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TMI Blog2015 (8) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Delhi Benches of the ITAT in the case of Ericson India Pvt. Ltd. (2012 (11) TMI 1 - ITAT, DELHI) has held that the legitimate business needs of the company must be judged from the view point of the company itself and must be viewed from the point of a prudent businessman. It was held that the it is not for the Assessing Officer to dictate what the business needs of the company could be. It is the businessman who can only judge the legitimacy of the business need of the company from the point of a view of a prudent businessman. The term “benefit” to a company in relation to its business has a very wide connotation. It was further held that it is not feasible to evaluate the price of each service in financial term in isolated and stand alone manner for each such service or part of the service and hence TNMM at entity is acceptable. The First Appellate Order on the issue is well supported by the decisions cited by the Learned AR and hence we are not inclined to interfere therewith. - Decided against revenue. - ITA No. 2444/Del/2012 - - - Dated:- 17-8-2015 - SHRI N. K. SAINI AND SHRI I. C. SUDHIR, JJ. For The Department : Shri Rahul Garg, Sr. DR For The Assessee : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he comparables worked out at 0.68% as against -0.03% of the assessee. As the assessee was within plus minus 5% of the arm s length price (ALP), the assessee claimed that its international transaction is at arm s length. The TPO did not agree with the assessee and decided to benchmark the international transaction individually as against the aggregate approach of the assessee. 6. The assessee has paid ₹ 61,62,872 towards allocation of information technology cost. The TPO issued show-cause notice to the assessee asking it to justify the payments made in this regard. The TPO was not satisfied with the cause shown by the assessee and came to the conclusion that no services actually had been received as no evidence had been filed in support. He observed further that no cost sheets or corroborative agreements have been provided to demonstrate that these services were actually received by the assessee. He held further that if the services had been rendered at all, those may be termed as ancillary services. No independent party would pay anything for such services under uncontrolled circumstances. The TPO thus held the payment of ₹ 61,62,872 is nothing but a device of profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant extracts of the submissions before the learned TPO and giving the detailed description of the services utilized by the assessee in its operations and their benefit was explained. He submitted that these services are utilized by the assessee in its operations and are critical for its efficient functioning. No third party would provide these services free of charge. Arm s length price of such services, by no stretch of imagination, can be determined to be nil. The Learned AR pointed out that in its own case of the assessee in assessment year 2006-07, the learned TPO has held the payment of IT Cost of ₹ 40,16,126 at arm s length and not drawn any adverse inference on this issue. He submitted that there is no change in the facts and circumstances of the case during the year and thus the Rule of Consistency should be applied. He contended that if TNMM is held as the most appropriate method, it is not permissible to single out certain costs for the sake of separate Benchmarking analysis. He submitted that in the present case, there is no dispute that TNMM is the most appropriate method for all other transactions. Considering that I. T. costs form a part of the cost base in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for maintaining all the customer records, sales history opportunity, Pricing etc. ), GCMS (Global Complaint Management System for analysis of customer complaints based on which correction action taken) and various knowledge data base required for business. iii. WAN site Fees : This fee covers the operation of Danisco s global wide area network which allows Danisco India to communicate and exchange information using the global network. iv. SAP Support Fee: This includes the expenditure incurred handling, user support and training and minor changes to the SAP template. This also includes all the support for company Business process software based on SAP platform and the technical support for local ERP system (Navision). v. License Fee: This is the fee with respect to licenses for software such as Lotus notes, Adobe, Windows Operating system, all server Application, Navision Software License, Pricing system software, SAP Software, BMC remedy (problem reporting software), and Antiviruses which are procured globally by the group companies; vi. Service Desk : These are the charges for internet IT service desk for resolution of IT related problems faced by the employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the probability to run the business of assessee has rightly accepted the claimed expenditure on the nature of the services required to run the business of the assessee with the direction to the Assessing Officer to allow the same. The Hon ble jurisdictional High Court of Delhi in the case of Hive Communication Pvt. Ltd. ( ITA No. 306/2011 followed by the Delhi Benches of the ITAT in the case of McCann Ericson India Pvt. Ltd. (supra) has held that the legitimate business needs of the company must be judged from the view point of the company itself and must be viewed from the point of a prudent businessman. It was held that the it is not for the Assessing Officer to dictate what the business needs of the company could be. It is the businessman who can only judge the legitimacy of the business need of the company from the point of a view of a prudent businessman. The term benefit to a company in relation to its business has a very wide connotation. It was further held that it is not feasible to evaluate the price of each service in financial term in isolated and stand alone manner for each such service or part of the service and hence TNMM at entity is acceptable. The First Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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