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2016 (5) TMI 1584 - AT - Income TaxTP Adjustment - payment of the group charges to its AE - whether the issue as to the payment on account of other group charges made by the assessee to its AE for services rendered was to be determined by the TPO/DRP or it was to be determined by the AO u/s 37 (1) - HELD THAT:- TPO goes to prove that the TPO has decided the issue as to making payment of the group charges to its AE for rendering services, such as, OTO and support and application work in respect of various projects for which tenders were submitted. TPO returned the categoric finding that assessee has failed to demonstrate “as to whether the services were claimed to have been rendered by its AE were actually received” and as such failed “the benefit test” applied by the TPO, which amounts to assuming the powers of AO. Identical issue has come up before the Hon’ble jurisdictional High Court in judgment cited as Commissioner of Income-tax-I vs. Cushman and Wakefield (India) (P.) Ltd. [2014 (5) TMI 897 - DELHI HIGH COURT] TPO has exceeded his power by determining that the assessee has not received services from its AE, thus failed the benefit test and further held that the assessee had not furnished any evidence to any visit of the employee of its AE in connection with the services rendered entailing payment of group charges by the assessee. We are of the considered view that since the payment made by the assessee to its AE for services rendered was basically an expenditure incurred for the purposes of business, the same are to be determined u/s 37(1) of the Act, if allowable or not and this issue is in the exclusive domain of the AO to be determined. Adverting to the assessment order passed by the AO which is in consonance with the direction issued by TPO/DRP vide which group charges have been treated as adjustment in the ALP - AO has neither examined nor returned any findings whatsoever if the payment made to the AE for availing services from its AE is an expenditure incurred for the purposes of business u/s 37 (1) rather passed the assessment order in mechanical manner in consonance with the directions issued by the TPO/DRP. Moreover, when the TPO has not disputed that the services were availed by the assessee from its AE, the question of determining the ALP of group charges to the tune of Rs.1,89,53,444/- does not arise because it was to be done by the AO only. We are of the considered view that without entering into merits of the case, the matter is required to be restored to the AO to determine the issue as to the payment of group charges by the assessee to its AE afresh after providing an opportunity of being heard to the assessee in the light of the observations returned hereinbefore. Consequently, the present appeal filed by the assessee is hereby allowed for statistical purposes.
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