TMI Blog2019 (4) TMI 1769X X X X Extracts X X X X X X X X Extracts X X X X ..... account of transfer pricing adjustment, if warranted. On the merits of the addition assessee went on making assumption after assumption for equating consultants from the companies shortlisted by it with the employees of NYLI assigned to it who were qualified for training etc. Firstly, there is no substantiation of the 'hourly charge out rates' as given by the assessee in its transfer pricing study report as a benchmark and, secondly, the companies so selected are in altogether different fields ranging from senior lawyers at Milliman Asia, Hong Kong, to health and welfare consultants. It, therefore, becomes evident that the ld. CIT(A) fell in error by upholding the price declared by the assessee at ALP under the CUP method. It is further crucial to note that he failed to deal with so many points raised by the TPO in his order and deleted the addition at a single stroke As decided in own case [ 2017 (10) TMI 1086 - ITAT DELHI] proceeded to compute the ALP by considering that one Mr. Paul Solgan, the Executive Vice President, was seconded to the assessee in another year. His cost per day was worked out. 120% and 80% of such cost was attributed as the cost per day of Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these 2 items fall under the provisions of section 28 to 43B of the act. If both these items fall in that compass, then they cannot be adjusted /added to the total income of the assessee. Both these issues have been considered by the coordinate bench in assessee s own case while deciding the issue for assessment year 2010 11, the coordinate bench in its own wisdom has held that provision for doubtful debt is not required to be adjusted but donation is required to be adjusted. Therefore respectfully following the decision of the coordinate bench, we hold that adjustment on account of the provision of doubtful debts cannot be made in the hands of the assessee and the adjustment on account of donation is required to be made. Disallowance of the fringe benefit tax provisions - HELD THAT:- Fringe benefit tax is not allowable as a deduction under the provisions of section 40 (ic) of the act, which falls under the bracket of the provisions of section 28 to section 43B of the act. The fringe benefit tax has also been included in the definition of tax under provisions of section 2 (43) of the act Therefore it cannot be said that it is different than income tax. There is no man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (34) - applicability of S. 14A - HELD TAT:- As decided in own case [ 2018 (1) TMI 845 - ITAT DELHI] allow exemption to the assessee u/s 10 (34) of the income tax act without disallowing any expenditure u/s 14 A of the income tax act. Accordingly additional ground number 1 raised by the assessee is allowed. Claim of deduction u/s 80 G of the income tax act with respect to the donation disallowed in the hands of the assessee - HELD THAT:- As the donation expenditure has been disallowed in the hence of the assessee and added to the total income of the assessee naturally, the assessee is entitled to deduction under Chapter VI- A of the income tax act with respect to the donation u/s 80 G of the act. As the requisite details as required by that section has not been furnished before us we direct the assessee to furnish the relevant information before the assessing officer in accordance with the law to claim any deduction under section 80G of the income tax act along with all donation receipts and the 80G certificates issued by the Donee to the assessee within one month of this order. The learned assessing officer may verify the detail in accordance with the law and if found prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that a. the assessee is duly licensed life insurance company, statutory 4 bit and by provisions of section 3 (4) (at) of the insurance act, 1938 from conduct of business other than life insurance business. b. The said income arises from investments which are made strictly in accordance with the insurance law. c. Such income is inextricably linked to the business of the assessee. 4.1 Without prejudice to the above, on the facts and circumstances of the case and in law, the learned AO added in computing the net assessable loss without giving due effect to the following d. provisions of section 70 (1) of the act while making the addition of INR 9 048000 on account of income from sale of investments credited to the profit and loss account e. setting up profit and loss on sale of investment of INR 9 048000 credited to shareholders account with loss on sale of investment of INR 4 8795/ appearing in the same account 5. the learned dispute resolution panel added both on facts and in law in confirming the learned AO/TPO s auction of making an adjustment of rupees 1183536/ to the income of the appellant by holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -term consultancy and assistant services of INR 6804099 (3) recharge from New York life in of INR 6923815/ (4) recharge to New York life company of ₹ 282748/ . The assessee adopted CUP method as the most appropriate method. The only international transaction in dispute is with respect to short-term consultancy and assistance fees of INR 6804099/ . The learned transfer pricing officer held that ALP of such transaction is only INR 5620563/ and therefore there is an adjustment of ₹ 1183536/ . Consequently order u/s 92CA (3) of the act was passed on 14/10/2009. On