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.
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 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.
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 filed an appeal before the tribunal challenging the additions made on account of foreign exchange loss incurred from marketing services .
Nitesh Joshi, counsel for the assessee submitted that assessee is consistently following the same accounting principles and tax treatment for foreign exchange loss/gain over the years and the same has been accepted by the tax authorities in the past. Further assessee own case in the assessment year 2013-14 tribunal deleted the disallowance of foreign exchange loss.
Vinod Tanwani, counsel for revenue supported the decision of the lower authorities.
After considering the contentions of the both parties the two member bench of Vikas Awasthy, (Judicial Member) and Gagan Goyal (Accountant Member) allowed the appeal filed by the assessee and observed that the assessee had been claiming foreign exchange loss in the past and the AO has consistently disallowed the same. The Tribunal in by the assessee has allowed foreign exchange loss in the past.
In Assessment Year 2013-14, the Co-ordinate Bench had followed the order of Tribunal in assessee’s own case allowing deduction towards foreign exchange loss.
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