TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 1054
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....r benchmarking/ computing arms length price in respect of 0.88% of a transaction when 99.12% of the international transaction forming part of same class have been subject to transactional net margin method under Rule 10B(1)(e) read with Rule 10C? 3. Whether the application of CUP method under Rule 10B(1)(a) is correct when the comparative data in relation to the price for exports to AE as against a hon-AE is very different because of the market, mode of delivery, geography location and volume of sale? 4. Whether the TPO can arrive at NIL arms length price without even rejecting the arms length price arrived by the Appellant and without even mandatorily applying the provisions of Section 92 and 92C wherein the TPO is bound compute the arms length price as per the methods prescribed under Rule 10B? 5. Whether the TPO has the jurisdiction to question the commercial expediency in relation to expenditure incurred by the Appellant for its business purpose? 6. Whether the TPO has the jurisdiction to decide how the assessee should conduct its business and regarding the necessity or otherwise of incurring the expenditure in the interests of its business? 7. Whether the TPO, DRP an....
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.... Pune bench in the case of Amphenol Interconnect India P. Ltd (supra) held that CUP method was not appropriate for evaluating part of the exports. But the reasons for taking the said view was on account of difficulties in carrying out the adjustments for differences between the transactions with Associated Enterprise and Non Associated Enterprise, which is not the case here. 13. Coming to the contention of the ld. Authorised Representative that Sec. 92C of the Act mandates adjustment and determination of Arms Length Price on a class of transactions, it is necessary to have a look of Sec. 92C(1) of the Act, which is reproduced hereunder:- '1) The arm's length price in relation to an international transaction or specified domestic transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely : (a) comparable uncontrolled price method ; (CUP) (b) resale price method ; (RPM) (c) cost plus method ; (CPM) (d) profit split method ; (PSM) ....
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.... is with regard to some commission paid to M/s. The Central Agency, appointed by the Assessee under the Supplemental Agreement dated 24 March 2005, to avail its services for finding market for the said threads and procuring the purchase orders from all over the world. The learned Tribunal disallowed the said expenditure in the form of commission paid to M/s. The Central Agency on the ground that there is no evidence for actual agency services availed by the Assessee being produced before the learned Tribunal and merely raising of invoices does not give rise to any presumption of rendering the actual service and therefore, the payment of such commission to M/s. The Central Agency was not an allowable expenditure. The relevant portion of the order of the learned Tribunal in the impugned order in this regard are also quoted below for ready reference :- "What the assessee was bound to pay was commission based on net invoice value. What the agent was supposed to do was promote the sale of the assessee. Finding of the ld. TPO is that no such services were rendered by the TCA to the assessee. It is not disputed that invoices were raised by the TCA on the assessee, based on the net valu....
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....require services of an Associated Enterprise or knowledge of any sublims stalls. When assessee was unable to bring on record anything to show for what reason agency commission was paid, in our opinion there arose an exceptional circumstance where by Arms Length Price could be taken as Nil. As for decision of the Delhi Bench of the Tribunal in the case M/s. McCann Erickson India (P) Ltd (supra) strongly relied by the ld. Authorised Representative, assessee therein was able to demonstrate the type of services, description of service and benefits received by the it from its Associated Enterprise. Further, the payment was not agency commission but management commission fees. In the host of other judicial decisions relied by the ld. Authorised Representative also the question dealt was on the management fees and not on agency commission. In these circumstances, we do not find any reason to interfere with the orders of the lower authorities. Ground No.3 stands dismissed. 5. The learned counsel for the Assessee Mr. Sandeep Bagmar, drew our attention to the previous order of the learned Tribunal dated 21 December 2012, by which the learned Tribunal decided the appeals for preceding years ....
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....adjustments could be made. But, however, misconstruing the same, the Tribunal has made a remand with specific direction for this AY 2009-10, that CUP Method was the most appropriate method to be adopted under Section 92C of the Act for the Assessee, the learned Tribunal has bound down the lower authorities to adopt the CUP Method and make TP Adjustments accordingly and only for recomputation of the TP Adjustments according to CUP Method, the matter has been remitted back to the lower authorities. He, therefore, submitted that the present remand by the learned Tribunal for AY 2009-10 shall also be held to be only an open remand, leaving it free for the learned TPO to decide once again as to which is the most appropriate method to be adopted in the facts and circumstances of the case, for TP Adjustment, whether CUP method or TNM Method and then make T.P. Adjustments, if any. 8. On the other hand, the learned counsel for the Revenue Mr. Swaminathan, also submitted that in pursuance of the previous remand order of the learned Tribunal dated 21 December 2012, for the previous assessment years, as stated above, for some of the assessment years, orders have been passed by the TPO/DRP bel....
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....es, as to which method whether CUP Method or TNM Method is appropriate to be applied in the facts and circumstances of a particular Assessee, looking to the nature of business. Though there are rules framed under the said provision in the Income Tax Rules, 1962, but it always depends on the facts and circumstances of each case, as to which method has to be adopted and which method is the most appropriate method to be adopted. In our opinion, it is not even a question of law, to be considered by the High Court. 14. Be that as it may, in our opinion, the only observation which we, in the present appeal, intend to make is that there is obviously a misreading of the previous order dated 21 December 2012, passed by the learned Tribunal for the previous Assessment Years, while deciding the present appeal for AY 2009-10. While the earlier order made an open remand to the authorities below to decide as to which is most appropriate method to be adopted, CUP Method or TNM Method, the learned Tribunal, by the impugned order dated 16 November 2016 for AY 2009-10 has apparently, fallen into error, in holding that the CUP Method as the appropriate method and that this issue was already decided ....
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...., if the data relating to external comparables were not available before it, the learned Tribunal could have very well directed both the sides, viz., the Revenue Authorities below and the Assessee, to adduce relevant evidence before itself. The Assessee in the present case had undertaken to produce the relevant data relating to external comparable before the learned Tribunal. Therefore, it was only matter of some time to be granted by the Tribunal to direct both the sides to adduce such evidence from the public domain available for comparison, to decide as to which is the most appropriate method to be adopted looking to the nature of business etc. as in Section 92C of the Act. Of course, the mathematical computation work could have been left to the Adjudicating Authorities below, or done by the Tribunal itself with the assistance of Counsels/Assessees etc. As far as the appropriateness of the method to be adopted for TP adjustments was required to be done, in our considered opinion, the Tribunal should not have remanded the matter back to the authorities below and that too to the two different authorities, viz., Dispute Resolution Panel and Commissioner of Income Tax (Appeals), in ....