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TMI Blog2019 (6) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... e is directed to file agreement under which payment has to be received from AE against services provided by assessee. Upon analysis of such agreement, assessee shall submit evidences in respect of agreed allowable credit period for making payments by AE to assessee based upon which interest shall be computed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 08/- (as against actual payment of INR 239,398,692/-) by inappropriate application of CUP method in contravention of the provision of Rule 10B of the Rules merely based on presumptions without furnishing details of price charged in any comparable uncontrolled transaction; 3.9 erred in holding that the Appellant has not been able to establish the need for the activities received from AEs based on the premises that no cost benefit analysis was undertaken with regard to cost of activities and benefit received from AEs vis-a-vis independent parties. 4. That the Ld. AO / Hon'ble DRP/ Ld. TPO erred on facts and in law in making an addition of INR 120,412/- to the income of the Appellant by imputing interest on outstanding inter-company receivables and in doing so have grossly erred in: 4.1 directing an adjustment to be made with respect to outstanding receivables ignoring that the same was accepted to be at arm's length by the Ld. TPO and no adjustment to that effect was arising from draft AO order; 4.2 treating the outstanding receivables from AEs as a separate international transaction; 4.3 re-characterising the overdue amount on receivables from AEs as an unsecured interest- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd development, analytical and production capabilities for production of electroplating chemicals that serves numerous industries and markets. 2.2. Ld. AO observed that assessee had entered into international transaction with its AE during year and accordingly a reference was made to Ld. Transfer Pricing Officer (TPO). Ld.TPO upon receipt of reference, issued notice to assessee u/s 92C of the Act and directed assessee to file economic analysis of international transaction as per Rule 10 D. Ld.TPO observed that assessee has entered into following international transactions.: Sl. No. Description of the Transactions Amount (In Rs.) 1. Purchase of Raw Material and Components 188,627,033 2. Sale of Product 27,381,366 3. Purchase of Capital Goods 559,861 4. Cost sharing expenses 239,398,692 5. Interest on External Commercial Borrowings 2,600,505 6. Cost Recharges paid/received 3,455,830 7. Cost Recharge paid 1,121,928 8. Cost Recharge received 1,442,487 2.3. Ld.TPO also observed that assessee has paid ₹ 2,23,93,98,692/-towards cost-sharing expenses to its AE as under: Sl. No. Particulars Amount - in Rs. 1. - Research & Developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 in ITA No. 3419 and 6571/del/2016 and 1112/del/2014 has observed as under: "4. We have heard the rival submissions and perused the relevant material on record. The authorities below have determined Nil ALP of the international transaction of 'Management group cost' on the ground that either no services were obtained or it was a case of duplication of services. Further, the authorities went on to apply the `benefit test' for determining the ALP of such services at nil. 5. The Hon'ble jurisdictional Punjab & Haryana High Court in Knorr-Bremse India P. Ltd. vs. ACIT (2016) 380 ITR 307 (P&H) has held that the question whether a transaction is at an arm's length price or not is not dependent on whether the transaction results in an increase in the assessee's profit. A view to the contrary would then raise a question as to the extent of profitability necessary for an assessee to establish that the transaction was at an arm's length price. A further question that may arise is whether the arm's length price is to be determined in proportion to the extent of profit. Thus, while profit may reflect upon the genuineness of an assessee's claim, it is not determinative of the same. It wen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent.' There is no adjudication on this issue by the Tribunal in its order for the A.Y. 2007-08. Since the matter has already been restored by the Tribunal for determining if it is a case of CCA or for intra-group services and the relevant Agreement continues to remain the same for the instant year as well, we are of the opinion that it would be just and fair if the impugned order holding payment of 'Management group cost' as intra-group services instead of CCA, is set aside and the matter is restored to the file of Assessing Officer/TPO for deciding it in conformity with the decision taken pursuant to the directions given by the Tribunal in the other year. 8. Coming to the most appropriate method, it is found that the assessee aggregated all the international transactions and applied the TNMM on entity level. On the other hand, the TPO came to hold that the CUP was required to be applied for determining the ALP of the international transaction of `Management Group cost', which view was accorded imprimatur by the ld. CIT(A). 9. The Hon'ble jurisdictional High Court in Knorr Bremse India (P) Ltd. (supra) considered the question of aggregation of international transactions. Their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected by the TPO. Obviously, the TNMM applied by the assessee simply establishes the aggregate price paid for independent international transactions to be at ALP. Since the international transaction of `Management Group cost' has been held above to be separate, the determination of its ALP also needs to be done distinctly. 12. Insofar as the Tribunal orders in the case of the assessee on the applicability of the most appropriate method are concerned, we find that as against the assessee applying the TNMM, the TPO applied the CUP method for determining the ALP of the international transaction in the immediately preceding year. The Tribunal approved the CUP as the most appropriate method, but on the basis of a concession given by the assessee as has been recorded therein. The ld. AR did not give any concession for the applicability of the CUP as the most appropriate method for the year under consideration. We further find from the order of the Tribunal for the assessment year 2011-12 that there is no adjudication on the applicability of a particular method as most appropriate for determining the ALP of the international transaction. 13. By now, it is fairly settled through a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the same, we also set aside this issue back to Ld.TPO/AO for fresh determination of the arm's length price of international transaction by applying CUP as most appropriate method. It is also directed that in case Ld.TPO finds that identical/similar comparables are not available under CUP, then he is free to apply any other appropriate method for determination of arm's length price of international transaction of management group cost. Needless to say that assessee shall be allowed proper opportunity of being heard as per law. 6.3. Accordingly these grounds raised by assessee stands allowed for statistical purposes. 7. Ground No. 4 has been raised by assessee in respect of addition of ₹ 1,20,412/- on account of imputing interest on outstanding receivables. 7.1. Ld.Counsel again submitted that issue stands squarely covered by order of this Tribunal for assessment year 2011-12 wherein this Tribunal (supra) has set aside this issue to Ld. AO/TPO for fresh examination. 7.2. On the contrary Ld. CIT DR placed reliance upon orders of authorities below. 8. We have perused submissions advanced by both sides in light of records placed before us. 8.1. It is observed that this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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