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TMI Blog2023 (12) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... fer Pricing Officer 3. erred in referring the Appellant's case to the Learned Transfer Pricing Officer ("TPO") under Section 92CA(1) of the Act, without satisfying the conditions specified therein, Rejecting the benchmarking analysis undertaken by the Appellant/selection of tested party 4. erred in rejecting the transfer pricing analysis undertaken by the Appellant by rejecting the selection of AE as the tested party, without appreciating that the analysis was in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("the Rules") and incorrectly holding that the Appellant' s international transactions of GCCM service availed from its AE were not at arm's length; Determining ALP of GCCM services availed by the Appellant from its AE at 50% of the GCCM fees paid to AE 5. erred in determining the ALP in respect to the international transaction of GCCM services availed by the Appellant from its AE at 50% of its value. Scope of TPO 6. erred in not appreciating the commercial rational/ expediency of the Appellant for availing of GCCM services, and thereby exceeding jurisdiction by considering benefit/ availing of services as a condition f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f various subsidiary companies which got merged with the Appellant and whose income is included in the Appellant's income while offering tax for the current year; Penalty Proceedings 15. erred in initiating penalty proceedings under Section 274 r.w.s. 271(1)(c) of the Act. Each of the above ground is independent and without prejudice to one another. The Appellant craves leave to add, to alter, to amend or to delete any or all of the above grounds of appeal, at or prior to hearing of the appeal so as to enable the Income Tax Appellate Tribunal to decide the appeal according to law. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case." 2. Fact in brief is that assessee (ISS Facility Services India Private Limited or ISS India) is wholly owned subsidiary of ISS Global A/S, which in turn is a downstream subsidiary of ISS World Services A/S (ISS A/S) Denmark. The assessee has entered into services agreement in relation to which the assessee has made payment to its AE for availing of Global Corporate Clients Management Services (GCC Services). Accordingly, assessee has paid GCC Fees (Global Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not demonstrate the rendering of any service or the benefit received for which such payment was made. The TPO referred two of the agreement of the assessee made with Barclay and Citi Group in respect of the GCC fees which was recovered from the third party clients. The TPO has allowed the claim of GCC fees to the extent of Rs. 12,94,05,791/- which was charged from the third parties and disallowed the remaining amount of Rs. 10,84,93,555/- claimed as GCC cost by the assessee and added back as income. 5. The assessee has filed objection against the aforesaid adjustment made by the TPO before the ld. DRP. Following the directions of the DRP for earlier years, the ld. DRP has restricted the disallowance to the extent of 50% of the amount received by the AE with reference to services rendered under Global Corporate Client Management agreement. 6. Heard both the sides and perused the material on record. During the course of appellate proceedings before us the ld. Counsel at the outset submitted that similar issue on identical fact in the case of the assessee itself for assessment year 2013-14 has been adjudicated by the ITAT, Mumbai vide ITA No. 411/Mum/2018 on 03.01.2022 in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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) by order dated 24th March, 2005 restricted the technical know how royalty paid by the respondent assessee to its AE at 1% instead of 2%, as claimed.In terms of the determination dated 24th March, 2005 of the TPO on the above issue amongst others, an assessment order dated 28th March, 2005 for the subject Assessment Year was passed by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee are allowed on this technical aspect and grounds raised by the revenue are dismissed on this technical aspect." In view of the above we hold that as no method under section 92C(1) of the Act was followed by TPO/ DRP for upholding partial adjustment in respect of international transaction pertaining to Payment of Global Client Management Fee and same was done merely on ad-hoc basis, TPO is directed to delete the transfer pricing adjustment of Rs. 3,66,71,462/- in respect of Payment of Global Client Management Fee. Accordingly, transfer pricing grounds no. 7 to 11 raised in the appeal are allowed." Since, during the year under consideration also the TPO/DRP has not followed any method u/s 92(1) of the Act for making adjustment in respect of international transaction pertaining to payment of Global Client Management Fees and similar to the earlier year the same was done merely on adhoc basis, therefore, following the decision of coordinate bench as referred above the TPO is directed to delete the impugned transfer pricing adjustment of Rs. 5,42,46,778/- in respect of payment Global Client Management Fees. Therefore, these ground of appeal of the assessee are allowed. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llaneous expenses: 13. During the course of assessment the AO noticed that assessee has claimed miscellaneous expenses to the amount of Rs. 6,10,64,234/- in the profit and loss account. The assessing officer after analyses of the material submitted by the assessee observed that assessee has claimed expenses of capital nature under the head miscellaneous expenses. Therefore, 20% miscellaneous expenses to the amount of Rs. 1,22,12,846/-was disallowed and added to the total income of the assessee. 14. The assessee filed objection before the DRP. The DRP has directed the assessing officer to work out the exact sum related to capital expenditure and allow the depreciation upon the same if it is allowable. 15. Heard both the sides and perused the material on record. We find that assessing officer has made adhoc disallowance without specifically referring the exact amount of capital expenditure debited to the profit and loss account. Therefore, we restore this issue to the file of the assessing officer for deciding afresh to determine the exact amount of expenditure of the nature of capital expenditure, after verification of relevant documentary evidences maintained by the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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