature should be applied retrospectively
i.e., from the date of insertion of the provisions of
Section 40(a)(ia) or to be applicable from the date of
enforcement.
26. TDS results in collection of tax and the deductor
discharges dual responsibility of collection of
tax and its deposition to the government. Strict
compliance of Section 40(a)(ia) may be justified
keeping in view the legislative object and purpose
behind the provision but a provision of such
nature, the purpose of which is to ensure tax
compliance and not to punish the tax payer, should
not be allowed to be converted into an iron rod
provision which metes out stem punishment and
results in malevolent results, disproportionate to the
offending act and aim of the legislation. Legislature
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can and do experiment and intervene from time to
time when they feel and notice that the existing
provision is causing and creating unintended and
excessive hardships to citizens and subject or have
resulted in great inconvenience and uncomfortable
results. Obedience to law is mandatory and has to
be enforced but the magnitude of punishment must
not be disproportionate by what is required and
necessary. The consequences and the injury caused,
if disproportionate do and can result in
amendments which have the effect of streamlining
and correcting anomalies. As discussed above, the
amendments made in 2008 and 2010 were steps in
the said direction only. Legislative purpose and
the object of the said amendments were to ensure
payment and deposit of TDS with the Government.

27. A proviso which is inserted to remedy unintended
consequences and to make the provision workable, a
proviso which supplies an obvious omission in the
Section, is required to be read into the Section to give
the Section a reasonable interpretation and requires
to be treated as retrospective in operation so that a
reasonable interpretation can be given to the Section
as a whole.

28. The purpose of the amendment made by the
Finance Act, 2010 is to solve the anomalies that the
insertion of section 40(a)(ia) was causing to the bona
fide tax payer. The amendment, even if not
given operation retrospectively, may not materially be
of consequence to the Revenue when the tax
rates are stable and uniform or in cases of big
assessees having substantial turnover and equally
huge expenses and necessary cushion to absorb the
effect. However, marginal and medium taxpayers,
who work at low gross product rate and when
expenditure which becomes subject matter of an
order under Section 40(a)(ia) is substantial, can
suffer severe adverse consequences if the
amendment made in 2010 is not given retrospective
24 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

operation i.e., from the date of substitution of the
provision. Transferring or shifting expenses to a
subsequent year, in such cases, will not wipe off the
adverse effect and the financial stress. Such could
not be the intention of the legislature. Hence, the
amendment made by the Finance Act, 2010 being
curative in nature required to be given
retrospective operation i.e., from the date of insertion
of the said provision.
29. Further, in Allied Motors (P) Limited (supra) , this
Court while dealing with a similar question
with regard to the retrospective effect of the
amendment made in section 43-B of the Income Tax
Act,1961 has held that the new proviso to Section
43B should be given retrospective effect from the
inception on the ground that the proviso was added
to remedy unintended consequences and supply
an obvious omission. The proviso ensured reasonable
interpretation and retrospective effect would serve
the object behind the enactment. The aforesaid view
has consistently been followed by this Court in the
following cases, viz., Whirlpool of India Ltd., v. CIT,
New Delhi [2000] 245 ITR 3, CIT v. Amrit Banaspati
[2002] 255 ITR 117 and CIT v. Alom Enterprises Ltd.
[2009] 319 ITR 306.
30. Hence, in light of the forgoing discussion and the
binding effect of the judgment given in Allied
Moters (supra), we are of the view that the amended
provision of See 40(a)(ia) of the IT Act should
be interpreted liberally and equitable and applies
retrospectively from the date when Section
40(a)(ia) was inserted i.e., with effect from the
Assessment Year 2005-2006 so that an assessee
should not suffer unintended and deleterious
consequences beyond what the object and purpose of
the provision mandates. As the developments with
regard to the Section recorded above shows that
the amendment was curative in nature, it should be
given retrospective operation as if the amended
provision existed even at the time of its insertion.
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Since the assessee has filed its returns on 01.08.2005 i.e., in accordance with the due date under the provisions of Section 139 IT Act, hence, is allowed to claim the benefit of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act.

31. In light of the forgoing discussion, we are of the view that judgment of the High Court does not call for any interference and, hence, the appeals are accordingly dismissed. In view of the above, all the connecting appeals, interlocutory applications, if any, transferred cases as well as diary numbers are disposed off accordingly. Parties to bear cost on their own.”

13. However, in the present, the payment of tax by the
recipient company before the due date of filing of the return of
income has not been verified by the lower authorities, hence, it
is appropriate to remit the issue to the file of the Assessing
Officer for the purpose of verification of applicability of first
proviso to section 40(a)(ia) of the I.T.Act, as it was considered
retrospective effect by the Hon’ble Supreme Court in the case
of Calcutta Export Company (supra). Accordingly, this issue is
remitted to the file of A.O. for fresh consideration.

14. As regards ground No.6 and its sub-grounds, the
grievance of the assessee is that the Transfer Pricing Officer
has no jurisdiction to question the reasonability of payment of
management service fees. For this purpose, he relied on the
order of the Chennai Bench of the Tribunal in the case of
Siemens Gamesa Renewable Power (P.) Ltd. v. DCIT [(2018) 92
26 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

taxmann.com 330 (Chennai – Trib.)], wherein it was held by the
Tribunal as under:-
“20.5 We have heard both the parties and perused the material on record. In our considered opinion, transaction to transaction approach is not required if the Profit Level Indicator (PLI) of assessee at entity segment level is at arm’s length where the assessee company has adopted TNMM for the purposes of benchmarking, its adoption of CUP solely for the purposes of evaluating technical assistance fee would lead to chaos and be detrimental to the interests of both revenue and the assessee. In other words, once the arm’s length criterion is tested at entity level, the learned TPO has no jurisdiction to examine the need, benefit etc. in relation to each transaction. This view was supported by the judgment of Delhi High Court in the case of Magnetic Marelli Powertrain India (P.) Ltd. (supra) wherein held that:-
“17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee as the most appropriate method in respect of all the international transactions including payment of royalty. The TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of Rs.
38,58,80,000 only for which Comparable Uncontrolled Price (“CUP”) method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element i.e payment of technical assistance fee, to an entirely different (CUP) method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction by each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to
27 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

judge the soundness of the international transaction
in an ALP fixing exercise. If this were to be disturbed,
the end-result would be distorted and within one ALP
determination for a year, two or even five methods
can be adopted. This would spell chaos and be
detrimental to the interests of both the assessee and
the revenue. The second question is, therefore,
answered in favour of the assessee, the TNMM had
to be applied by the TPO/ AO in respect of the
technical fee payment too.”

20.5.1 In the case of Air Liquide Engg. India (P.) Ltd.
(supra) held that:-
“33. The TPO has made the disallowance in question
mainly on the basis of the benefit test. In this
regard, it is seen that the payment of royalty cannot
be examined divorced from the production and
sales. Royalty is inextricably linked with these
activities. In the absence of production and sale of
products, there would be no question arising
regarding payment of any royalty. Rule 10A(d) of the
ITAT Rules defines ‘transaction’ as a number of
closely linked transactions. Royalty, then, is a
transaction closely linked with production and sales.
It cannot be segregated from these activities of
an enterprise, being embedded therein. That being
so, royalty cannot be considered and examined in
isolation on a stand-alone basis. Royalty is to be
calculated on a specified agreed basis, on
determining the net sales which, in the present case,
are required to be determined after excluding
the amounts of standard bought out components,
etc., since such net sales do not stand recorded by
the assessee in its books of account. Therefore, it is
our considered opinion that the assessee was
correct in employing an overall TNMM for examining
the royalty. The TPO worked out the
difference in the PU of the outside party (the
assessee) at 4.09% and the comparables at 7.05%.
This has not been shown to fall outside the
permissible range.
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34. The decision of the Tribunal in ‘Ekla Appliances’,
2012- TH-OI-HC Del-TP, has been sought to
be distinguished by the TPO, observing that the facts
in that case are not in pari materia with those
of the assessee’s case. However, therein also, the
benefit test had been applied by the TPO, as in the
present case. The matter was carried in appeal
before the Hon’ble High Court. The Hon’ble Delhi
High Court has held that the so-called benefit test
cannot be applied to determine the ALP of
royalty payment at nil and that the TPO could apply
only one of the methods prescribed under the
law. A similar view has been taken in ‘Sona
Okegawa Precision Forgings Ltd.’ (supra) and in ‘KHS
Machinery Pvt. Ltd. v. ITO 53 SOT 100 (Ahm) (URO).