receipt of the order of the learned Transfer Pricing Officer [ TPO] the learned AO passed order u/s 144C (1) of the act on 15/12/2009. Over and above the transfer pricing adjustment suggested by the learned TPO of INR 1 183536/ , the learned AO also made an (1) addition on account of sale of investment of INR 9 048000/ . (2) Disallowed the provisions of the fringe benefit tax of ₹ 25575000/ (3) Disallowance of Provision bad debts (4) Disallowance of donation of ₹ 3328358/ . Consequently the total addition of INR 3913489 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law, the DRP/AO erred in not allowing deduction u/s 80 G of the act on the amount of donation paid by the appellant during the previous year relevant to subject assessment year. 7. Adverting to the application of the admission of additional grounds, the learned authorised representative submitted that during the previous year relevant to the subject assessment year the appellant has earned dividend income from the investment made by assessee in the course of carrying on its life insurance business and assessee is entitled to avail exemption under section 10 (34) of the act with respect to the aforesaid dividend income. However while filing the return of income; the appellant had inadvertently not claimed the said exemption in the income tax return. He therefore submitted that assessee is entitled to this exemption, there is no bar on claiming such exemption, and it is purely a legal issue. Therefore this ground is required to be admitted and adjudicated. He otherwise stated that even where the claim for relief exemption does not form part of the original revised return it shall be granted by the assessing officer as well as appellate authorities and he relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the coordinate bench. He referred to para number 5 of the order of the coordinate bench where identical additional ground with respect to the exemption under section 10 (34) of the act was admitted. He therefore submitted that this decision covers the whole issue about the admission of additional ground as well as the issue itself. 11. We have carefully considered the rival contention and perused the order of the learned assessing officer as well as the direction of the learned dispute resolution panel. With respect to the additional grounds the assessee raised identical additional ground vide letter dated 13/12/2017 for assessment year 2010 11 before the coordinate bench. These facts have been recorded in para number 3 of the order of the coordinate bench. As per para number 5 of order of the coordinate bench the above additional ground was admitted stating as under:- 5. We have heard the rival submissions and carefully considered the same. It is a fact on record that assessee has earned dividend income. Therefore whether the assessee is entitled for deduction u/s 10 (34), in our view is legal ground. Honourable Supreme Court in the case of Nation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of deduction u/s 80 G of the income tax act. The learned assessing officer has disallowed the donation which was claimed by the assessee is not adjustable under the provisions of section 44 of the act. As the disallowance has been made the alternate claim arising out of the disallowances is allowability of the claim of the assessee under the provisions of section 80G of the act. In view of this we do not find any difficulty in admitting this ground raised by the assessee. Even otherwise this ground is also purely legal in nature and hence same is also admitted. In view of this both the additional ground raised by the assessee are admitted for adjudication. 14. The 1st and 2nd ground of appeal was submitted to be general in nature and therefore they were dismissed. 15. Ground number 3 of the appeal is with respect to the order of the learned assessing officer wherein he has made i. disallowance of ₹ 25575000/ on account of the fringe benefit tax provision, ii. Disallowance of INR 9 43000 on account of provision for bad debts and iii. Disallowance of INR 2 385358/ on account of the donation expenditure. On the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able u/s 30 to section 43B shall be added back. However there is no such provision in the impugned assessment year and therefore such adjustment cannot be made. He further relied on the decision of i. life insurance Corp of India in 119 ITR 900, ii. Gen insurance Corp 240 ITR 139, iii. Oriental insurance company 291 ITR 370 and iv. New India assurance Co Ltd 133 ITD 131 ii. He submitted that it is held that the computation as per section 44 results in allowing deduction of certain expenses which otherwise would not have been deductible and similarly certain items of credits included in income, even though they are otherwise not chargeable to tax. iii. He further stated that in assessee s own case for assessment year 2010 11 the disallowance of provision of doubtful debts has been deleted on the identical facts and circumstances of the case. iv. With respect to the provision for fringe benefit tax, he submitted that the provisions of section 40 (a) (ic) are not applicable while applying rule and therefore same is also not required to be added to the total income of the assessee as a disallowance for the same rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies , income from property , ‗capital gains or income from other sources . In view of this he submitted that the learned assessing officer has correctly made the disallowance of the provision of fringe benefit tax. ii. With respect to the disallowance of provision for doubtful debts and the donation he also stated that his arguments with respect to the fringe benefit tax are also squarely applies to this issue. iii. Contesting and supporting all these 3 disallowances made by learned AO, He further submitted a copy of the article written by Shri R Ramakrishnan, consultant actuary, titled as ‖Taxation of life insurance companies in the magazine The Actuary India (October 2008). 