M/S.Daimler India Commercial … vs Deputy Commissioner Of Income Tax

Madras High Court

IN THE HIGH COURT OF JUDICATURE AT MADRAS

 RESERVED ON         : 04.01.2018
		PRONOUNCED ON :    30.01.2018     
CORAM 

THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM

W.P.No.43435 of 2016 and
 WMP.Nos.37296 & 37297 / 2016



M/S.Daimler India Commercial Vehicles Private Limited,
SIPCOT Industrial Growth Centre,
Mathur Road,
Oragadam Sriperumbudur,
Kancheepuram, Chennai,
Tamil Nadu  602 105
acting through its
Authorised representative Mr.Rishab jain			 ...     Petitioner 
  
			          Vs.



1.Deputy Commissioner of Income Tax,
   Corporate Circle-1(1),
   Room No.511, Wanaparthy Block,
   121, M.G.Road, Nugambakkam,
   Chennai-600034.

2.Assistant Commissioner of Income Tax (OSD),
   Corporate Range 1,
   Room No.603, 6th Floor,
   Wanaparthy Block,
   121, Mahatma Gandhi Road,
   Aayakar Bhavan, Nungambakkam,
   Chennai-600034.				               ...  Respondents

PRAYER:Petition filed under Article 226 of the Constitution of India to issue a Writ of Certiorari calling for the records relating to the impugned notice in PAN:AABCF1590N passed by the 1st respondent dated 24.03.2016 issued under Section 148 of the Income tax Act relating to assessment year 2009-10 and consequential impugned order in PAN:AABCF1590N / 2009-10 passed by the 2nd respondent dated 25.10.2016.

		For Petitioner    :  Mr.Ajay Vohra, SC for Mr.N.P.Vijaya kumar 
		For Respondents:  Mrs.Hema muralikrishnan.

O R D E R

The petitioner is a Company incorporated during 2007 under the provisions of the Companies Act, 1956 with its main objects being Designing, Manufacturing, Distributing, Selling and conducting research and development of commercial vehicles and related products and components for Indian and overseas markets. In this writ petition, the petitioner has challenged the notice issued by the 1st respondent under Section 148 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’ for brevity) stating that he has reasons to believe that the petitioner’s income chargeable to tax for the assessment year 2009-10 has escaped assessment within the meaning of Section 147 of the Act. The other order which is impugned in this writ petition is the order passed by the 1st respondent dated 25.10.2016 rejecting the petitioner’s objection for reopening.

Modi Govt. signs 26 advance pricing agreements; software, BPO, engineering services sectors to benefit

Financial Express : September 5, 2019

In order to induce certainty in international transactions and reduce the scope for litigation, the central board of direct taxes (CBDT) has entered into 26 advance pricing agreements this year. While one of these 26 agreements is a bilateral agreement (BAPA) entered into with UK authorities, remaining 25 are unilateral advance pricing agreements (UAPAs). These advance pricing agreements cover various sectors and sub-sectors of the economy like information technology, banking, semiconductor, power, pharmaceutical, hydrocarbon, publishing and Automobiles among others. The progress of the APA scheme strengthens the government’s resolve of having a non-adversarial tax regime, said the CBDT in a statement.

With the signing of these agreements entered into the first five months of this fiscal, total number of advance pricing agreements signed by the CBDT so far now stands at 297, out of which 32 are bilateral agreements (BAPAs).

“The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner,” said the apex body for administering the direct taxes in the country.

An advance pricing agreement is a contract between the CBDT and any other entity or individual.

It determines in advance, the arm’s length price or stipulates the manner through which the price will be decided for an international transaction. And these prices will be valid for the period specified in the APA.

This process is completely voluntary in nature and is aimed at supplementing appeals and other dispute resolutions measures provided under the double taxation avoidance agreement (DTAA) for resolving the transfer pricing disputes.

Sectors covered under 26 advance pricing agreements:

1. Contract manufacturing.
2. Provision of software development services.
3. Back office engineering support service.
4. Provision of back-office (ITeS) support services.
5. Provision of marketing support services.
6. Payment of royalty for use of technology and brand.
7. Trading and distribution.
8. Payment of charter charges.
9. Corporate guarantee.
10. Intra-group services.
11. Interest on financial instruments.

India moves to tax Big Tech, eyes OECD meet

Aug 20, 2019

The Central Board of Direct Taxes (CBDT) is looking at new ways to tax global tech giants who invoice their revenues out of India while maintaining operations in India with minimum profits. The tax department will be consulting at a meeting next month of OECD . The move comes at a point when the developed internet economies across the world are exploring new ways to tax large technology companies.

Transfer pricing methodology of MNCs under customs department lens

The days for information arbitration may just be over for many companies.