35. It is, thus, seen that the royalty payment @ 3% by
the assessee is at arm’s length. The Technical
Collaboration Agreement stands approved by the
Government of India. The royalty payment has
been accepted by the department as having been
made by the assessee wholly and exclusively for
its business purposes. For Assessment Years 2004-
05 and 2005-06, such payment of royalty has
been allowed by the CIT (A). As per the FEMA
Regulations, royalty can be paid on net sales @ 5%
on domestic sales and @ 8% on export sales. The
royalty payment by the assessee falls within these
limits. It also falls within the limits of payment of
royalty in the auto mobile sector, as per the
market trend. This payment of royalty is at the same
percentage as that paid by other auto
ancillaries in the automotive industry. Then in ‘Ekla
Appliances’ (supra) and in ‘Ericsson India Pvt.
Ltd. v. DeIT 2012-TII-48-ITAT-Qel-TP, it has been held
that royalty payment cannot be
disallowed on the basis of the so-called benefit test
and the domain of the TPO is only to examine as to
whether the payment based on the agreement
adheres to the arm’s length principle or not. That
being so, the action of the TPO in the present case, to
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make the disallowance mainly on the ground
of the benefit test, is unsustainable in law.

36. Keeping in view all the above factors, the
disallowance made on account of royalty is found to
be totally uncalled for and it is deleted as such.
21. Hence, following the ratio of the Hon’ble Delhi
High Court in CIT v. EKL Appliances (supra)
and various other decisions as noted above and
given the facts and circumstances of the instant
case, we hold that the addition made by the TPO and
upheld by the DRP is unsustainable and is to
be deleted. Hence Ground No.2 is held in favour of
the assessee. Hence, the appeal of the Revenue
ITA. No. 1040/Hyd/2011 is dismissed and
Assessee’s appeal in ITA. No. 1159/Hyd/2011 is
allowed.”
20.5.2 In the case of Sakata Inx (India) Ltd. (supra)
wherein held that:-
“2.9 We have heard the rival contentions and
perused the material available on record. In our
considered view, there is no infirmity in the order of
ld. CIT(A) inasmuch as:
(i) Id. DR could not justify the application of CUP
method to Arm’s Length working.
(ii) The products manufactured by the appellant
were developed from technology support provided by
the AE it would not have been possible so
without the continuous AE support. The rights of
access to the ongoing technical support and
development of new products received by the
appellant were clearly provided in the agreements
entered into with the AE.
(iii) The cost benefit test as worked out by the TPO
was not based on proper appreciation of the facts
and thus CUP method applied by the AO/TPO was
not justifiable.
(iv) The judicial citations relied on by Id. CIT(A) as
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well as further judgments relied on by the assessee
including Hon’ble High Court in the case of Delhi
EKL appliance Ltd. (supra) support the view taken by
Id. CIT(A).
In view of the foregoing we uphold the order of the
CIT(Appeals) and dismiss the revenue’s appeal.”
20.6 In our considered opinion, ALP of management
service cannot be said to be Nil in the absence of a
valid comparable. Since no effort had been made by
TPO to determine market value of services received
by assessee, adjustment made by TPO as a
disallowance of expense could not be upheld. In other
words, the TPO cannot simply arrive at a conclusion
that quality and volume of services received by the
Appellant were not commensurate with payment
made by the Appellant. This view is fortified by the
order of Tribunal in the case of Merck Ltd. (supra) –
upheld by Bombay High Court [ITA 272 of 2014].

24.7 Such argument in our view is not convincing.
The argument would have been valid if fees was
fixed in respect of each service, which was
compulsorily required to be provided to the assessee,
but it is not so in the present case. The agreement
listed certain services on which the assessee
requires guidance/assistance from time to time. The
assessee was thus entitled to any of the services
as and when required. Therefore, applying CUP
method to the service not availed by the assessee
during the year is not justified. It would have been
appropriate if the AO had applied CUP method
to the payment made during the year by the
assessee for the three services and compared with
similar payment for such services by an independent
party. No efforts have been made by TPO/ AO
to determine the market value of services received by
the assessee during the year relating to SAP
implementation and quality control to show that the
assessee had paid more compared to any
independent party for the same services. The
assessee had submitted that in case the assessee
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had paid to the AE at man hour rate for the technical
services provided during the year in relation to
SAP implementation, the fees payable would have
been significantly higher. There is nothing
produced before us to controvert the said claim. The
assessee has applied TNMM which shows that
the margin shown by the assessee was higher than
the comparable companies. The case of the
assessee is also supported by the decision of
Tribunal in case of Me Can Erricson India Pvt. Ltd.
(supra) in which the decision of TPO to take the value
of certain services at nil has not been upheld.
Considering the entirety of facts and circumstances,
the adjustment made by TPO which is nothing
but disallowance of expenses cannot be upheld. We,
therefore, set aside the order of CIT (A) on this
point and delete the addition made.
20.7 Further, this view was supported by the
decision of Co-ordinate Bench, Chennai in the case of
Flakt India Ltd. (supra) vide order dated 9th June,
2016 for assessment year 2009-10 and in the case of
Da Business Process Services (P.) Ltd. v. Dy. CITITAT
in ITA No. 2166 of2011.
20.8 In our considered opinion, Jurisdiction of the
TPO is to determine the commercial expediency and
necessity in the hands of the assessee. The learned
TPO has remarked that the Assessee has not
substantiated the necessity to incur such
expenditure. In this regard, it is pertinent to note that
the business transactions of the Assessees taken
place in the ordinary course, which cannot be
questioned by the TPO. Further, the learned TPO
cannot conclude based on mere assumptions without
examining the commercial expediency of the
assessee. This view is fortified by the
judgments/order of the various courts as below:-

(i) Hive Communication (P.) Ltd. (supra)
(ii) EKL Appliances Ltd. (supra)
(iii) Computer Graphics Ltd. (supra)
32 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

20.9 In our considered opinion, benefit test is not a
precondition for justifying arm’s length price. Under
Rule 10B of the Income-tax Rules, 1962 which deals
with ‘Determination of the arm’s length price’.
there is no mention of the ‘benefit test’ being adopted
for the purpose of determining such arm’s length
price. It is not a precondition to conclude that the
payment is within arm’s length. In other words, the
TPO cannot apply the benefit test for determining ALP
as he cannot assess the benefit derived by
assessee in a particular transaction. This view is
fortified by the following judgments:-
(i) R.A.K Ceramics India (P.) Ltd. (supra) which
was upheld by Andhra Pradesh High Court [IT
Appeal No. 595 of 2016]-

’10. We are really surprised to see the reasoning of
TPO in fixing the ALP of royalty payment at 2%. It is
manifest from TPO’s order he has rejected
assessee’s TP analysis under TNMM. Further, in para
6.4 of his order TPO has mentioned of undertaking
an independent analysis under TNMM for
selecting comparables and determining ALP.
However, even after repeatedly scanning through his
order, we failed to find any such analysis being done
by him. Similarly, though in para 5.1.1, Id. DRP has
observed that TPO has benchmarked intangible
transactions by using CUP, but, the order passed by
TPO does not support such conclusion. It is an
accepted principle of law that TPO has to determine
the ALP by adopting anyone of the methods
prescribed u/s 92C of the Act. Mode and manner of
computation of ALP under different methods have
been laid down in rule 10B. Even, assuming
that TPO has followed CUP -method for determining
ALP of royalty payment, as held by Id. DRP, it needs
to be examined if it is strictly in compliance with
statutory provisions. Rule 1OB(1 )(a) lays down the
procedure for determining ALP under CUP method. As
per the said provision. TPO at first has to find
out the price charged or paid for property transferred
33 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

or services provided in a comparable uncontrolled
transaction, or a number of such transactions.
Thereafter, making necessary adjustments to such
price, on account of differences between the
international transaction and comparable
uncontrolled transactions or between the enterprises
entering into such transactions, which could
materially affect the price in the open market, TPO
will determine the ALP. It is patent and obvious from
TPO’s order, the determination of ALP at 2% is not at
all in conformity with Rule 1OB(1)(a). The TPO has
not brought even a single comparable to justify arm’s
length percentage of royalty at 2% either under CUP
or TNMM method. On the contrary, observations
made by TPO gives ample scope to conclude that
adoption of royalty at 2% is neither on the basis of
any approved method nor any reasonable basis.
Rather it is on ad hoc or estimate basis, hence, not in
accordance with statutory provisions. The approach
of TPO in estimating royalty at 2% by applying the
benefit test, in our view, is not only in complete
violation of TP provisions but against the settled
principles of law. ITAT, Mumbai Bench in case of
Castrol India Ltd. v. Additional CIT, ITA No.
1292/Mum/2007 dated 20/12/2013 while
examining identical issue of determination of ALP at ‘Nil’ by applying the benefit test held as under:

“11. We have considered the rival submissions and
perused the relevant material on record. It is
observed that the impugned royalty was paid by the
assessee company to its AE namely Castro I Ltd. UK
at 3.5% of the net ex-factory sale price of products
manufactured and sold in India as per the
technical collaboration agreement. This international
transaction involving payment of royalty to its AE
was benchmarked by the assessee R.A.K
Ceramics India P. Ltd. by following CUP method in its
TP study report and since average rate of royalty of
three comparables selected by it was higher
at 4.67% than the rate at which royalty was paid by
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the assessee to its AE, the transaction involving
payment of royalty was claimed to be at arm’s
length. A perusal of the order passed by the TPO u/s
92CA(3) of the Act shows that neither these com
parables selected by the assessee in its TP
study report were rejected by her nor any new com
parables were selected by her by making a fresh
search in order to show that the payment of royalty
by the assessee to its AE was not at arm’s length.
She simply relied on the approval of SIA to hold that
any royalty paid by the assessee on exports and
other income was not allowable and disallowed the
royalty payment to the extent of Rs. 40,51,486/-
treating the same as the royalty paid by the
assessee in respect of exports sale and other income.
We are unable to agree with this strange method
followed by the TPO to make a TP adjustment in
respect of royalty payment which is not sustainable
either in law or on the facts of the case. She has
neither rejected the method followed by the assessee
to benchmark the transaction in respect of payment
of royalty nor has been adopted any recognized
method to determine the ALP of the said transactions.
The approval of SIA adopted by the TPO as basis to
make TP adjustment in respect of royalty payment
was untenable and even going by the said basis
wrongly adopted by the TPO, no TP adjustment in
respect of royalty payment was liable to be made. As
per the said basis, the net sales of the assessee after
excluding export sale and other income were
to the extent of Rs. 1118.70 crores and the royalty
paid thereon at Rs. 24.38 crores being less than the
rate of 3.5% approved by SIA, there was no case
of any excess payment made of royalty by assessee
than approved by SIA to justify its disallowance by
way of TP adjustment. In our opinion, the Id. CIT
(A) could not appreciate these infirmities in the order
of the TPO despite the same were specifically brought
to his notice on behalf of the assessee and
confirmed the TP adjustment made by the TPO in
respect of royalty payment which was totally
35 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

unjustified. We therefore, delete the addition made
by the AOITPO and confirmed by the Id. CIT on
account of TP adjustment in respect of royalty
payment and allow ground NO.3 of the assessee’s
appeal.'”

(ii) TNS India (P.) Ltd. (supra) ’16. We have considered the issue. We are unable to
accept the contention of the Assessing Officer/TPO
with reference to the services provided by AEs.
Assessee has provided the agreements which were
entered not during the year but in earlier year and
has been paying the service fee termed as
management fee accordingly. This claim is not
arising for the first time in this year but, is also there
in earlier years and later years. Assessee is part of a
worldwide group and they have placed some
corporate centres for guidance of various units run by
them across the globe. It was submitted that the
costs being incurred by the centres are being shared
by various units and assessee’s share in this year
has come to 5% of the receipts payable to NFO
Worldwide Inc USA and at 4% to NFO Asia Pacific
Ltd. Hongkong on the net revenues. These amounts
are within the norms prescribed for payment of
fees to various group companies of similar nature.
There is no dispute with reference to services being
provided by the group companies to assessee
and assessee also paid various other amounts
including royalty. As submitted by assessee, even
though some correspondence was placed on
record with reference to the advise given to assessee,
providing a concrete evidence with reference to the
services in the nature of specific activities is
difficult, like proving the role of an anesthesian in an
operation conducted by a surgeon. There may be an
evidence of operation being performed by the
Doctor in the form of sutures or scars etc., which can
be proved later but the role of an anesthesian before
operation and after gaining consciousness is
difficult to prove as that is not tangible in nature.
36 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.

Likewise, for the advise given by various group
centres to the group companies in day-to-day manner
is difficult to place on record by way of concrete
evidence but the way business is conducted, one can
perceive the same. Assessee has given a
detailed write-up as well as the services provided
and benefit obtained which were not contradicted.
The Assessing Officer did not believe the same in the
absence of concrete evidence. Unless the Assessing
Officer steps into assessee’s business premises and
observes the role of these companies/assessee’s
business transactions, it will be difficult to place on
record the sort of advice given in day-to-day
operations. What sort of evidence satisfies the AO
also not specified. Assessee has already placed lot
of evidence in support of claims. Therefore, on that
court, we are not in agreement with the Assessing
Officer and TPO that services were not rendered by
the group companies to assessee.

16.1. Even otherwise, the role of transfer pricing
Officer is to determine the arm’s length price of a
transaction. He cannot reject the entire payment
under the provisions of sec. 92CA as held by the
Hon’ble Delhi High Court in the case of EKL
Appliances Ltd. (supra) wherein the Hon’ble Delhi
High Court, on I similar facts where the TPC also
determined the ALP at Nil, has held as
under:

“21. The position emerging from the above decisions
is that it is not necessary for assessee to show that
any legitimate expenditure incurred by him was also
incurred out of necessity. It is also not necessary for
assessee to show that any ITA Nos. 944/H/07, 194
& 74/H/OB, 793/H/09, 654, 655/H/10 &
7/H/2012 TNS India Pvt. Ltd. expenditure incurred
by him for the purpose of business carried on by him
has actually resulted in profit or income either in the
same year or in any of the subsequent years. The
only condition is that the expenditure should have
37 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

been incurred “wholly and exclusively” for the
purpose of business and nothing more. It is this
principle that inter alia Finds expression in the OECD
guidelines, in the paragraphs which we have quoted
above.

22. Even Rule 10B(I)(a) does not authorise
disallowance of any expenditure on the ground that it
was not necessary or prudent for assessee to have
incurred the same or that in the view of the Revenue
the expenditure was unremunerative or that in view
of the continued losses suffered by assessee
in his business, he could have fared better had he
not incurred such expenditure. These are irrelevant
considerations for the purpose of Rule 10B.
Whether or not to enter into the transaction is for
assessee to decide. The quantum of expenditure can
no doubt be examined by the TPO as per law
but in judging the allowability thereof as business
expenditure, he has no authority to disallow the
entire expenditure or a part thereof on the ground
that assessee has suffered continuous losses. The
financial health of assessee can never be a criterion
to judge allowability of an expense; there is
certainly no authority for that. What the TPO has
done in the present case is to hold that assessee
ought not to have entered into the agreement to pay
royalty/brand fee, because it has been suffering
losses continuously. So long as the expenditure or
payment has been demonstrated to have been
incurred or laid out for the purposes of business, it is
no concern of the TPO to disallow the same on any
extraneous reasoning. As provided in the OECD
guidelines, he is expected to examine the
international transaction as he actually finds the
same and then make suitable adjustment but a
wholesale disallowance of the expenditure,
particularly on the grounds which have been
given by the TPO is not contemplated or authorized.
38 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.

23. Apart from the legal position stated above, even on merits the disallowance of the entire brand fee/royalty payment was not warranted.
Assessee has furnished copious material and valid reasons as to why it was suffering losses continuously and these have been referred to by us earlier. Full justification supported by facts and figures have been given to demonstrate that the increase in the employees cost, finance charges, administrative expenses, depreciation cost and capacity increase have contributed to the continuous losses. The comparative position over a period of 5 years from 1998 to 2003 with relevant figures have been given before the CIT (Appeals) and they are referred to in a tabular form in his order in paragraph 5.5.1. In fact there are four tabular statements furnished by assessee before the CIT (Appeals) in support of the reasons for the continuous losses. There is no material brought by the revenue either before the CIT (Appeals) or before the Tribunal or even before us to show that these are incorrect figures or that even on merits the reasons for the losses are not genuine.