18. We have carefully considered the rival contention and perused the orders of the lower authorities. The 1st issue involved is with respect to the addition on the account of provision for doubtful debts. The identical issue arose in the case of the assessee for assessment year 2010 11 wherein the coordinate bench has decided the above issue wide para number 93 of its order in ITA number 142 123/Del/2017 dated 5/1/2018 Max New York Life Insurance Co. Ltd. v. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s own case ( supra) in para no 94 has held as under :- 94. Ground Nos. 7 8 relates to the sustenance of disallowance of ₹ 2,50,00,000/-. made by the Assessing Officer on account of donation paid by the assessee. Ground no. 8 relates to the sustaining disallowance of ₹ 2500/- in respect of share issue expenses. While disposing of ground no. 6 in preceding paragraph, we held that the income of the assessee has to be computed in accordance with Rule 2 of First Schedule provided in S. 44 of the Income Tax Act and the normal provisions of the Income Tax Act relating to the profit and gains of the business will not apply. Section 44 specifically excludes the provisions of computation of the income chargeable under the head Interest on Securities , Income from house properties , capital gain or Income from other sources or in section 199 or in sections 28 to 43B and requires that the profit and gains of any business of insurance has to be computed in accordance with the rules contained in the First Schedule. Sections 28 to 43B are applied when the income is computed under the head Income from business but in view of section 44 these provisions are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t section 44 is a special provision governing computation of taxable income earned from business of insurance. It opens with a non-obstante clause and, thus, has an overriding effect over other provisions contained in the act. It mandates the authorities to compute the taxable income for business of insurance in accordance with the provisions of 1st schedule of the act. Then, honourable Supreme Court considered the provisions of rule 5 which were applicable for insurance business other than life insurance business wherein in clause (a) there was a specific mandate to make the disallowances which are not admissible under the provisions of section 30 to section 43A of the income tax act while computing the profits and gains of business of insurance other than life insurance. Therefore the decision of the honourable Supreme Court specifically says that the income is required to be computed strictly in accordance with the provisions of section 44 and 1st schedule of the act. The provisions of section 44 provides as under:- 44. 56 Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the income. Rule 4 provides the mechanism for granting the credit of tax deducted at source against the income as computed in rule 2. Therefore, there is no reference of any deduction available to the assessee from the income computed as per rule 2. Similarly, nothing is provided to include or enhance the income computed under rule 2. 21. Therefore on the issue of provision of doubtful debts and donation which is been debited to the profit and loss account it is necessary for the assessee to prove that these 2 items fall under the provisions of section 28 to 43B of the act. If both these items fall in that compass, then they cannot be adjusted /added to the total income of the assessee. Both these issues have been considered by the coordinate bench in assessee s own case in para number 93 and 94 while deciding the issue for assessment year 2010 11, the coordinate bench in its own wisdom has held that provision for doubtful debt is not required to be adjusted but donation is required to be adjusted. Therefore respectfully following the decision of the coordinate bench, we hold that adjustment on account of the provision of doubtful debts cannot be made in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of investment partakes the character of income not from insurance business of the assessee however assessee has considered it is part of business of insurance. The main reason given by the assessee is that life insurance companies in India are governed by the provisions of the insurance act 1938 and insurance regulatory development authority act 1999 and rules framed there under. The assessee is in Indian insurance company and has been allowed the life insurance business license by IrDA. He further stated before the assessing officer that according to section 2 (7A) defines the Indian insurance company wherein according to clause (C) it provides that whole sole purpose of the company is to carry on life insurance business are general insurance business or reinsurance business. According to the provisions of section 2 (11) of the insurance act 1938 provides the definition of life insurance business. Provisions of section 3 (4) of the