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TMI Blog2019 (12) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... st by number of budgeted users. The invoices raised by the AE on the assessee in this regard also goes to prove that the same are on cost to cost without any mark up. All these facts are confirmed by the AE vide separate letter dated 21.10.2014 filed before the lower authorities. Payment of e-connectivity charges forms part of the cost base (i.e operating cost in both marketing support services and distribution activity) and the entire operating costs had been recovered with arm s length margin from the AE. Hence there is no reason to determine the ALP of the said international transaction at NIL by the ld TPO which has been wrongly upheld by the DRP. TPO had determined the ALP of payment for e-connectivity charges at NIL without resorting to any of the methods prescribed in the statute. Once a reference is received by the TPO u/s.92CA(1) from the ld. AO, TPO is required to determine the ALP of the international transaction as per the provisions contained in Section 92C and 92CA read with relevant rules thereon. From the conjoint reading of the relevant sections and the relevant rules, we find that the duty of the ld. TPO is restricted only to the determination of the arm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had made payment for e-connectivity charges to its AE of ₹ 52,83,464/- and had reported the same as an international transaction in Form 3CEB. The assessee applied Comparable Uncontrolled Price (CUP) method on cost allocation basis as the Most Appropriate Method (MAM). The assessee submitted before the ld TPO vide submission dated 28.10.2014 that during the year, it had availed information communication and technology services from its AE. These are costs in the nature of information, communication and technology support which have been charged to the assessee on a cost to cost basis, without any mark up. Copies of invoices for the service charges were furnished before the ld TPO. The assessee also submitted a letter from the AE specifying the services availed by the assessee and confirming that expenses cross charged to the assessee for such services are on cost to cost basis without charging any mark up. The ld TPO asked the assessee to produce the basis for allocation, if invoices are back to back and to produce the evidence for AE s cost and to provide cost-benefit analysis on 18.12.2014. The ld TPO observed that the assessee could not produce the basis for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from such tools and services were at arm s length. The ld DRP observed that no comparability analysis has been carried out rather all the transactions have been bundled and the TNMM has been applied. The sum and substance of ld DRP observation is that the assessee had not provided the evidences regarding receipt of services , the benefits derived from such services or cost incurred towards such so called services. With these observations, the ld DRP upheld the action of the ld TPO. 5. Aggrieved, the assessee is in appeal before us on the following grounds :- Each of the grounds and/ or sub-grounds of the appeal are independent and without prejudice to the others. 1. On the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel ('DRP') erred in confirming the action of the Ld. Transfer Pricing Officer ('TPO') in determining the arm's length price of the Appellant's international transaction of payment for e-connectivity services availed from its associated enterprise as NIL instead of ₹ 52,83,464 as determined by the Appellant. 2. In doing so, the HonTDle DRP/ Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servers. Intranet services: Secure access to DSM owned internal data from all ICT workplaces. Includes system to share structured information and data from all DSM locations and premises. Access to DSM from non DSM locations: Data connection costs from outside DSM connection points into DSM owned network. Pushmail on Tablets . Smart phones: Email exchange between DSM ICT's Email System and tablet computers And smart phones Operation costs of dedicated applications like Domino and Quick plac e 6.1. We find that the assessee had further elaborated in detail vide its letter dated 12.1.2015 before the ld TPO , the various services provided by the AE and the benefits derived by the assessee pursuant to rendering of such services at global level by the AE in the tabular form as under:- Service Nature Benefit to assessee Information Communication Technology (Aurora) O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All email exchange, contact lists and time planning is made available at tables and / or smartphones for the employees which are on travel or outside the DNP India Premises Application like Domino and Quickplace Access to applications like Domino and Quickplace It provides access to DNP employee to important applications like Domino and Quickplace required for business operations. 6.2. We are convinced with the arguments advanced by the ld AR that the aforesaid services are extremely critical to ensure the smooth functioning of day to day business of the assessee in India. We find that the whole purpose of having a centralized IT-set up within the group was to avoid duplication of efforts and to make the arrangement administratively convenient and cost effective. Accordingly, we hold that the said services are such that an independent enterprise in comparable uncontrolled circumstances would have been willing to pay for the activity if performed for it by an independent enterprise. 6.3. We find lot of force in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an entity (i.e assessee herein) by applying Indirect Charge Method based on the Usage. The ld AR stated that each DSM group entity availing the services from the AE will give the AE the projected number of users for each service and based on that the AE will determine the per user cost. The total cost is accumulated with respect to each service and per user cost is calculated by dividing the total cost by number of budgeted users. 6.5. We find that the ld TPO agreed to the fact that the services were indeed rendered by the AE to the assessee herein, but concluded that the nature of services rendered are routine in nature. Having accepted the fact that services were rendered by AE, then there is no reason to disbelieve the payment incurred thereon on cost to cost basis without any mark up. We find that the ld TPO in his order conceded the fact of rendering of services by the AE to the assessee but stated that they were only routine in nature not warranting any payment of cost. Whereas the ld DRP observed that no services were indeed rendered by the AE to the assessee warranting any payment of cost and additionally the ld DRP stated that the assessee had not proved t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.7. Finally we hold that the ld TPO had determined the ALP of payment for e-connectivity charges at NIL without resorting to any of the methods prescribed in the statute. We hold that once a reference is received by the ld. TPO u/s.92CA(1) of the Act from the ld. AO, the ld. TPO is required to determine the ALP of the international transaction as per the provisions contained in Section 92C and 92CA of the Act read with relevant rules thereon. From the conjoint reading of the relevant sections and the relevant rules, we find that the duty of the ld. TPO is restricted only to the determination of the arm s length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C of the Act read with rule 10B of the rules. Thus, there is no provision made in the statute empowering ld. TPO for determining the ALP on a particular international transaction at NIL without resorting to any of the methods prescribed. We find that the Hon ble Jurisdictional High Court in the case of CIT vs. Johnson Johnson Limited in ITA No.1030 of 2014 dated 07/03/2017 had held as under:- 4.Regarding question (D) : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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