24. We are, therefore, unable to hold that the Tribunal committed any error in confirming the order of the CIT (Appeals) for both the years deleting the disallowance of the brand fee royalty payment while determining the ALP. Accordingly, the substantial questions of law are answered in the affirmative and in favour of assessee and against the Revenue. The appeals are accordingly dismissed with no order as to costs”‘.

15. On the other hand, the learned Departmental
Representative relied on the order of the lower authorities.

16. We have heard the rival submissions and perused the
material on record. It was categorically held by the Tribunal in
39 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

the case of Siemens Aktiongesellschaft (supra) that benefit test
is not a precondition for justifying arm’s length price. Under
Rule 10B of the Income-tax Rules, 1962 which deals with ‘Determination of the arm’s length price’. there is no mention
of the ‘benefit test’ being adopted for the purpose of
determining such arm’s length price. It is not a precondition to
conclude that the payment is within arm’s length. In other
words, the TPO cannot apply the benefit test for determining
ALP as he cannot assess the benefit derived by assessee in a
particular transaction. Accordingly, ground No.6 raised by the
assessee is allowed.

17. By way of ground No.7 and its sub-grounds, the
grievance of the assessee is that the Management Service
cannot be categorized as “Fees for included Services” and
hence not taxable in India as per the Double Taxation
Avoidance Agreement between India and United States of
America.

18. After hearing both the parties, we are of the opinion that
similar issue has been considered by the Tribunal in
assessee’s own case for assessment year 2007-2008 in ITA
No.222/Coch/2013 dated 27.09.2013, wherein it was held as
under:-
“16. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee, a resident company, entered into management service agreement with a company, viz. US Technology Resources LLC, a company incorporated in USA and a tax resident in USA. As per this management service agreement, the USA company agreed to provide assistance, advice and support to assessee company in management decision making, sales
40 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

and business development, financial decision making, legal matters and
public relation activities, treasury service, risk management service
and any other management support as may be mutually agreed between
the parties. In pursuance of this agreement, the USA company provided
its assistance, advice and support and the assessee company paid a
sum of Rs.85,22,743 in consideration of the services rendered by the
USA company. Thus, the question arises for consideration is whether
the payment made by the assessee company to USA company for the
services rendered would be taxed in India or not? If it is taxable in
India the assessee has to necessarily deduct tax at source at the time of
making payment as provided in section 195 of the Indian Income-tax
Act. The contention of the assessee before this Tribunal is that the
managerial consultancy service has been specifically omitted in clause
4 of Article 12 of DTAA. Therefore, the managerial service provided by
the USA company to the assessee company is not taxable in India. It is
also the contention of the assessee before this Tribunal that at the best,
the payment made by the assessee company to USA company may be
considered as a business profit under Article 7 of the DTAA between
India and USA and in the absence of a permanent establishment in
India for the USA company it cannot be taxable in India. Therefore, the
assessee company is not liable to deduct tax at the time of payment as
required under section 195 of the Act.

17. We have carefully gone through the provisions of section
9(1)(vii) of the Income-tax Act which defines ” fees for technical
services”. For the purpose of convenience, the provisions of section
9(1)(vii) are reproduced alongwith Explanation 1:

9.(1) The following incomes shall be deemed to accrue or arise in
India:-
(i) to (vi) xxxxxxxxxxxxxxxx
(vii) income by way of fees for technical services payable by-
(a)The Government; or
(b)A person who is a resident, except where the fees are payable in
respect of services utilized in a business or profession carried on by
such person outside India or for the purposes of making or earning any
income from any source outside India; or (c)A person who is a non-resident, where the fees are payable in
respect of services utilized in a business or profession carried on by
such person in India or for the purposes of making or earning any
income from any source in India:

Provided that nothing contained in this clause shall apply in relation to
any income by way of fees for technical services payable in pursuance
of an agreement made before the 1st day of April, 1976, and approved
by the Central Government) [Explanation 1.- For the purposes of the
41 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

foregoing proviso, an agreement made on or after the 1s: day of April,
1976, shall be deemed to have been made before that date if the
agreement is made in accordance with proposals approved by the
Central Government before that date.]”

Explanation 2 to section 9(1)(vii) which was introduced by Finance
Act, 1977 with effect from 01-04-1977 clearly says that fees for
technical service means any consideration for rendering any
managerial, technical or consultancy services.

18. We have also carefully gone through the provisions of DTAA
between India and USA as notified by the Government of India in
Notification No.GSR 990(E), dated 20-12-1990. Article 12 of DTAA
between India and USA deals with royalties and fees for included
service. Fee for included service is defined in clause 4 of Article 12 of
DTAA. For the purpose of convenience, we are reproducing below
clause 4 of Article 12 of the DTAA between India and USA:

“4. For the purposes of this Article, “fees for included services” means
payments of any kind to any person in consideration for the rendering
of any technical or consultancy services (including through the
provision of services of technical or other personnel) if such services:
(a)Are ancillary and subsidiary to the application or enjoyment of the
right, property or information for which a payment described in
paragraph 3 is received; or
(b)Make available technical knowledge, experience, skill, know-how, or
processes, or consist of development and transfer of a technical plan or
technical design.”
19. As per the above definition in DTAA, fees for included services
means payment of any kind to any person in consideration for
rendering of any technical or consultancy services. As rightly submitted
by the Ld.counsel for the assessee, the term “managerial service” as
found in Explanation 2 to section 9(1)(vii) of the Indian Income-tax
Act, 1961 is not found in clause 4 of Article 12 of the DTAA between
India and USA. Taking advantage of the absence of these words “managerial services” in clause 4 of Article 12 of the DTAA between
India and USA, the Id.counsel argued that clause 4 of Article 12 of the
DTAA between India and USA is more beneficial to the assessee when
compared to section 9(1)(vii) of the Indian Income-tax Act, 1961.
Therefore, in view of section 90(2) of the Income-tax Act, 1961, the
assessee is entitled to take the benefit out of the DTAA between India
and USA. Therefore, the question now arises for consideration is –
Which are the services included in clause 4 of Article 12 of the DTAA
between India and USA?

20. The contention of the assessee is that fees for included services as
provided in clause 4 of Article 12 includes only fees paid for technical
42 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

services which are made available to the assessee to avail technical
knowledge, expertise, skill, know how or process, etc. We have
carefully gone through the Memorandum of Understanding concerning
the fees for included service in Article 12 of the DTAA between India
and USA. For the purpose of convenience, we are reproducing the
relevant portion of the Memorandum of Understanding said to be
executed between India and USA on 15th May, 1989:

“Under paragraph 4, technical and consultancy services are
considered included services only to the following extent: (1) as
described in paragraph 4(a), if they are ancillary and subsidiary to the
application or enjoyment of a right, property or information for which
are royalty payment is made; or (2) as described in paragraph 4(b), if
they make available technical knowledge, experience, skill, know-how,
or processes, or consist of the development and transfer of a technical
plan or technical design. Thus, under paragraph 4(b), consultancy
services which are not of a technical nature cannot be included
services.”

21. From this Memorandum of Understanding, it is obvious that as
provided in clause 4(b) of Article 12 of the DTAA between India and
USA, if the technical or consultancy services made available are
technical knowledge, experience, skill, know-how, or processes, or
consist of the development and transfer of a technical plan or technical
design are considered to be technical or consultancy services. It is also
clarified that consultancy services not of technical nature cannot fall
under “included services”. In view of this Memorandrum of
Understanding between two sovereign countries, the consultancy
services which are technical in nature alone are to be included as
technical and consultancy services for the purpose of fees for included
services as per sub clause 4(b) of Article 12 of DTAA between India
and USA.

22. With this background, let us now examine whether the service
provided by USA company to the assessee company would be of service
of technical nature as provided in clause 4(b) of Article 12 of DTAA
between India and USA. Copy of the so-called management service
agreement between the assessee and the USA company is not filed by
the assessee before this Tribunal. Therefore, this Tribunal has to
examine the services from the order of the CIT(A) where the relevant
part of the management service agreement is extracted at paragraph 14
on page 22 of his order:

“WHEREAS, USTRPL (i.e. appellant) is in the business of developing
world class information technology turnkey software solutions and
innovative application development services.
43 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.

WHEREAS USTR (i.e. service provider) provides customer specified
software development services and IT consulting services .

WHEREAS, USTRPL and USTR now desire to enter into an agreement
whereby USTR would provide following management services to
USTRPL:.

– Assistance, advice and support in the field of management decision
making. These services will be rendered by USTRs CEO and his
support personnel.