it act was also pressed into service by the assessee wherein it is provided that it can cancel the registration of any insurance if the insurer fails to comply with the provisions of section 7, 98 with respect to the deposits and according to clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has been given by the learned assessing officer and in past such profit on sale of investments has been considered as part of the insurance business, the learned AO stated that principles of res judicata do not apply to the income tax proceedings and if it is a mistake it ought to be rectified. Therefore he considered the income from sale of investment of INR 9 048000/ to be business income falling within section 28 of the act and added to the total income of the assessee separately. The learned DR P also upheld the action of the learned assessing officer wide para number 3 of the act stating that activity of earning profit from sale of investment cannot be considered as business of insurance. Therefore the assessee aggrieved with the above order of the learned assessing officer has challenged it by ground number 4 of the appeal. 24. The learned authorised representative vehemently contested the above ground on following counts:- i. The assessee is engaged in the business of life insurance and is not permitted to carry on any other business other than life insurance business according to the provisions of it act, insurance act et cetera. He referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the order of the learned AO. The learned departmental representative mostly reiterated the argument that has been raised by the assessing officer in his order. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. The only issue involved in this ground of appeal is whether the profit earned by the assessee on sale of its investment is chargeable to tax as part of insurance business or as a separate business. The provisions of section 44 of the income tax act is culled out earlier specifically provides that profits of insurance business specifically required to be computed as per the mandate of section 44 of the income tax act with specific reference to schedule 1 to the act. The income tax act does not define what insurance businesses . Therefore it is necessary to go to the insurance act 1938 wherein in section 2 it provides certain definitions which are very important to decide the above issue. Such definitions are with respect to what is life insurance business, what is insurance company, what is investment required to be made by such companies. (3) approved securities means- (i) Government secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include- (a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance, (b) the granting of annuities upon human life, and (c) the granting of superannuation allowances and 22[benefit] payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons. 23 [Explanation.-For the removal of doubts, it is hereby declared that life insurance business shall include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment and a component of insurance issued by an insurer referred to in clause (9) of this section;] 29. IRDA Investment Regulation Act 2000 has a specified rule for investments and according to that all Insurance companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved by the Board of Directors of the insurer. 2. Bonds or debentures issued by companies, rated not less than AA or its equivalent and A1 or equivalent ratings for short term bonds, debentures, certificate of deposits and commercial papers by a credit rating agency, registered under SEBI (Credit Rating Agencies) Regulations 1999 3. Subject to norms and limits approved by the Board of Directors of the insurer's deposits [including fixed deposits as per Regulation 3 (a) (8)] with banks (e.g. in current account, call deposits, notice deposits, certificate of deposits etc.) included for the time being in the Second Schedule to Reserve Bank of India Act, 1934 (2 of 1934) and deposits with primary dealers duly recognized by Reserve Bank of India as such. 4. Collateralized Borrowing Lending Obligations (CBLO) created by the Clearing Corporation of India Ltd and recognized by the Reserve Bank of India and exposure to Gilt, G Sec and liquid mutual fund forming part of Approved Investments as per Mutual Fund Guidelines issued under these regulations and money market instrument/investment. 5. Asset Backed Securities with underlying Housing loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to invest according to the rules provided by the IRDA of all its controlled funds. It is not the case of the assessee that assessee has invested funds other than its controlled funds. To get out of the provisions of section 44 of the income tax act it is the duty of the assessing officer to show that investment is not part of the insurance business of the assessee. However on our reading of the various regulatory provisions concerning the life insurance business, we find that assessee is investments are part of its insurance business. In view of this we do not subscribe to the view of the learned AO that investment is a separate and identifiable business of the assessee separate from life insurance business. 