TMI Blog2022 (4) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... the conjoint reading of the relevant sections and the relevant rules, we find that the duty of the ld. TPO is restricted only to the determination of the arm s length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C read with rule 10B of the rules. Thus, there is no provision made in the statute empowering ld. TPO for determining the ALP on a particular international transaction on an estimation basis / adhoc basis. Duty of the TPO is restricted only to the determination of the arm s length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C of the Act read with rule 10B of the rules. Thus, there is no provision made in the statute empowering TPO for determining the ALP on a particular international transaction on an estimation basis / adhoc basis. As relying on M/S. JOHNSON JOHNSON LTD. [ 2017 (3) TMI 1520 - BOMBAY HIGH COURT] we have no hesitation in directing the ld. TPO to delete adjustment made to ALP in respect of aforesaid three services viz., GIS services, MSF Services and MNC Services. Accordingly, grounds raised by the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction at NIL, and not following one of the prescribed methods under section 92C(1) of the Act, thereby making an ad-hoc disallowance. 6. On the facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon'ble DRP have erred in questioning the commercial wisdom and expediency of the Appellant for receiving GIS services. 7. On the facts and circumstances of the case in law the learned TPO and the learned AO erred in considering the aforesaid services to be in the nature of shareholder/ stewardship/ duplicative/ incidental/ passive/on-call services without appreciating the underlying nature of the services Receipt of Management Service Fee ('MSF ) Services - INR 16.06,22.324 Multinational Client Co-ordination ('MNC') Services - INR 1,62,55,966 8. On facts and circumstances of the case and in law, the learned TPO and the learned AO, under the directions of the Hon ble DRP have erred in not following Hon ble Tribunal's ruling in Appellant own case for AY 2010-11 to AY 2013-14 in relation to above international transactions, more so considering that there is no change in fact as compare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issues in appeal are covered, in favour of the assessee, by co-ordinate bench decisions in the own cases of the assessee. However, these decisions are disregard on two grounds-first, the sixth method, which is now available for bench marking, has not been considered in this case; and-second, that the issue is to be kept alive as decisions of the co-ordinate benches have been challenged in further appeal. The relevant DRP observations are as follows:- (iii) Analysis of the stand of the assessee The stand of the assessee is that the need and benefit is not required to be established. The assessee has not been able to independently substantiate /establish the actual cost of services claimed to have been received, yet the assessee expects that the cost to the AE and markup thereon should be accepted at face value, without any independent verification by the TPO being made possible The said cost has been compared with certain comparables of the world by using TNMM method, however the deficiencies in such selection of comparables and FAR Analysis has been rightly highlighted by the TPO as discussed above. In fact, the assessee has totally ignored the Sixth method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015. The TPO has also further correctly relied upon the decision of jurisdictional ITAT in the case of Deloitte Consulting India (P) Ltd (22 Taxman 1079-2012) where it has been held that the TPO can arrive at NIL ALP in absence of details from the assessee on the services claimed to be rendered by the AE's. The TPO has not merely quoted the decisions but in great detail discussed and analysed how the facts of the instant case are similar to the decisions being relied upon by the TPO. We find that the reliance placed by the TO on these decisions of Hon'ble ITAT is correct and these decisions are squarely applicable to the facts of the instant case. We have gone through the decisions cited by the assessee in its support but find that the facts of our case are on different footing. The TPO has further relied upon the relevant provisions of the Indian Evidence Act 1872. In view of the above discussion we find that the TPO has rightly concluded that the assessee has failed to prove evidences in respect of- a) The benefits received by the assessee; b) When and how such services were rendered by the AE; c) At what rate these services were available in the open ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AO, which have been considered. No additional submissions have been made before us. In any case, the assessee has been provided due opportunity to be heard before us and the issue has been discussed in detail. Accordingly we reject the above contentions raised by the assessee. viii) Without prejudice to the above, with respect to the decisions of Hon'ble ITAT in the case of the assessee, which have been relied upon, we find that further appeal has been preferred against the order of Hon'ble ITAT of earlier years. In this regard, we also place reliance on the order of DRP in