TMI Blog2016 (8) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... ls of the Revenue are directed against the different orders of the DRP for the above assessment years. 2. Revenue s appeal in ITA No.740/Mds./2016 for assessment year 2011-12 has been filed late by 13 days. Condonation petition has been filed by Revenue. Reasons shown are justified and hence, delay is condoned and appeal admitted. 3. The issues involved in both the Revenue s appeals are common, we consider the facts narrated in assessment year 2010-11. 4. The facts of the issue are that In the TPO s order that most of the e-mail correspondences are in the nature of doubts raised, guidance seeked, reviews updating the sales, enquiry about general functions of the company. The TPO has also observed on page 4 of the order that these are share holders services categorised as Stewardship Services do not require separate payment as per the OECD guidelines. The TPO has also mentioned on page 5 that substantial management activities were performed by the assessee itself. In later part in the assessment order the TPO has discussed the relevant submissions of the assessee forming part of replies dated 07- 01-2014 and 13-01-2014 and also has made certain observations on these submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be individually analysed and an appropriate method adopted for the purpose of arriving at the ALP. Thereafter the TFO proceeded to determine ALP of services received in each head of service. For instance in respect to service received from Volex Group Plc towards finance support the TPO has analyzed the contents of four mails related to it. The TPO writes in respect to 3 mails that no service has been received. Only in respect to 4th mail the TPO has submitted that providing training to an employee by the AE is a service and therefore 50% of fees apportioned under the finance support is found to be allowable. In view this TPO has determined the ALP of finance support service at Rs 38,11,146. Likewise the TPO has done analysis in respect to all kind of services given by the AEs. 4.2 According to DRP Chennai, the application of CUP is not a proper method in this case. Comparison in CUP involves availability of price which independent parties charge in a third party scenario in an open market. If such price is available then it is considered as an arm s length price and a comparison is made with the price the tested party has paid to its AE to see as to whether price is comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice on the limited evidence produced before the TPO. Even the ALP has been decided treating the price fixed as er the agreement as CUP. This is improper and cannot be upheld. Further in Transfer Pricing the method prescribed in the Act are based on comparison with third party transactions in an open market. No method prescribed in the Act is based on the cost of the transaction. Therefore cost can be one of the indicators while determining the ALP of the services but i cannot be the basis for determination of ALP. ALP ultimately must be determined on the basis of third party situation in an open market. The TPO has not done the same. It is also not evident from record as to how the cost of the services has been decided by the TPO. It appears that the TPO has decided the cost of the services rendered on an estimated Lasis, which seems arbitrary to the panel. In the third party scenario the independent parties determine the cost of the services keeping in view the benefits accruing to them. But the TPO has not made any study of the benefits accruing to the assessee in terms of sales goirg up, expenditure coming down, market is expanded for the goods of the assessee, etc. While dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced by the assessee is enough as there is a receipt of services also and TNMM is appropriate when the expenses incurred cannot be segregated, or individually not capable of analyzing. Further, he submitted that judgment relied by the Department in the case of Knorr Bremsc India Pvt Ltd. Vs. ACIT in ITA No.5097/Del/2011 is no more good law as it was reversed by the High Court of Delhi. 7. We have heard both the parties and perused the material on record. The main isuse for consideration is whether the CUP method to be followed or TNMM to be followed to determine the ALP of assessee s case. This was considered by the Tribunal in the case of M/s.Knorr Bremsc India Pvt Ltd. Vs. ACIT vide order dated 31.10.2012 wherein held that:- 9. The appellant has also assailed the addition made on account of international transactions (Rs.1,52,07,206/- towards professional consultancy and Rs.1,40,56,800/- towards management fee for support services), by determining Nil value as the ALP. The TPO found that these services provided by the AE are very general in nature and such a support is expected from AU even without payment of any such charge. The assessee argued that the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure is not assessee s business expenditure. The DRP as well as the authorities below have merely elucidated that the payments are reimbursement jn respect of Ms. Rita Ricken and other personnel s case to serve the interest of share holders. By saying so they have only described the circumstance under which the international transaction has been entered by the appellant, so as to test the benefit that can be said to have reached the assessee. It, therefore, cannot be said to have questioned the commercial expediency of such transactions entered by the appellant. The I.T. rules contain exhaustive detail regarding nature of information and documents which are required to be maintained by the assessee. Rule 10D(1) of the I.T. Rules, 1962 also mandates the maintainability of record of uncontrolled transactions to be taken into account in analysing the comparability of the international functions entered into by the assessee. It, therefore, is obligatory on part of the appellant to maintain such record and produce the same before the TPO to show that it has benchmarked the international transaction at ALP. This obligation, however, has not been discharged by the assessee. 9.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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