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TMI Blog2020 (4) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned assessment year is similar to the one made in assessment year 2011-12. The assessee had made payments to its Associated Enterprises (AEs) towards intra group services to the tune of Rs. 7.54 crores. The Transfer Pricing Officer(TPO) held that the assessee has not been able to show services rendered and the benefit derived by the assessee from the alleged services. Hence, the TPO determined the Arms Length Price (ALP) of the services at 'Nil'. The assessee filed objections before Dispute Resolution Panel (DRP).The DRP vide directions dated 22/12/2016 rejected the objection of the assessee and upheld the findings of TPO. The ld. Authorized Representative for the assessee pointed that TPO in para A3.3 and 5 of his order dated 25/01/2016 has categorically mentioned that addition on similar grounds for the same transactions were made in assessment year 2011-12 and the DRP had rejected the objections of the assessee. The ld. Authorized Representative for the assessee further pointed that the DRP in para 4.2.18 of the directions has reiterated that the issue had come up before the Panel in the preceding year also, wherein the action of the TPO in determining ALP of the internation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 2011-12. 6. We have heard the submissions made by rival sides and have perused orders of authorities below. The assessee in appeal has raised as many as 17 grounds. The ground No.1 to 3 are general in nature, hence, requires no adjudication. 7. The ground No.4 to 9 of the appeal are in respect of a single issue assailing the method of benchmarking international transactions entered into by the assessee with it Associated Enterprise (AE) in the period relevant to the assessment year under appeal. The assessee had made payment towards allocation of operational expenses. The assessee paid Rs. 3.95 crores to its AE Millward Brown Inc(Global Hub) and Rs. 3.59 crores to Millward Brown Singapore (Regional Hub) in lieu of certain intra group services. The assessee selected AE as tested party and selected 16 companies as comparable to benchmark the transaction. The AE charged 10% mark-up on direct and indirect cost for rendering global services. The assessee applied Transactional Net Margin Method (TNMM) as most appropriate method to benchmark its international transaction. The TPO rejected the benchmarking of the assessee. The TPO held that the assessee has failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposition that Transfer Pricing officer has erred in applying the benefit test. In this view of the matter in our considered opinion authorities below have totally erred in rejecting the assessee's documents and submissions on the ground that they do not prove the benefit obtained by the assessee. That the services have been rendered is very much evident from the documents submitted to the authorities below. The assignment to the TPO was to benchmark the international transaction and compute the arm's length price. Instead of performing his statutory duties the TPO sat into the shoes of the Assessing Officer and rejected the documents on the ground that they do not prove the benefit test. This action has been upheld by the DRP. This approach is not sustainable. 9. Furthermore, we also note that submission of learned Counsel of the assessee is also correct that the authorities below have summarily rejected the assessee's claim without applying any method of benchmarking international transaction as specified in section 92C of the Act. In this regard we note that section 92C provides that following method of benchmarking of international transaction. 92C. (1) The arm's l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine the arm's length price of the international transaction by adopting one of the method prescribed under the statute and cannot deviate from the restrictions/conditions imposed under the statute. The Hon'ble Jurisdictional High Court in CIT vs. Johnson & Johnson Ltd., ITA no. 1030/2014, dated 7th March 2017, while dealing with identical issue of determination of arm's length price of royalty by resorting to estimation by the Transfer Pricing Officer has held as under:- "(d) We find that the impugned order of the Tribunal upholding the order of the CIT(A) in the present facts cannot be found fault with. The TPO is mandated by law to determine the ALP by following one of the methods prescribed in section 92C of the Act read with Rule 10B of the Income Tax Rules. However, the aforesaid exercise of determining the ALP in respect of the royalty payable for technical knowhow has not been carried out as required under the Act. Further, as held by the CIT(A) and upheld by the impugned order of the Tribunal, the TPO has given no reasons justifying the technical know-how royalty paid by the Assessing Officer to its Associated Enterprise being restricted to 1% instead ..... 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