TMI Blog2021 (1) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... see has to demonstrate and satisfy Evidence Test or rendition test and benefit test, as envisaged u/s 92(2) of the Act, and that, services provided by AE are neither duplicative nor shareholder s activity. Ld.AO/TPO is then directed to determine Arm s length price of these services based on documents submitted by assessee by determining most appropriate method‟ and Comparability analysis. Disallowance u/s 40(a)(ia) - HELD THAT:- No details have been furnished in support of the claim of assessee. Accordingly we are of considered opinion that the issue needs to be re-verified by Ld.AO. Assessee is directed to file all relevant details in support of its contention. Ld.AO shall then consider all these doc evidences filed by assessee in accordance with law. - IT(TP)A No.290/BANG/2017 - - - Dated:- 25-11-2020 - SHRI. B.R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For the Appellant : Shri K.R Vasudevan, Advocate For the Respondent : Shri Farhat Hussain Qureshi, CIT (DR) ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against final assessment order dated 15/12/2016 passed by Ld.ACIT Circle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in not appreciating the Group Services received by the Appellant are inextricably linked and constitute an integral part of the manufacturing activity, thereby justifying aggregation with the transactions in the manufacturing operation. Thereby, not accepting the TNMM adopted by the Appellant as the most appropriate method for justifying the payments made for the receipt of Group Services. 7. The learned AO/learned TPO/Hon'ble DRP erred in ignoring the evidences submitted by the Appellant to prove that it was in need of services, services were actually rendered and the benefit was derived from the services obtained from the AE. 8. The learned AO/learned TPO/Hon'ble DRP erred in proposing adjustment amounting to MR 2,85,825 on account of commission paid to its AE. 9. The learned AO/ learned TPO/ Hon'ble DRP erred in not accepting the TNMM adopted by the Appellant as the most appropriate method for benchmarking the transaction of payment of commission to its AE. 10. The learned AO/learned TPO/Hon'ble DRP erred in considering CUP as the appropriate method to compare the commission paid by Appellant to its AE despite the learned TPO not following the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,431 Export of equipment and parts 8,19,72,810 Import of traded goods 1,86,14,571 Import of capital goods 94,91,360 Payment for ERP software 34,65,000 Payment of royalty 1,01,84,712 Income from sales commission 1,81,24,976 Rendering of technical services 32,49,778 Payment of commission 3,09,000 Payment of group service fees 1,82,90,866 Payment of group information technology (IT) fees 2,07,40,434 Reimbursement of expenses 4,16,526 Amounts receivable 4,15,33,167 Amounts Payable 3,98,67,807 6. Ld.TPO observed that assessee received business support services, against which payments were made to AE. Ld.TPO accordingly called upon assessee to establish the services having rendered by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is also a working of allocation based on the agreement. These documents do not prove that any actual services had been rendered. ii) Page 3 of the additional evidence, is a confidential and nondisclosure agreement dated 11/10/2013 (which is subsequent to the assessment year) which does not in any way establish that the services commensurate to the fees, were rendered. 11. Regarding disallowance of commission paid/payable to foreign from under section 40(a)(ia) of the Act, Ld DRP observed that no evidence was furnished by assessee it has been observed by DRP that assessee did not establish the onus with supportive documents that expenses had been incurred for purpose of business carried out during the year, and the claim was not contingent in nature. DRP accordingly upheld the disallowance made. 12. Upon receipt of DRP directions, Ld.AO passed impugned assessment order making addition in the hands of assessee. Aggrieved by order passed by Ld.AO, assessee is in appeal before us now. 13. At the outset, Ld.AR submitted that, various details were furnished by assessee before the authorities below which were not considered in right perspective. Ld.AR submitted that, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P at NIL and value of transaction has to be computed as per law. 19. The Income Tax Act provides computation of arms length price of any international transaction as under: Computation of income from international transaction having regard to arm's length price. 92. (1) Any income arising from an international transaction shall be computed having regard to the arm's length price. Explanation.-For the removal of doubts, it is hereby clarified that the allowance for any expense or interest arising from an international transaction shall also be determined having regard to the arm's length price. (2) Where in an international transaction [or specified domestic transaction], two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm's length price of such benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Transfer Pricing Officer's determination of ALP of the services received under cost contribution arrangement as 'NIL' is his perception that the assessee did not need these services at all, as the assessee had sufficient experts of his own who were competent enough to do this work. For example, the Transfer Pricing Officer had pointed out that the assessee has qualified accounting staff which could have handled the audit work and in any case the assessee has paid audit fees to external firm. Similarly, the Transfer Pricing Officer was of the view that the assessee had management experts on its rolls, and, therefore, global business oversight services were not needed. It is difficult to understand, much less approve, this line of reasoning. It is only elementary that how an Assessee conducts his business is entirely his prerogative and it is not for the revenue authorities to decide what is necessary for an Assessee and what is not. An Assessee may have any number of qualified accountants and management experts on his rolls, and yet he may decide to engage services of outside experts for auditing and management consultancy; it is not for the revenue officers to qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus India (P.) Ltd. v. Asstt. CIT [IT Appeal No. 352 (Bang.) of 2009, dated 20- 10- 2010] held that the assessee has to establish before the Transfer Pricing Officer that the payments made were commensurate to the volume and quality service and that such costs are comparable. When commensurate benefit against the payment of services is not derived, then the Transfer Pricing Officer is justified in making an adjustment under the arm's length price. 24. Placing reliance upon aforestated decisions, we are of considered opinion that for these services, assessee has to demonstrate and satisfy Evidence Test or rendition test and benefit test, as envisaged u/s 92(2) of the Act, and that, services provided by AE are neither duplicative nor shareholder s activity. Ld.AO/TPO is then directed to determine Arm s length price of these services based on documents submitted by assessee by determining most appropriate method‟ and Comparability analysis. Accordingly this issue stands allowed for statistical purposes. 25. Ground 11 is in respect of disallowance of ₹ 4,13,721/- under section 40(a)(ia) of the Act. 26. At the outset both sides submit that no details have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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