The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has recently while providing relief to Sabre Travel Network (India) deleted additions made on account of foreign exchange loss incurred from marketing services.
The assessee Sabre Travel Network (India) Pvt. Ltd. is a wholly owned subsidiary of Sabre Asia Pacific Pte Ltd. (SAP). SAP provides a Computerised Reservation System (CRS) that facilitates the travel agents to provide Travel information, hotel and cab booking facilities and facilitates to make air bookings. The assessee promotes the CRS offered by SAP in India. SAP remains the owner of CRS.
In order to promote the CRS offered by SAP, the assessee undertakes marketing and promotion activities. It provides support to the subscribers of CRS like training to users, computer hardware support, third party communication lines, help desks support, etc.
During the period relevant to the assessment year under appeal, the assessee inter-alia entered into international transactions with its Associated Enterprise (AE) with respect to provision for marketing services.
The Transfer Pricing Officer (TPO) rejected all the comparables selected by the assessee. The TPO further made adjustment of Rs.2 crores in respect of marketing service fee, rejecting assessee’s entity level TNMM approach.
The assessee filed objections before the Dispute Resolution Panel (DRP) assailing the adjustments made by the TPO. DRP upheld the comparables selected by the TPO. DRP also rejected marketing service fees and foreign exchange losses.
The assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method to benchmark the transactions. The assessee selected six comparables to benchmark the transaction.
Further assessee has assailed adjustment of Rs.2 crore. The TPO had made adjustment of Rs.2 crores on the premise that the assessee has recovered less marketing service fee from its AE. Thus, the AO made an adjustment of Rs.2 crores to make the short fall.
While considering the assesses own case the tribunal observed that the Assessing Officer who while framing the draft assessment order has made a separate addition of Rs.2 crore on the ground that the assessee should have received the amount of Rs.2 crore from the AE as against the total incentives paid to travel agent.
Therefore nothing has been brought on record by the Departmental Authorities to demonstrate that the assessee has actually received the amount of 2 crore from the AE The Department has also not disputed or doubted the payment of incentives of Rs.56,13,02,874 to the travel agents.
Thus, after considering the above facts, the two member Bench of the ITAT Vikas Awasthy, (Judicial Member) and Gagan Goyal, (Accountant Member) allowed the appeal filed by the assessee and observed that the same issue was already closed by the tribunal in assessee own case in the assessment year 2009-10.
Nitesh Joshi & Ruben Menezes ,who appeared for the assessee and Vinod Tanwan who appeared for the revenue.
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