TaxTMI 
TaxTMI 
2019 (10) TMI 1441
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....pellant company can be categorised into the following segments: a) Export Business [Air and Sea] b) Import Business [Air and Sea] 4. In case of the export business, the principal contractor with the shipper/consignor would be JAS India. JAS India would organize the collection of the goods from the Exporter's premises and load the same for transport (air or ship). It would also provide a copy of the airway/shipping bill and bill of lading to the Exporter. The copy of Bill of lading/House Airway Bill after loading the material is given to the shipper. Thereafter, it would communicate with its associated enterprise in the destination country, who would organize the material released in the recipient country, including custom clearance and delivery to the consignee. JAS will raise the bill to the exporter for the transportation charges; haulage charges, custom clearance charge, ocean/air freight, air handling/clearing, charges, documentation charges, terminal charges, advance cargo declaration charges and fumigation charges. 5. In case of the import business, the principal contractor with the shipper/consignor would be the JAS Associated Enterprises and JAS ....
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....sked to explain the treatment given in its books of account and was also required to submit the cost benefit analysis of the above services. 14. The assessee filed detailed reply vide letter dated 11.10.2011. 15. Reply filed by the assessee did not find any favour with the Assessing Officer who was of the opinion that the assessee has failed to specify whether these services were actually received or not. 16. The TPO observed that the assessee has neither been able to specify the services nor been able to produce any evidence of services. The TPO further observed that the assessee has not been able to produce any evidence of any tangible benefit received from such services and formed a belief that the AE has imposed upon the assessee certain costs pertaining to itself and without passing on either any services or any benefit out of the above. 17. Rejecting the contentions of the assessee, the TPO made an adjustment on account of IGS payment made to AE at Rs. 35,89,000/- by determining the Arm's Length Price of IGS at Rs. NIL. 18. The assessee raised objections before the DRP vehemently contending that the comparables selected by the TPO are not functionally compa....
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....herefore, cannot be taken as a good comparable. 25. The ld. DR reiterated what has been observed by the DRP stating that logistics, per se, is a big umbrella which includes all the services like transportation, shipment, etc. and, therefore, comparables selected by the TPO should be upheld. 26. We have given thoughtful consideration to the orders of the authorities below. There is no quarrel in so far as the most appropriate method is concerned. Both the appellant and the TPO have taken TNMM as the most appropriate method with PLI OP/OC. We will now address to the disputed comparables. VRL LOGISTICS LIMITED 27. The website screen shot of this company shows that its name is entered in Limca Book of Records as the largest fleet owner of commercial vehicles in India in the private sector. The Annual Report of this company shows that this company has acquired one Hawker Beechcraft Premier IA Aircraft. Its freight receipts are at Rs. 51,258.80 lakhs. The fixed assets show vehicles and there is also one aircraft. The segment revenue shows revenue from goods transport, bus operation, sale of wind power and air charter business. 28. We further find that there is allocable ex....
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....and pointed out that this company has significant RPT at 37.10% of sales and hence fails RPT filter as applied by the TPO. 33. We find that the TPO has applied RPT filter of 25%. We are of the considered view that the TPO must look into the calculation made by the assessee and decide afresh whether this company passed the RPT filter or not. We, accordingly restore this comparable to the file of the TPO. The TPO is directed to examine the RPT and whether it passes the filter. The TPO shall given reasonable opportunity of being heard to the assessee. GORDON WOODROFEE LOGISTICS LTD 34. The ld. counsel for the assessee pointed out that Gordon Woodrofee Logistics Ltd. was excluded by the assessee when it applied a filter on comparables having 75% of turnover. It is the say of the ld. counsel for the assessee that when the TPO has applied filter on turnover of more than Rs. 1 crore, then this comparable should have been included in the final list of comparables. 35. We find force in the contention of the ld. counsel for the assessee. Earlier, when the assessee applied filter of 75% of Revenue, this comparable was excluded. But later on, the TPO applied the filter and included....
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....d better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure,....
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....ht of the aforementioned decisions of the Hon'ble High Court of Delhi, we are of the considered view that the only thing that a TPO can examine is the rendition of services and supporting evidences. We, accordingly, restore this issue to the file of the TPO. The TPO is directed to examine the rendition of services with supporting evidences and the assessee is directed to file the details for the same. This ground is treated as allowed for statistical purposes. 42. In so far as the disallowance u/s. 40a(ia) is concerned, we find that the quarrel is squarely covered in favour of the assessee and against the revenue by the decision of the Tribunal in assessee's own case in ITA No. 3222/DEL/2011 and 3296/DEL/2011. The relevant findings of the Tribunal read as under: "21. The payments made to non-resident are not on account of rendering any services in the nature of technical or professional services or fees for technical services or getting any income on account of royalty, albeit the nature of activities performed by the non-resident are purely business activities. The AEs are carrying on the business of freight forwarding services in their respective jurisdictions....
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....,741,128 NIL Yes 3 Worldwide Pty Ltd. Australia JAS (Jet Air Service) Belgium Brussels, 6,994,450 NIL Yes 4 NV Belgium JAS Do Brasil Transporters, Paulo, Brasil 1,427,306 NIL Yes Internattionals Ltda. 5 Jas Canada Inc. Toronto, 2,979,530 NIL Yes 6 JAS Forwarding S. A. Canada Switzerland 155,588 NIL Yes 7 JAS Forwarding (Chile) Ltda Santiago De 17,660 NIL No 8 Chile 9 Shanghai JAS Intl. Transport Co. Ltd. 10 JAS Forwarding (Czech) s.r.o. Cargo China Yes 10,270,980 NIL Yes Czech 206,85/ NIL 11 JAS Forwarding GMBH Frankfurt, 7,533,986 NIL Yes Germany 12 JAS Nordic APS Copenhagen, 255,078 NIL Yes Denmark 13 Quito, No Jet Air Service Ecuador S. A. 16,610 NIL Ecuador 14 Barcelona, Yes JAS Forwarding Spain, S.A. 3,002,296 NIL Spain 15 Yes JAS (Jet Air Service) France Paris, France 3,121,764 NIL Yes 16 JAS Forwarding (UK) Ltd. 17 London, U. K. 10,516,748 NIL No JAS Forwarding (HK) Ltd. Hong Kong 948,111 NIL 19 18 JAS Cargoways Inc. Kft. PT JAS Worldwide Indonesia 20 JA....