The special valuation branch of the customs department is scrutinising transfer pricing methodologies of several multinationals with a view to reconcile their tax and import-expert submissions.

Up until now, the MNCs used to file separate transfer pricing positions to both departments, one for taxation purpose and other for international trade. Since the two departments wouldn’t share data or information with each other, companies could get away with the information arbitrage in some cases said insiders.

Transfer price is basically a price charged by a subsidiary or a division of a company to another. The rules suggest that there has to be an ‘arm’s length’ while fixing this price so that it’s not too low or too high than the existing open market prices. Tax officers can question and demand tax in case they suspect that companies are escaping taxes.

The customs department too has its own valuation mechanism whereby it checks the price of the imports and exports to subsidiaries outside India.

“Collaboration between customs and income tax department was initiated few years ago, it’s only recently that we have seen that data and information provided by businesses to one is being used by the other more frequently. While the objectives of both the departments could be different, there could be disputes where multinationals’ may see their methodologies and positions challenged by either of the departments,” said Pratik Jain, partner, national leader, indirect taxation, PwC India.

No international transaction with the related party in absence of documentation

Colgate Palmolive (India) Ltd. v. ACIT (ITA No. 6073/Mum/2014 and ITA No. 2778/Mum/2011)

The taxpayer was a 51% subsidiary of a U.S. corporation, and was engaged in manufacturing and marketing of diversified pharmaceutical products.

The Transfer Pricing Officer examined the advertising, marketing, and promotion expenses and found that they were about 13% of sales (compared to an industry average of 6.39%), and that the royalty payment made by the taxpayer reflected steep growth from 0.15% in AY 1999-2000 to 0.96% in AY 2005-2006. Based on these findings, it was determined that sales on which a royalty was being paid reflected a “faster growth” benefiting the related party and that the advertising, marketing, and promotion expenses had to be shared by the related party.

CBDT issues clarification regarding requirement for furnishing of Country-by Country report under section 286(4) of IT Act, 1961

Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes

New Delhi, 23rd March, 2018.

PRESS RELEASE

CBDT issues clarification regarding requirement for furnishing of Country-by Country report under section 286(4) of IT Act, 1961

In keeping with India’s commitment to implement the recommendations of 2015 Final Report on Action 13, titled “Transfer Pricing Documentation and Country-byCountry Reporting”, identified under the OECD Base Erosion and Profit Shifting (BEPS) Project, section 286 of the Income-tax Act, 1961 (‘the Act’) was inserted vide Finance Act, 2016, which provides for furnishing of a Country-by-Country (CbC) report in respect of an international group.

The CbC report is to be furnished by the ultimate parent entity of an international group in the country or territory of its residence. As specified under subsection (2) of section 286, the said report is to be furnished on or before the due date specified under section 139(1) of the Act for furnishing of return of income for the relevant accounting year. The date for furnishing of CbC report under sub-section (2) of section 286 for FY 2016-17 was subsequently extended to 31st March, 2018 vide CBDT Circular No. 26 of 2017 dated 25th October, 2017.

India, Hong Kong sign double taxation avoidance pact

March 19, 2018

India and Hong Kong on Monday entered into a double taxation avoidance agreement, aiming to facilitate investment flow between both countries and prevent tax evasion. Investors will get an advantage of a lower withholding tax of 10% on interest or royalties provided they fulfill the main purpose test which broadly checks that the transaction is not entered specifically to avoid taxes.

“The agreement will stimulate flow of investment, technology and personnel from India to HKSAR (Hong Kong Special Administrative Region) and vice versa, prevent double taxation and provide for exchange of information between the two contracting parties. It will improve transparency in tax matters and help curb tax evasion and tax avoidance,” the tax department said in a statement.

Investors will get an advantage of a lower withholding tax of 10% on interest or royalties provided they fulfil the main purpose test which broadly checks that the transaction is not entered specifically to avoid taxes.

It also provides for capital gains taxation of indirect transfers. It provides that gains from sale of shares of a company deriving more than 50% of its value from property situated in a country will be taxed in that country.

Exxon Mobil Company India P. Ltd, … vs Addl Cit Cir 3(1), Mumbai

Income Tax Appellate Tribunal – Mumbai on 21 February, 2018

IN THE INCOME TAX APPELLATE TRIBUNAL
“K” BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER

ITA no.6708/Mum./2011
(Assessment Year : 2007-08)

ExxonMobil Company India Pvt. Ltd.
Kalpataru Point, Plot no.107
                                                      ................ Appellant
Road no.8, Sion (East)
Mumbai 400 022 - AACE3157H

                                     v/s

Addl. Commissioner of Income Tax
                                                    ................ Respondent
Range-3(1), Mumbai

                   Assessee by     : Shri Girish Dave a/w
                                     Ms. Kadambari Dave
                   Revenue by      : Shri Saurabh Deshpande a/w
                                     Shri Jayant Kumar


Date of Hearing - 06.12.2017                Date of Order - 21.02.2018


                            ORDER

PER SAKTIJIT DEY, J.M.

