TMI Blog2019 (11) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure is not in dispute and since the only reason given by the Revenue authorities is that the assessee did not need the services as the same were duplicative and that the assessee did not derive any tangible benefit from such expenditure and did not file sufficient details to establish that it has, in fact, received some benefit or that the AE has rendered some services, therefore,direct the A.O./TPO to delete the addition. - Decided in favour of assessee. - ITA No.3059/Del/2015 - - - Dated:- 15-11-2019 - Shri R.K. Panda, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Nageshwar Rao, Advocate For the Revenue : Shri Sanjay I Bara, CIT, DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 25th February, 2015 of the CIT(A)-44, New Delhi, relating to assessment year 2008-09 2. The grounds raised by the assessee are as under:- Based on the facts and circumstances of the case, the Appellant respectfully submits: 1. That on facts and in law, the Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds, the Learned CIT (A) has failed to prove that the Arm s Length Price of certain intra group services availed would depend on the benefit derived by Appellant. 9 Without prejudice to the above grounds, the Learned CIT(A) has grossly erred by assuming the arm s length price of certain intra group services to be Nil and 30 percent of value o transaction (in case of administrative services and administrative and technical training services ) while applying the Comparable Uncontrolled Price (CUP) method to benchmark the impugned transactions. The Learned CIT(A) has not made any efforts to identify comparable uncontrolled transactions, in absence of which, the CUP method cannot be applied. The above grounds are independent and without prejudice to each other. The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing. 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of trading of various agricultural commodities such as corn, soya bean, maize, edible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it has received various services such as human resources, business unit engineering, accounting and audit services, credit management and public affairs, tax services, regional network group, availing corporate IT and other services, administrative and technical support services, etc. The assessee also submitted the agreement for services and cost sharing dated 01.06.2004 and 01.06.2005 and the service agreement dated 06.01.2006. The assessee also filed documentation from Cargill stating the features and value of the IT related services for business which includes write ups on shared storage, back up, internet connection services, Cargill remote accesses services, Cargill mobile office, instant messaging, mobility solutions, mailbox restoration etc. 5. However, the TPO noted that most of the evidences filed by the assessee are irrelevant since it consists of invoices and simply filing invoices is not evidence of services rendered. So far as filing of administrative services for which an amount of ₹ 27,19,190/- has been paid, he observed that the assessee has not filed any evidence as to how it has benefited from the receipt of this service which are numerou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at arm s length only when it is proved substantially by the taxpayer that such services were actually received and further proving that such received services have benefited it. In most of the countries like UK, USA, Germany etc it is an established position that a subsidiary does not to have to pay for the auditing, accounting and such other functions performed by the parent company as owner of the subsidiary company. If the subsidiary were an independent company it would neither require such services nor would it pay for the same. 14. No independent party would have made such large payments in uncontrolled circumstances. Therefore, by the application of CUP, the arms length of this transaction of payment of service fee is determined at NIL as against ₹ 19,743,210 determined by the assessee. The assessing officer shall enhance the income of the assessee by ₹ 19,743,210/-. 6. Before the CIT(A), the assessee filed certain additional evidences which were admitted by the CIT(A) and, thereafter, forwarded to the A.O./TPO for a remand report. After considering the remand report of the TPO and relying on various decisions, the ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministrative and technical training service to appellant. The appellant has submitted that AE provides various support services such as training and guidance on various administrative functions, provision of information on potential trade transactions and counterparties, advice on trade documentation, and other management support. These services were rendered through Workshops, Conferences, Emails, Research Material. The appellant has claimed that the appellant company is able to carry out its business operations more efficiently in an increasingly globalized and competitive scenario. 1 have considered the observation of the TPO in the remand report and the reply of the appellant to the remand report. I have also gone through the paper book submitted by the appellant during the course of the appellate proceedings. The appellant has engaged local professionals for Administrative Services / Administrative Technical training services and incurred huge expenses on these accounts. These services are partly in the nature of duplication of services incidental services/share-holders services. On perusal of the additional evidence, it is observed that there is no proper evidence to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the case of Mohinder Singh Gill vs. Chief Election Commissioner reported in AIR 1978 SC 851. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. EKL Appliances Ltd., reported in (2012) 345 ITR 241 (Del) , he submitted that the Hon'ble Delhi High Court in the said decision has held that there is no need to establish necessity and benefit especially in proceedings before the TPO. Similarly, a conclusion has been reached in the case of Cushman Wakefield, 46 taxmann.com 317 . He submitted that the adjustment made by the TPO to ALP for consideration paid for availing services and upheld by the CIT(A) on the pretext of applying CUP are not valid in law as neither most appropriate method of CUP is chosen with reference to criteria indicated under the Act and Rules nor is the ALP determined by reference to any uncontrolled transaction. He accordingly submitted that the order of the CIT(A) sustaining the addition should be deleted and the search process and ALP determination applied by the assessee in its transfer pricing study deserves to be upheld. 8. The ld. DR, on the other hand, strongly opposed the argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO as well as before the CIT(A) and, after obtaining the remand report from the A.O./TPO, the ld.CIT(A) has deleted the TP adjustment in respect of treasury services amounting to ₹ 5,59,020/- and held the ALP of the administrative services and administrative and technical training services at 30% of the value. The Revenue is not in appeal for the same. This otherwise implies that the Revenue is admitting that certain services have been received by the assessee from its AE. We find from the order of the TPO/Assessing Officer that the only reason cited for determining the ALP of such services at nil was that the assessee did not need the services as the same were duplicative and that the assessee did not derive any tangible benefit from such expenditure. We find the Hon'ble Delhi High Court in the case of CIT vs. EKL Appliances Ltd. (supra) has decided somewhat identical issue and held that so long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. The relevant observation of the Hon'ble Delhi High Court f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the TPO is not contemplated or authorised. 23. Apart from the legal position stated above, even on merits the disallowance of the entire brand fee/ royalty payment was not warranted. The assessee has furnished copious material and valid reasons as to why it was suffering losses continuously and these have been referred to by us earlier. Full justification supported by facts and figures have been given to demonstrate that the increase in the employees cost, finance charges, administrative expenses, depreciation cost and capacity increase have contributed to the continuous losses. The comparative position over a period of 5 years from 1998 to 2003 with relevant figures have been given before the CIT (Appeals) and they a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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