Case Law Details
Celltick Technologies Ltd Vs DCIT (ITAT Mumbai)
If the arms length principle is satisfied qua the relevant transaction between the assessee and its Indian subsidiary, no further profits can be attributed to the assessee in India even if it was to be held that the latter had a PE in India
e find that the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. Ltd. had for A.Y. 2015-16 to A.Y 2019-20 entered into an ‘APA’ with the CBDT. As is discernible from the ‘APA’, the functions of the subsidiary company inter alia included “marketing and sale of various software solutions” of the assessee company. As per the “APA” the operating profit margin of M/s Celltick Mobile Media (India) Pvt. Ltd. up to its revenue of Rs. 50 crore was to be taken at 7% of its “Operating revenue”. Admittedly, the FAR analysis and overall functions of the subsidiary company i.e M/s Celltick Mobile Media (India) Pvt. ltd. had remained the same during the period covered by the “APA” and that for the year under consideration i.e A.Y 2014-15. Though, the APA in the case of the assessee had been entered into for the period spread over A.Y. 201516 to A.Y 2019-20, however, as held by the ITAT, Mumbai in the case of 3i India Pvt. Ltd. Vs. DCIT (ITA No. 581/Mum/2015, dated 16.09.2016), a subsequent “APA” would also have a bearing on the earlier years. Accordingly, we find that the ALP of the transactions covered by the “APA” up to INR 50 cr. was to be taken @ 7% of its operating revenue. As such, as the operating revenue of M/s Celltick Mobile Media (India) Pvt. Ltd. during the year under consideration viz. A.Y 2014-15 was Rs.32,71,03,165/-, therefore, the ALP of the covered transactions @ 7% worked out at Rs.2,30,20,874/-. As against the aforesaid ALP, the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. Ltd. had shown a profit of Rs.3,65,52,479/-as per its profit and loss account for the year under consideration. Accordingly, we are of the considered view that as the income disclosed by M/s Celltick Mobile Media (India) Pvt. Ltd. is higher than the ALP as per its “APA” for the succeeding years, therefore, no further income on the said count also could be attributed to it.
When the amount remunerated by the assessee to M/s Celltick Mobile Media (India) Pvt. Ltd. is found to be satisfying the “arms length” principle, therefore, no further profits could be attributed to the assessee in India even if it was to be held that the latter had a PE in India. Accordingly, we delete the addition of Rs.6,52,66,294/-made by the A.O by attributing the same to the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. Ltd. Resultantly A.O is directed to delete the addition of Rs. 6,52,66,294/- made to the returned income of the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
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