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TMI Blog2015 (2) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... of AO/TPO for deciding it in conformity with the law laid down by the Hon’ble jurisdictional High Court in the case of Cushman (supra). - Appeal is allowed for statistical purposes. - ITA No. 521/Del/2013 - - - Dated:- 30-1-2015 - Sh. R. S. Syal and Sh. A. T. Varkey, JJ. For the Appellant : Assessee by : Sh. Deepak Chopra, Adv, Sh. Anil Kumar Gupta, CA, Mrs M. Bajpai Ms. Neha Singh, Advs. For the Respondent : Sh. Peeyush Jain, CIT DR ORDER Per R. S. Syal, AM: This appeal by the assessee is directed against the order passed by the Assessing Officer on 30.11.2012 u/s 143(3) r.w.s 144C of the Income-tax Act, 1961 (hereinafter also called the Act ) in relation to the assessment year 2008-09. 2. The first issue raised in this appeal is against the addition on account of Transfer Pricing Adjustment from international transaction of Sale of finished goods valued at ₹ 11,80,09,913/- 3. Briefly stated the facts of the case are that the assessee is an Indian subsidiary company of Illinois Tool Works Inc. The holding company has worldwide presence in the field of manufacturing of highly engineered products and specialty items. The assessee is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be computed having regard to the arm's length price. The mandate of this section is to determine the ALP of an international transaction. The term transaction has been defined under rule 10A(d) to mean a number of closely linked transactions . It follows that the ALP of more than one transaction can be determined as one unit, only if they are closely linked transactions. In such a case, the plural of international transactions shall be considered as a singular for the purposes of benchmarking as a single transaction. Reverting to the facts of the instant case, we find that all the six sets of international transactions undertaken by the assessee can, by no standard, be considered as closely linked . We, therefore, refuse to accept the adoption of TNMM on entity level. 5. As the assessee has no mechanism to determine the ALP of this international transaction under the TNMM in a separate manner and the further fact that the comparable uncontrolled data under the CUP method is available, we feel no difficulty in holding that the CUP is the most appropriate method for this transaction. Under the given facts and qua the international transaction of sale of finished goods i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from 8. Section 92C deals with the computation of arm's length price. Sub-section (1) provides that the arm's length price in relation to an international transaction shall be determined by any of the five specific and one general 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 etc. The first proviso to subsection (2) of section 92C provides that : where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices . Rule 10B(1)(a) deals with the determination of Arm s Length Price under the CUP method. Sub clause (i) of Rule 10B(1)(a) provides that; the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or number of such transaction, is identified . When we consider the mandate of section 92C in conjunction with that of rule 10B, it transpires that if there is a single comparable uncontrolled transaction, then the price in such transaction is to be considered but if there are number of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ALP of this transaction was Nil because the assessee failed to provide any evidence of an independent transaction between unrelated parties and further the assessee could not explain with any documentary evidence about the functions performed by the AE necessitating the payment of such commission. That is how, he computed the Arm s Length Price of this international transaction price at Nil. The assessee remained unsuccessful before the DRP and the Assessing Officer, accordingly, made this addition amounting to ₹ 77.00 lacs, being the entire commission paid by the assessee to its AEs. 12. After considering the rival submissions, we find it as an undisputed position that the TPO computed Arm s Length Price of this transaction at Nil and the Assessing Officer made the addition without independently considering the deductibility or otherwise of such expenditure in terms of section 37(1). The Hon ble Delhi High Court in the case CIT vs. Cushman and Wakefield India Pvt. 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 serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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