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2019 (9) TMI 1381 - AT - Income TaxTP adjustment as regards the reinsurance commission received by the assessee from its AEs - TPO apportioning the total costs of “direct insurance broking segment‟ and “reinsurance segment‟ on a pro-rata basis of the respective incomes received from the said segments instead of taking actual cost - HELD THAT:- In case, the actual bifurcated details of the aforesaid segments viz. (i). reinsurance commission segment; (ii). direct insurance brokerage segment backed with supporting documentary evidence were available with the assessee and was furnished with the TPO, therein there was no justification on his part to have allocated the expenses on a pro rata basis of the respective incomes of the said segments. However, the said claim of the assessee as regards allocation of the expenses on actual basis in respect of the aforesaid segments cannot be accepted on the very face of it and would require necessary verification. Accordingly, we restore the issue to the file of the TPO who shall after making necessary verification as regards the authenticity of the allocation of expenses by the assesse on actual basis in the aforesaid segments shall redetermine the operating cost of the reinsurance segment. The Ground of appeal No. 2 & 6 are allowed for statistical purposes in terms of our aforesaid observations. International transactions of the assessee forming part of the reinsurance segment - HELD THAT:- Not being able to persuade ourselves to subscribe to the order of the DRP which had upheld the transfer pricing analysis carried out by the TPO in respect of the non-AE transactions, therefore, set aside his order and restore the matter to the file of the TPO with a direction to carry out the transfer pricing analysis only in respect of reinsurance commission received by the assessee from its AEs during the year under consideration - substantial force in the claim of the assessee that the DRP had erred in giving direction to the TPO to compare the ratio of the operating profit to operating cost of the reinsurance commission segment of the assessee with the PLI of 27.96% of the 5 comparables on entity level. As the reinsurance commission segment of the assessee is to be benchmarked, therefore, the TPO ought to have carried out a comparability analysis on the basis of the PLI of the reinsurance commission segment of the said comparables. Accordingly, we further direct the TPO to confine the TP analysis in the course of the set aside proceedings only on the basis of the uncontrolled transactions of receipt of reinsurance commission by the aforesaid 5 comparables and not on the basis of their PLI worked out at an entity level. Grounds of appeal No. 1, 3, 4 & 5 are allowed. ALP of the “common corporate costs" - TPO had taken the ALP of the aforesaid common corporate costs viz. “managerial services;‟ at nil, for two fold reasons, viz. (i). that, the assessee had not incurred any expenditure in respect of “managerial services‟; and (ii). that, no services in lieu of incurring of the impugned costs had been received by the assessee - HELD THAT:- We are afraid that as observed by us hereinabove, the very basis for taking the ALP of the aforesaid “common corporate costs‟ viz. “managerial services‟ at nil by the TPO falls beyond the scope and gamut of his limited jurisdiction. We thus not being persuaded to accept the upholding of the ALP of the “common corporate costs‟ viz. “managerial services‟ at nil by the DRP, set aside its order. Accordingly, the A.O is directed to take the ALP of the aforesaid “common corporate costs‟ viz. “managerial services‟ - Ground of appeal No. 8 is allowed. Common corporate costs viz. I.T costs charged by the assessee in its accounts - HELD THAT:- Admittedly, the assessee had placed on record substantial documentary evidence with the TPO in order to substantiate its aforesaid claim of expense which however was not looked into by the TPO. Be that as it may, in our considered view, the very basis for taking the ALP of the aforesaid “common corporate costs‟ viz. “I.T costs‟ at nil by the TPO falls beyond the realm of his limited jurisdiction. In fact, we find that the TPO by embarking on the aforesaid exercise had clearly exceeded his jurisdiction and had tried to assume the jurisdiction as that of an A.O. We thus not being persuaded to accept the taking of the ALP of the “common corporate costs‟ viz. “I.T costs‟ at nil by the DRP, set aside its order. Accordingly, the A.O is directed to take the ALP of the aforesaid “common corporate costs‟ viz. “managerial services‟.Ground of appeal No. 9 is allowed.
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