TaxTMI 
TaxTMI 
2015 (5) TMI 688
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....se was not subject to ALP adjustment?" 2. By judgment and order dated 23.05.2014, both the questions of law were answered against the assessee. Subsequently, the assessee filed R.P. No.321/2014; notice was issued in it. The Review Petition was heard stating that on the second question the Revenue had given up the challenge and consequently, the Court had no occasion to hear the assessee. The same was allowed after hearing on 17.11.2014 in the following terms: - "Notice was issued in these proceedings at the behest of the assessee/review petitioner, who contended that the judgment of the Court dated 23.05.2014 in so far as it dealt with the liability of referral fees, was not argued and had been given up. The discussion in the impugned judgment on this question which is formulated as question no. (E), is to be found from para 38 onwards. Having regard to the averments of the review petitioner/assessee and the submissions made, this Court had required Sh. Sanjeev Sabharwal, learned Standing Counsel to be present today. At the outset, Sh. Sanjeev Sabharwal, learned Standing Counsel states that this question had been given up during the hearing. It was, however, urged on behalf of t....
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....the assessee's claims were not substantiated. He, therefore, disallowed such claims under Section 37 of the Income Tax Act and added back the said amount of Rs. 1,73,52,992/-. The AO's order pertinently state as follows: - "4.8 On close scrutiny of e-mails, copies of which have been given in the submissions, it is seen that most of them are cryptic mails in that most of them do not clearly mention either the client or the requirements of the client which is the mandatory requirement for any entity referring to any other entity. There is no evidence submitted regarding the services provided by the group entities to merit the referral fee. Copies of some invoices are also given but again raising invoices does not substantiate or gives proof of the work done by the group entities. 4.9 The assessee has not been able to demonstrate as to how the Indian entities from whom income was generated on account of rendering off services etc. is linked to the associate enterprise of the assessee to whom referral fee is paid. In simpler words the link between the clients based in India and the associate enterprises of the assessee company which could enable their referral in the first instance h....
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....hich noted that even though some materials had been furnished by the assessee, the documents did not point out with any particularity the details of the transaction on account of which such referral fee was paid and business transaction actually done. 7. The ITAT after considering the rival submissions and noticing the legislative changes brought about by the amendment to the provision (Section 92CA (4)) by Finance Act, 2007 w.e.f. 1.6.2007 and the effect of three CBDT Circulars, held that the structures of that provision virtually precluded the re-examination of the issue which had been considered by the TPO. Not resting its conclusions on this determination alone, the ITAT examined the merits of the rival claims and held as follows: - "39. Right from the beginning it has been the case of the assessee that the Assessing Officer did not have jurisdiction to re-examine the allowability of referral fee as Ld. TPO has already held that this being international transaction of the assessee is at arm's length. In view of aforementioned discussion, we found that such contention of the assessee has a force and it is to be held that once an international transaction has been made subject ....
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....nsactions or otherwise, were available. He referred to the specific findings of the ITAT in this regard and the submissions made and stated that even though such materials were available with the AO, who made no adverse comments with respect to receipts both in respect of this head as well as in respect of the total income derived from the main activity which was the subject matter of the Revenue sharing transfer pricing exercise (ALP), the approach of somehow seeking to deny the legitimate expenditure was not warranted. 10. This Court has considered the rival submissions. Whilst, there is some merit in what the ITAT observed with respect to the change in law brought about on account of the amendment in 2007 (an aspect which was even commented upon and dealt with in the main judgment - which has now been since recalled), this Court is of the opinion that the said issue is best left open given its wide ramifications and importance. The Court, therefore, proposes to decide the merits on the assumption that the AO did possess the power which he in fact exercised in the present case. 11. Here, it would be material to extract the chart which the ITAT had occasion to consider in respec....