Cisco Systems Capital (India) Private Limited Vs DCIT (ITAT Bangalore)
The assessee grievance is bundled approach for benchmarking should be accepted. At the outset, the ld. AR submitted that the TPO has accepted the bundled approach of aggregation of payment of fees for administrative support services in the preceding years (i.e. from the incorporation year to AY 2015-16). Also, the Tribunal in its order passed for the AY 2015-16 dated April 8, 2021 has accepted the bundled transaction approach adopted by the Assessee. There has been no change in the functions, assets and risk analysis in the current year vis-a-vis preceding years. In this context, the Assessee submits that the rejection of the consistent approach adopted by the Assessee which has been accepted by the TPO in preceding years is incorrect. Given the fact that primary transaction of purchase of networking equipment for lease has been considered at arm’s length, the claim of the TPO that the impugned specified domestic transaction should be separately benchmarked is erroneous and unjustified.
Accordingly, it was submitted that as the assessee’s primary transaction of import of equipment from AE (Appellant’s margin 5.90%) has been accepted at arm’s length after considering the payment of administrative and marketing support services as part of operating cost, no separate adjustment is warranted in respect of the same.
This issue came up for consideration in assessee’s own case in AY 2015-16 in IT(TP)A No.2614/Bang/2019 and by order dated 8.4.2021 the Tribunal held as under:-
“6.7 It is also an admitted fact that assessee has been carrying out these activities in a bundled format in the preceding years which has not been objected by the Ld.TPO/AO. Further that all these expenses incurred by assessee towards administrative expenses and sales and marketing expenses stands subsumed in the operating expenses under TNMM for computing the arm’s length margin of the international transaction, a separate benchmarking may not be necessary. However all these things deserves verification at the end of Ld.AO/TPO. The Ld.AO/TPO shall verify the transactions as indicated hereinabove. In the event the expenses are subsumed under TNMM we do not find any necessity for a separate benchmarking.
Taking a consistent view, we hold that payment of administrative and marketing support services is part of the operating cost, no separate adjustment is warranted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by the assessee is directed against the order of the Assessing Officer dated 31.3.2021 passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 144(3A) & 143(3B) of the Income-tax Act, 1961 [the Act] for the assessment year 2016-17.
2. The assessee company is engaged in the business of leasing and finance. The assessee company filed Form No 3CEB indicating the international transactions u/s 92 of Income Tax Act. The case was referred to the TPO on 28/05/2018with prior approval of Pr. CIT-2, Bangalore with letter dated 23/05/2018 to determine the Arm’s length price. The TPO passed an order u/s 92CA of the IT Act on 31/10/2019 making Transfer pricing adjustment of Rs. 14,59,70,160 in respect of the international transactions entered by the Assessee with its associated enterprises during the previous year. Accordingly, an amount of Rs. 14,59,70,160 is added to the income of the assessee and brought to tax in the draft assessment order as follows:-
