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2015 (5) TMI 344 - AT - Income TaxTransfer pricing adjustment - determination of arm’s length price[ALP] in the case of cost contribution agreement - whether intra group services are duplication of services for which the AE has already paid in addition to what is paid by way of allocation is also to be looked into? - Held that:- As decided in Dresser Rand India Pvt.Ltd. Vs. ACIT [2011 (9) TMI 261 - ITAT MUMBAI ]Even cost contribution arrangement should be consistent with arm’s length principle, which, in plain words, requires that assessee’s share of overall contribution to the costs is consistent with benefits expected to be received, as an independent enterprise would have assigned to the contribution in hypothetically similar situation. 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 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. The Assessee has also given the breakup of costs incurred by the parent company and the basis of apportionment. The same has not been considered at all by the TPO. The findings of the DRP with regard to the nature of services as given in a chart in the earlier part of this order are general without reference to the material filed by the Assessee. The findings are purely on surmises and cannot be sustained in the absence of any material on the basis of which such conclusions were arrived at being set out in the DRP’s directions. The Assessee in the present case has chosen TNMM at the entity level and has not provided any other method for determination of ALP in respect of the transaction of “Payment of Technical and Management cost” individually. This will take us to the question as to whether the TNMM at the entity level will be the MAM or should the ALP determined using CUP. This will again depend on the question whether all the activities manufacture and trading etc., carried on by the Assessee is closely linked so that benchmarking its overall results with comparable company using TNMM would be appropriate. - Decided in favour of assessee for statistical purpose
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