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2023 (9) TMI 737 - AT - Income TaxTP Adjustment - addition of 15% Mark-up on reimbursement of expenses received by the assessee/Foreign Company for expenses relating to registration of Patents and Trademark for the Indian Subsidiary - HELD THAT:- According to us, the Adhoc mark-up directed by Ld. DRP cannot be accepted since the Ld. DRP did not follow any method prescribed u/s 92C for determining the ALP of International Transaction between two Associated Enterprises u/s 92B of the Act. And it is trite that the ALP has to be determined as per section 92C of the Act. And further for any comparability analysis, the Ld. DRP ought to have followed the mandate u/r 10B(1)(a) of the Rules, i.e. one of the method prescribed u/s 92C of the Act needs to be used while determining the ALP as held in the case of Kodak India Pvt. Ltd 2013 (11) TMI 667 - ITAT MUMBAI]. Therefore, the action of Ld. DRP directing mark-up of 15% without adhering to the methods prescribed u/s 92C of the Act, cannot be countenanced since it would breach the ‘Rule of law’ and makes the order arbitrary. Therefore, this ground of appeal of the assessee is allowed and the addition made by AO pursuant to such a direction of Ld. DRP is directed to be deleted. Addition as ‘Fees for Technical Services’ ignoring the assessee’s contention that it was purely reimbursement received for Construction and Management Expenses - Documents submitted before us, we note that other than the expenses of Euro 5,900/- raised by cross border consultancy which has given the nature of expenses as “being advance towards statutory expenses to be incurred for incorporation of subsidiary company of assessee dated 21.06.2013’ a perusal of the other invoices, it is not discernable as to whether the expenses pertains to the subsidiary company or not. And without as certaining the nature of the expenses, it is not possible to determine whether the claim of assessee that it is only reimbursement is possible. Since the Ld. AR pleaded that provided an opportunity is given to the assessee, it would be able to bring in evidence to show that the expenses have been made for the purpose of setting up of the business of the subsidiary company. Therefore, we set aside this issue back to the file of the AO for deciding this issue afresh after giving an opportunity to the assessee. This issue is allowed for statistical purposes.
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