– Assistance, advice and support in the field of financial decision
making. These services will be rendered by USTR’s CFO and USTR’s
Group controller including their support personnel.

– Assistance, advice and support in legal matters and public relation
activities. These services will be rendered by USTR’s legal advisor and
his support personnel. – Assistance, advice and support in the field of
treasury services. These services will be rendered by different treasury
managers of USTR.

– Assistance, advice and support in the field of risk management
services. These services will be rendered by different risk managers of
USTR.

– And any other management support as may be mutually agreed
between the parties.

NOW THEREFORE in consideration of the mutual promises and
covenants hereinafter contained, the parties hereto agree as follows:

I. GENERAL DESCRIPTION OF OBJECTIVES AND SCOPE OF
DELIVERY 1. During the term of this agreement the role of each company in this
partnership is as follows:

a) USTRPL employs USTR to provide management services. The
knowledge and experience of USTR will be used to support USTRPL in
managing its business and in training its employees.

b) USTR is responsible for recruiting, training and deploying adequate
resources to provide the services.

II. ROLE OF USTRPL 1. The USTRPL designated Person will operate as the main interface
between USTR and USTRPL. He will ensure that USTRPL’s personnel
44 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

co- ordinates and interfaces with USTR’s personnel in a manner
satisfactory to USTR.

2. Depending upon the requirements, USTRPL will send its personnel
from time to time to USTR office in US or 23 ITA No.222/Coch/2013
Overseas to study and analyse the requirements. USTRPL will bear all
the expenses including travel, lodging, training expenses associated
either directly or indirectly with the said assignments.”

23. It is not in dispute that the assessee has received the above services
from the USA company in terms of management service agreement
between the assessee and the USA company. Therefore, it is obvious
that the USA company provides highly technical services which are
used by the assessee for taking managerial decision, financial decision,
risk management decision, etc. 24. The next question arises for consideration is whether the above
services could be considered as “technical and consultancy services”
as provided in clause 4 of Article 12 of DTAA? As already discussed,
only the services which are technical in nature, alone could be
considered for included services. Therefore, This Tribunal has to
examine whether the services rendered by the USA company are in the
nature of technical services. Admittedly, the services rendered by the
USA company are made use by the assessee company in management
decision making, sales and business development, financial decision
making, legal matters and public relations activity, treasury service,
risk management service, etc. 25. Let us also examine whether the services provided by the USA
company are technical in nature or not? Around 2500 years ago, the
Tamil poet Thiruvalluvar in ‘Thirukkural’ under chapter XLVII under
the heading “Action after Deliberations” has elaborated the points
which are required for human relations, management, science and
communication. It may be relevant to consider one of the verses # 461
the translated version of which reads as follows:

“Analyse the cost involved, yield and profits achievable before acting
on a proposition.”

Therefore, it could be seen that the technology that is involved in
analyzing a business proposition was well developed even before 2500
years ago. The term “management” has been explained by various
authors at various point of time. In fact, Mr. James A.F. Stoner
explains “management” as follows:

“Management is the process of planning, organizing, leading and
controlling the effects of organization members and of using all other
organizational resources to achieve the stated organizational goals.”
45 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.

Some of the other authors described management as – latest of the arts
and youngest of sciences. The systematic body of knowledge is the
phenomenon of present century in management. So the recent trend in
management is to adopt systematic body of knowledge in the
management process. As per the management service agreement, the
managerial advice rendered by the USA company was used in the
decision making process of management, financial and risk
management etc. Science is fact based, critically tested, systematized
body of knowledge pertaining to specific field. The knowledge is
accumulated through study, experience and experimentation. The
scientific knowledge produces impersonal results and it can be
empirically tested and universally applied. Therefore, the knowledge
which was accumulated through study, experience and experimentation
with regard to management, finance, risk, etc. of a particular business
is nothing but a technical knowledge. In the era of technology
transformation, the information / experience gathered by US resident
company relating to financial risk management of business is technical
knowledge.

26. We now move on to see what is meant by ‘decision making’. The
term ‘decision making’ is not defined either in the Income-tax Act or in
the DTAA. Therefore, one has to go by the meaning understood in the
management. Shri Harold Koontez and Keinz Weihrach, experts in the
management define ‘decision making’ as follows:

“Decision making is a selection of a course of action from amongst the
alternatives, it is the core planning.”

Another expert by name, R Terry defines ‘decision making’ as follows:

“Decision making is a selection of an alternative form from two or
more alternative to determine a course of action.”

Yet another expert, Kenneth R Andrews defines decision making as
follows:

“Decision making is a process involving information, choice of
alternative options, implementation and evolution that is directed
towards achievement of certain selected goals.”

27. From the above definitions given by various experts, we may come
to a simple and comprehensive meaning as follows:

– Decision making is an act of selecting the suitable solution to the
problems from various available alternative solutions to guide actions
towards achievement of desired objectives.
46 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.

28. Now the assessee here is admittedly making use of the advice,
input, experience, experimentation and assistance rendered by the USA
company in the decision making process of management, financial and
risk management, etc. It is nobody’s case that the USA company is
taking any decision on behalf of the assessee. On the basis of the input,
advice, assistance and service provided by the USA company, the
management decision is taken by the assessee company in India by
selecting suitable solution after considering all the alternatives
available. It is also to be remembered that the USA company is giving
training to the assessee’s employees in making use of the inputs,
experience, experimentation, assistance and advice rendered by them
for taking a better and possible decision in order to achieve the desired
objectives / goal. Therefore, in the context of professional management
and decision making process, the advice and service rendered by the
USA company which was made use by the assessee in managerial
decision making process is in the nature of technical services which
facilitate the assessee to take correct and suitable decision towards
achievement of the desired objects and business goal. Therefore, it may
not be correct to say that what was received by the assessee is only a
managerial advice and not technical advice. The technological input
acquired by the US company through experience and experiment was
tested at various stages and process and further it was made available
to the assessee so as to enable the assessee to apply / use the same in
its decision making process.

29. Apart from that financial and risk decision making process is a
highly complicated and technical one. Unless the assessee gets a
technical input and advice from financial and risk management experts
it may be difficult to select a right process for the growth of the
company. It is not the case of the assessee that in a given set of facts /
problem, the USA company gave its solution or advice. The solution or
decision is admittedly taken by the assessee company on the basis of
the advice, service rendered by the USA company. Therefore, it is
obvious that the technical knowledge, experience, skill possessed by the
USA company with regard to financial and risk management was made
available in the form of advice or service which was made use by the
assessee company in the decision making process not only in
management but also in financial matters. Another aspect is risk
management service. Risk management service is a highly complicated
one in the financial sector. Unless, the technical expertise and
knowledge gained by the USA company is made available to the
assessee company, they may not be able to analyse the situation to
avoid risk in the business. It is also necessary to note that apart from
providing the input, service and advice, the USA company is also
providing training to the employees of the assessee company.
Therefore, this Tribunal is of the considered opinion that the service of
technical input, advice, expertise, etc. rendered by the USA company
47 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

are technical in nature as provided in clause 4(b) of Article 12 of the
DTAA.

30. We have carefully gone through the judgment of the Andhra
Pradesh High Court in the case of GVK Industries Ltd (supra). In the
case before the Andhra Pradesh High Court, the assessee company
constructed and erected power generating station designed to operate
using industrial gas as fuel near Rajamundri. The assessee company
intended to utilize the expert service of qualified and experienced
professional who would prepare a scheme for raising the finances and
tie up the required loan. A non resident company offered its services as
a financial advisor to the petitioner company’s project.. The services
offered by the non resident company includes financial structure and
security package to be offered to the lender, study of various lending
alternatives for the local and foreign borrowings, making an
assessment of export credit agencies world-wide and obtaining
commercial bank support on the most competitive terms, assisting the
petitioner-company in loan negotiations and documentation with
lenders and structuring, negotiating and closing the financing for the
project in a co-ordinated and expeditious manner. For its services the
assessee company paid 0.75% of the total debt financing as “success
fee”. On the advice of the non-resident company at Zurich, the assessee
approached the Indian finance institution for loan. The assessee also
approached the International Finance Corporation, USA for a part of
its foreign currency loan requirement. After successful rendering of
service, the non resident Zurich company sent an invoice for payment
of “success fee” to the extent of US$ 17,15,476.16 (Rs.5.4 crores). The
assessee company approached the income-tax authorities in India for
issuing a no objection certificate to remit the said amount claiming that
the non resident company had no permanent establishment in India and
all services were rendered from outside India. The Income- tax Officer
refused to issue the certificate. On a writ petition before the High Court
it was found that the scope of service / work undertaken by the non
resident company was merely to draw up a scheme, advise on the terms
and methods of negotiation and for documentation with the lender,
evaluate the pros and cons of various lending alternatives, both for
local and the foreign borrowings, prepare a preliminary information
memorandum to be used as the basis for placing the foreign and local
debt, and that the responsibility of entering into correspondence as per
the advice of the non resident company and pursuing the matter was
that of the assessee company itself, and not that of the non resident
company. Therefore, the office of the assessee company could not be
treated as the place of business of the non-resident company. In those
facts and circumstances, the Andhra Pradesh High Court found that
the business connection between the assessee company and non
resident company had not been established. However, it was found that
the “success fee” would fall within the definition of 9(1)(vii)(b) of the
48 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

