TMI Blog2014 (7) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... e equipments and dredgers from more than one associate enterprise, therefore, the aggregation of the transaction is permitted only in respect of those which are between the Assessee and one enterprise separately - AO/TPO is directed to determine the ALP by aggregating the various transactions between the Assessee and each associate enterprise separately and not by clubbing the transactions with all associate enterprises. Lease rentals paid beyond period of project disallowed – Held that:- The Assessee was required to pay lease rentals even after the project till the vessel was redelivered at the determined port - the Assessee was to pay lease rentals for the period of time spent on demobilization and transportation of dredger and vessel to the port of redelivery - neither assessee has produced any record to show that the payment of rental for the period which was spent for re-delivery of the dredger/equipment is a standard practice in this field of business not the TPO has brought on record any material or transaction entered between the independent parties to show that the rent paid by the Assessee over and above the project period is in excess of the comparable case - both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and thereby disallowing lease rentals computed in excess of 267 days for the vessels D1 509, D1 508, BKM 100, Paru, Oostende XII and Saskia. The Appellant submits that all the above grounds are independent of and without prejudice to one another. 2. At the time of hearing the ld. AR of the assessee has stated that the assessee does not press ground No.1(a) and 1(b) and the same may be dismissed as not pressed. The ld. DR had no objection if ground No.1(a) and 1(b) are dismissed as not pressed. Accordingly ground No.1(a) and 1(b) are dismissed being not pressed. 3. Ground No.2 is regarding TP adjustment of lease rentals by rejecting the contention of the assessee for clubbing of the transactions to compare with the Arms-Length-Price (ALP). The assessee is a Limited Partnership firm and incorporated in Netherland to undertake international dredging contract. The assessee entered into a contract with Indian Oil Corporation (IOC) on 12/10/2000 for undertaking dredging and reclamation work for IOC in Paradeep Refinery Project in Orissa (India). Assessee (M/s. Boskalis International-Dredging International ) and Dredging International NV, Belgium, as well as M/s. Boskalis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of personnel services 4,121,226 Provision of personnel services 54,637 3. DIPL Provision of personnel services 3,446,968 Provision of personnel services 4,350,690 4. To bench mark the international transaction of leasing of dredger and other equipments the assessee used Comparable Uncontrolled Price (CUP) as most appropriate method whereas for personal service and support services the assessee used Transaction Net Margin Method (TNMM) and for lease of survey equipments Cost Plus method was used as most appropriate method. The assessee computed the ALP of international transaction as the transactional value recorded in the books of account. 5. Before the Transfer Pricing Officer (TPO) the assessee filed a TP study report and computed the ALP study of dredgers and equipments by using the VG Bouw Valuation Certificates as the same are used in the dredging industry for setting/negotiating the lease rentals. The VG Bouw valuation was accepted by the TPO as a suitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rules a number of transactions can be aggregated and construed as single transaction for the purpose of determining the ALP if such transactions are closely linked. The ld. AR has also relied upon the following decisions :- 1. Toyota Kirloskar Motors (P.) Ltd. (2012) 28 taxman.com 293(Bang.) 2. Taj Sats Air Catering Ltd. v. DCIT in ITA No.8500/Mum/2010 dated 20/01/2012 3. Henkel Adhesives Technologies India Private Limited v. DCIT in ITA No.1647/PN/2011 dated 18/3/2014. 4. M/s. Intimate Fashion (India) Pvt. Ltd. v. ACIT in ITA No. 2116/Mds/2010 and 2108/Mds/2011 dated 28/06/2012 5. M/s. Mainetti India Pvt. Ltd. v. ACIT in ITA No.1789/Mds/2011 dated 16/3/2012 7. Thus the ld. AR has submitted that if these transactions are aggregated then the aggregated rent paid by the assessee is less than the bench mark accepted by the TPO and no adjustment is required. The ld. AR has also referred to the guiding note of Institute of Chartered Accountants of India (ICAI) . 8. On the other hand the ld. DR has submitted that the V.G. - Bow Benchmark is a scientific bench mark and assessee cannot be permitted to further state that since payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of evaluation it is to be considered that one transaction is follow-on of the earlier transaction and then the subsequent transaction is carried out and dependent wholly or substantially on the earlier transaction. It can be vice-versa when the earlier transaction has been entered into between parties by keeping in mind that a continuous transaction of similar nature will be entered into between the parties thereafter. Therefore, when the transactions are influenced by each other and particularly in determining the price and profit involved in the transactions then those transactions can safely be regarded as closely linked transactions. The OECD guidelines has referred a portfolio approach as business strategy consisting of tax payers bundling certain transaction for the purpose of earning an appropriate return across portfolio rather than single product. For instance some products may be marketed by the tax payer with a low profit or even at loss because they create a demand for other products or related services of the same tax payer that are then sold or provide high profit. Some of the examples given in the OECD guidelines for transfer pricing are the equipment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons between the Assessee and each associate enterprise separately and not by clubbing the transactions with all associate enterprises. 13. Ground No.3 regarding the adjustment by disallowing the lease rentals paid beyond the period of project. The Assessee has paid lease rentals for the period ranging from 214 days to 306 days. The TPO noted that the lease rentals by the Assessee were paid even after the period for which the vessels/dredger are used in the project. The TPO was of the view that in respect of all vessels the lease rentals allowable will be for 252 days and therefore, the rentals paid by the Assessee for more than 252 days were disallowed by the TPO. The working of disallowance of lease rentals is given at page-9 of the TPO order in para 5.1.4 as under :- Name of Vessel No. of Days for which lease rental paid Total Amount paid in INR Total amount corresponding to 252 days Difference Taurus 261 496,478,667 479,358,712 17,119,954 DI509 298 89,92 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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