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2017 (6) TMI 287 - AT - Income TaxTPA - ALP determining nil by applying benefit test - rendering the services to AE - Held that:- TPO has erred in holding the ALP nil by applying benefit test. In the instant case, issue as to rendering the services has already been admitted by the DRP. So, the TPO has erred in determining the ALP at nil by holding that the services were actually not rendered nor such services were needed by the assessee company nor any benefit has been accrued to the assessee company by availing such services from its AE. Determining the ALP of intra group services - Held that:- TPO while determining the ALP of intra group services at nil by using CUP method has not brought on record any comparable. Moreover the transactions are interlinked and the TPO himself aggregated the agency services and marketing support services and benchmarked the operating result of such combined activity, therefore, in these circumstances, we are of the considered view that the TNMM may be used for determining the ALP of intra group services. Accordingly, this issue is restored to the TPO to decide afresh in the light of the findings recorded herein above. Adjustment by clubbing commission income with market support services in allocating the expenses to the agency services in the ratio of sales - Held that:- TPO/DRP/AO have erred in making adjustment by clubbing commission income with market support services in allocating the expenses to the agency services in the ratio of sales. So, following the decision rendered by coordinate Bench of the Tribunal, the ld. TPO is directed to allocate expenses on the basis of gross margin in the agency segment and not in the ratio of sales for the purpose of computing the ALP transaction. No doubt, assessee by making benchmarking analysis of marking support services in the TP study considered 11 comparables with weighted average operating profit margin of 7.32% as against assessee’s margin of 5.00% but the said transfer study has been rejected by the TPO who has rejected 9 comparables out of 11 comparables chosen by the assessee and after introducing 6 new comparable companies computed the average OP/OC at 21.8% and computed the TP adjustment on account of difference in the arm’s length price of the international transactions of agency commission and marketing support services fee at ₹ 1,98,16,836/-, which has been restricted to ₹ 1,64,90,548/- by the ld. DRP by allowing the working capital adjustment to the assessee. Since the basis for allocating the expenses to the agency segment is ordered to be changed, it would be futile to examine the suitability of the comparables considered by the TPO for benchmarking the international transactions as it would change the entire scenario and for that purpose, fresh TP study analysis is required to be done by the TPO. Consequently, we direct the TPO to make fresh TP study analysis after providing an opportunity of being heard to the assessee company to benchmark the international transaction undertaken by the assessee. Adjustment on account of delay in proceed of receipts of AEs beyond 30 days by treating the same to be unsecured loans - Held that:- As from the findings returned by ld. DRP and assessment order passed in this case, it has become apparently clear that ld. DRP has given specific directions to the AO to verify the amount of receivables as well as on the payables due to / from AE, outstanding beyond the period of 30 days only and calculate the interest of net balance of the same. AO without verifying the factual position proceeded to make an addition. So, in these circumstances, we are of the considered view that AO is to recompute the amount after verifying any of receivables in view of the findings returned herein above and after verifying the amount of receivables as well as payable due to / from the AE outstanding beyond a period of 30 days only for the purpose of calculating the interest.
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