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2018 (3) TMI 1989 - AT - Income TaxTP Adjustment - determination of the arm’s length price (ALP) of the international transaction of ‘Payment of application cost’ at nil - HELD THAT:- In view of the fact that the payment of application cost is a separate international transaction unrelated with royalty, the next question is the determination of its ALP. The TPO as well as the DRP have taken Nil ALP of the international transaction of payment of `Application cost’ under the CUP method for the reason adduced in their respective orders, which has been found above to be not sustainable. In such a situation, a separate benchmarking of this international transaction is required. However, we find that no data for determining the ALP of payment of application cost is available, nor has it been discussed by the TPO - we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this score is set aside and the matter is remitted to the file of AO/TPO for determining the ALP of the international transaction of payment of `Application cost' afresh as per law after allowing a reasonable opportunity of being heard to the assessee. Discussion made infra holds good here as well, which justifies restoration of the issue. Addition for receipt of services - TPO proposed the transfer pricing adjustment equal to the stated value of three international transaction at Rs.1.22 crore and odd by holding that no benefit was received by the assessee as a result of availing the services or these amounted to duplication of services and hence no payment on this score was warranted - HELD THAT:- AO in his draft order has taken the ALP of the international transaction at Nil on the basis of recommendation of the TPO without carrying out any independent investigation in terms of the deductibility or otherwise of such payment in terms of section 37(1) of the Act. This addition has been made by the AO in his final assessment order giving effect to the direction given by the DRP and not by invoking section 37(1) of the Act. As per the ratio decidendi of Cushman & Wakefield India (P.) Ltd. [2014 (5) TMI 897 - DELHI HIGH COURT] TPO was required to simply determine the ALP of the international transaction, unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1) - As the TPO in the instant case initially determined Nil ALP by holding that no benefit accrued to the assessee etc. and the AO made the addition without examining the applicability of section 37(1) of the Act, we find the actions of the AO/TPO running in contradiction to the ratio laid down in Cushman & Wakefield (supra). Following this decision, we remit the matter to the file of AO/TPO for deciding it in conformity with the law laid down by the Hon'ble jurisdictional High Court in this case.
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