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TMI Blog2018 (4) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... rm's length price in relation to management service fee. The assessee has taken one more ground with regard to reversal of service tax and delayed payment of R&D cess. Moreover, the assessee is also challenging the levy of interest under Section 234A and 234B of the Income-tax Act, 1961 (in short 'the Act'). 3. Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that the DRP made downward adjustment in respect of international transaction relating to management service fee holding that the arm's length price of the management service fee paid to Associated Enterprise to be NIL. According to the Ld. representative, when the services rendered by the Associated Enterprise were supported by invoices, the Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, the DRP cannot make any adjustment in the arm's length price determined by the assessee. 5. Sh. B. Ramakrishnan, the Ld. representative for the assessee, further submitted that an additional ground was also raised by the assessee before this Tribunal. Referring to the additional ground, the Ld. representative submitted that the benefit test is not a pre-condition to hold that the transaction is at arm's length price. According to the Ld. representative, the TPO and the DRP exceeded their jurisdiction to determine the commercial expediency of the assessee while availing the services from Associated Enterprise. According to the Ld. representative, it is for the assessee to decide which service has to be availed from which entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most appropriate method, in the following manner, namely :- (a) comparable uncontrolled price method, by which,- (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified ; (ii) such price is adjusted to account for differences, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions or between the enterprises entering into such transactions, which could materially affect the price in the open market ; (iii) the adjusted price arrived at under sub-clause (ii) is taken to be an arm's length price in respect of the property transferred or services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... direct and indirect costs of production incurred by the enterprise in respect of property transferred or services provided to an associated enterprise, are determined ; (ii) the amount of a normal gross profit mark-up to such costs (computed according to the same accounting norms) arising from the transfer or provision of the same or similar property or services by the enterprise, or by an unrelated enterprise, in a comparable uncontrolled transaction, or a number of such transactions, is determined ; (iii) the normal gross profit mark-up referred to in sub-clause (ii) is adjusted to take into account the functional and other differences, if any, between the international transaction or the specified domestic transaction and the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under sub-clause (ii) ; (iv) the profit thus apportioned to the assessee is taken into account to arrive at an arm's length price in relation to the international transaction : Provided that the combined net profit referred to in sub-clause (i) may, in the first instance, be partially allocated to each enterprise so as to provide it with a basic return appropriate for the type of international transaction or specified domestic transaction in which it is engaged, with reference to market returns achieved for similar types of transactions by independent enterprises, and thereafter, the residual net profit remaining after such allocation may be split amongst the enterprises in proportion to their relative contribution in the manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction. (f) Any other method as provided in rule 10AB 8. From the above, it is obvious that for selecting a Comparable Uncontrolled Price method, the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transaction is to be identified. In this case, admittedly, no such companies were identified by the TPO or DRP. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the authorities below. Moreover, the additional ground also needs to be reconsidered by the authorities below. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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