Hyundai Rotem Company Vs. ACIT (ITAT Delhi)
Out of the international transactions, the taxpayer reported to have spent an amount of Rs. 96,71,69,164/- on account of payment of arbitral award on behalf of the AE and the same have been reimbursed by the AE to the taxpayer. This transaction has not been bench marked by the taxpayer on the ground that it is a cost to cost reimbursement. Major component of this transaction is reimbursement made by the AE to the tune of Rs. 95,50,32,150/- being the payment made by the taxpayer on behalf of its Associated Enterprises (AE) on account of arbitral award.
Undisputedly, the taxpayer paid an amount of Rs.95,50,32,150/- to DMRC out of remittance received from the Head Office and the balance amount of Rs.15,43,13,697/- has been adjusted by DMRC against offshore payment in compliance to the arbitration award dated 22.07.20 10. TPO taken the view that the AE has made reimbursement to the taxpayer as a support that Head Office would provide to its Project Office, but the payment arose in the course of business which the taxpayer carried out in India and as such, this transaction should form part of the margin calculation and would be added to the revenue and cost. Consequently, the TPO proposed to calculate the net margin as under :-