32. Further in case of the assessee for assessment year 2005 06 this issue arose and decided by the learned CIT A in assessee s own case in favour of the assessee holding that profit or loss arising on the sale of investment is not chargeable to tax separately, in nutshell, beyond the provisions of section 44 of the act. In view of this we do not find any reason to hold that the profit and loss on by the assessee out of the investment is not part of the life in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Schedule.' (emphasis supplied by us) 13. On circumspection of the prescription of section 44, it emerges that this section starts with a non-obstante clause (bold part) qua the computation of income chargeable under the head interest on securities , Income from house property , Capital gains , or Income from other sources or in section 199 or in sections 28 to 43B ( italicized bold part). It provides that profits and gains of insurance business (normal part) shall be computed (normal italicized part) in terms of the rules contained in the First Schedule. Effect of the non- obstante clause in the section is that whatever is contained in the provisions specifically enumerated herein will be superseded and the profits and gains of any business of insurance shall be computed in accordance with the Rules contained in the First Schedule. When we read section 44 in juxtaposition to the First Schedule, it becomes vivid that the profits and gains of any business of insurance shall be computed in accordance with the First Schedule to the Act and the mandate of the First Schedule shall have an overriding effect over the provisions contained under the heads I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 28, which provides that : 'The following income shall be chargeable to income-tax under the head Profits and gains of business or profession ..' and the computation is contained in section 29, which mandates that :'The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43D. It is manifest from the above discussion that the computation of income under each head is separately enclosed in Chapter IV, which contains not only the charging but also the computation provisions. However, section 92 has been placed in a separate Chapter X, with the caption 'Special provisions relating to avoidance of tax'. Section 92 with the marginal note 'Computation of income from international transaction having regard to arm's length price', is the first section of this Chapter. Sub-section (1) provides that: 'Any income arising from an international transaction shall be computed having regard to the arm's length price'. This shows that the computation provision contained in section 92, as applicable to income from international transaction falling under any head of income given in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd computation has to be necessarily made u/s 92. If the second computation results into a transfer pricing addition, such an addition is made to the income computed under the first computation. If on the other hand, the second computation results in reduction of the income computed under the first computation, the same is ignored and the assessment is finalized on the basis of first computation alone. This mechanism of two computations can be understood with the help of a simple illustration. An assessee has sale of ₹ 100/- to its AE and the AO computes income under the first computation at ₹ 6/-. Such first computation of income of ₹ 6/- gets enhanced by the second computation based on the transfer pricing adjustment of ₹ 15/-, if the ALP of the sale transaction to the AE is determined at ₹ 115/-. The resultant total income comes to ₹ 21/- (₹ 6/- under the first computation plus ₹ 15/- under the second computation). Section 44, in our above illustration, has done away with the first computation of income of ₹ 6/- and has given its own mechanism for determination of income from insurance business under the First Schedule. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provision starting with 'relating to the computation of income' and ending with 'sections 28 to 43B' would have been omitted, in which case, section 44 would have read as : ''Notwithstanding anything to the contrary contained in the provisions of this Act, the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co-operative society, shall be computed in accordance with the rules contained in the First Schedule'. This is not something unknown to the law. The Parliament has worded the non-obstante clause in relevant provisions in accordance with its intent. The immediately succeeding section 44A is again a special provision for deduction in the case of trade, professional or similar association. This provision too, like section 44, opens with a non obstante clause but overrides all the provisions of the Act, as is evident from its language, which says 'Notwithstanding anything to the contrary contained in this Act,'. Similarly, section 44AD is also a special provision for computing profits and gains of business on presumptive basis. This also opens with a non obstante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of starting the second computation u/s 92 without there being any first computation. 