Act. The Andhra Pradesh High Court found that advice given to
procure loan to strengthen finances would be as much a technical or
consultancy service, as it would be with regard to management,
generation of power or plant and machinery. The “success fee” was
chargeable under the provisions of the Income-tax Act, and therefore,
the assessee was not entitled to no objection certificate.

31. During the course of hearing, the ld.counsel for the assessee was
called upon to comment on the applicability of this judgment of the
Andhra Pradesh High Court. The ld.counsel submitted that the Andhra
Pradesh High Court had no occasion to consider the DTAA between
India and USA. Therefore, the judgment of the Andhra Pradesh High
Court is not applicable. No doubt, DTAA agreement between India and
USA was not considered by the Andhra Pradesh High Court, but the
ratio laid down by the Andhra Pradesh High Court clearly shows that
advice given to procure loan to strengthen the finance would be
managerial or technical or consultancy services for generation of
power or plant and machinery. This finding of the Andhra Pradesh
High Court is squarely applicable in respect of the service received by
the assessee from USA company. Therefore, this Tribunal is of the
considered opinion that advice / service said to be received by the
assessee company from USA company is in the nature of technical or
consultancy services within the meaning of clause (iv)(b) of Article 12 of DTAA.

32. We have also carefully gone through the judgment of the Karnataka
High Court in the case of De Beers India Minerals Pvt Ltd (supra). In
the case before the Karnataka High Court, the assessee engaged in the
business of prospecting and mining for diamonds and other minerals.
The assessee entered into an agreement with Netherland company to
engage their services for conducting airborne survey for high quality,
high resolution, geophysical data suitable for selecting kimberlite
targets. For the technical services rendered by them the assessee had
paid consideration as per the agreement. The assessing officer found
that the payment made to Netherlands company was for technical
services provided by them. Therefore, the assessee has to deduct tax on
payments made to Netherlands company. However, the Commissioner
(Appeals) found that the payment made by the assessee to the
Netherlands company was not covered by Article 12(5) of the DTAA
between India and 33 ITA No.222/Coch/2013 Netherlands. He also
found that the Netherlands company has not imported any technology
to the assessee and they have just used the technology and have gone
back with the same. The CIT(A) further found that no technology has
been made available to the assessee by the Netherlands company,
therefore, the consideration paid does not fall within the definition
of Article 12(5) between India and Netherlands. On further appeal by
49 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

the revenue before the Tribunal it was held that the payment in
question for services rendered would not fall within the definition of “fee for technical services” under Article 12(5)of the DTAA between
India and Netherlands. The Tribunal found that Netherlands company
has surveyed, collected and processed the data on behalf of the
assessee. There is no doubt that Netherlands company performed the
service using the technical knowledge and expertise, but such technical
expertise, skill and knowledge has not been made available to the
assessee. On those facts, the Karnataka High Court found that the
assessee was not being possessed with technical know how to conduct
the prospecting operation. The maps and photographs which were
made available to the assessee cannot be considered as technology
made available. Therefore, the question of Netherlands company
transferring any technical plan or technical design does not arise in the
facts of the case.

33. As observed by the Karnataka High Court, the Netherlands
company surveyed the area, prepared plan and photographs which are
made available to the assessee company locating the exact area for
mining. In fact, the Netherlands company located the exact area where
diamonds were available after analyzing the photograph and the
assessee company has nothing to do except mining the earmarked area
for excavating diamonds. In fact, the technology of locating the
diamond by aerial survey was not given to the assessee company. Only,
the result of the survey was furnished by the Netherland company.
Therefore, it is not a case of making available any technical expertise.
In fact, the decision was taken by the Netherlands company fixing the
location for mining. In the case on our hand, the facts are entirely on
different set of facts. The decision was not taken by the USA company.
The USA company facilitated the assessee company for making
decision in the managerial, financial and risk management system by
providing their knowledge, expertise, experimentation to the assessee
company. The entire experiment, knowledge, expertise was made
available to the assessee and the assessee was facilitated to take a
decision on the knowledge, expertise, experimentation which were
made available by the USA company. Therefore, this Tribunal is of the
considered opinion that the judgment of the Karnataka High Court in
the case of De Beers India Minerals Ltd (supra) may not be applicable
to the facts of this case.

34. We have also carefully gone through the decision of the Mumbai
Bench of this Tribunal in the case of Raymond Ltd (supra). In the case
before the Mumbai Bench of this Tribunal the assessee engaged in
manufacturing suiting, engineers’ steel files and rasps and cement in
India. With a view to muster funds it proposed to issue two types
of Global Depository Receipts (GDRs) in the international market. The
assessee company engaged a UK company as lead managers to the
50 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

issue. The assessee paid necessary charges for the services rendered by
the lead managers and the managers. However, no tax was deducted by
the assessee company form the payment made to them. The assessing
officer found that there was violation of the provisions of section
195(1) of the Act holding that the amounts paid to lead managers and
managers were chargeable to tax in India as fees for technical services
within the meaning of section 9(1)(vii) of the Act. The Appellate
Commissioner also upheld the order of the assessing officer. On further
appeal before the Mumbai Bench of this Tribunal, the Tribunal found
that the services rendered by the lead managers and managers are
managerial or consultancy services within the meaning of section
9(1)(vii) r.w.s. Explanation 2 of the Act and therefore the payment
made to managers are income by way of fees for technical services
deemed to accrue or arise in India. Referring to the DTAA between
India and UK, the Tribunal found that no technical knowledge,
experience, skill, know how or process, etc. was made available to the
assessee company by the non resident managers to the Global
Depository Receipts. However, considering the services rendered by
the UK company, the Mumbai bench of this Tribunal found that the
arrangement between the assessee and the managers of the Global
Depository Receipt issued was for the purpose of engaging the service
of the managers under the subscription agreement. The subscription
agreement contained detailed clauses as to rights and liabilities of the
assessee company and the managers. The Tribunal found that as per
the agreement, the managers had undertaken to render service in
connection with the issue of Global Depository Receipts for which they
are entitled for remuneration. The Tribunal found that the services of
the managers for issue of Global Depository Receipt were utilized
outside India for the purpose of carrying on its business in India. Since
the arrangement is only for marketing the Global Depository Receipt
outside India, the Tribunal found that the commission paid to UK
company cannot be considered to be fee for technical service,
therefore, there is no obligation on the part of the assessee to deduct
tax u/s 195(1) of the Act. Therefore, it is obvious that only for
marketing the GDR outside India, the service of managers are enjoyed.
The decision to issue GDR was taken by Indian company without any
assistance from managers. In the case before us, it is a clear case of
using the technology, expertise of the foreign company in India for
taking managerial, financial decision and risk management analysis.
The expertise, analysis, technical knowledge supplied by the foreign
company remains with the assessee for ever and it could be even used
in future for the business of the assessee in the process of management
decision, financial decision making and risk management analysis.
Therefore, the decision of the Mumbai Bench of this Tribunal in the
case of Raymond Ltd (supra) is also not applicable to the facts of the
case.
51 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.

