TMI Blog2018 (8) TMI 1845X X X X Extracts X X X X X X X X Extracts X X X X ..... justment is going back to the file of DRP, we feel it proper that this issue also should go back to the file of DRP for fresh decision because as per the DRP, necessary evidence was not brought on record but the ld. AR of assessee submitted that the evidence were furnished before the authorities below but these were not considered. Be that as it may but in the interest of justice, we set aside the assessment order on this issue also and restore it back to the file of DRP for fresh decision with the direction that the assessee should furnish the evidences in this regard before DRP and after considering the same, the DRP should decide the issue afresh after providing reasonable opportunity of being heard to both sides. Addition u/s 36(1)(va) - HELD THAT:- DRP of its directions held that assessee placed reliance on the judgment of EssaeTeraoka (P.) Ltd. Vs. DCIT [ 2014 (3) TMI 386 - KARNATAKA HIGH COURT] and case of CIT Vs. Sabari enterprises [ 2007 (7) TMI 169 - KARNATAKA HIGH COURT] approved by the Hon ble Apex Court in the case of CIT Vs. Alom Extrusions Ltd. [ 2009 (11) TMI 27 - SUPREME COURT] . We delete this disallowance by respectfully following these three judgements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts. 4.3 In holding that the payment of license fees does not satisfy the arm's length principle despite the fact that the principle transaction (being sale of manufactured formulations to AIHPL) was compliant with the arm's length standard and the operating margins earned by the Appellant were higher than the margins earned by comparable entities. 4.4 In holding that the payment of license fees does not satisfy market conditions without appreciating that the Appellant is a joint venture entity. 4.5 In not appreciating the contention of the Appellant that the license feeisrecovered as part of the sales price. The Hon. DRP erred in affirming the orders above by not correctly appreciating the facts and the judicial precedents on the above. 5. The LAO and the Learned TPO erred in not appreciating the totality of the facts of the Appellant and erred in holding that the ALP of the management fee is nil and consequently erred in treating the entire management fee payment of ₹ 35,521,487/- as a transfer pricing adjustment under section 92CA of the Act. More specifically, 5.1 The LAO and the Learned TPO e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the assessment order and the directions of the DRP. 4. We have considered the rival submissions and first of all, we reproduce para 22 from the Tribunal order rendered in assessee s own case for Assessment Years 2009-10 and 2010-11. The same reads as under. 22. We are in considered agreement with the views so expressed by the coordinate bench and the impugned addition must stand deleted for this short reason alone. In our considered view, the facts of the case before us are materially similar inasmuch as the services are indeed rendered by the AE, as evident from the documentary evidences on record and yet its arm's length value is held to be NIL only because, according to the authorities below, these services were worthless, these services were not required by the assessee, the assessee could have performed these services on its own and the services were not rendered by the group entity. The TPO has rejected the determination of arm's length price on the basis of TNMM, at entity level, but then he has not adopted any other permissible method for determination of arm's length price. Such a course of action, as noted above, is not pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the correctness of the ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. The CIT (A) is directed to take the remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter. .Thus Ground nos.3, 4, 5 6 of revenue appeal are allowed for statistical purposes. 5. We find that as per this para no. 22 reproduced from the Tribunal order in assessee s own case for Assessment Years 2009-10 and 2010-11, the matter was restored back to the file of CIT(A) for examining the correctness of ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. In the present year, the matter has come to the Tribunal against the assessment order because the assessee preferred to chose the DRP route and not CIT(A) route. Therefore, by respectfully following this Tribunal order in assessee s own case for earlier years, we set aside the assessment order on this issue and restore the matter back to the file of DRP for fresh decision with similar directions as were given by the Tribunal in earlier years as per para 22 of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the judgment of Hon'ble Karnataka High Court rendered in the case of EssaeTeraoka (P.) Ltd. Vs. DCIT (366 ITR 408) and also on the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Sabari enterprises (298 ITR 141 approved by the Hon ble Apex Court in the case of CIT Vs. Alom Extrusions Ltd. (319 ITR 306). But the DRP has taken a different view on this basis that there are contradictory judgements on this issue and the CBDT as per Circular No. 22 of 2015 dated 17.12.2015 has made it clear that the decision of Hon ble Apex Court in the case of CIT Vs. Alom Extrusions Ltd. (supra) is not applicable to the payments covered under Section 36(1)(va) of IT Act. In our considered opinion, when there is a binding judgement of Hon ble Apex Court and also of Hon ble jurisdictional High Court, the same has to be followed and not the CBDT Circular. In this view of the matter, we delete this disallowance by respectfully following these three judgements which are cited before DRP as noted above. Ground no. 7 is allowed. 10. In the result, the appeal filed by the assessee stands allowed for statistical purposes in the terms indicated above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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