20. The reliance of the ld. AR on the judgments in the case of LIC v. CIT [1964] 51 ITR 773 (SC) and CIT v. Oriental Fire and General Insurance Co. Ltd., [2007] 291 ITR 370/161 Taxman 181 (SC), etc. is again not germane to the issue under consideration. In these judgments and the other decisions relied by the ld. Senior counsel, the Hon'ble Courts have held that the profits of insurance business are governed by the rules in Schedule and the Assessing Officer cannot make any adjustments in accounts. This proposition is obviously undisputed and cannot be called into question. But, in none of these decisions, there is any reference to the non-applicability of section 92, being the second computation dealing with the determination of the ALP of an international transaction of an assessee carrying on insurance business. Similarly, the assessee can't drive home any benefit from certain decisions including Cash Edge India (P) Ltd. v. ITO (Mumbai) in which the question was about computation of book profits u/s 115JB and the Tribunal held that Explanation 1 to section 115JB (2) does not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma facie noticed that the ld. CIT(A) failed to deal with all the points raised in the order passed by the TPO. As such, it was considered expedient to properly examine the matter. It was accordingly directed to both the sides to file a copy of the Agreement pursuant to which the services were received by the assessee and also a copy of the Transfer pricing study report of the assessee for the year. Case was adjourned to 21.9.2017. Certain adjournments sought by the ld. AR on account of ill health, were also allowed. When the case eventually came up for hearing on 9.10.2017, the ld. DR placed on record a copy of the Agreement. The ld. AR wanted a week's time, impliedly, treating such a document as a paper book filed by the Revenue in terms of rule 18 of the ITAT Rules, 1963. Knowing well that the additional ground has not been accepted and the proceedings have started on merits, he sought time, inter alia, on the ground that similar legal issue has been heard by the Mumbai bench of the tribunal and the order is awaited. On a pertinent question, it was stated that no order has been passed so far by the Mumbai bench of the tribunal. The request of the assessee was turned down as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 01.01.2002 (hereinafter also called 'the Agreement'). The same is accompanied by a letter dated 22.09.2017 from ACIT addressed to the CIT, DR. The Agreement has been entered into between the assessee and New York Life International, LLC, (NYLI) a company incorporated in the USA. 25. Article 1 of the Agreement containing 'Scope of services' provides through clause 1.1 that the services: 'shall be to advice and assist MNYL in devising Training Programme for MNYL Agent Advisors (hereinafter referred to as the 'Services.').' Clause 1.2 states that : 'NYLI will send trained personnel to the designated MNYL sites in India or abroad as required by MNYL to provide the Services.' Article II with the heading NYLI as independent contractor states that: 'NYLI agrees to perform the Services under this Agreement as an independent contractor. The personnel provided by or through NYLI to MNYL shall not be considered to be the employees of MNYL nor shall they have the authority to or be asked by MNYL to exercise management authority with respect to MNYL's business. The obligation of NYLI and that of its personnel is to act in good faith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evident that NYLI deputed its employees as independent contractor who: shall not be considered to be the employees of MNYL. It is further clear that the employees were to be paid on per day basis and even the time spent by NYLI personnel on travel etc. was to be paid by the assessee. Such payment was supposed to be made: 'within one month of the completion of the project or . .., whichever is later.' An overview of the above clauses makes it manifest that NYLI deputed its personnel to the assessee for devising Training Programme for the assessee's agent advisors. This discerns that the transaction was more of the nature of short-term assignment of employees and no 'consultancy services' were sought to be received by the assessee. That apart, NYLI itself is not a consulting company as it is engaged in the business of selling various insurance products and the entire emphasis of sending its personnel was to train and assist the assessee in its start up phase. Here it is pertinent to mention that the TPO has referred to two agreements i.e., one for training and one for actuarial services under which the employees were assigned to the assessee. These Agreements as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces, including health and welfare consulting and consultancy services also in respect of compensation and benefits, human resource effectiveness and technologies, and benefits administration. US$ 370 for a Principal and for an Actuary US$ 305 for a Consultant Mercer Human Resource Consultancy Consultancy in the field of human resources, including consultancy services provided in respect of health care, retirement benefits, human capital strategy, HR risk management, HR function strategy, performance management, etc US$ 440 for a Senior Health and Welfare Consultant and for an Actuary US$ 250 for a Consultant Rael Letson Consultants and Actuaries Consultancy in the field of human resources, including health and welfare consulting. US $ 190 for an Actuary US$ 170 for a Consultant Argo Navis Consulting Consultancy in the field of customer relationship management, marketing technology, and business strategy. US$ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rison have been listed below: (a) Senior Manager employed at Ernst Young could be equated to AVP at NYLI (b) As regards, Deloitte Touche Tohmatsu and Solomon Consulting, since we had access to a range of hourly charge-out rates, which indicated