35. We have also carefully gone through the decision of the Pune
Bench of this Tribunal in the case of Sandvik Australia Pty Ltd (supra).
The assessee, an Australian company provided I.T. support service to
Indian group companies in Asia Pacific Region in order to achieve the
consolidated and standardized I.T. environment in Sandvik group. The
Tribunal, after considering the agreement between the parties found
that the agreement provided only for back up services, I.T. support
services for solving I.T. related problems in Indian subsidiary. The
agreement with Sandvik Asia Ltd nowhere suggested that the assessee
has to make available required technical know how for solving the
problem in the I.T. related problems. In the case before us, the USA
company has to provide all expertise to the assesee company which
would be utilized in the decision making process related to
management, financial and risk management. Therefore, this decision
of the Pune Bench of this Tribunal may also not be applicable to the
facts of the present case. 36. We have also carefully gone through the
decision of the Mumbai Bench of this Tribunal in the case of Wokhardt
Ltd (supra). In the case before the Mumbai Bench of this Tribunal, the
assessee company was incorporated in USA and as per the agreement,
the said company sent one of its professionals to India for a period of
two days to address conference on future strategy of the company. The
assessee company paid US$ 80,000 for the services rendered by the
USA company and no tax was deducted. The Tribunal found that the
presentation made by the professional was essential in the nature of
sharing management, experience and business strategy. Therefore, the
Tribunal found that the services rendered by US company could not be
termed as technical services in nature. In the case before us, it is not a
case of sharing of experience and business strategy. It is a case of
providing technical information for taking managerial and financial
decision. The assessee also used that technology, information and
expertise of USA company in management risk analysis. The
information and expertise made available to the assessee company was
very much available with them and it can be used in future whenever
the occasion arises. Apart from the employees of the assessee company
was also trained by USA company. Therefore, this Tribunal is of the
considered opinion that the decision of the Mumbai Bench of this
Tribunal in the case of Wokhardt Ltd (supra) also may not be of any
help to the assessee.

37. We have also carefully gone through the decision of the Authority
for Advance Ruling in Intertek Testing Services India (P) Ltd (supra).
The Authority for Advance Ruling considered the DTAA between India
and UK and found that rendering of service and making use of service
go together. It was found that rendering of service and making use of
the service are two sides of the same coin. After considering the word “which” the Authority for Advance Ruling found that rendering
technical or consultancy service is followed by relative pronoun
52 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

“which” and it has the effect of qualifying the services. The service offered may be the product of intense technological effort and lot of technical knowledge and the experience of the service provider would have gone into it. The Authority for Advance Ruling found that the technical knowledge and the experience of the service provider should be imparted to and absorbed by the receiver, so that the receiver can deploy similar technology or techniques in future without depending on the provider. In this case also, the information, expertise and training provided by the USA company was absorbed by the assessee company in their decision making process and it was utilized for the purpose of business. The USA company made available all the technical data, information, expertise to the assessee company which was absorbed and made use of by the assessee company in their managerial and financial decision making process and other decision in the development of the business. Therefore, the expertise and technology which was made available by the USA company is technical service within the meaning of Article 12(4)(b) of the DTAA between India and USA. Hence, this ruling of the Authority for Advance Ruling may not of any assistance to the assessee.

37. In view of the above, we do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed.

38. In the result, the appeal of the assessee is dismissed.”

19. The same view was followed by the Tribunal for A.Y.s
2008-2009 to 2013-2014 in ITA Nos.99-104/Coch/2017 vide
order dated 29.01.2018. Further, it was held in that order that
even if the assessee has credited the amount to the recipient’s
account, the provisions of section 195(1) is applicable. In view
of the above, we are inclined to uphold the orders of the lower
authorities and sustain the addition on this count for non-
deduction of TDS, in this year as well. This ground raised in
the assessee is rejected.
20. Ground No.8 is in respect of levy of interest u/s 234B
and Ground No.9 is in respect of levy of interest u/s 234D and
244A. These grounds are consequential in nature, to be
53 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

computed accordingly by the Assessing Officer. It is ordered
accordingly.

21. In the result, the appeal for assessment year 2012-2013
is partly allowed for statistical purposes.
22. Grounds of appeal raised in ITA No.134/Coch/2016 are
reproduced below:-

“The grounds stated hereunder are independent of, and without prejudice to one another. The Appellant submits as under:
Ground No.1 – Erroneous Demand 1.1 The learned ACIT and DRP erred in law and on facts in:

(i) Determining the total income of USTRPL for the year at Rs. 40,56,92,844;
(ii)Levying income tax of Rs. 15,77,16,247 (including interest under section 234B of the Income-tax Act, 1961 (“the Act”) amounting to Rs. 4,66,02,188); and (iii) Raising a demand of Rs. 16,72,35,830 upon the Appellant.

Ground No.2 – Assessment and Reference to Transfer Pricing Officer are bad in law 2.1. The draft order issued by the ACIT is bad on facts and in law, and is in violation of the principles of natural justice that the AO did not issue to the Appellant, a show cause notice, as per proviso to section 92C(3) of the Act;
2.2. The AO has erred in making a reference to the Deputy Commissioner of Income-tax, (Transfer Pricing 2(3)(2))(‘TPO’), inter alia, since the TPO has not recorded an opinion that any of the conditions in
54 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

section 92C(3) of the Act, were satisfied in the instant
case. Accordingly, the order passed by the TPO is
without jurisdiction;
2.3. On the facts and in the circumstances of the
case and in law, the learned TPO and accordingly,
the learned AO erred in not demonstrating that the
motive of the Annel1ant was to shift profits outside of
India by manipulating the prices charged in its
international transactions, which is a pre-requisite
condition to make any adjustment under the
provision of Chapter X of the Act;

2.4 The draft order passed by the AO is without
jurisdiction, inter alia, insofar as it purports to give
effect to an invalid order of the TPO.

Ground No.3 – Erroneous disallowance of
reimbursement of salary expenses under section
40(a)(ia)
of the Act
3.1. On the facts and in the circumstances of the
case, the ACIT and DRP have erred in disallowing
under section 40(a)(ia), an amount of Rs.
26,41,76,508, being reimbursement, on a cost-to-cost
basis, of salary and other allowances borne by US
Technology International Pvt. Ltd. (“USTIPL”)
on behalf of the Appellant, in respect of employees
deputed by USTIPL to the Appellant, pursuant
to Deputation and Support Service Agreement.
3.2. The ACIT and DRP erred in not considering the
settled position of law that the provisions of Chapter
XVII-B of the Act does not apply to a payment on a
cost-to-cost basis, without any element of profit
therein. In other words, ACIT and DRP have erred in
not considering the settled principle that tax
is deductible at source only in respect of payment of
income or any sum comprising an element of
Income.
3.3. The ACIT and DRP have erred in law by
alleging non- deduction of tax on reimbursement of
55 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

salaries paid to USTIPL by USTRPL, even after
acknowledging the fact that tax has been deducted
on such reimbursement of salaries by USTIPL. The
ACIT and DRP have thus effectively proposed a
double deduction of tax on the same amount.
Ground No. 4 Erroneous disallowance of
reimbursement of rent paid under section 40(a)(ia) of
the Act 4.1. On the facts and in the circumstances of the
case, the ACIT and DRP have erred in disallowing
under section 40(a)(ia), an amount of Rs. 90,50,903,
being reimbursement, on a cost-to-cost basis,
of rent borne by USTIPL on behalf of the Appellant, in
respect of office premises shared by the
Appellant with USTIPL;
4.2. The ACIT and DRP erred in not considering the
settled position of law that the provisions of Chapter
XVII-B of the Act does not apply to a payment on a
cost-to-cost basis, without any element of profit
therein. In other words, ACIT and DRP have erred in
not considering the settled principle that tax
is deductible at source only in respect of payment of
income or any sum comprising of an element
of income.
4.3. The ACIT and DRP have erred in invoking TDS
provisions under the Act on such reimbursement
of rent which has already been subject to TDS under
section 1941 of the Act, resulting in double
deduction of TDS on same amount of income.
Ground No. 5- Erroneous disallowance of
reimbursements without considering that the law
prescribed under second proviso to section 40(a)(ia)
of the Act is curative in nature
5.1. The ACIT and DRP have erred in law on
proposing disallowance of reimbursements of
expenses paid to USTIPL under section 40(a)(ia)
disregarding the substantive compliance of second
proviso to section 40(a)(ia) of the Act by the payee
56 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

and USTRPL.
5.2. The ACIT and DRP have erred in law on
proposing disallowance of reimbursements of
expenses to USTIPL under section 40(a)(ia) by
alleging procedural defect of non-filing of Form 26A
under rule 31ACB. The ACIT and DRP have erred in
construing such directory compliances as mandatory
compliances.

