{"id":19684,"date":"2020-11-18T15:53:02","date_gmt":"2020-11-18T10:23:02","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=19684"},"modified":"2020-11-18T15:53:03","modified_gmt":"2020-11-18T10:23:03","slug":"itat-levies-penalty-for-failure-to-maintain-transfer-pricing-document","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/itat-levies-penalty-for-failure-to-maintain-transfer-pricing-document\/","title":{"rendered":"ITAT levies Penalty for Failure to Maintain Transfer Pricing Document"},"content":{"rendered":"\n

The Income Tax appellate tribunal of New Delhi bench levied the penalty for the violation of laws regarding the maintenance of Transfer Pricing Document u\/s 271AA. The Assessee named Convergys Customer Management Group Inc. is an overseas company operating under the laws of the USA. The assessee has a full-fledged unit in India operating as a subsidiary named as Convergys India Services Pvt. Ltd. This write up talks about the failure to maintain Transfer Pricing Document and the penalty provision related to it.<\/p>\n\n\n\n

What are the Quantum of Penalty?<\/h2>\n\n\n\n
\n Section<\/em><\/strong>\n <\/td>\n Nature of default<\/em><\/strong>\n <\/td>\n Penalty Threshold <\/em><\/strong>\n <\/td>\n Authority Involved <\/em><\/strong>\n <\/td><\/tr>
\n 271A*\n <\/td>\n Failure to keep and maintain retain book and documents u\/s\n 44AA\n <\/td>\n Rs 25,000\n <\/td>\n AO\/CIT(A)\n <\/td><\/tr>
\n 271AA (1)*\n <\/td>\n Failure to keep and maintain information u\/s 92D, failure to\n report transactions\n <\/td>\n Two percent of value of each cross border or domestic\n transaction\n <\/td>\n AO\/CIT(A)\n <\/td><\/tr>
\n 271AA (2)*\n <\/td>\n Failure to render info and documents as per Section 92(4)\n <\/td>\n Rs 5,00,000\n <\/td>\n Prescribed IT Company\n <\/td><\/tr><\/tbody><\/table>\n\n\n\n

Read our article<\/b>:Income Tax Return Filing without Form 16<\/a><\/mark><\/p>\n\n\n\n

Facts of the Case<\/h3>\n\n\n\n

The subsidiary company facilitates a wide range of IT related services including call center\/back-office support to the parent company. The FTS income and interest were reaped by the parent company from CIS and linked companies of the assessee operating in the Indian Territory<\/strong><\/em>[1]<\/strong><\/em><\/a><\/sup>. <\/p>\n\n\n\n

The assessing office claimed that the\ncompany posses the fixed place PE, dependent PE, and Service PE in the view of\nArticle 5 of Indo-USA DTAA. Furthermore, the arrangement of profit under the\nsame article will be attributable to the unit working in India. <\/p>\n\n\n\n

The assessing officer refused to approve People Soft License maintenance charges that cost around Rs 68, 17,878\/. Moreover, this particular amount is taxable @ 15% on the gross basis as Royalty u\/s 9(1) (VI) of the Act & Article 12 of the DTAA. <\/p>\n\n\n\n

In the context of IPLC\/link charging\ncosting around Rs 53,282,192, the officer claimed that the amount is taxable @15\npercent in the form of \u201cEquipment Royalty\u201d as per Section 9(1) (VI) of the Act\nand Article 12(3) (b) of the DTAA.<\/p>\n\n\n\n

Assessee Approached to CIT (A)<\/h3>\n\n\n\n

The assessee chose to appeal before the\nCommissioner of Income Tax (also referred to as CIT(A). CIT(A) refused to\naccept the same part of the appeal. The assessee have failed to comply with the\nprovision under Section 92D that talks about the failure to maintain Transfer\nPricing Document. According to the department, the Commissioner of Income Tax\nsimply eradicates the penalty without any reasonable ground. <\/p>\n\n\n\n

Further, it was claimed that the assessee\nhas failed to maintain the Transfer Pricing report as per the bylaws. However,\nits subsidiary managed to remain in compliance in this context. In the view of\nthis event, the assessee pretended to show conformity with compliances, which\nin fact is a violation in the eye of the law. Henceforth, the department\nrefused to accept the CIT (A) order in the view of the above fact. <\/p>\n\n\n\n

Furthermore, the assessee claimed that in\nthe absence of the cross-border transaction, the requirement for the Transfer\nPricing Document doesn\u2019t make any sense which otherwise is a mandatory\nrequirement as per section 92D IT Act. <\/p>\n\n\n\n

Conclusion<\/h2>\n\n\n\n

The member of the bench claimed that is compulsory to maintain an independent accountant\u2019s report in the context of all cross-border transactions held between associated companies. The tribunal further cited that the report is meant to be submitted on or before the due date of the ITR filing<\/strong><\/a>. <\/p>\n\n\n\n

The entities cannot bypass the law (related to Transfer Pricing Documents) by merely relying on the document of linked companies. This is against the code of conduct and it cannot be viewed as complied action. Henceforth, the tribunal mentioned that the assessing officer was doing the right job and their response is legitimate by all means. Failure to maintain Transfer Pricing Document will lures significant penalties, thus; the company needs to take care of all its transaction and record it appropriately. <\/p>\n\n\n\n

Read our article<\/b>:10 Reasons Why Filing Income Tax Return Is Vital For You<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"

The Income Tax appellate tribunal of New Delhi bench levied the penalty for the violation of laws regarding the maintenance of Transfer Pricing Document u\/s 271AA. The Assessee named Convergys Customer Management Group Inc. is an overseas company operating under the laws of the USA. The assessee has a full-fledged unit in India operating as […]<\/p>\n","protected":false},"author":22,"featured_media":19732,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[153,152],"tags":[1222],"acf":{"service_id":"50"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":3910,"readingTime":3,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19684"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=19684"}],"version-history":[{"count":8,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19684\/revisions"}],"predecessor-version":[{"id":19734,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/19684\/revisions\/19734"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/19732"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=19684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=19684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=19684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}