TaxTMI 
TaxTMI 
2016 (8) TMI 1572
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....ved on page 4 of the order that these are share holders services categorised as 'Stewardship Services' do not require separate payment as per the OECD guidelines. The TPO has also mentioned on page 5 that substantial management activities were performed by the assessee itself. In later part in the assessment order the TPO has discussed the relevant submissions of the assessee forming part of replies dated 07- 01-2014 and 13-01-2014 and also has made certain observations on these submissions. The assessee has submitted that TNMM is the most appropriate method to bench mark the management fee transaction. The assessee has submitted n this regard that where comparable data of similar transaction carried on with independent parties is not available and internal or external CUP cannot be applied, it is with TNMM that is considered to be the most appropriate method. The assessee also challenged in the replies the application of CUP by the TPO. The TPO has observed at page 6 of the TP Order in this regard that in many judicial decisions it was held that the TPO can verify whether actual service are received from the AEs. The TPO has considered it a preliminary step wherein it is essential....
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....e TPO has done analysis in respect to all kind of services given by the AEs. 4.2 According to DRP Chennai, the application of CUP is not a proper method in this case. Comparison in CUP involves availability of price which independent parties charge in a third party scenario in an open market. If such price is available then it is considered as an arm's length price and a comparison is made with the price the tested party has paid to its AE to see as to whether price is comparable to the price chargeable by independent parties? Therefore, arm's length price cannot be the price that appears in the in the agreement entered into by elated parties for various services. This price, it is presumed, is influenced by relationship existing between the parties who enter into such transactions. Obivious of this fact, the TO has considered the price of services appearing in the intra-group service agreement as CLJP. The TPO has also mentioned on page 7of the order that CUP is most appropriate methoc1 in this case. By analysing the list of documents filed by the assessee and the cost incurred by the AE it can be knon whether such services have a value fixed to it which is nothing but the CUP da....
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.... been decided by the TPO. It appears that the TPO has decided the cost of the services rendered on an estimated Lasis, which seems arbitrary to the panel. In the third party scenario the independent parties determine the cost of the services keeping in view the benefits accruing to them. But the TPO has not made any study of the benefits accruing to the assessee in terms of sales goirg up, expenditure coming down, market is expanded for the goods of the assessee, etc. While determining the price of the services the third parties decide the price of the services on the basis of macro level benefits that may accrue to them. Therefore, it will be very narrow approach to decide the price of services for each micro service evident on perusal of the mail. 4.4 Hence, the DRP observed that the use of CUP cannot be upheld due to number of flaws mentioned above. In our view the CUP is not the most appropriate method in this case as reliable and correct data required to apply CUP is not available in this case. The use of CUP by the TPO in this case is therefore rejected. The TPO is directed to consider TNMM as the right method for determination of ALP of the international transaction pertain....
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....in held that:- "9. The appellant has also assailed the addition made on account of international transactions (Rs.1,52,07,206/- towards professional consultancy and Rs.1,40,56,800/- towards management fee for support services), by determining Nil value as the ALP. The TPO found that these services provided by the AE are very general in nature and such a support is expected from AU even without payment of any such charge. The assessee argued that the authorities below are stated to have acted beyond their jurisdiction in touching upon the commercial expediency of the transactions. The DRP, however, has found that Emails brought on record merely justify presence of Ms. Rita Ricken as team leader of sales logistics, which is only an effort to justify her presence. She in fact is safeguarding group interestl shareholder interest. The TPO has analysed each service and benefit received by assessee in detail. No cost allocation key has been furnished to the DRP either which confirmed the addition made for both such services claimed by the assessee. 9.1. The appellant's contention that TPO is no authority to judge the allowability o the business expenditure is a correct proposition of ....
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....f the I.T. Rules, 1962 also mandates the maintainability of record of uncontrolled transactions to be taken into account in analysing the comparability of the international functions entered into by the assessee. It, therefore, is obligatory on part of the appellant to maintain such record and produce the same before the TPO to show that it has benchmarked the international transaction at ALP. This obligation, however, has not been discharged by the assessee. 9.3. The appellant in the present case is also not shown to be willing to pay any amount for such services, if it were, so provided by an independent enterprise or if the same would have been performed in house. The DRP is found to have considered these services as non-beneficial for the recipient and did not take it as chargeable services. The perusal of e-mails and other contemporaneous record only goes to reveal that incidental and passive association benefit has been provided by the associate enterprise. In this view of the matter there could neither be any cost contribution or cost reimbursement nor payment for such services to the AE. The TPO, therefore, has rightly adopted Nil value for benchmarking the arm's length p....