5.3. The ACIT and DRP have erred in principle by
disregarding the contention of the Assessee that the
amendment to section 40(a)(ia) of the Act, by way of
introduction of second proviso thereto, vide
Finance Act 2012 is curative in nature intending to
avoid undue hardships to assesses.

5.4 The ACIT and DRP failed to appreciate that the
amendment to section 40(a)(ia) of the Act was made
with a view to remove the unnecessary hardship
caused to assessee by the earlier provision. It is
settled legal position that when an amendment in
law, inserts a remedy to make the section workable,
then such amendment ought to be in operation from
the inception of the section itself, so that reasonable
interpretation can be given to the section as a whole.

Ground No.6 – Determination of arm’s length price in
relation to Management support services 6.1. The TPO/AO erred in rejecting the TP
documentation maintained by the petitioner and
erred in non-acceptance of the benchmarking
followed by the Assessee in relation to the
management service fees ( aggregated with software
development activity ) paid by the appellant to its
associated enterprise for the service rendered. The
TPO/AO has erred in not considering the fact that
even after paying the management service fee the
Assessee still earns an overall NCP Margin of23.45%
57 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

which is higher than the margin earned by the
comparable i.e. 13.60%.
6.2. The TPO/AO failed to understand that the
payment of the management fee was in connection
with the software development activity of the
Company. Instead the TPO/AO has considered the
payment of management fee and the software
development activity of the company as two different
functions performed by the company.
6.3. The TPO/AO concluded that comparable
uncontrolled price (‘CUP’) was the most appropriate
method for benchmarking without providing any
details of the CUP used. The Hon’ble DRP has not
passed a speaking order on the adoption of CUP as
the most appropriate method by the TPO/AO
and assessing the ALP at Nil.
6.4. The TPO/AO erred in understanding the
legitimacy of the management fee paid and
concluded that no services were received by the
assessee, without appreciating the business realities
of the Company and the evidences such as growth in
the revenue, acquisition of new clients retention of
existing clients provided during the course of the
assessment.
Ground No.7 – Without prejudice, Management
Services cannot be categorized as “Fees for included
Services” and hence not taxable in India as per the
Double Taxation Avoidance Agreement (‘DTAA’)
between India and United States of America
7.1. Without prejudice to Ground 6, on facts and
circumstances of the case, the learned ACIT and DRP
have erred in law by alleging that the payment made
by the Appellant to US Technology Global Inc
(“USTG”) the erstwhile US Technology Resources LLC
58 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

(“USTR”), as payment made for technical
service and hence “Fees for included Services” for the
purpose of India US DT AA.
7.2. The ACIT and DRP have failed to consider the
fact that the services provided by USTG to USTRPL
are primarily in the nature of management services
i.e. assistance in decision making involving areas
such as sales and marketing, legal matters, public
relation activities, treasury services and risk
management services 7.3. The ACIT and DRP have failed to consider that
the management services rendered are neither
technical services nor consultancy service and have
wrongly adopted a position that the said payment
has been made for technical knowledge, experience
and processes rendered by USTG.
7.4. The learned ACIT and DRP have arbitrarily
concluded that the services are technical in nature
and have failed to take cognizance of the relevant
facts in this regard.

7.5. The learned ACIT and DRP have failed to
consider the fact that the management services are
not covered in the ambit of “Fee for included Services”
(“FIS”) prescribed in Article 12 of the India-
USA Double Tax Avoidance Agreement. The sequence
chart encapsulating the ambit of FIS is attached as
Exhibit 1. In consequence, such management fees
would assume the character of business profits of
USTG under Article 7 of the India-USA DTAA, which
would be taxable in India. In the absence of a PE of
USTG in India, the said amount would not be taxable
in India as business profits. In view of the same, the
said amount of management service charges would
not be chargeable to tax in India in the hands of
59 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

USTG, in light of the provisions of section 90(2) of the Act.

7.6. On the facts and in the circumstances of the case, the learned ACIT and DRP have erred in law by confirming the disallowance of management fees paid by the Appellant to USTR, under section 40(a)(i) of the Act, on the grounds of perceived non- withholding of tax at source under section 195 of the Act, without considering the fact that the said amount is not chargeable to tax in India under the provisions of the India-USA DTAA.

Ground No. 8- Consequential levy of interest under section 234B of the Act.
8.1. On the facts and circumstances of the case, the learned ACIT and DRP have erred confirming the consequential levy of interest under section 234B of the Act at Rs.4,66,02,188.

Ground No.9 – Consequential levy of interest under section 234D and 244A of the Act.
9.1. On the facts and circumstances of the case, the learned ACIT has erred in levying interest under section 234D of the Act at Rs 62,89,220 and recovering interest ofRs.32,30,367 under section 244A of the Act.
Ground No. 10 – Relief 10.1. The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, the above grounds of appeal, at any time before or during the hearing of the appeal.”

23. Ground No.1, 2 and its sub-grounds are general in
nature, does not require any specific adjudication.
60 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.
24. As regards Ground No.3 and 4, similar ground was taken
up for adjudication in ITA No.475/Coch/2016, wherein we
have held that the expenditure in question cannot be
considered as reimbursement of expenditure and it is to be
liable for deduction of tax at source u/s 194J or 194-I, as the
case may be. Therefore, respectfully following the same, we
dismiss ground No.3 and 4, in this year as well.

25. As regards ground No.5 also, similar issue was taken up
for adjudication in ITA No.475/Coch/2016, wherein we have
held the payment of tax by the recipient company before the
due date of filing of the return of income has not been verified
by the lower authorities, hence, it is appropriate to remit the
issue to the file of the Assessing Officer for the purpose of
verification of applicability of first proviso to section 40(a)(ia) of
the I.T.Act, as it was considered retrospective effect by the
Hon’ble Supreme Court in the case of Calcutta Export
Company (supra). Accordingly, this issue is also remitted to
the file of A.O. for fresh consideration.

26. As regards ground No.6 and its sub-grounds, similar
issue has been adjudicated earlier in this order in ITA
No.475/Coch/2016, wherein by relying upon the decision of
the Tribunal in the case of Siemens Aktiongesellschaft (supra)
we have held that benefit test is not a precondition for
justifying arm’s length price. Under Rule 10B of the Income-
tax Rules, 1962 which deals with ‘Determination of the arm’s
length price’. there is no mention of the ‘benefit test’ being
61 IT(TP)A Nos.475 & 134/Coch/2016. M/s.US Technology Resources Pvt.Ltd.

adopted for the purpose of determining such arm’s length
price. It is not a precondition to conclude that the payment is
within arm’s length. In other words, the TPO cannot apply the
benefit test for determining ALP as he cannot assess the
benefit derived by assessee in a particular transaction.
Accordingly, ground No.6 raised by the assessee is allowed.

27. As regards Ground No.7 and its sub-grounds, similar
issue raised in these grounds were came up for adjudication
before us in assessment year 2012-2013, which we have
discussed in para 18 and 19 above, and decided against the
assessee. Accordingly, for this assessment year as well, by
applying the same ratio, we dismiss the ground raised by the
assessee.

28. Ground No.8 is in respect of levy of interest u/s 234B
and Ground No.9 is in respect of levy of interest u/s 234D and
244A. These grounds are consequential in nature, to be
computed accordingly by the Assessing Officer. It is ordered
accordingly.

29. In the result, the appeal for assessment year 2011-2012
is partly allowed for statistical purposes.

30. The assessee has filed Stay Application No.25/Coch/
2016 for assessment year 2011-2012. At the time of hearing
before us, the learned Counsel for the assessee requested for
withdrawal of the same. Accordingly, the same is dismissed as
withdrawn.
62 IT(TP)A Nos.475 & 134/Coch/2016.
M/s.US Technology Resources Pvt.Ltd.
31. The assessee has also filed an SA No.08/Coch/2018.
Since the appeal in ITA No.475/Coch/2016 is disposed off by
us, the stay application filed by the assessee, arising out of
the said appeal, has become infructuous. Accordingly, the
same is dismissed as infructuous.
Order pronounced on this 23rd day of May, 2018.

Sd/- Sd/- (George George K.) (Chandra Poojari) JUDICIAL MEMBER ACCOUNTANT MEMBER Cochin ; Dated : 23rd May, 2018.
Devdas* Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The Pr.CIT (Central) Kochi.
4. The CIT(A) – IV, Kochi.
5. DR, ITAT, Cochin
6. Guard file. BY ORDER, (Asstt. Registrar) ITAT, Cochin

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