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THE COMMISSIONER OF INCOME-TAX, LTU, BANGALORE AND THE DEPUTY COMMISSIONER OF INCOME-TAX, LTU, BANGALORE Versus M/s FOSROC CHEMICALS INDIA PVT LTD

2016 (5) TMI 578 - KARNATAKA HIGH COURT

Transfer pricing adjustment - whether the Tribunal is right in law in setting aside the issue of transfer pricing to the file of the TPO for reconsidering the issue on the adoption of the most appropriate method and to arrive at the ALP after making the adjustment after taking the appropriate comparables, as even for computation of ALP by adopting CUP method? - Held that:- Even if we consider that under Section 92 of the Income Tax Act, such an exercise is available read with the decision of Del .....

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Delhi High Court in case of EKL Appliances Ltd (supra).

As such, in our view, no substantial question of law arises for consideration, as sought to be canvassed. - ITA NO.492/2015 & ITA NO.642/2015, C/W ITA NO.470/2013, ITA No.492/2015 & ITA No.642/2015 - Dated:- 22-3-2016 - MR. JAYANT PATEL AND MRS. B.V.NAGARATHNA, JJ. FOR THE APPELLANT : SRI.K.V.ARAVIND, ADVOCATE JUDGMENT The appellants-Revenue have preferred the present appeals by raising the following substantial questions of law .....

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ed finality and when the TPO rightly held that the payment made by the assessee for technical and management cost of ₹ 7,27,57,135/- to the AE was an independent international transaction which had to be analysed by applying CUP method prescribed by Rule 10B (1)(a) of the Act ? bstantial questions of law in ITA No.470/2013 1. Whether on the facts and in the circumstances and in law the Tribunal was correct is setting aside the determination of ALP on the International Transaction Payment o .....

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here was any international transaction between the assessee and the AE and recorded perverse finding? 2. We have heard Mr.K.V.Aravind, learned Counsel appearing for the appellants. 3. It may be recorded that the Tribunal while considering the relevant aspects at paragraphs-9 an d 10 has observed thus: 9. Having heard both the parties and having considered the rival contentions and also the material on record, we find that the basic finding of the TPO is that the assessee has not received any ser .....

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ind that it for the services rendered by the AE as enumerated in clause 6.2 and 6.7 of the licence agreement that the payments are to be made by the ssesseee and those payments shall also include the living expenses, travel expenses etc., The word including used in this clause demonstrates that the payment is something over and above the expenses of travel, living etc., and that the payment for the services exceeding these expenses have to be agreed upon by the parties mutually. As far as the re .....

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ave visited India and might have rendered their services to the assessee. 9.1 Now whether any services have been rendered by the AE to the assessee company is to be examined. The assessee has drawn our attention to pages 61 to 67 of the paper book which consists of the e-mails between the assessee and the personnel of the AE and also reports of the personnel of AE who have visited India which are at pages 61-523. We find that the TPO has brushed aside these documents perfunctorily stating that t .....

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n is for the assessee to decide and the TPO can only examine and compute the quantum of ALP, but he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses and therefore, not gained any commensurate benefit there from. Similar view was expressed by the Bench of the Tribunal at Mumbai in the case of Dresser Rand India (P) Ltd., cited supra. Respectfully following the same, we hold that the TPO has no authority to hold th .....

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s and the commensurate benefit is concerned, we hold that the TPO cannot go into the fact whether the assessee is actually benefited from such expenditure. As held by the Hon ble Gujarat High Court in the case of Veer Gems (cited supra). The TPO is only required to determine the ALP of the International transactions, but cannot examine whether there was any international transaction between the assessee and its AE. This power is vested with the AO only. Having regard to the comparable cases, as .....

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ed expenses by the AE to assessee. Further, it is also to be observed that the revenue authorities have to adopt a uniform and consistent approach in the case of the assessee on the same set of facts for each year. Though, the assessee has been receiving the services from its AE from the year 2003 onwards, the TPO has not made any transfer pricing adjustment till the AY: 2006-07 and even for the subsequent AY: 2008-09 where the assessee has received the services from its AE. Once the TPO has acc .....

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see and the commensurate benefit that has accrued to the assessee. The entire payment made by the assessee towards management services shall be taken as the aggregate payment for all the services rendered by the AE. The TPO is also directed to again reconsider the issue on the adoption of the most appropriate method and shall arrive at the ALP before making the adjustment after taking the appropriate comparables, as even for computation of ALP by adopting CUP method, identifying comparables is e .....

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cord, has noted the finding of fact which reads as under: The documents purportedly are advices given by the AE to the assessee on various issues concerning its business. 5. Thereafter, the Tribunal has found it proper for the matter to be relegated to Transfer Pricing Officer (hereinafter referred to as TPO for brevity) with a direction to recompute the ALP, taking into consideration the allocated expenses by Associated Enterprises to the assessee. Further, the Tribunal has also observed that t .....

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