TMI Blog2019 (2) TMI 1783X X X X Extracts X X X X X X X X Extracts X X X X ..... he benchmarking carried out by the assessee. The TPO has no authority to hold that this transaction should not have taken place. See M/S. CUSHMAN AND WAKEFIELD (INDIA) PVT. LTD. [ 2014 (5) TMI 897 - DELHI HIGH COURT] As the TPO has not carried out exercise of determining the arm s-length price of the specified domestic transaction in accordance with law, in the interest of justice, we feel it appropriate to restore this issue back to the file of the Ld. AO/TPO for deciding afresh is directed above. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes. - ITA No.7555/Del/2019 - - - Dated:- 3-2-2019 - Shri Sudhanshu Srivastava, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Ms. Rashmi Chopra, Adv., Shri Ruchesh Sinha, Adv. For the Respondent : Shri Sukesh Kumar Jain, CIT(DR) ORDER PER O.P. KANT, AM: This appeal was fixed for hearing on the direction of the Hon ble Delhi High Court, dated 24/12/2019. In the present appeal of the assessee, the application (SA No. 982/Del/2019) for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic transaction and, therefore, he referred the benchmarking of the transaction to the learned TPO. The facts in respect of the specified domestic transaction reproduced by the Ld. CIT(A) in the impugned order is extracted as under : 6.1 The salient facts of the case are as follows. The appellant is a private limited company engaged in the business of real estate, it is a consortium of three different company of the Orris Group including Orris Infrastructure Private Limited (OIPL). During the year under reference, the appellant had made a specified domestic transaction with its Associated Enterprise namely OIPL. The appellant applied to Yamuna Expressway Industrial Development Authority for allotment of land for development and was granted a plot Bearing Number TS- 02, Sector 22D Yamuna Expressway. District Gautam Buddha Nagar, UP of about 200 acres for the purpose of making an integrated township. Different areas in the said plot was marked tor residential, commercial, institutional and for road - parking. 6.2 The AE (OIPL) was also engaged in real estate business of developing and selling of residential, commercial units sector. The appellant and OIPL entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specified domestic transaction of collaboration expenses at nil. The relevant finding of the learned TPO is reproduced as under: 7.3 In view of the discussions at paras 6 and 7.2 above, it is concluded that the economic substance of the transaction differs from its form and the transaction is so arranged that when viewed in totality, it differs from those which would have been adopted by independent enterprises behaving in a commercially rational manner. This principle is laid down in the OECD guidelines in paragraphs 1.36 to 1.41. 7.4 Assessee also raised the contention that there was no loss to the revenue by undertaking this transaction. Here it needs to be emphasized that the main focus of this transfer pricing audit is correct computation of ALP of specified domestic transaction. While computing ALP, it is not necessary to find whether there was any motive to shift expenses or income to the related party. It has been held in Coca Cola Pvt. Ltd. 309 1TR 194 (P H) that there is no need to show motive of shifting of profit to invoke transfer pricing provisions. 7.5 For benchmarking the above stated transaction, the other method applied by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related parties follow the market principle so that the income and profit of an entity is calculated correctly. 3.4 The objection of the assessee that the learned TPO has not found any flaw in the working of the assessee reported in transfer pricing report , were also dismissed by the Ld. CIT(A) observing as under: 6.11 Ground No. 3 pertains to the contention of the appellant that the AO had erred in not considering that the TPO had not found any flaw in the working reflected in the transfer pricing report which was prepared by a Chartered Accountant. The AO has considered the different agreements and the contentions of the appellant which have been discussed and commented upon in the body of the order itself. The main issue pointed out by the AO/TPO is that in an unrelated party scenario where market conditions prevail, the appellant would not have made a payment of ₹ 68,80,48,216 to OIPL. The contention of the appellant is not accepted as the issue relates to transaction between related parties and the TPO has the jurisdiction, as per law, to determine the value of the transaction or the income / profit derived from the same at market value. 3.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable in public domain. If data is not available in public domain, he should collect from private domain by way of issue notice under section 133(6) of the Act and confront the same to the assessee and then decide the arm slength price of the specified domestic transaction. The second option is that if no data is available, then accept the benchmarking carried out by the assessee. The TPO has no authority to hold that this transaction should not have taken place. The Hon ble Delhi High Court in the case of Cushman and Wakefield (India) P. Ltd. (supra) has observed on the issue of authority of the TPO while benchmarking international transaction as under: 35. The TPO's Report is, subsequent to the Finance Act, 2007, binding on the AO. Thus, it becomes all the more important to clarify the extent of the TPO's authority in this case, which is to determining the ALP for international transactions referred to him or her by the AO, rather than determining whether such services exist or benefits have accrued. That exercise - of factual verification is retained by the AO under Section 37 in this case. Indeed, this is not to say that the TPO cannot - after a consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has highlighted the authority of the Assessing Officer under section 37 of the Act and authority of the learned TPO under Chapter X of the Act. The relevant para is extracted as under: 40. On the first ground, this Court notes that the jurisdiction of the AO, under Section 37, and the TPO, under Section 92CA, are distinct. A referral by the AO to the TPO is only for the limited purpose of determining the ALP, based on a prima facie view that such a referral is necessary. It does not imply a concrete view as to the existence of services, or the accrual of benefit (such that allowance under Section 37 must be permitted). This very argument was considered and rejected by the ITAT in Delloite (supra): 34. The second argument of learned counsel that the Transfer Pricing Officer is not empowered to disallow the expenditure and that the very reference to the Transfer Pricing Officer by the Assessing Officer presumes that the amount in question is allowable under section 37 of the Act ITA 475/2012 Page 32 and certain case laws were relied upon for this proposition. 35. We are unable to persuade ourselves to agree to this proposition for the reasons that the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to the TPO by the AO. Ultimately, any exercise of discretion by the AO is bound to be judicially reviewed by the statutory appellate authorities as well as by courts. Therefore, it is not as if there is no check on the exercise of discretion by the AO. The AO can, therefore, determine under Section 37 that the expenditure claimed (in this case, the referral fees) was not for the benefit of the business, and thus, disallow that amount. This does not restrict or in any way bypass the functions of the TPO. Quite to the contrary, it represents the correct division of jurisdiction between the two entities. 6.3 As the TPO has not carried out exercise of determining the arm s-length price of the specified domestic transaction in accordance with law, in the interest of justice, we feel it appropriate to restore this issue back to the file of the Ld. AO/TPO for deciding afresh is directed above. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes. 7. In the result, the appeal of the assessee is allowed for statistical p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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