Case Law Details
CASE LAWS DETAILS
DECIDED BY: ITAT, DELHI BENCH `B’, NEW DELHI,
IN THE CASE OF: Electrobug Technologies Ltd. Vs ACIT, Appeal No: ITA No. 1898/Del/2009, DECIDED ON: December 4, 2009
RELEVANT PARAGRAPH
2. The assessee company was incorporated on 30-1-2003 and this is the first return filed by the assessee company since its incorporation. The company is branch office of Electrobug Technologies Ltd., U.K. operating in India to support their activities. Main business of the assessee company is to retrieve and extract Data for clients of their Head Office against which it raises invoices to its head office on cost plus margin method. The Margin is the income earned from Head Office. During the period relevant to the assessment year under consideration, the assessee has shown total turnover of Rs. 2,51,57,706/ – and other income of Rs. 150/-. The net profit earned from these activities was claimed as exempt under sec. 1 OB of the Act. Exemption under seel OB was also allowed. The Assessing Officer noted that the international transaction carried out by the assessee was with its associated enterprises. The assessee was asked to justify that the transaction was at an arm’s length. The assessee replied that the assessee is supporting the activities of UK Head Office. The assessee being branch office is invoicing in UK at cost plus margin method. The margin is 10%. No transfer pricing study has been undertaken. The Head Office in U.K. is suffering huge losses. The Assessing Officer noted that wherein international transactions exceeds Rs. l crore, the assessee was required to maintain all the records as per section 92D read with Rule 10D of the Income-tax Rules. Since the assessee has not maintained any record .which has been admitted by the assessee itself and the fact remains that the transfer pricing study has/been undertaken by the assessee also, the margin of 10% is not correct arm’s length price. In I.T. enabled business services, the margin varies from 10 to 20%. Under the circumstances, the Assessing Officer adopted 15% as the margin and applying the same to the gross revenue income was enhanced by Rs. 12,57,885/- being adjustment in the arm’s length price. Since the assessee could not present itself before the Commissioner (Appeals), no further argument could be raised and hence this addition was confirmed. The assessee is in further appeal before us.
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