that the lower value of the range would possibly be for their junior level employees which may not be equitable to either an AVP, VP or SVP at NYLI. However, the upper value would possibly be for their very senior employee who could be equated to an SVP at NYLI. (c) The Partners and Senior Lawyers at Milliman Asia, Hongkong could be equated to VP and AVP at NYLI, respectively. (d) The Principal/Actuary and Consultant employed at Buck Consultants and Actuaries could be equated to SVP and AVP at NYLI, respectively. However, since no level of employee specified in case of Buck Consultants and Actuaries could be equated to VP at NYLI, an average of the hourly charge-out rates for a Principal/ Actuary and of a Consultant was considered to be appropriate for a level at Buck Consultants and Actuaries, which could be equated to VP at NYLI. (e) The Senior Health and Welfare Consultant/Actuary and Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the consultancy provided by NYLI to the appellant was not in the nature of provision of any services but were pursuant to secondment of NYLI employees to the appellant company in India. I find that the appellant has entered into a separate Expatriate Salary Reimbursement Agreement with NYLI during the relevant period one employee by the name of Paul Colgan was on deputation to India under the said agreement. In the present case, the consultants came to India on short visits from time to time pursuant to the service agreement and worked under the supervision and control of NYLI. In my view it was not correct on the part of the A.O. to re-characterize the consultancy as secondment. 10.2 Considering the above, in my view the rates prevailing in the international market for such services as evidenced by rates actually charged by reputed international service providers from NYLI, the tested party, fairly represent the arms length price for such services during the relevant period. I have already observed that the services provided by NYLI consultants are functionally comparable. I also find that the rates actually paid to NYLI by the appellant were lower than the rates det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition on flimsy grounds. Under these circumstances, we are unable to approve the view taken by the ld. CIT(A) in deleting the addition. 33. Having found that the view taken by the ld. CIT(A) cannot be countenanced, it remains to be seen if the action of the TPO is sustainable. After rejecting the application of the CUP method, the TPO invoked the TNMM as the most appropriate method. Let us find out the prescription of working out the ALP under the TNMM under rule 10B(1)(e), reading as under : - (e) transactional net margin method, by which,- (i) the net profit margin realised by the enterprise from an international transaction entered into with an associated enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base; (ii) the net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base; (iii) the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the TPO for determining under the TNMM does not conform to the method prescribed under rule 10B(1)(e) and hence cannot be approved. 36. We are confronted with a situation in which the action of the CIT(A) in deleting the transfer pricing addition cannot be upheld and equally the view of the TPO in applying the TNMM also cannot be approved for the reasons assigned supra, albeit his exercise of rejecting the assessee's determination of ALP is correct. Under such circumstances, we are of the considered opinion that the ends of justice would adequately meet if, the impugned order is set aside and matter is restored to the file of the AO/TPO with a direction to determine the ALP of the international transaction afresh as per law after allowing a reasonable opportunity of being heard to the assessee. 37. Therefore respectfully following the decision of the coordinate bench in assessee s own case, with similar direction we also set aside ground number 5 of the appeal of the assessee back to the file of the learned transfer pricing officer for fresh adjudication. Accordingly ground number 5 of the appeal is adjudicated in the same manner as adjudicated in ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the computation of income chargeable under the head 'Interest on Securities', 'income from house property', 'income from capital gains' or 'income from other sources' or in S. 199 or in S. 28-43B has to be disregarded. Second stage comes after computation of income u/s 44, computation as per provision of S. 92 by making addition on a/c of transfer pricing adjustment. 98. This decision in our view will not apply w.r.t. the applicability of S. 14A as the applicability or inapplicability of S 14A has to be considered at the stage of making computation of income u/s 44. We also do not agree with submissionof learned DR since the only activity in shareholders a/c is of investment, it cannot be said that no expenditure was incurred for earning dividend. In this regard, we may state question before us is not whether any expenditure has been incurred or not for earning of dividend but the question relates to the applicability of S. 14A, which issue has already been decided by co-ordinate Bench against Revenue in view of discussion under para 46 of the order of this Tribunal Mumbai Bench in case of ICICI Prudential Insurance Co. Ltd. (Supra), in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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