ITAT PUNE BENCH ‘A’
Eaton Technologies (P.) Ltd
versus
Deputy Commissioner of Income-tax
IT Appeal No. 1621 (PN) of 2011
[ASSESSMENT YEAR 2007-08]
JANUARY 11, 2013
ORDER
R.K. Panda, Accountant Member
This appeal filed by the assessee is directed against the order passed u/s.143(3) r.w.s.144C of the Income Tax Act, 1961.
2. Grounds of appeal No 1 to 3 by the assessee reads as under :
“On the facts and circumstances of the case, and in law:
1. The Learned Assessing Officer (‘Ld. AO’), pursuant to the directions of the Learned Dispute Resolution Panel (‘Ld. DRP’), erred in making a double addition to income by disallowing the expenses relating to the reimbursement of expenses made to associated enterprises (‘AE’) i.e. Eaton UK amounting to Rs. 7,42,20,575 without appreciating that the assessee himself has voluntarily disallowed such expenses in its return of income for AY 2007-08 resulting in double taxation.
2. The Ld. DRP/AO erred in proceeding to compute the arm’s length price of the transaction relating to the reimbursement of expenses to Eaton UK without appreciating that the assessee has permanently disallowed these expenses as explained in Ground 1 above and thereby resulting in no erosion of tax base.
3. The Ld. DRP/AO erred in determining the arm’s length price of the transaction relating to reimbursement of expenses to Eaton UK as Nil.”
3. Facts of the case, in brief are that the assessee is engaged in providing customer support service activities including pricing analysis, technical support and application engineering services and business support services to Eaton Group of Companies outside India. The Global Support Service Centre (GSSC) owned by the assessee renders customer support services. This center is approved under the STPI Scheme and assessee has claimed deduction u/s.10A of the I.T. Act, 1961. The assessee filed e-return for A.Y. 2007-08 on 15-11-2007 declaring total income of NIL. The same was processed u/s.143(1) and the case was selected for scrutiny for which notice was issued on 17-09-2008. Subsequently the assessee filed a revised e-return on 16-01-2009 declaring total income of Rs. 6.94,378/-. The AO made a reference u/s.92CA(1) of the I.T. Act to the TPO for determination of Arms Length Price with reference to the transactions reported in Form No. 3CEB filed by the assessee company.
4. The TPO observed that Eaton Technologies Pvt. Ltd. (ETPL/assessee) is a subsidiary of Eaton Asia International Limited, which is in turn a Subsidiary of Eaton Corporation. The assessee is primarily engaged in providing customer support services and business support services to Eaton Corporation. Eaton Corporation, USA (“Eaton Corporation”) is a globally diversified industrial manufacturer of fluid power systems, electrical power products, electrical distribution and control products, automotive engine air management and fuel economy products, and intelligent truck systems for fuel economy and safety. During the period from April 2006 to July 2006, Eaton Industries Private Limited rendered the said business support services to Eaton Corporation. However, from August 2006, the said services have been rendered by ETPL to Eaton Corporation. The business support services rendered, which forms the non- STPI unit of ETPL, includes market research and analysis on the Group’s high-end markets, analysis of financial reports, analysis of competitive intelligence documents, financial analysis for decisions on mergers and acquisitions, creating acquisition proposals etc. The assessee is remunerated on the basis of cost plus a mark-up for the above mentioned services provided to Eaton Corporation.
4.1 The TPO further noted that the assessee, during the year under consideration, has undertaken the following International transactions :