the case of the assessee for AY 2015-16 and earlier years, where the issue of Intragroup services has been discussed and decided against the assessee. The assessee has raised the principle of consistency in one of its grounds. Dispute Resolution Panel, though a quasi-judicial body, however, does not represent a pure judicial setup. It is a forum constituted for the purpose of resolution of disputes between the Assessing Officer (AO) and the assessee to the extent possible, related to the draft order proposed by the AO, before a final order is passed. It is important to note that the Panel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Panel could be challenged by the Department. It is pertinent to point out that if the DRP for the year under consideration arrives at a conclusion, which is against the Department and in favour of the assessee, especially on a legal issue which has not yet attained finality in the Supreme Court, and if the said issue is eventually decided by the Hon'ble Supreme Court in favour of the Department, there will be no recourse available for collecting the revenue attributable to the said issue, since the Department's appeal would not have been pending, as for the year under consideration, DRP orders cannot be appealed against by the Department. As the issues raised in above grounds of objection is pending for decision by higher judicial forums, also relying on the findings of DRP for AY 2015-16, we reject the grounds of objection raised by the assessee. 5. The issues raised in this appeal, as learned Departmental Representative fairly accepts, are covered by the decision of coordinate benches dated 12th June 2019 07th August 2019, in assessee s own case in ITA Nos 1156/Mum/2015, ITA No. 1187/Mum/2015 (AY 2010-11) ITA Nos 2075/Mum/2016, ITA 1762/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer under Section 143(3) of the Act. (b)Being aggrieved with the order dated 28th March, 2005 of the Assessing Officer, the respondent assessee preferred an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 22ndMarch, 2007, the appeal of the respondent assessee on the issue of royalty payable on technical know how, allowed the appeal. It inter alia held that restricting the royalty paid on account of technical know how to 1% was arbitrary and ad-hoc. Inasmuch as, there were no reasons justifying the restriction of the technical know how royalty paid by the respondent assessee to its AE at 1%. Moreover, it also records the fact that the TPO did not determine the ALP of the technical know how royalty by adopting any of the methods prescribed under Section 92C of the Act. (c)Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order dated 20th August, 2013 the Tribunal dismissed the Revenue's appeal inter alia upholding the order of the CIT(A). (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 mandate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing any of the prescribed methods as per law. 8.1. We hold that once a reference is received by the ld. TPO u/s.92CA(1) of the Act from the ld. AO, the ld. TPO is required to determine the ALP of the international transaction as per the provisions contained in Section 92C and 92CA of the Act read with relevant rules thereon. From the conjoint reading of the relevant sections and the relevant rules, we find that the duty of the ld. TPO is restricted only to the determination of the arm s length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C of the Act read with rule 10B of the rules. Thus, there is no provision made in the statute empowering ld. TPO for determining the ALP on a particular international transaction on an estimation basis / adhoc basis. 8.2. We find that the Hon ble Jurisdictional High Court in the case of CIT vs. Johnson Johnson Limited in ITA No.1030 of 2014 dated 07/03/2017 wherein it was held as under:- 4.Regarding question (D) :- (a)The respondent assessee paid to its Associated Enterprises (AE), technical know how royalty of 2%. The Transfer Pricing Officer (TPO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. 8.3. Respectfully following the aforesaid decision of Hon ble Jurisdictional High Court, we have no hesitation in directing the ld. TPO to delete adjustment made to ALP in respect of aforesaid three services viz., GIS services (Rs.62,95,226/-), MSF Services (Rs.7,88,90,157/-) and MNC Services (Rs.19,29,008/-). Accordingly, grounds raised by the assessee are allowed on this technical aspect and grounds raised by the revenue are dismissed on this technical aspect. 8.4. In view of the aforesaid decision rendered on technical aspect, the other elaborate arguments made by both ld. AR and ld. DR before us on merits for justification of their respective actions need not be gone into and becomes academic in nature. We make it clear that no opinion is rendered by us with regard to those elaborate arguments made by both the parties before us. 8.1. Respectfully following the same, we allow the Transfer Pricing Grounds rasied by the assessee and dismiss the Grounds raised by the revenue for the Asst Year 2011-12. (AY 2012-13) 13. The first issue to be decided in this appeal is with regard to the action of the ld. DRP in upholding the action of the ld. TP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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