TMI Blog2016 (7) TMI 1497X X X X Extracts X X X X X X X X Extracts X X X X ..... isted. Though the price accepted by the department under said agreement are not applicable for the year under consideration however, on principle the management fees is accepted along with the other service and the ALP for ITES as well as other services including the payment of management fees has to be determined on composite transaction basis. The TPO has not examined the matter by considering the management fees as part of the operating cost for the purpose of testing the ITES as per provisions of section 92 of the Act. Accordingly, we set aside the matter to the record of the TPO/A.O for reconsideration of the same afresh in terms of the above observations. - Appeal of the assessee is allowed for statistical purposes. - I.T.(T.P)A. No.659/Bang/2012 - - - Dated:- 25-7-2016 - SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER For The Appellant : Shri T. Suryanarayana, Advocate. For The Respondent : Shri K.R. Narayan, JCIT (D.R) ORDER Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.12.3.2012 of Commissioner of Income Tax (Appeals)-IV, Bangalore for the Assessment Year 2007-08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2005, is engaged in providing IT Infrastructure services to AXA Group operating companies. The company is set up under the Software Technology Park Scheme, AXA Tech India is engaged in the business of remote systems administration, data processing and general consulting services in the field of software, production of computer programmes and export of software data and is providing different types of back office support services in the insurance sector. 4. The assessee was providing Information Technologies Enabled Services (ITES) to its Associated Enterprise (AE) in addition to the services rendered to other entities in India. The financial as well as international transactions reported by the assessee are recorded by the TPO in para 2.4 and 2.5 as under : 2.4 Financial Information of Axa Technology Services for F.Y. 2006-07 : Particulars Overseas Services Rs. Domestic Services Rs. Others Rs. Total Rs. Op. Revenue 12,90,36,321 25,43,43,902 1,71,56,463 40,05,36,686 Op. Cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO has questioned the justification of payment of management fees to the AE on the ground that the assessee has failed to prove that it derives economic benefit from the alleged management services. Thus the TPO / A.O applied the test of benefit obtained by the assessee by receiving the alleged management services from the AE. On appeal, the CIT (Appeals) confirmed the action of the TPO/A.O and also observed that the assessee has failed to establish that the assessee has received the alleged management services from the AE which has benefitted it. 5. Before us, the learned Authorised Representative of the assessee has submitted that the assessee produced all relevant records and copies of the agreement under which the management fees was paid to the AE. The learned Authorised Representative has further contended that the assessee bench marked its transactions of providing ITES to the AE which includes the payment of the management fees. Even otherwise the TPO cannot held that the ALP of the management fees at Nil. As required under the provisions of Chapter X what is determined is ALP by comparing with the independent and uncontrolled price. The TPO cannot apply the test of ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approve such methodology applied by the assessee in bench marking the international transactions. However the TPO has segregated the ITES from management fees and found that the international transactions of ITES exclusive of management fees at arm s length. The action of the TPO in determining the ALP of management fees at NIL is not justified because the assessee has paid the management fees under the agreement wherein the services provided by the AE has been enlisted. Therefore, without giving a finding that the assessee has also incurred expenditure in respect of the same services over and above the management fees paid to the AE it cannot cannot be said that the assessee has not received the alleged management services. Thus only when it is found that the assessee has also incurred the expenditure on account of the same services and also paid the management fees to the AE then the TPO/A.O may come to the conclusion that the assessee has paid the management fees without availing the services from the AE. Even otherwise when the management fees paid under the agreement and there is no finding by the authorities below that the same services also availed by the assessee separatel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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