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TMI Blog2019 (11) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... w the same on any extraneous reasoning. Since, in the instant case, the incurring of the expenditure is not in dispute and since the only reason given by the Revenue authorities is that the assessee did not need the services as the same were duplicative and that the assessee did not derive any tangible benefit from such expenditure and did not file sufficient details to establish that it has, in fact, received some benefit or that the AE has rendered some services, therefore,direct the A.O./TPO to delete the addition. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e Learned CIT(A) has grossly erred by assuming the arm's length price of certain intra group services to be 'Nil' and '30 percent of value o transaction' (in case of administrative services and 'administrative and technical training services') while applying the Comparable Uncontrolled Price (CUP) method to benchmark the impugned transactions. The Learned CIT(A) has not made any efforts to identify comparable uncontrolled transactions, in absence of which, the CUP method cannot be applied. The above grounds are independent and without prejudice to each other. The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing." 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of trading of various agricultural commodities such as corn, soya bean, maize, edible oil, fertilizers, etc. It filed its return of income on 31st March, 2010 declaring an income of ₹ 52,08,74,989/-. Since the assessee has entered into certain international transactions with its AE, the Assessing Officer referred the matter to the file of the TPO for determinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has benefited from the receipt of this service which are numerous in number. The assessee should have been able to file some evidence in connection with advice on law or taxation or human resources or even help received by the AE for audits, etc. However, nothing has been filed in this respect. He, therefore, held that no payment is warranted in this respect for which he reduced the ALP to nil. So far as availing of corporate, IT and other services for which an amount of ₹ 3,91,170/- is paid is concerned, he observed that the assessee filed some details for the services and the assessee also uses the software and other programmes prepared by the assessee. However, he noted that some of these pertained to the period 2008-09 and 2009-10 making most of it irrelevant. According to the TPO, the evidences so filed by the assessee is not enough to prove that the services have actually been used or received by the assessee. So far as availing of treasury services for which an amount of ₹ 5,59,020/- has been paid, he noted that no documentation regarding the help claimed to have been received from the AE was furnished. The TPO, therefore, held that the ALP of this transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in connection with the treasury services. However, the arm's length price of the administrative services and cost reimbursement was determined by him at 30% of value by observing as under: "8.7.1 As regard administrative services (₹ 2,719,190), the TPO has observed that the appellant has not filed any evidence as to how it has benefitted from the receipt of these services which are numerous in number and it should have been able to filed some evidence in connection with advise on law or taxation or human resources or even help received from the AE for audits etc. The TPO has determined the ALP of administrative services at NIL. As regards Administrative support services from Cargill Asia Pacific Holdings Pte. Ltd (CAPHPL), the appellant has stated that during AY 2008-09, CGTIPL availed administrative services such as accounting and audit services, management services, human resources (HR) and legal services, information and system services, etc. In consideration of the services availed, CGTIPL pays a service fee equivalent to allocated costs plus a mark-up of 6 percent. I have carefully considered the submission of the appellant. 1 have also perused the additional evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate only in a few instances that the services were actually received in this case. Considering the facts of the case, I hold that 70% of administrative services (₹ 2,719,190) and Administrative & Technical training services (₹ 16,425,830) are in the nature of duplication of services/incidental services/share-holders' services and not supported by proper evidence. Accordingly, the ALP of Administrative Services (₹ 2,719,190) and Administrative & Technical training services (₹ 16,425,830) is computed at ₹ 57,43,506/-, being 30% of ₹ 1,91,45,020/-[27,19,190 + 1,64,25,830)." 7. The ld. counsel for the assessee strongly challenged the order of the CIT(A) in computing the ALP of the administrative services and administrative and technical training services at ₹ 57,43,506/- being 30% of the value. He submitted that both the TPO as well as the CIT(A) have applied the CUP as the most appropriate method without citing any reasons, without indicating any basis for selection of the most appropriate method, without reference to any uncontrolled transaction and by emphasizing at irrelevant aspects like the services received in question being dupl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee as sacrosanct. Referring to para 10.3 of the order of the TPO at page 9, he drew the attention of the Bench to the findings given by the TPO according to which the assessee has not filed any documentary evidence to support that it has actually received services and, in fact, benefitted from the services. He submitted that since the ld. CIT(A), after considering the factual matrix of the case has held that 30% of the administrative services and cost reimbursement is at ALP, therefore, no further relief should be granted to the assessee and the grounds raised by the assessee should be dismissed. 9. We have considered the rival arguments made by both the sides and perused the orders of the A.O./TPO/CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions. We find the Assessing Officer, on the basis of the report of the TPO, has made an upward adjustment of ₹ 1,97,43,210/- being the arm's length price of the international transaction with the AE by applying CUP method wherein the TPO had applied the CUP method as the most appropriate method. We find, in appeal, the ld.CIT(A) deleted an amount of ₹ 5,59,020/- bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Bill of 1961 was introduced, Section 37(1) required that the expenditure should have been incurred "wholly, necessarily and exclusively" for the purposes of business in order to merit deduction. Pursuant to public protest, the word "necessarily" was omitted from the section. 21. The position emerging from the above decisions is that it is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred "wholly and exclusively" for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines, in the paragraphs which we have quoted above. 22. Even Rule 10B(1)(a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT (Appeals) or before the Tribunal or even before us to show that these are incorrect figures or that even on merits the reasons for the losses are not genuine. 24. We are, therefore, unable to hold that the Tribunal committed any error in confirming the order of the CIT (Appeals) for both the years deleting the disallowance of the brand fee/ royalty payment while determining the ALP. Accordingly, the substantial questions of law are answered in the affirmative and in favour of the assessee and against the Revenue. The appeals are accordingly dismissed with no order as to costs." 11. Since, in the instant case, the incurring of the expenditure is not in dispute and since the only reason given by the Revenue authorities is that the assessee did not need the services as the same were duplicative and that the assessee did not derive any tangible benefit from such expenditure and did not file sufficient details to establish that it has, in fact, received some benefit or that the AE has rendered some services, therefore, respectfully following the decision of the Hon'ble Delhi High Court cited (supra), we set aside the order of the CIT(A) and direct the A.O./TPO to delete t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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