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TMI Blog2019 (3) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... yee did not work in India and the AE has also compensated for the services of the employee on the roll of the assessee. The decision of the JV and the assessee clearly constituted a business or managerial decision which the revenue could not have, in the manner it did, interfered with holding that the employees of the AE were subjected to secondment, which resulted in non deductible expenditure. No substantial question of law arises. - ITA 169/2019, CM APPL. 7722-7723/2019, ITA 170/2019, CM APPL. 7726-7727/2019, ITA 173/2019, CM APPL. 7747-7748/2019 - - - Dated:- 19-2-2019 - MR. S. RAVINDRA BHAT AND MR. PRATEEK JALAN JJ. Counsel for the appellant: Mr. Zoheb Hossain, Senior Standing Counsel Counsel for the respondent: None. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the salaries were really paid to employees seconded to it by the Australian AE. The AO confirmed the TPO s order; the assessee successfully appealed to the Appellate Commissioner [CIT(A)]. The CIT (A) reversed the finding of the AO. The Revenue s appeal was rejected by the ITAT. 3. The Revenue contends that the ITAT fell into error in overlooking that the real beneficiary of the Australian entity s employees was not the JV but the AE and that in effect the arrangement was secondment, resulting in expenditure that could not be deducted. Learned counsel relied upon the finding of the TPO that the JV arrangement and the agreement entered into between the assessee and the third party company nowhere indicated that the employees of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the AD is duty bound to provide for the deduction on account of the expenses incurred towards earning the same income. The appellant being a service company, the main component of, the expenditure is towards employee cost. As narrated earlier, the employee cost consists of local expenditure and salary expenditure reimbursed to its AE. There is no rational to accept only the local expenditure and deny the expatriate salary paid by the AE and reimbursed by the appellant. 4.5. The AO used the CUP method to determine the ALP of the salary reimbursement as NIL. It is to be pointed out that the AO has not used any independent comparable transactions to hold that such services were rendered by third parties in the market place as an arm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 98 3000 N/A 3000 N/A 3000 Expenses -Salary Amount (reimburse on actual to AE by Assessee/JV 100 500 1 600 - 600 -Other costs (amount of 10 assumed as non expat related cost) 100 1500 10 1590 10 1590 -Service charge from Assessee N/A 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk in India. The AE has also compensated for the' services received from the employees on the roles of the appellant. There is no basis to conclude that the expenses incurred are a sham transaction since the appellant has offered the income for taxation generated after incurring such expenses. The legitimate question to be asked is whether in an uncontrolled transaction, the parties to the similar transaction behaved in the same way as the appellant did? In the absence of any comparable uncontrolled transaction (CUP) 'price of a similar transaction, treating there imbursernents made by the assessee as unnecessary and the value of the transaction as NIL is unjustifiable. It is not open to the TPO to suggest where from the employees&# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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