DCIT Vs Benetton India Pvt. Ltd (ITAT Delhi)
The appeals filed by both the revenue and the assessee for Assessment Year 2013–14 were adjudicated together by the Tribunal. The revenue’s appeal, delayed by 66 days, was admitted after condonation in the interest of substantial justice. The dispute primarily concerned transfer pricing adjustments relating to reimbursement of expenses and payment of royalty.
With respect to reimbursement of expenses to associated enterprises (AEs), three categories were examined: personnel costs, IT-related expenses, and advertisement & publicity expenses.
For reimbursement of personnel costs, the assessee had employed expatriates whose salaries were partly paid by AEs for administrative convenience and later reimbursed on a cost-to-cost basis without markup. The assessee provided documents including visa copies, passport details, Form 16, and secondment agreements, and explained the business need and benefits derived from such services. The Transfer Pricing Officer (TPO), however, determined the arm’s length price (ALP) at nil, alleging lack of evidence regarding requisition, need, and benefits. The Commissioner (Appeals) deleted the adjustment, relying on prior Tribunal decisions and a Delhi High Court ruling in the assessee’s own case. The Tribunal upheld this deletion, finding no reason to interfere.
For reimbursement of IT-related expenses, the assessee received software and technical support services essential for its manufacturing operations, including tools such as CAD and other software. These were also reimbursed at cost without markup. The assessee submitted supporting evidence, including screenshots of software usage. The TPO again determined the ALP at nil due to alleged lack of evidence. The Commissioner (Appeals) deleted the adjustment based on earlier Tribunal rulings in the assessee’s own case. The Tribunal affirmed this decision, noting consistent precedent and sufficient documentation.
