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TMI Blog2019 (8) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Pune Bench of the Tribunal in the case of Emerson Climate Technologies (India) Ltd [ 2017 (12) TMI 1568 - ITAT PUNE] restore this issue to the file of AO/TPO for a limited purpose of verification as to whether the margin of the tested party is at arm s length to the margins of the comparable companies. Needless to say, that the authorities shall give a reasonable opportunity of being heard to the assessee while deciding the said issue X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 107) 4.6 Not acknowledging the fact that the services were actually received by the Appellant 4.7 Disregarding the documentary evidence submitted by the Appellant in the nature of cost allocation, details of allocation keys and bifurcation of the cost for each category of services received 4.8 Arbitrarily relying on the DRP directions of AY 2011-12 in Appellant's own case, without proper examination of the facts and circumstances of A Y 2014-15 and concluding that the material placed on the record by the Appellant in the instant A Y is similar to the documentary evidences submitted in the previous AY without proper examination Other grounds: 5. That the learned AO has erred on the facts and circumstances of the case and in law, in levying the interest under section 234B of the Act mechanically and without recording any satisfactory reasons for the same 6. That AO/DRP has grossly erred on the facts and circumstances of the case and in law by initiating the penalty proceedings under section 271 (1 )(c) read with section 274 of the Act and stating that the Appellant has furnished inaccurate particulars of income leading to concealment of income. 2. Brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, the ld. Departmental Representative (DR) for the revenue supported the order of the authorities below. The ld. DR further submits that in AY 2011-12 and 2012-13 the contention of the assessee was that the allocation key applied by the AE to allocate cost of services provided by the AE is one of the accepted methods and same cannot be rejected without rebuttal. This assessee has not taken such plea for the years under consideration. 5. We have considered the rival submissions of the parties and have gone through the orders of authorities below. Grounds No. 1 to 3 are general and needs no specific adjudication. Ground No. 4 relates to transfer pricing adjustment. We have noted that for AY 2011-12 and 2012-13 the assessee has raised identical grounds of appeal as raised in the appeals under consideration. The ld. DRP while considering the objection for AY 2013-14, followed the order of DRP for AY 2012-13 and in AY 2014-15 followed the order of DRP for AY 2011-12. The coordinate bench of Tribunal in appeal for AY 2012-13 in ITA 1404/Mum/2017 after considering the contentions of the representative of assessee and ld. DR for the revenue passed the following order. For apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in accordance with the provisions of the Act. The Ld. TPO has wrongly computed the arm's length price of the international transaction at Nil. In the present case, since the Ld. TPO has wrongly applied CUP method the Ld. DRP ought to have set aside the order passed by the Ld. TPO. The Ld. counsel for the assessee relying on the decision of the Pune Bench of the Tribunal in the case of Emerson Climate Technologies (India) Ltd. vs. DCIT 2018 90 taxman.com 125 submitted that in the present case the CUP method cannot be applied as most appropriate methods because the transaction is intra group i.e. between the AEs. The Ld TPO has not brought on record any comparable for applying CUP methods for benchmarking the transaction. The Ld. counsel further pointed out that the assessee has furnished apart from other details, the financial of the comparables including the description of services provided by the seven comparables selected by the assessee in its TP study report available at page No. 805 to 807 of the paper book. 13. On the other hand, the Ld. DR relying on the order passed by the AO in terms of the directions issued by the Ld. DRP submitted that the Ld. TPO by applying CUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Indian market, implementation of cost effective process, improvement of financial performance, establishing robust control, establishing best in class HR practices, develop strong global customer business and established its identity in the Indian market. 15. In order to demonstrate the justification of benefits derived by the assessee from the services rendered by its AE, the assessee has placed on record, the details of the services availed, details of benefit derived and the functions performed by the assessee. As per the details furnished by the assessee, the assessee placed on record the copies of e-mail, correspondences, templates and presentation to establish that by availing the services from the AEs the assessee could perform its function effectively in the fields of regional sales and marketing, operation management, finance and treasury, human resources, Information Technology and Information delivery system. The assessee has further submitted that details of benefit derived from the AE which includes: a) Regional sales and marketing - As per the details furnished by the assessee, CWT India was benefitted from the support provided by CWT Singapore in generatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed conditions. It is on this basis that ALP of the product or service can be ascertained. It cannot be a hypothetical or imaginary value but a real value on which similar transactions have taken place. Coming to the facts of this case, the application of CUP is dependent on the market value of the arrangements under which the present payments have been made. Unless the TPO can identify a comparable uncontrolled case in which such services, howsoever token or irrelevant services as he may consider these services to be, are rendered and find out consideration for the same, the CUP method cannot have any application. His perception that these services are worthless is of no relevance. It is not his job to decide whether a business enterprise should have incurred a particular expense or not. A business enterprise incurs the expenditure on the basis of what is commercially expedient and what is not commercially expedient. As held by Hon'ble jurisdictional High Court in the case of CIT v. EKL Appliances Ltd. [2012] 345 ITR 241/209 Taxman 200/24 taxmann.com 199 (Delhi), "Even Rule 10B(1)(a) does not authorize disallowance of any expenditure on the ground that it was not necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the cost of services is at arm's length price determined by adopting TNMM. The assessee has further taken the comparables keeping in view the similar business models. 19. In the case of Emerson Climate Technology India Ltd. vs. DCIT (2018) 90 taxman.com 125 (Pune Tribunal), the Pune Bench of the Tribunal has restored the issue to the file of AO/TPO for a limited purpose of verifying that whether the margin shown by the tested party is at arm's length to the margin of the comparables selected by the assessee. In the said case, the TPO rejected the financials of the comparable on the ground that the assessee has failed to demonstrate that the AEs were capable of providing any valuable services and determined the arm's length at Nil. In the present case, the assessee has filed the details relevant to compute the cost allocation duly certified the CPA, Singapore. The said details cannot be rejected summarily without pointing out any infirmity. Since, the AE has provided the services aforesaid to the assessee. The assessee has selected as tested party which is in consonance with OECD guidelines and United Nation's Practical Manual. The assessee has further demonstr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son Climate Technologies (India) Ltd (supra), restore this issue to the file of AO/TPO for a limited purpose of verification as to whether the margin of the tested party is at arm's length to the margins of the comparable companies. Needless to say, that the authorities shall give a reasonable opportunity of being heard to the assessee while deciding the said issue." 6. We have further seen that in appeal for AY 2011-12 in ITA No. 1484/Mum/2016, the coordinated bench of Tribunal passed the following order: 5. Ground No. 4 to 5.6 pertaining to the transfer pricing issue are identical to Ground No. 4 to 4.7 of the assessee's appeal for the A.Y. 2012-13 aforesaid. Since, the issue involved in the present case are identical and there is no material change in the facts of the present case, consistent with our findings in the assessee's case for the A.Y. 2012-13 discussed above, we restore the issue for a limited purpose of verification of margin of the tested party vis-à-vis margins of the comparable companies selected by the assessee as to whether the margin of the tested party is at arm's length. 7. Considering the order of the Tribunal in appeal for AY 2011-12 & 2012- 13 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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