TaxTMI 
TaxTMI 
2016 (10) TMI 1335
X X X X Extracts X X X X
X X X X Extracts X X X X
....up charges) on the basis of the order passed under section 92CA(3) of the Act by the TPO. 2.1 That the assessing officer/ TPO erred on facts and in law in holding the arms length price of international transactions of payment of corporate charges as NIL as against Rs. 2,53,87,180 incurred by the appellant, alleging that (i) no services were received by the appellant (ii) cost are charged on allocation basis and therefore, some of the group cost may be loaded in appellant share of corporate charges (iii) the services received are incidental being in the nature of long association. 2.2 That the assessing officer/TPO erred on facts and in law in not appreciating that the payment of corporate charges was appropriately benchmarked applying TNMM as most appropriate method and that no adverse inference could be drawn on this account. 2.3 That the assessing officer/TPO erred on facts and in law in computing adjustment on account of international transaction of payment of corporate charges without reasonably applying any prescribed methods, thereby, violating the basic principles of TP regulations. 2.4 That the assessing officer/TPO erred on facts and in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(ii) the appellant is in fact working as a contract manufacturer for the limited purpose of exports made to AE. 3.2 That the assessing officer/TPO failed to appreciate that the appellant manufactures products on the basis of the technical know-how provided by the AE and the fees for technical services is paid as percentage of sales. 3.3 That the assessing officer/TPO erred on facts and in law in not appreciating that the intangibles provided by the AE helps the appellant to manufacture new products, upgrade existing products, reduce manpower, reduce raw material cost and increase in productivity. 3.4 That the Dispute Resolution Panel erred on facts and in law in confirming the adjustment made by the TPO with regard to the payment of royalty by relying on its order for AY 2009-10 & AY 2010-11 and holding that the issues are identical. 4. That the assessing officer erred on facts and in law in making an ad-hoc disallowance of Rs. 2,75,437 to the returned income on account of advertising and sales promotion expenses incurred by the assessee. 4.1 That the assessing officer erred on facts and in law in making ad-hoc disallowance of 5% of adve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fit margin to operating cost (OP/OC%) of the assessee at 9.20% was higher than the weighted average profit margin of comparable companies at 8.43%, therefore, the international transactions undertaken by it with AE were at arm's length price. However, the TPO held that the assessee has failed to substantiate that services have actually been rendered to it and benefit has actually been derived by it on the basis of documentary evidence. He further observed that the assessee in support of its contention has merely furnished copies of certain mails exchanged between its personnel. The TPO was of the view that none of the e-mails exchanged between the employees established the requirement/specific need of the assessee for their services, the benefit which had accrued to the assessee or that an independent party would have been willing to pay another independent party for the services purported to be received by the taxpayer. The TPO applied CUP method and concluded that the arm's length price of this transaction for payment of corporate charges was at Nil as against Rs. 2,53,87,180/- paid by the assessee to its AE. Thereafter, the AO passed the draft assessment order by making the addi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nditure. Broad details of various technical, marketing and administrative support service were furnished to the TPO / DRP. In terms of application dated 4.7.2014 under Rule 29 of the ITAT Rules, the assessee had sought to place on record the summary of invoices raised on the assessee by its AE during the financial year 2007-08. The detailed break up of invoices on the basis of nature of services and the summary of the man hours spent by the various divisions of the AE in rendering technical, marketing and administrative service to Contitech group of companies. It is a case of the assessee that the above said specific details or complete break up of how the cost has been allocated could not be furnished before the completion of the proceedings before the TPO/DRP, since these details were to be obtained from its AE Germany. We find that the details now produced have an important bearing for resolving the transfer pricing dispute and therefore in the interest substantial justice and equity, we admit the same on record. Since the additional evidence is admitted on record the same needs to verify by the TPO/AO. Hence, the transfer pricing dispute of payment of corporate charges is resto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncorporated the conclusion of the TPO in determining the ALP of this international transaction at Nil without carrying out any independent analysis or evaluation as to whether or not such use of technical know-how was required/availed by the assessee in terms of section 37(1) of the Act. The ld. AR fairly admitted that there is no independent discussion in the assessment order about the disallowance of royalty payment, except for reproduction of the relevant parts from the order of the TPO. 9. The Hon'ble Delhi High Court in CIT v. Cushman & Wakefield (India) (P.) Ltd. (2014) 367 ITR 730(Del) has held that the authority of the TPO is limited to conducting transfer pricing analysis for determining the ALP of an international transaction and not to decide if such services exist or benefits did accrue to the assessee. Such later aspects have been held to be falling in the exclusive domain of the AO. In that case, it was observed that the E-mails considered by tribunal from Mr. Braganza and Mr. Choudhary dealt with specific interaction and related to benefits obtained by assessee, providing a sufficient basis to hold that benefit accrued to assessee. Since the details of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pect of expenses claimed. According to the AO the assessee could not produce complete bills/vouchers in support of its claim in respect of sales promotion and advertising. He made a disallowance @ 5% on ad-hoc basis to prevent leakages of revenue, if any. Accordingly, disallowance of Rs. 2,75,437/- @ 5% of Rs. 55,08,731/- was made. 17. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee submitted that the AO had not brought any evidence on record to substantiate that the sales promotion and advertising expenses was not incurred by the assessee for the business purposes. It was further stated that despite of all bills/vouchers as asked by the AO being produced before him, the AO without pointing out any specific instance of nonincurrence of said expenditure, had simply disallowed @ 5% of the total expenditure which was not justified. The reliance was placed on the following case laws: Dwarka Prasad Agarwal Vs ITO 52 ITD 239 (Cal) Mahendra Oil Cake Industries Pvt. Ltd. Vs ACIT 55 TTJ 711 Rattah Mechanical Works Ltd. Vs ITO 87 Taxman 288 (Chd.) Shriram Pistons and Rings Ltd. Vs IAC 39 TTJ 132(Del.) ....