Captioned appeal by the assessee is against the order passed under section 143(3) r/w section 144C(13) of the Income-tax Act, 1961 (for short “the Act”) for the assessment year 2007-08, in pursuance to the directions of the Dispute Resolution Panel (DRP).

2. In ground no.2 with its sub-grounds, the assessee has raised number of issues relating to transfer pricing adjustment made by the ExxonMobil Company India Pvt. Ltd.

Transfer Pricing Officer and sustained by the DRP. However, at the time of hearing, learned counsel for the assessee, Shri Girish Dave, has restricted his argument to the following issues:-

(i) Rejection of comparables under technical services segment;

(ii) Selection / rejection of comparables in back office support service segment; and

(iii) Benefit of working capital and risk adjustment.

3. Brief facts are, the assessee an Indian company is a subsidiary of ExxonMobil Corporation Group of USA. The assessee is basically involved in providing services of information dissemination, maintaining customer relationship and market development to its overseas Associated Enterprise (A.E) ExxonMobil Chemical Co., USA. It also provides application research and technical services as well as back office support services to its A.E. Though, as per the transfer pricing order, the assessee has entered into various international transactions with its A.E., however, in the present appeal, we are concerned with the international transaction relating to provisions of technical services and back office support services. As far as the provision of technical services to A.E. is concerned, the assessee bench marked such transaction by applying Transaction Net Margin Method (TNMM) as the most appropriate method. In the search process conducted by the assessee, ten companies stated to be functionallyExxonMobil Company India Pvt. Ltd. similar to the assessee were selected as comparable.

Danisco India Pvt Ltd v. Union of India

Delhi High Court (Feb 20, 2018)

Hon. Delhi High Court held that in case of conflict between the tax rate prescribed in Section 206AA of the Income Tax Act and in a tax treaty, the tax treaty rate would apply. The requirement (pre amendment) that TDS should be deducted at 20% on payments to non-residents even though the income is chargeable to tax at a lower rate under the DTAA is not acceptable because the DTAA has primacy over the Act. S. 206AA (as it existed) has to be read down to mean that where the non-resident payee is resident in a territory with which India has a Double Taxation Avoidance Agreement, the rate of taxation would be as dictated by the provisions of the treaty.

Dcit, New Delhi vs M/S. Oracle (Ofss) Bpo Services … on 31 October, 2017

IN THE INCOME TAX APPELLATE TRIBUNAL
           (DELHI BENCH 'E' : NEW DELHI)

  BEFORE HON'BLE PRESIDENT, SHRI G.D. AGRAWAL
                      and
      SHRI KULDIP SINGH, JUDICIAL MEMBER

                    ITA No.6974/Del./2014
                (ASSESSMENT YEAR : 2009-10)

DCIT, Circle 19 (1),         vs.   M/s. Oracle (OFSS) BPO Services Ltd,
New Delhi.                         DLF Infinity Tower A, 3rd Floor,
                                   DLF Cyber City, Phase - II,
                                   Gurgaon - 122 002.

                                        (PAN : AABCE1201F)

       (APPELLANT)                            (RESPONDENT)

      ASSESSEE BY : Shri Tarandeep Singh, CA and
                    Shri Shubham Gupta, Advocate
      REVENUE BY : Shri A.K. Yadav, Senior DR

                    Date of Hearing :     30.10.2017
                    Date of Order :       31.10.2017

                             ORDER

PER KULDIP SINGH, JUDICIAL MEMBER :

The Appellant, Deputy Commissioner of Income-tax, Circle 19 (1), New Delhi (hereinafter referred to as ‘the Revenue’) in by filing the present appeal sought to set aside the impugned order dated 30.09.2014 passed by the Commissioner of Income-tax (Appeals)-XVI, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-

“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to grant deduction in respect of (1) provision for bonus of Rs.1,01,701/-, (2) Sale of fixed assets of Rs.21,607/- and (3) Foreign exchange gain on capital expenditure of Rs.5358/- which were claimed by the assessee by filing revised computation of income during the course of assessment proceedings which is not permissible under the Act.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to grant deduction u/s 10A in respect of (1) unpaid bonus inadmissible u/s 43B of Rs. 87,98,002/-, (2) Provision for doubtful debts of Rs. 1,24,67,570/- and payment of employees contribution of PF of Rs.1,85,038/- which was not claimed by the assessee in the return income or by filing revised return but was claimed by way filing a revised computation of income during the course of assessment proceedings which is not permissible under the Act.”