Sabre Travel Network (India) Pvt Ltd Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that addition made on account of foreign exchange loss unsustainable as the same is duly allowed as deduction by the Tribunal in past.
Facts- The assessee is a wholly owned subsidiary of Sabre Asia Pacific Pte Ltd. (SAP). SAP provides a Computerised Reservation System (CRS) that facilitates the travel agents to provide Travel information, hotel and cab booking facilities and facilitates to make air bookings. The assessee promotes the CRS offered by SAP in India. SAP remains the owner of CRS. In order to promote the CRS offered by SAP, the assessee undertakes marketing and promotion activities. It provides support to the subscribers of CRS like training to users, computer hardware support, third party communication lines, help desks support, etc.
During the period relevant to the assessment year under appeal, the assessee inter-alia entered into international transactions with its Associated Enterprise (AE) with respect to provision for marketing services. The assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method to benchmark the transactions. The assessee selected six comparables to benchmark the transaction. The Transfer Pricing Officer (TPO) rejected all the comparables selected by the assessee. Accordingly, TPO further made adjustment of Rs.2 crores in respect of marketing service fee, rejecting assessee’s entity level TNMM approach.
The assessee filed objections before the Dispute Resolution Panel (DRP) assailing the adjustments made by the TPO. The DRP upheld the comparables selected by the TPO. The DRP further rejected the assessee’s objections qua marketing service fees and foreign exchange losses. Hence, the present appeal by the assessee.
Conclusion- As far as disallowing the expenditure of Rs.2 crores, while computing the taxable income of the assessee, is concerned, we would like to hold that the DRP was not justified in disallowing the same There is no doubt about incurring of expenditure by the assessee, as stated earlier The assessee had introduced an incentive scheme and had incurred the expenses of Rs.34 61 crores Whether the money received from AE was at arm’s length or not is a separate issue But, incurring of expenditure was never in doubt. So, in our opinion, the alternate argument raised by the assessee has to allowed.
We find that this is a perennial issue. The assessee has been claiming foreign exchange loss in the past and the AO has consistently disallowed the same. The Tribunal in appeal by the assessee has allowed foreign exchange loss in the past. In AY 2013-14, the Co-ordinate Bench followed the order of Tribunal in assessee’s own case in ITA No.1504/Mum/2017 (supra) and allowed deduction towards foreign exchange loss. In the impugned assessment year, the facts are similar. The AO has not raised any doubt over quantum of charges or loss claimed. Hence, following the earlier order of Tribunal in assessee’s own case, ground no. 3 of appeal is allowed, for parity of reason.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the assessment order dated 31.10.2018 passed u/s 143(3) r.w.s. 144C (13) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for the Assessment Year 2014-15.
2. The facts of the case as emanating from records are: The assessee is a wholly owned subsidiary of Sabre Asia Pacific Pte Ltd. (SAP). SAP provides a Computerised Reservation System (CRS) that facilitates the travel agents to provide Travel information, hotel and cab booking facilities and facilitates to make air bookings. The assessee promotes the CRS offered by SAP in India. SAP remains the owner of CRS. In order to promote the CRS offered by SAP, the assessee undertakes marketing and promotion activities. It provides support to the subscribers of CRS like training to users, computer hardware support, third party communication lines, help desks support, etc. The assessee company gets compensation for its services in accordance with the provisions of the sub distribution agreement and addendum agreement entered into by it with SAP. During the period relevant to the assessment year under appeal, the assessee inter-alia entered into international transactions with its Associated Enterprise (AE) with respect to provision for marketing services. The assessee applied Transactional Net Margin Method (TNMM) as most appropriate method to benchmark the transactions. The assessee selected six comparables to benchmark the transaction. The Transfer Pricing Officer (TPO) vide order dated 11.12.2017 rejected all the comparables selected by the assessee and introduced fresh set of five comparables as under:
