TMI Blog2019 (3) TMI 1537X X X X Extracts X X X X X X X X Extracts X X X X ..... determining of ALP in respect of purchase of fixed assets is necessitated as in the subsequent years the value of transactions will have bearing when depreciation is claimed. TPO in the instant case at the outset had determined the services i.e. technical assistance and project management services at ‘Nil’ without determining ALP of the transactions, hence, we deem it appropriate to restore the ground No.1 and 2 of the appeal back to the file of TPO/Assessing Officer to ascertain the ALP of the transactions by adopting most appropriate method prescribed under the Act. The assessee is granted liberty to furnish necessary documents to further substantiate rendering of technical assistance and project management services by AEs to the assessee. Ground raised in the appeal by assessee are allowed for statistical purposes. Rectification of mistake u/s 154 with respect to the amount of fees paid for project management services - against Project Management Services the TPO has made upward adjustment of ₹ 1,54,78,224/- in respect of project management fees considering it as ‘Nil - HELD THAT:- It is not emanating from the orders as from where the TPO has picked the figure of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Arm s Length Price (ALP) of the above said two transactions as Nil . On the basis of order of TPO, the Assessing Officer passed draft assessment order making upward adjustment of ₹ 2,99,08,224/-. 3. Aggrieved by the additions proposed by TPO, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP vide directions dated 26.12.2014 rejected the contentions of the assessee and upheld the adjustment made by the TPO on account of both the above said services. In line with the directions of the DRP, the Assessing Officer made addition of ₹ 2,99,08,224/- germinating from transfer pricing adjustment, hence, the present appeal by assessee. 4. The assessee in appeal has raised following grounds/additional grounds challenging the assessment order: GROUND I: DISALLOWANCE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IN RELATION TO TECHNICAL ASSISTANCE FEES: On the facts and circumstances of the case and in law, the Ld. Dispute Resolution Panel ( DRP ) and the Ld.AO (following the directions of the DRP) erred in adding a sum of ₹ 14,430,000/- on account of technical fees paid to BIEC International Inc ( BIEC or the AE ) for provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period relevant to assessment year under appeal, the assessee was in the process of setting up a new manufacturing facility at Jamshedpur for coated steel. The assessee received Technical Assistance Services and Project Management Services from its AEs for which the assessee paid fee ₹ 1,44,300,000/- and ₹ 33,91,555/-, respectively. The assessee capitalized the payments made for both the above services and did not claim the same as expenditure in the P L account. No depreciation was claimed by the assessee either in the assessment year 2010-11 as the project was still under construction. The assessee furnished the certificate from AEs certifying that the charges for providing technical assistance services and project management services charged from the assessee are at par with the charge from third party, for similar services. The TPO rejected the assessee s claim primarily on the ground that the assessee has failed to produce necessary documents to show that the services have been indeed rendered. 5.1 The ld. AR further submitted that during the course of proceedings before the TPO, assessee had submitted various documents to show that the services have been rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be recomputed on the basis of value of fixed assets determining ALP applying the most appropriate method under Chapter X. 5.4 The ld. AR further contented that the Authorities below have rejected the transactions at the outset without ascertaining the ALP as per method prescribed u/s. 92C of the Act disallowing the payments without applying any of the prescribed method is an action which is completely dehors the provisions of Chapter X and therefore, the same cannot be sustained. To buttress his argument, the ld. AR placed reliance on the following decisions: i) CIT Vs. Jhonson Jhonson Ltd. reported as 80 taxmann.com 269 (Bombay) ii) Lever India Exports Ltd. Vs. ACIT reported as 43 taxmann.com 427 (Mumbai-Trib.) iii) Asst. Commissioner of Income Tax Vs. Koch Chemical Technology Group (India) Ltd. reported as 64 taxmann.com 464 5.5 In respect of additional grounds raised by the assessee, the ld. AR submitted that while making transfer pricing adjustment in relation to project management services, the TPO and the Assessing Officer inadvertently recorded the transaction at ₹ 1,54,78,224/- instead of ₹ 33,91,555/-as claimed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Eaton Technologies (P.) Ltd. Vs. Deputy Commissioner of Income Tax, reported in 32 taxmann.com 103 (Pune-Trib.). Since the assessee failed to prove the benefit received from the services or the rendering of services, the same were valued at Nil . 7. Controverting the submissions advanced by DR, the ld. AR submitted that a bare perusal of the provisions of section 92 of the Act would make it clear that they apply to allowability of any expenditure arising from international transaction on the basis of ALP. Depreciation is in the nature of allowance and not expenditure. Therefore, it does not fall within the purview of Explanation to section 92(1) of the Act. To support his submissions, the ld. AR placed reliance on the following decisions: i) Necter Beverage (P.) Ltd. Vs. DCIT reported as 314 ITR 314 (SC). ii) Special Bench decision in the case of Shri Vishnu Anant Mahajan Vs. ACIT, in ITA No.3002/Ahd/2009, (SB)(Ahd.) decied on 25.05.2012. iii) Hoshang D. Nanavati Vs. ACIT reported as 16 ITR (T) 614) (Mum.) 8. We have heard the submissions made by representatives of the rival sides and have perused the orders of the Authorities below. We have also co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred wholly and exclusively for the purpose of business and nothing else .. 9. The Mumbai Bench of the Tribunal in the case of Thyssen Krupp Industries India (P.) Ltd. Vs. ACIT, reported as 55 SOT 497 following the ratio laid down in CIT Vs. EKL Appliances Ltd. (supra.) held that jurisdiction of TPO is limited to determine the ALP of the transactions under the methods provided under the Act. Similar view has been taken by the Tribunal in various other cases. The TPO cannot step into the shoes of the assessee to ascertain the need for the services. 10. It is an undisputed fact that the assessee has not claimed the expenditure toward payments of Technical Assistance fees and Project Management fees. The assessee has capitalized the same as the project was not complete in the period relevant to the assessment year under appeal. The capital transactions are outside the purview of Trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outset had determined the services i.e. technical assistance and project management services at Nil without determining ALP of the transactions, hence, we deem it appropriate to restore the ground No.1 and 2 of the appeal back to the file of TPO/Assessing Officer to ascertain the ALP of the transactions by adopting most appropriate method prescribed under the Act. The assessee is granted liberty to furnish necessary documents to further substantiate rendering of technical assistance and project management services by AEs to the assessee. The assessee is further directed to furnish the details of comparable services rendered by the AEs to third parties. The TPO/Assessing Officer while reconsidering the issue shall grant reasonable opportunity of hearing to the assessee, in accordance with law. Accordingly, ground No.1 and 2 raised in the appeal by assessee are allowed for statistical purposes. 13. In ground No.3 of the appeal, the assessee has raised alternate plea to ground No.1 and 2. In principle, we have allowed the ground No. 1 2 of the appeal and have restored the same to the file of Assessing Officer/TPO to determine ALP of international transactions under disput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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