TMI Blog2022 (3) TMI 1512X X X X Extracts X X X X X X X X Extracts X X X X ..... o addressed the issue of adopting CUP as the most appropriate method for the cost contribution charges - In assessee s case the TPO has treated the cost contribution charges as a separate class of transaction quoting that there is no restriction that the TP should be done only at enterprise level and also on the basis that it is an intra group transaction. From the details of services and the benefits received from these services as submitted by the Ld AR, the payment made towards these charges are integral part of the core business of the assessee. Thus we are of the considered view that the TPO is not justified in applying CUP is the most appropriate method for computing the ALP treating the cost contribution charges as the most appropriate method. Disallowance made on non-production of invoices by the assessee - HELD THAT:- The assessee has produced as additional evidence, in the form of invoice copies before the Tribunal. The additional evidence now produced go to the root of the issue of disallowance - Invoice copies submitted by the assessee and taken as additional evidences require thorough examination to check the genuineness of the expenses and the allowability the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te basis disregarding the fact that that cost is allocated on a rational global basis. (Ground No.1, 5 6) ii. Treating cost construction charges as a separate class of transaction and applying the Comparable Uncontrolled Price Method (CUP) as the most appropriate method as against the Transaction Net Margin Method as applied by the assessee (Ground No. 2 to 4) iii. In the corporate tax, the main issue contended by the assessee is towards the disallowance made by the AO on various expenses claimed by the assessee on the contention that supporting documents in terms of invoices were not submitted. (Ground No. 1 to 37 under Corporate Tax) 5. We will first take up issues pertaining to transfer pricing adjustment. The assessee is in the manufacture and trading of pneumatic power tools and spares accessories. The assessee lays great emphasis on pre after sales service to customers to help customers select appropriate technology and products. The company s operations can be broadly classified into 2 major schemes i.e. manufacturing of tools and pumps and trading of security products and tools. International transactions reported by the assessee are as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar class of transaction. While making the TP adjustment applying CUP method, the TPO made an estimate towards this adjustment after taking into account, the cost of personnel, time spent etc. After the estimation, the TPO concluded that out of the total payment of Rs.2,40,69,613/-, Rs.65,30,000/- is the reasonable amount for providing the services and hence made an adjustment of Rs.1,75,39,613/-. 7. Aggrieved, the assessee raised objections before the DRP. The DRP confirmed the TP adjustments stating that it is a settled law that ALP of each international transaction is to be determined separately and that TNMM at entity level cannot be applied to justify the ALP of Intra group services. The DRP also relied on its own order with regard to the similar adjustment in assessee s own case which was a subject matter of decision of the DRP for the asst. year 2010-11, citing that there are no changes in the facts of the case during the year under consideration. The DRP also mentioned that the assessee failed to demonstrate the genuineness of the expenses by the AE as well as its allocation amount to various groups and that it has received / benefited from such services to the extent cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an have any role in determining arm's length price of that service. The real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. Similarly, whether the AE gave the same services to the assessee in the preceding years without any consideration or not is also not relevant. The Assessee has filed a huge compilation of papers, including copies of reports, emails and other documents evidencing the rendering of services. There is no infirmity in this contribution being taken as an arm's length contribution to the costs. There is no objective way in which use of services can be measured and as is the commercial practice even in market factors driven situation, the costs are shared in accordance with some objective criterion, including sales revenues and number of employees. In any case, the assessee has adopted TNMM as most appropriate method, and the revenue authorities have neither made an effort to show as to how this method is not appropriate to the facts of this case, nor shown as to which other prescribed method of ascertaining arm's lengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e towards these charges are integral part of the core business of the assessee. Considering the decision of the Hon ble Tribunal in Ingersoll Rand India Ltd (supra) and the facts of the present case we are of the considered view that the TPO is not justified in applying CUP is the most appropriate method for computing the ALP treating the cost contribution charges as the most appropriate method. 14. On the corporate tax the AO made the following disallowances:- a) Depreciation on addition to fixed assets b) Commission paid to dealers c) Adhoc disallowance of staff expenses d) Ad hoc disallowance of Misc. expenses e) Disallowance of bad debts advances written off f) Adhoc disallowance of advertisement promotion expenses g) Adhoc disallowance of travelling expenses h) Adhoc disallowance of repairs maintenance expenses i) Disallowance of Provision for warranty j) Disallowance of Cost contribution expenses - k) Disallowance of Legal professional expenses The main reason as contended by the AO for making these additions is that the assessee did not produce books of accounts, bills and vouchers for verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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