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TMI Blog2017 (7) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... onduct this activity is a matter that lies within the assessee’s exclusive domain and cannot be second–guessed by the Revenue. So, following the above the detail of specific activities for which cost was incurred by both CWS and CWHK and the attending benefit to the assessee have not been considered till date, which need to be provided, in addition to the consideration of the ALP vis-à-vis the total cost claimed by these AEs, the case is remanded to the AO/TPO for ALP assessment, followed by the AO’s assessment order in accordance with law. Reimbursement of cost and payment of referral fees to the foreign AEs - Held that:- Again following the aforesaid judgment passed by the Hon’ble High Court in assessee’s own case, the case is remanded to the file of AO to comply with the directions contained in paras 37 and 45 of the judgment (supra) on the question of referral fees, the report of TPO validating the arms length price is binding on the AO who may verify the transactions and assessed the deductions u/s 37 of the Act in accordance with law. - ITA No.2624/Del./2013 - - - Dated:- 29-3-2017 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (in Rs.) 1 Payment of referral fee TNMM 6,25,91,392 2 Provision of professional services TNMM 9,47,,242 3 Receipt of referral fee TNMM 3,54,135 4 Provision of lease review services TNMM 4,46,010 5 Provision of lease renewal services TNMM 6,48,842 6 Provision of project management consultancy TNMM 8,84,273 7 Provision of valuation services CUP 75,81,919 8 Reimbursement to AEs paid - 80,86,661 9 Reimbursement received from AEs - 4,66,509 4. Except international transaction relating to reimbursement of Associated Enterprises to the tune of ₹ 80,86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since from the duplication of these services as assessee has separately booked the profit in its profit loss account under these heads, the additional evidence does not serve any purpose. CIT (A) after considering the facts and circumstances of the case, and the fact that this issue was subject matter of the litigation in the earlier year also and as such, adjustments were deleted by the Tribunal, came to the following conclusion :- 4.9. I have gone through the order of the TPO, submission of the appellant as well as order of the Hon'ble ITAT in the appellant's own case for the AY 2006-07. The facts and circumstances of the case remains the same as compared to the decided case by the Hon'ble ITAT. For example, the main customer in Singapore agreement is IBM. The agreement is dated 01.01.2006 and the person employed for this purpose, namely, Mr. Royden by the Singapore entity remains the same. It is also a fact, appellant derives substantial revenue from IBM. The documentation presented by the appellant before the ITAT as well as during the course of this appeal proceeding are also similar. Further, the transaction with Hong Kong AE is also similar as compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re superfluous in nature and they were part of the transaction within group which is reimbursed by the assessee at cost. 12. However, the ld. AR for the assessee contended that the identical issue has already been decided by Hon ble jurisdictional High Court in assessee s own case in ITA No.475 / 2012 dated 23.05.2014 by remanding the case to AO, for ALP assessment by TPO followed by the AO s order in accordance with law which has not been controverted by the ld. DR. 13. We have perused the aforesaid judgment of Hon ble jurisdictional High Court in assessee s own case in which following identical question of law was framed and answered by the Hon ble High Court :- Is the Tribunal correct in holding that benchmarking was not necessary in respect of the cost reimbursement reported by the assessee that was later subject to disallowance by the AO, since the TPO held that ALP in respect of this component was nil? 14. Hon ble High Court in para 13 of the aforementioned judgment observed that :- 13. The arguments advanced before this Court appears to divide this issue in two parts : first, whether services have indeed been provided by CWHK and CWS to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddressed - and determined, is whether an independent entity for the same liaisoning and client interaction services as were provided by CWS and CWHK charges an amount less than or equal to or more than SGD 74,330/- and SGD 281,265/-. An independent entity would quite possibly include a mark-up over and above the cost, and thus, exceed the value charged by the AEs in this case. The sequitur cannot be that the cost incurred by those entities would be the same as the AEs in this case. It may be greater (in which case Section 92(3) would clearly apply), or lower. This cannot be a matter of speculation. Nor is the application of Section 92(3) a logical inference from the fact that CWS and CWHK have only asked for reimbursement of cost. This being a transaction between related parties, whether that cost itself is inflated or not only is a matter to be tested under a comprehensive transfer pricing analysis. The assessee did not benchmark these costs in its transfer pricing study. Neither was any transfer pricing study conducted by the TPO, who, crucially, did not say that the ALP was lower than the amount claimed. He, instead disallowed the expenditure altogether on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt further held that in this case, the issue is, whether an independent entity would have paid for such services . Importantly in reaching this conclusion, neither the Revenue, nor this court, must question the commercial wisdom of the assessee, or replace its own assessment of the commercial viability of the transaction. The services rendered by CWS and CWHK in this case concern liaising and client interaction with IBM on behalf of the assessee interaction with IMB s regional offices in Singapore and US was necessary. It is further held by Hon ble High Court whether it is commercially prudent or not to employ outsiders to conduct this activity is a matter that lies within the assessee s exclusive domain and cannot be second guessed by the Revenue. 19. So, following the aforesaid judgment rendered by Hon ble High Court in assessee s own case in earlier year, the detail of specific activities for which cost was incurred by both CWS and CWHK and the attending benefit to the assessee have not been considered till date, which need to be provided, in addition to the consideration of the ALP vis- -vis the total cost claimed by these AEs, the case is remanded to the AO/TPO for AL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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