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2018 (5) TMI 1972 - AT - Income TaxTP Adjustment - controlled transaction - ALP of intra group services received by one of the associated enterprises - TP approach relating to payment of management fees - appropriate/logical allocation of cost to ATK affiliates for management support and cost allocated to ATK India - HELD THAT:- As held by various courts that it is not for the revenue authorities to dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur. The question whether decision was commercially sound or not is not relevant. The Hon'ble High Court in the judgment cited as EKL Appliances [2012 (4) TMI 346 - DELHI HIGH COURT] has held that the assessee was not required to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in the subsequent years. In the case of Cotton Naturals India [2015 (3) TMI 1031 - DELHI HIGH COURT] of its order has held that “Chapter X and Transfer Pricing rules do not permit the Revenue authorities to step into the shoes of the assessee and decide whether or not a transaction should have been entered. It is for the assessee to take commercial decisions and decide how to conduct and carry on its business.” It is incorrect to say that the assessee has not provided appropriate/logical allocation of cost to ATK affiliates for management support and cost allocated to ATK India. Allegation relating to the payment for duplicate services is concerned, it appears that lower authorities have confused ATKBO with another group entity ATK India Pvt. Ltd which is a separate entity whose financial/TP study are placed on our record for the year under consideration. Detailed cost allocation sheets showing different personnel involved for each service has been placed on record separately. We find that the revenue authorities have simply rubbished the email evidences brought on record without examining and pointing out defects in the evidences. It is not proper for the lower authorities to disregard such direct evidences. Payment relating to management services provided by ATK Australia is concerned, we find that the same has been dismissed by lower authorities on flimsy grounds. Allocation in respect of services provided by Shri John Yoshimura Regional head of offices is on the basis of time spent by him in relation to ATKBO. In our considered opinion, this allocation is logical and sound on the facts of the case. There are email evidences wherein it has been mentioned that Shri John Yoshimura was responsible for advising on various performances/review of Indian partners. Considering the cost allocation chart exhibited elsewhere supported by evidences placed as exhibits in the paper book, we do not find any merit in the transfer pricing adjustments made by DRP/TP/Assessing Officer on this count and the same is directed to be deleted. Adjustment made on the interest received from 8.46% to 17.26% which was reduced by the DRP to 13.38% - HELD THAT:- This relates to the interest received by the assessee from ATK Finance Ltd on which the assessee received interest @ 8.46%. The assessee has bench marked receipt of interest using internal CUP by pointing out that the loan received by ATK Group from unrelated party i.e. the bank. This was dismissed by DRP which was of the opinion that the lender has negotiated rate of interest to be charged not on credit rate of ATK Finance alone but conjointly with parent company ATK UK. DRP further observed that the credit rating of ATK Finance cannot be sole guiding factor. DRP was of the view that the interest rate equal to prime lending rate of RBI during the year under consideration should be applied and accordingly direct the TPO. We find that the assessee has earned interest on fixed deposits @ 7.56%. In our considered opinion, since the assessee has received interest from its AE in France, applying prime lending rate of RBI is not proper In any case, since the assessee is receiving interest on FD @ 7.56%, interest received from AE @ 8.46% can be considered at ALP. Therefore, no TP adjustment is called for. We direct accordingly.
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