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2018 (9) TMI 1851 - AT - Income TaxTP adjustments - whether License Fees and Management Fees transactions are a separate class of transactions and are not closely linked with the transaction relating to manufacture and export of drug formulations to Adcock Ingram Health Care (Pty) Ltd. South Africa ('AIHPL') - HELD THAT:- We find no merit in the analysis carried out by the TPO by benchmarking the licence fee. In fact assessee by aggregation of transactions in the TP study had benchmarked the arm's length price of all the transactions by comparing operating profit/operating cost at the entity level was 25.49% as against the non-AE it was 5.26%. However, we observe that the comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the most appropriate method has not been examined by either of the authorities below who have merely concentrated merely on the issue of aggregation/segregation of transactions. CIT (A) has mechanically accepted the results of the assessee to be at arm's length by accepting the operating profit/operating cost of the assessee as 25.49% as against non-AE at 5.26%. In that view of the matter, we deem it appropriate to remand the issue to the file of the CIT (A) for examining the correctness of the ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. CIT (A) is directed to take the remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter. ALP adjustments in respect of the payment of fees for technical services - arm's length price of these services was NIL under the CUP method, the TPO had to necessarily demonstrate that the same services, whatever be its intrinsic worth, were available for NIL consideration in an uncontrolled situation; that is not, and that cannot be, the case. It is also not the case of the authorities below that the arm's length price of these services, under any other legally permissible method is, NIL There is thus no legally sustainable foundation for the impugned ALP adjustment. We observe that the comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the most appropriate method has not been examined by either of the authorities below who have merely concentrated merely on the issue of aggregation/segregation of transactions. CIT (A) has mechanically accepted the results of the assessee to be at arm's length by accepting the operating profit / operating cost of the assessee as 25.49% as against non-AE at 5.26%. In that view of the matter, we deem it appropriate to remand the issue to the file of the CIT (A) for examining the correctness of the ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. CIT (A) is directed to take the remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter ALP at the entity level by applying TNMM as the MAM by aggregating the transactions - HELD THAT:- We deem it appropriate to set aside the order of the learned CIT (Appeals) / TPO in the matter and remand this issue to the file of the CIT (Appeals) for examining the correctness of the ALP at the entity level by applying TNMM as the MAM by aggregating the transactions. CIT (Appeals) is directed to obtain a remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter and to file details / submissions required which shall be considered before deciding this issue. Therefore, the ground raised by the assessee at S.No.2 is allowed for statistical purposes.
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