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2012 (6) TMI 597 - AT - Income TaxTransfer Pricing - adjustment to ALP - assessee, joint-venture company between Mastek Ltd and Deloitte Consulting, formed for establishment and operation of an offshore development centre for provision of both offshore and on site information technology and other related services - various international transactions entered into by the assessee includes reimbursement made to Deloitte, on account of marketing services rendered by way of assignment of three senior managers by Deloitte to undertake full-time marketing only for assessee - Cost incurred on assignment of said managers consisted of their salary and related expenditure, charged by Deloitte on actual basis - TPO held that marketing costs incurred and allocated by Deloitte to assessee did not result in rendering of any service to assessee and, therefore, determined ALP for same, at Nil – assessee contesting the same - Held that:- It is very imperative on the part of the assessee, to establish before the TPO, that the payments made were commensurate to the volume and quality of services and such costs are comparable. No such efforts was made. No ALP was computed by the assessee. In present case, Deloitte is responsible for generation of sales management, delivery of projects, maintaining customer relationship and billing and collection. The assessee has no market risk. In fact, assessee company has no revenue which has been derived as a result of these marketing expenses. Under similar circumstances a uncontrolled comparable company would not incur such expenditure. Hence, the ALP is rightly determined at "nil". On contention of assessee that TPO is not empowered to disallow the expenditure and that the very reference to the TPO by the AO presumes that the amount in question is allowable u/s 37 it is held that Assessing Officer has no discretion in the matter, in view of the binding nature of CBDT instructions dated 20th May 2003, directing for referral of matters to the TPO for determination of ALP where the aggregate value of international transactions exceeds ₹ 5,00,00,000. Further, TPO has not disallowed any expenditure, only the ALP was determined. It was the Assessing Officer who computed the income by adopting the ALP decided by the TPO at "nil". It is also held that 'ALP' has to be determined irrespective of any contractual/legal obligation undertaken by parties. Deduction u/s 10A - dis-allowance in respect of income arising out of the adjustment - Held that:- Since income arising out of the adjustment is not derived by the undertaking from expert. Hence, requirement of section 10A, have not been compiled with resulting in non-entitlement of deductions u/s 10A - Decided in favor of Revenue
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