AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (3) TMI 1727
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....s the most appropriate method for determining the arm's length price of management services fees. 3. The Ld TPO, Ld AO and Hon'ble DRP erred in law, in applying the "Comparable Uncontrolled Price" method as prescribed under Rule 10B(1)(a) for determining the arm's length price for management services, in the absence of any finding of "the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction," 4. The Ld TPO, Ld AO and Hon'ble DRP erred on facts and in law in determining the arm's length price of international transaction pertaining to payment of management services fees (sales and marketing services) to SABIC Innovative Plastics Japan, SABIC Innovative Plastics Korea and SABIC Innovative Plastics Hongkong at 'Nil' as against INR 1,37,74,052 (USD 2,99,826) as determined by the Appellant. 5. The Ld TPO, Ld AO and Hon'ble DRP erred on facts and in law in determining the arm's length price of international transaction pertaining to payment of management services fees (environment, health and safety services) to SABIC Innovative Plastics Japan and SABIC Innovative Plastics Singapore at &#....
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.... Environment, Health and Safety Sabic SEA 15,500 Sabic Japan 15,966 Manufacturing Services Sabic HK 28,623 Supply Chain Services Sabic Japan 4,883 Sabic Korea 12,303 Sabic HK 10,883 Finance Consultancy Services Sabic Japan 896 Sabic Korea 1,784 6. The reasoning adopted by the TPO was broadly on these lines. So far as Sales and Marketing Services are concerned, he was of the view that, on a perusal of evidences in support of these services, the discussions in emails eyc seem to be somewhat general in nature and in any case not worth any independent payment. He has observed that benefit conferred on the assessee because of a part of Sabic group, which gets him these inputs provided by the AEs, "does not deserve any payment". In respect of EHS, the TPO has observed that "except correspondence relating to the training of personnel in this area and long forecasting, no services appear to have been rendered" and that "to factor the issue of training as well forecasting, the payments.... are taken as for the services rendered". Similarly, in terms of manufacturing segment, he was of the view that sharing or material, preparation of budget, assistance in arranging spar....
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....el)] and which are equally applicable in the present context: 15. One of the very basic pre condition for use of CUP method is availability of the price of the same product and service in uncontrolled conditions. It is on this basis that ALP of the product or service can be ascertained. It cannot be a hypothetical or imaginary value but a real value on which similar transactions have taken place. Coming to the facts of this case, the application of CUP is dependent on the market value of the arrangements under which the present payments have been made. Unless the TPO can identify a comparable uncontrolled case in which such services, howsoever token or irrelevant services as he may consider these services to be, are rendered and find out consideration for the same, the CUP method cannot have any application. His perception that these services are worthless is of no relevance. It is not his job to decide whether a business enterprise should have incurred a particular expense or not. A business enterprise incurs the expenditure on the basis of what is commercially expedient and what is not commercially expedient. As held by Hon'ble jurisdictional High Court in the case of CIT Vs EK....
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....ly. 9. The only justification for taking ALP of services at NIL is under CUP but then there has to be something on record to show that in an arm's length situation these services are rendered without consideration. The worth of services cannot be decided by the TPO, nor is it open to him to question, as such an approach implicitly does, the commercial expediency of these services. It is only elementary that how an assessee conducts his business is entirely his prerogative and it is not for them to decide what is necessary for an assessee and what is not. It is not for the TPO to question assessee's wisdom in making payment for the services, which, in the opinion of the TPO, are not of "much" use. The TPO has travelled much beyond his powers in questioning commercial wisdom of assessee's decision to take benefit of expertise of its AEs. The DRP is also in error, in the light of these discussions, evaluating the worth of services on the basis of benefit of these services. The very foundation of the impugned ALP adjustment was thus devoid of any legally sustainable basis. 10. In any case, we have carefully perused the evidence of services rendered and the nature of services in ques....
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....al contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 15. We have noted that these credits were duly accounted for and that is how these were shown in the books of accounts as an asset. The present position is, and that appears to be undisputed, that the assessee is no longer eligible for these credits. Clearly the assessee has an incurred a business loss in respect of the credits so lost. The admissibility of deduction is thus beyond any dispute or controversy. There is also no dispute that the assessee has not claimed this deduction in any other year as the loss is written off in the current previous year and as such bonafides of this claim is also not in doubt. On these facts, in our considered view, the pedantic approach being adopted by the Assessing Officer, in demanding conclusive evidence of loss having crystallized in the current previous year, in wholly unjustified. As the assessee has recognized this loss in the present year, and as incurring of loss is beyond any doubt or controversy, we deem it fit and proper to direct the Assessing Officer to delete the impugned disallowances. The assessee ....
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....es) to SABIC Innovative Plastics Management (Shanghai) Co., Ltd and SABIC Innovative Plastics (SEA) Pte. Ltd at 'Nil' as against INR 33,16,370 (USD 72,967) as determined by the Appellant. 7. The Ld TPO, Ld AO and Hon'ble DRP erred on facts and in law in determining the arm's length price of international transaction pertaining to payment of management services fees (legal services) to SABIC Innovative Plastics (SEA) Pte, Ltd and SABIC Innovative Plastics US LLC at 'Nil' as against INR 31,97,788 (USD 70,358) as determined by the Appellant. 8. The Ld TPO, Ld AO and Hon'ble DRP erred on facts and in law in determining the arm's length price of international transaction pertaining to payment of management services fees (human resource services) to SABIC Innovative Plastics US LLC and SABIC Innovative Plastics Management (Shanghai) Co., Ltd at 'Nil' as against INK 41,84,616 (USD 92,071) as determined by the Appellant. 9. The Ld TPO, Ld AO and Hon'ble DRP erred on facts and in law in determining the arm's length price of international transaction pertaining to payment of management services fees (sales and marketing services) to SA....
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....s included 10% mark up on the costs allocated. The TPO was of the view that the service rendered by this AE was more of infrastructure support than software development, because the software is being procured from outside and being distributed to the AEs. Therefore, the mark up of 10% is not acceptable and it should be taken @ 3% as usually applicable on infrastructure support. Aggrieved by this proposal, the assessee raised a grievance before the DRP but without any success. The assessee is not satisfied and is in appeal before us. 24. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 25. We did ask the learned Departmental Representative about the basis on which 3% margin was adopted and he justified the same on the ground that when software is being procured from outside and simply being distributed by the AE, such a margin is more than reasonable. No specific comparables were, however, pointed out. Such being the position, as learned counsel rightly points out, there is no basis for adoption of 3% as an acceptable mark up for the information management services. This variation i....
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.... assessee has raised the following grievance: The Ld AO and Hon'ble DRP erred on facts and in law in disallowing advances of INR 7,92,881 adjusted against provision for doubtful advances as an expense u/s 37(1) of the Act. 34. To adjudicate on this grievance of the assessee, only a few facts need to be taken note of. The assessee has written off small debit balances aggregating to Rs. 7,92,881 and claimed deduction in respect of the same. The Assessing Officer has, however, disallowed the claim on the ground that the assessee has failed to prove that these advances were given in the course of normal business and furnish the evidences in support of its claim. The DRP has also confirmed the action of the AO by observing that the assessee has failed to satisfy the Assessing Officer with regard to old balances in the creditors ledger. The assessee is not satisfied and is in appeal before us. 35. Having heard the rival contentions and having perused the material on record, we find that the advances written off were in respect of advance payments for creditors for supplies in the course or normal business. The claim of the assessee was thus justified and it is upheld. The Assess....