Tata Consultancy Services Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that the fee paid by the assessee i.e. Tata Consultancy Services towards the brand to Tata and Sons Ltd. is not capital in nature for the reason that the brand is not owned by the assessee. Hence, there cannot be any TP adjustment towards the amount that ought to have been received by the assessee towards brand royalty.
Facts- The assessee is a company engaged in business of export of computer software providing e-solutions, BPO activities and other management consultancy activity. The case was selected for scrutiny and the statutory notices duly served on the assessee. A reference was made to the Transfer Pricing Officer in order to compute the arm’s length price of the international transactions, the assessee had with its Associated Enterprises (AEs). The TPO made an overall TP adjustment of Rs.1945.16 crores towards provision of software, technical & consultancy services, towards interest chargeable from AE, towards corporate guarantee and receipt of brand royalty. AO passed the final assessment order incorporating the TP adjustment. AO also made various adjustments on the corporate tax brand to arrive at the assessed income of Rs.18752,53,99,510/-. The assessee preferred appeal before the CIT(A), who gave partial relief to the assessee. Against the order of the CIT(A), both the assessee and the revenue are in appeal before us.
Conclusion- Held that under the fellowship programme CCI trains the employees of assessee which as per the programme, would help in the future growth of business of the assessee. We, therefore, see merit in the contention of the Ld.AR that though the amount is paid under the head „donation‟, the actual nature of payment is towards the research programme which would benefit the assessee in long term and the same should be allowed as a deduction under section 37(1). Accordingly in our considered view the payment to CCI towards research program is incurred for the purpose of assessee’s business and therefore should be allowed as a deduction under section 37(1).
Held that the provision of guarantee as an international transaction and direct the assessing officer to charge guarantee commission at the rate of 0.5% following the decision of the Hon’ble jurisdictional High Court.
Held that the fee paid by the assessee towards the brand to Tata and Sons Ltd. is not capital in nature for the reason that the brand is not owned by the assessee. Accordingly there cannot be any royalty that needs to be charged on the brand since assessee is not the owner of the brand and there cannot be any TP adjustment towards the amount that ought to have been received by the assessee towards brand royalty.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals are against the order of the Commissioner of Income-tax (Appeals)-58, Mumbai [in short, „the CIT(A)‟] dated 28/06/2019 for assessment year 2014-15.
2. The grounds raised by the assessee and the revenue with respect to various issues are as given below:-
Assessee
