TMI Blog2021 (8) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the form of e-mails between parties, reports etc. As to how the evidence filed by the assessee was actually useful in its business has also to be highlighted as the assessee will be the best person to know these facts which are within its knowledge. It is only if such a stand is taken by the assessee can the TPO take the issue forward to arrive at a proper conclusion. In our opinion filing of voluminous correspondence, reports etc., would not be a proper way of discharge of assessee's burden to establish the ALP of expenditure in question. We would therefore direct the assessee to comply with the queries raised by the TPO in his show cause notice which has been set out in his order u/s. 92CA of the Act. We therefore allow the appeal of the assessee for statistical purpose on this issue. The order of the CIT(A) is set aside and the issue is remanded to the TPO/AO for fresh consideration in the light of the directions given above. The TPO/AO will afford opportunity of being heard to the assessee in the set aside proceedings. Disallowance u/s 14A - assessee is engaged in the business of insurance - plea of the assessee that the total income of the assessee has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual costs incurred by INGAP in rendering the services were reimbursed by the assessee and that INGAP did not charge any mark up on such services. These services rendered by INGAP are specialized in nature and provided to all the ING Group companies in the Asia Pacific region on a centralized basis. These centralized services assist the ING Group Companies, including the assessee in their regular operation and administration of the insurance business in India. It was claimed by the assessee that the technical service charges paid by the assessee is commensurate with the benefits accrued to the assessee. Since essentially these are the payments of actual cost incurred, it was claimed that the same are at arm's length from the Indian Regulations perspective. 5. The TPO in a questionnaire dated 24.08.2016 called upon the assessee to furnish copy of the agreement between the assessee and its AE for providing intra group services, break up of services received, need for the above services, proof of receipt of required services, tangible benefits arising to the tax payers as a result of intra group services and cost benefit analysis. The assessee vide reply dated 16.09.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxpayer which I not the case. Related parties are quite likely to give a form that will give an impression that a real service is being rendered by one to another but the necessity to look beyond the wheel is recognized across tax jurisdiction. In the above circumstances the payment of service fee is only an arrangement to change the tax base without any economic substance in the transaction. He further even discussed the relevant OECD guidelines in order to support his finding. The TPO further mentioned that base constitutes a serious risk to tax revenues, tax sovereignty and tax fairness for all While there are many ways in which domestic tax bases can be eroded, a significant source of base erosion is profit shifting. The issue of jurisdiction to tax is closely linked with the one of measurement of profits: once it has been established that a share of an enterprise's profits can be considered to originate from a country and that the country should be allowed to tax it, it is necessary to have rules for the determination of the relevant share of the profits which will be subjected to taxation. Transfer pricing rules perform this function. The internationally accepted princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO DRP disallowed the expenditure on the ground that the ALP was 'Nil' as no real services had been availed by the assessee and the arrangement was not genuine. On further appeal by the Assessee, the Tribunal held as follows: 8. We find that the basic reason of the Transfer Pricing Officer's determination of ALP of the services received under cost contribution arrangement as 'NIL' is his perception that the assessee did not need these services at all, as the assessee had sufficient experts of his own who were competent enough to do this work. For example, the Transfer Pricing Officer had pointed out that the assessee has qualified accounting staff which could have handled the audit work and in any case the assessee has paid audit fees to external firm. Similarly, the Transfer Pricing Officer was of the view that the assessee had management experts on its rolls, and, therefore, global business oversight services were not needed. It is difficult to understand, much less approve, this line of reasoning. It is only elementary that how an assessee conducts his business is entirely his prerogative and it is not for the revenue authorities to decide what is nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi) rendered similar ruling as was rendered in the case of Dresser Rand India (P.) Ltd. (supra). In the case of Cushman Wakefield India (P.) Ltd. (supra), the Hon'ble Delhi High Court observed that whether a third party - in an uncontrolled transaction with the Taxpayer would have charged amounts lower, equal to or greater than the amounts claimed by the AEs, has to perforce be tested under the various methods prescribed under the Indian TP provisions. Further, the Hon'ble High Court opined that concept of base erosion is not a logical inference from the fact that the AEs have only asked for reimbursement of cost. This being a transaction between related parties, whether that cost itself is inflated or not only is a matter to be tested under a comprehensive transfer pricing analysis. The basis for the costs incurred, the activities for which they were incurred, and the benefit accruing to the Taxpayer from those activities must all be proved to determine first, whether, and how much, of such expenditure was for the purpose of benefit of the Taxpayer, and secondly, whether that amount meets ALP criterion. 11. We are of the view in the light of the law laid down as abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, than the ALP of such mark-up will have to be determined. 14. The assessee has in the present case filed material before the TPO to demonstrate the nature of services rendered. In the paper book filed before us the index of the paper book gives a description of the service. We are of the view that the above description alone would not suffice. As we have already seen the TPO had specifically called upon the assessee to give details of the services rendered and how the same were utilized by the assessee and its relevance for the assessee's business. The evidence filed by the assessee in this regard is in the form of e-mails between parties, reports etc. As to how the evidence filed by the assessee was actually useful in its business has also to be highlighted as the assessee will be the best person to know these facts which are within its knowledge. It is only if such a stand is taken by the assessee can the TPO take the issue forward to arrive at a proper conclusion. In our opinion filing of voluminous correspondence, reports etc., would not be a proper way of discharge of assessee's burden to establish the ALP of expenditure in question. We would therefore direct th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to computation of profits and gains of business or profession. Section 44 specifically excludes the provisions of the Act relating to computation of income, inter alia, those contained in Section 28 to 43B . Thus, the exclusion would take within its sweep section 14A which is an exemption for deductions as allowable under the Act, as provided under section 28 to 43B. Further, section 44 is a special provision applicable in the cases of insurance companies and applies, notwithstanding anything to the contrary contained in the provisions of the Income-tax Act relating to the computation of income chargeable under different heads. For computing the profits and gains of the business of insurance company, the AO had to resort to section 44 and the prescribed rules, and could not have applied section 28 to 43B, since the same were excluded from the purview of section 44. This necessarily includes the exception provision enshrined under section 14A of the Act. Therefore, in our view, the AO could not have travelled beyond section 44 in the first schedule of the Act. Besides, the tribunal has also invoked the rule of consistency since the same view of the Tribunal has prevailed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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