TMI Blog2019 (6) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... ices provided by assessee. Upon analysis of such agreement, assessee shall submit evidences in respect of agreed allowable credit period for making payments by AE to assessee based upon which interest shall be computed. - ITA No. 5939/Del/2017 - - - Dated:- 31-5-2019 - Shri G.D. Agrawal, Vice President And Smt. Beena A Pillai, Judicial Member For the Assessee : Shri K.M.Gupta, Adv. For the Department : Sh. Sanjay I Bara, CIT, D.R. ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against final assessment order dated 11/08/17 passed by Ld.DCIT, Circle I (1), Gurgaon for assessment year 2013-14 on following grounds of appeal: 1. That on the facts and circumstances of the case and in law, the order passed by the Learned Assessing Officer ( AO ) / Transfer Pricing Officer ( TPO ) and upheld by the Hon ble Dispute Resolution Panel ( DRP ) is bad in law and erroneous. 2. That the Ld. AO pursuant to the directions of the Hon ble DRP erred on facts and in law in making an addition of ₹ 217,238,084/- to the income of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefits received by the Appellant are in the nature of shareholder services and no payment was warranted for the same. 3.8 erred in considering the ALP of the transaction to be INR 22,160,608/- (as against actual payment of INR 239,398,692/-) by inappropriate application of CUP method in contravention of the provision of Rule 10B of the Rules merely based on presumptions without furnishing details of price charged in any comparable uncontrolled transaction; 3.9 erred in holding that the Appellant has not been able to establish the need for the activities received from AEs based on the premises that no cost benefit analysis was undertaken with regard to cost of activities and benefit received from AEs vis-a-vis independent parties. 4. That the Ld. AO / Hon ble DRP/ Ld. TPO erred on facts and in law in making an addition of INR 120,412/- to the income of the Appellant by imputing interest on outstanding inter-company receivables and in doing so have grossly erred in: 4.1 directing an adjustment to be made with respect to outstanding receivables ignoring that the same was accepted to be at arm s length by the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1. Ld.AO observed that assessee has merged with M T Harshaw a supplier of general metal finishing chemistry and process for printed circuit board manufacturing and electroplating division of Schering AG, a manufacturer of printed circuit board chemistry, general metal finishing chemistry and equipment for the same. Thus assessee has been considered to be a leading electroplating chemicals and equipment supply company in the world with overall research and development, analytical and production capabilities for production of electroplating chemicals that serves numerous industries and markets. 2.2. Ld. AO observed that assessee had entered into international transaction with its AE during year and accordingly a reference was made to Ld. Transfer Pricing Officer (TPO). Ld.TPO upon receipt of reference, issued notice to assessee u/s 92C of the Act and directed assessee to file economic analysis of international transaction as per Rule 10 D. Ld.TPO observed that assessee has entered into following international transactions.: Sl. No. Description of the Transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P who upheld view proposed by Ld. TPO. 3.1. Upon receipt of directions of DRP, Ld.AO passed final assessment order by making following additions in hands of assessee: Sl. No. Nature of international transaction ALP determined by the assessee (INR) ALP determined by the TPO (INR) Adjustments u/s 92CA (INR) 1. Intra Group Services (Cost sharing services) 239,398,692 22,160,608 21,72,38,084 2. Interest on receivables NIL 1,20,412 1,20,412 Total 21,73,58,496 4. Aggrieved by additions made by Ld. AO, assessee is in appeal before us now. 4.1. Ld.Counsel submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proportion to the extent of profit. Thus, while profit may reflect upon the genuineness of an assessee s claim, it is not determinative of the same. It went on to hold that business decisions are at times good and profitable and at times bad and unprofitable. Business decisions may and, in fact, often do, result in a loss. The question whether the decision was commercially sound or not is not relevant. The only question is whether the transaction was entered into bona fide or not or whether it was sham and only for the purpose of diverting the profits. 6. Reverting to the facts of the extant case, it is found that the assessee has placed on record a list of services received under the international transaction of Management cost services , a copy of which is available on pages 18 to 21 of the paper book. Certain other details of technical materials received from the AEs during some of the workshops attended by the employees of the assessee, has also been placed on pages 94 to 650 of the paper book. Under these circumstances, it is difficult to approve the stand taken by the authorities that the assessee did not avail any services. We, therefore, hold that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t , which view was accorded imprimatur by the ld. CIT(A). 9. The Hon ble jurisdictional High Court in Knorr Bremse India (P) Ltd. (supra) considered the question of aggregation of international transactions. Their Lordships held that several transactions between two or more AEs can form a single composite transaction if they are closely linked transactions and the onus is always on the assessee to establish that such transactions are part of an international transaction pursuant to an understanding between various members of a group. The Hon ble High Court observed that in case of a package deal where each item is not separately valued but all are given a composite price, these are one international transaction. It went on to hold that where a number of transactions are priced differently but on the understanding that the pricing was dependent upon the assessee accepting all of them together (i.e. either take all or leave all), then it is also an international transaction. But it will be on the assessee to prove that although each is priced separately, but they are provided under one composite agreement. It still further held that each component may be priced diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he most appropriate method for the year under consideration. We further find from the order of the Tribunal for the assessment year 2011-12 that there is no adjudication on the applicability of a particular method as most appropriate for determining the ALP of the international transaction. 13. By now, it is fairly settled through a catena of decisions that the CUP is the most appropriate method to determine the ALP of an international transaction because it seeks to compare the price charged or paid for property transferred or services rendered, provided proper comparables are available. It is under this method alone that the price charged or paid is directly compared with the price charged or paid in an uncontrolled comparable transaction. The remaining four specific methods seek to make comparison of the price charged or paid indirectly through the medium of normal profit arising in a comparable uncontrolled transaction. Further, the CUP method is a transaction specific method which strives to determine the ALP of an international transaction on a micro level, thereby lending more credibility to the ALP of a transaction. 14. Considering the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g receivables. 7.1. Ld.Counsel again submitted that issue stands squarely covered by order of this Tribunal for assessment year 2011-12 wherein this Tribunal (supra) has set aside this issue to Ld. AO/TPO for fresh examination. 7.2 . On the contrary Ld. CIT DR placed reliance upon orders of authorities below. 8. We have perused submissions advanced by both sides in light of records placed before us. 8.1 . It is observed that this Tribunal for assessment year 2011-12 has directed Ld.AO to adjudicate afresh considering agreed credit period allowable to Associated Enterprise by assessee. 8.2. Respectfully following same, we direct Ld. AO to adjudicate this issue afresh on basis of documents/evidences filed by assessee. Assessee is directed to file agreement under which payment has to be received from AE against services provided by assessee. Upon analysis of such agreement, assessee shall submit evidences in respect of agreed allowable credit period for making payments by AE to assessee based upon which interest shall be computed. 8.3. Accordingly this groun ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
