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TMI Blog2016 (6) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... y of services are disproportionate to the payment made by the assessee. It is not known how the Transfer Pricing Officer came to know that the volume and quality of services received by the assessee was disproportionate to its payment. The Transfer Pricing Officer has not taken any pain to identify uncontrolled transaction between two independent entities. In the absence of any comparison of the transaction with transaction carried out in a uncontrolled market, this Tribunal is of the considered opinion that the Transfer Pricing Officer cannot independently come to a conclusion that volume and quality of services was disproportionate to the payment made by the assessee. The matter may be totally different if the Transfer Pricing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Tolani, Advocate Shri Darpan Kirpalani, Advocate ORDER Per N. R. S. Ganesan, Judicial Member This appeal of the Revenue is directed against the order of the order of the Assessing Officer, consequent to the direction of the Dispute Resolution Panel, Chennai, dated 20.12.2013 and pertains to assessment year 2009-10. 2. Smt. Vijayalakshmi, the Ld. Departmental Representative, submitted that the assessee is engaged in the business of manufacturing and sale of industrial fans. Flakt Woods (Luxembourg) is the holding company of the assessee-company. The ultimate holding company of the group is Stromboli Investments SAS. The assessee paid management service fee to its Associate Enterprise. The Transfer Pricing Officer acknowledg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D.R. submitted that the Transfer Pricing Officer found a sum of `2,05,11,061/- was to be disallowed and accordingly a downward adjustment of `6,15,33,183/- was made. 3. The Ld. Departmental Representative further submitted that when the matter was referred to the Dispute Resolution Panel, the Dispute Resolution Panel found that though theoretically Transaction Net Margin Method was the most appropriate method, but, practically adoption of CUP method would be most appropriate. According to the Ld. D.R., when the DRP found that CUP method would be the most appropriate practical method for making transfer pricing adjustment, ought to have adopted CUP method for determination of arm's length price. The Ld. D.R. further pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has not made clear how he was able to estimate the management service fee at 25% of the claim made by the assessee. According to the Ld. representative, estimation is not permitted while making transfer pricing adjustment. Therefore, the application of CUP method without comparing the services of comparable companies cannot be adopted. According to the Ld. representative, the Dispute Resolution Panel has rightly found that the management service fee cannot be estimated for the purpose of making transfer pricing adjustment. 5. We have considered the rival submissions on either side and perused the relevant material available on record. Rule 10B of Income-tax Rules, 1962 provides for method of determining the arm's length price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational transactions. Therefore, it is obvious that for the purpose of CUP method, the services received by the assessee have to be compared with similar services received in India by the tested parties in an uncontrolled transaction. If there is any difference between the two, the adjusted price arrived has to be taken into consideration for the purpose of determining the arm's length price. 7. In the case of Transaction Net Margin Method also, the net profit margin realized by the enterprise or by an unrelated enterprise in an uncontrolled transaction has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transaction, which could materially affect the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enterprise. In the case before us, the Transfer Pricing Officer called for the details relating to services rendered by the Associate Enterprise item-wise along with costs incurred by the Associate Enterprise. Without examining further the services rendered by the Associate Enterprise, the Transfer Pricing Officer has simply observed that the services rendered are advice and discussion in nature, therefore, volume and quality of services are disproportionate to the payment made by the assessee. It is not known how the Transfer Pricing Officer came to know that the volume and quality of services received by the assessee was disproportionate to its payment. 9. The Transfer Pricing Officer has not taken any pain to identify uncontrolled tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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