TaxTMI 
TaxTMI 
2017 (2) TMI 901
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....or previous year ended 31.03.2009 were as under:- Sl. No Name of Associated Enterprise Details of International transactions Amount(Rs) as per form 3 CEB 1 Durr Systems GmBH, Germany, Durr Anlagenbau, Austria, Durr Somac GmbH, Germany Import of parts and accessories. 53,79,164 2 Durr Systems GmBH, India Purchase of Assets 58,841 3 Durr Systems GmBH, Germany, Durr Systems Korea Installations & Other services rendered by/for Durr India. 29,58,25,325 4 Durr Systems GmBH UK, Durr Systems Inc, USA, Durr Poland Sd. Z.o.o., Poland Engineering services rendered by Durr India 1,47,30,372 5 Durr Systems GmBH, Germany Research & Development and Management fees 8,64,46,671 6 Durr Systems GmBH, Germany, Durr Korea, Durr Limited, UK, Durr system Inc, USA, Durr Eco Clean Filderstadt. Reimbursement of expenses receivable by Durr India. 11,99,49,850 Such transactions for previous year ended 31.03.2010 were as under:- Name of Associated Enterprise Details of International transactions Amount as per FORM 3CEB (INR) Durr Germany, Durr Austria, Durr China, Durr Italy, Durr Polans Import of pa....
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....sed by the ld. TPO was confined to engineering services segment and management fees segment. Assessee was required to justify the payments effected to Associated Enterprise abroad on these segments and to demonstrate that it was on an Arms Length basis. In reply it was submitted by the assessee that the payment of management fees as well as Research and Development fees were based on an agreement called PAS cost allocation agreement with Durr Systems Gmbh, Germany. As per assessee M/s. Durr Systems Gmbh, Germany allocated the cost incurred by it for common services/ benefits arising from its R & D and use of their management expertise, and shared it with its various Associated Enterprises spread all over the world. The said agreement also specified the nature of services that were to be rendered by Durr Systems Gmbh, Germany for the research and development services and management services separately. As per the assessee allocation of R & D expenditure was done by its Associated Enterprise abroad by using a formula whereby 50% of such cost was allocated between various Associated Enterprise in the ratio of total external sales of Durr group to the external sales of each Associated ....
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....According to them, increase in profitability of various Associated Enterprises could not be attributed solely to the R & D services rendered by M/s. Durr Systems Gmbh, Germany. They held that allocation of shared cost had to be done on the basis of the ratio of sales of various Associated Enterprises of M/s. Durr Systems Gmbh, Germany. Ld. DRP also held that negative adjustment for management charges could not be done since cross subsidization was not recognized in Transfer Pricing. Ld. DRP further held that method used by ld. TPO was nothing but CUP, since by applying the excess earning method, what would be arrived at was the CUP price. The assessment was thereafter completed for assessment year 2009-2010, considering the directions of ld. DRP and result was a downward adjustment of R& D expenses by a sum of F2,17,88,709/-. 6. For the subsequent two assessment years 2010-2011 and 2011-12, ld. TPO after rejecting TNMM adopted by the assessee followed the method suggested by the ld. DRP described by us in preceding para, for fixing the Arms Length Price of the R & D fees and management fees. resultant adjustment recommended for assessment year 2010-2011 came to F1,72,41,453/- an....
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....e Veritas As vs. Addl. DIT (2016) 268 ITR 1022. For his contention that CUP could not be preferred over TNMM in the absence of a comparable, ld. Authorised Representative placed reliance on a decision of Delhi Bench of this Tribunal in the case of Frigoglass India (P) Ltd vs. ACIT, 180 TTJ 265. For his contention that lower authorities ought to have accepted TNMM based on the study done by the assessee, when CUP could not be applied, reliance was placed on a Co-ordinate Bench decision in the case of DCIT vs. M/s. Flakt (India) Ltd, (in ITA 1032/Mds/2014, dated 9.06.2016). According to him there was no requirement for any adjustment for Arms Length Price of the international transaction undertaken by the assessee for the impugned three years. 9. Per contra, ld. Departmental Representative strongly supported the directions of the ld. DRP and the pursuant orders of the ld. Assessing Officer. 10. We have considered the rival contentions and perused the orders of the authorities below. Case of the assessee is that TNMM was rejected without proper reasoning and a method which was unknown to the law was used by the ld. TPO for the transfer pricing analysis. A look at the internation....
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....ner, namely :- (a) comparable uncontrolled price method, by which,- (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified ; (ii) such price is adjusted to account for differences, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions or between the enterprises entering into such transactions, which could materially affect the price in the open market ; (iii) the adjusted price arrived at under sub-clause (ii) is taken to be an arm's length price in respect of the property transferred or services provided in international transactions or specified domestic transactions'' ; Other methods mentioned in the said Rule are resale price method, cost plus method, profit split method and transactional net margin method. There is residual clause (f) which gives freedom to the ld. TPO to follow a method which takes into account the price which was charged or paid or would have been charged or paid and rule 10AB defines it so. Mumbai Bench in the case of DET Norske Veritas As (supra) has clea....