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TMI Blog2016 (3) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... the arm’s length price of the services rendered by the assessee but also in rejecting bonafide quotations as a valid input for ascertaining the arm’s length price by the assessee. In view of the above we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned arm’s length price addition - Decided in favour of assessee - I.T.A. No.3812/Mum/2015 - - - Dated:- 29-2-2016 - Pramod Kumar AM and Pawan Singh JM For The Appellant : None For The Respondent : N Sathya Moorthy ORDER Per Pramod Kumar, AM: 1. By way of this appeal, the assessee has challenged correctness of the order dated 26th March 2014, passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2011- 12. The short issue that we are required to adjudicate in this case is whether or not the learned CIT(A) was justified in upholding the arm s length price adjustment of ₹ 12,71,378 on the facts and in the circumstances of this case. 2. The appeal is time barred by 7 days. The assessee has moved a condonation petition, duly supported by an affidavit, praying that the delay be condon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see did explain that, under clause 5.1 of the agreement with the AE, the fees of US $ 40,000 per month is irrespective of the number of crew members, and that the number of crew members varied from 152 to 180. It was also explained that there is no provision for minimum rate to be charged for each of the crew member. As for the computation of average charge of US $ 263.15 per crew member done by the Assessing Officer, the assessee submitted that there are three broad categories of crew members- namely officers, ratings and trainees who are paid, on an average, US$ 248.78, US $ 100.00 and nil remuneration respectively. The assessee computed that, even on this basis, the total amount works out to US $ 3,30,285 whereas the assessee has received US $ 4,80,000. None of these submissions, however, impressed the Assessing Officer. He rejected the same and proceeded to make an arm s length price adjustment of ₹ 12,71,378 on the following basis: 7.5 The submission of the assessee has been carefully considered, however, the same is not acceptable. First of all the assessee has not furnished any proper working in respect of 'international transactions' carried out with its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed representative of the assessee has failed to rebut the categorical findings of the Assessing Officer . The assessee is not satisfied and is in further appeal before us. 6. We have noted that even as the Assessing Officer has rejected the determination of arm s length price by the assessee and has proceeded to ascertain the arm s length price on his own, he has not done so on the basis of any known method of determining the arm s length price or on the legally sustainable basis. It is not open to the Assessing Officer to decide that for each variation in the number of crew members on the job, the charges must vary. The computation of fees on the basis of number of members, as done by the Assessing Officer, is devoid of any legally sustainable basis. While determining arm s length price, the Assessing Officer can only decide as to what is the arm s length price for services rendered but he has to do so on the basis of a legally recognized method. The arm s length price so determined has not been decided on the basis of a recognized method. Even if one is to proceed on the basis that determination of ALP by the assessee is incorrect, the Assessing Officer cannot ascertain the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same as it would have been, under similar circumstances and considering all the relevant factors, for an uncontrolled transaction, the price so paid can be said to be arm s length price. As we have noted earlier in this order, the price need not be in terms of an amount but can also be in terms of a formulae, including interest rate, for computing the amount. In any case, when the expression price which .would have been charged on paid is used in rule 10BA, dealing with this method , in this method the place of price charged or paid , as is used in rule 10B(1)(a), dealing with CUP method, such an expression not only covers the actual price but also the price as would have been, hypothetically speaking, paid if the same transaction was entered into with an independent enterprise. This hypothetical price may not only cover bonafide quotations, but it also takes it beyond any doubt or controversy that where pricing mechanism for associated enterprise and independent enterprise is the same, the price charged to the associated enterprises will be treated as an arm s length price. In this view of the matter, the business model said to have been adopted by the assessee, in pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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