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2016 (5) TMI 862 - AT - Income TaxRejection of CUP as most appropriate method for determining ALP - Held that:- We find that while adjudicating the appeals for the assessment years 2002-03 and 2003 -04, the Tribunal had rejected the cup method adopted by the TPO, that he had not proposed adjustment in the subsequent years i. e. assessment years 2010-11 to 2012-13. - Decided against revenue Adjustment on account of allocation of e-connectivity cost - TPA - Held that:- The assessee had entered into agreement with its AE for econnectivity, dt. 1. 1. 2004, to received SAP services, e-connectivity services and people soft services, that in the TP study the cost incurred by the AE in providing services by the AE. s to the assessee on the basis of number of users, that the Operating margin of the assessee from all other transaction was higher than of the comparables, that the assessee claimed that transaction was at Arm’s Length because of the cost allocation methodology adopted by AE, that the TPO made an adjustment of ₹ 4. 73 crores by determining the ALP as Nil, that he held that the assessee did not furnish copy of the agreement or any proof of requesting for such services, that he further held that assessee did not demonstrate as to how the cost benefited it, that it did not provide any proof of any exact number of users and their allocation, that the DRP called for a remand report from the TPO after admitting additional evidence, that DRP directed the TPO/AO to delete the proposed adjustment. We are of the opinion that TPO is not empowered to determine the ALP of an IT at NIL, that in the case under consideration he had made adjustment without adopting any of the prescribed methods. It is a fact that the assessee had satisfied all the necessary tests for the purpose of availing services from its AE. In these circumstances, we hold that the approach of the assessee in benchmarking the transaction under the head availing e-connectivity services under combined transaction approach was at arm’s length. Considering the above, we confirm the order of the DRP and decide ground against the revenue. Treatment to expenditure incurred for e-connectivity - Revenue or capital expenditure - Held that:- The expenditure incurred by the assessee on econnectivity is incurred for day-to-day running of its business without creating any asset and therefore same is allowable as revenue expenditure. - Decided in favour of assessee
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