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TMI Blog2017 (11) TMI 1881X X X X Extracts X X X X X X X X Extracts X X X X ..... from the AE. Simply because in earlier years the issue was remanded back to lower authorities, remand cannot be ordered in the present year without valid reason in the light of the decisions cited supra. Needless to mention that each year is an independent and separate assessment year and the principle of res-judicata is not applicable.Therefore, we do not find any merit in the submissions made by the learned counsel for the assessee for remand of the matter to the file of the TPO for de novo examination. Interest income as part of eligible profits of the undertaking for purposes of computation of deduction u/s 10A - HELD THAT:- The direction of the DRP is in consonance with the decision in the case of CIT vs. Motorola India Electronics (P) Ltd [ 2014 (1) TMI 1235 - KARNATAKA HIGH COURT] Therefore, we do not find any reason to differ with the direction of the DRP. Ground of appeal in this regard is dismissed. Reduce expenditure incurred in foreign currency on travel and telecommunication to be reduced from both export turnover as well as total turnover - HELD THAT:- This direction is line with the decision of the Hon ble jurisdictional High Court in the case of CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered: 1.1. Copies Of invoices raised by the AE in your favour qnd also ledger account of Management fees / intra group service in your books Of account for the FY 2009-10. 1.2. Exact details of services for which the Management fees / intra group service is shown to have been paid. Reasons why such services are not available locally. How did the Taxpayer manage its requirements before taking the services from the AE? Ifthere is a duplication of services, for such services, furnish the details Of expenditure incurred by you and your AE and also justification for such duplication. For example, if you have availed HR services AE, expenditure on HR department in your company needs to be given, immaterial of which head such expenses are debited in your books of account. Furnish the copies of relevant ledger accounts. 1.3. Your AE might be in a position to provide a number Of services, but it has to be shown that such services were actually required by the Taxpayer for its business during the FY2009-10. 1.4. Please submit the documentation and evidence to show that the above services are actually rendered by the AES to the Taxpayer. In this regard, please produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y how two independent parties would have quantified the services as no independent company would pay Management fees/intra group service payments without actually knowing the apportionment. 1.9 In respect Of each type Of expense under the Management fees / intra group services rendered, the basis of such quantification / break-up of service or cost involved and also the price to be paid at arm's length. This is required as no independent party would like to pay for a service without knowing the cost Of such service Or without knowing the cost at which such service is rendered in the market and as it is such a huge amount. 1.10 Whether intra service payment is paid by any of the other concern or subsidiaries of the Group anywhere in the world. If yes, copies of those agreements for intra service payment and also the basis on which such payments are made. 1.11 Whether Management fees / intra group services is paid by any independent concern or entity in any other country through which AE Group carries on similar business as that of you. If yes, copies of those agreements for intra-group services and also the basis on which such payments are made. 1.12 Please establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axpayer, as the same need not be charged by the AES to the Taxpayer. 1.15 Whether the charges paid by the Taxpayer for Management fees / intra group services reflect the same charges for the services that would have been, or would reasonably be expected to be, levied between independent parties dealing at arm's length for comparable services under comparable circumstances. 1.16 IF any services purported to have been received through electronic media like e-mails, network, CDs etc. then please furnish the details thereof along with valuation of such services. If the same is valued by two independent parties dealing in similar circumstances, the value of such services and also justification that such payment is at arm's length. 1.17 If the payment is made for utilization IT services as well as software, please furnish the following details. a. Particulars of the hardware and software used and cost Of their purchase and maintenance for the FY 2009-10 as shown in the books of the AE with independent third party evidence in the form of purchase vouchers / invoices along with copies of ledger account. b. Proofthat such software [hardware were used by the Taxpay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he group and also have someone to advocate Safran India 's capabilities to the customers(AEs) for effective promotion of India 's business. To accomplish the above objective, Safran India could have either deputed someone from India or availed the services from a local person. Safran India chose to utilize the services of a local person (ie., Program manager) because acquiring business from the French jurisdiction requires local expertise and knowledge about the French language, culture and business practices. 'From the above it appears that among the group entities, only Safran India has a disadvantage being non French. The knowledge and the expertise that the Taxpayer has stated above are things that any professional has to be trained in and acquired, not only to work in France but anywhere in the world. The aim is to get contracts for Safran India and for that, Safran India's previous track record should help and not the local expertise and knowledge of French culture. Further, in the same submission, it is stated as under: The program Manager had spent time with Safran India to understand the capabilities of the company and his services have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, even though the facts have changed, vitiates the TPO's conclusions. The TPO at places also appears to be somewhat short sighted and substitutes his business wisdom for that of the taxpayer. For instance, his conclusion about knowledge of French laguage not being critical in obtaining contract for Safran India exemplifies this. It is contrary to the stand approved in all the judicial decisions cited above. 7. After receipt of directions from the DRP, the AO passed final assessment order 30/01/2015 without making any adjustment of ALP on account of payment of management services fee. 8. Being aggrieved, the revenue is in appeal before us raising the following grounds of appeal: 1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in law in al owing the management fee for payment towards cost support services without appreciating the fact that the assessee has not been able to justify the payment. 3. On the facts and in the circumstances of the case, the Disputes Resolution Panel erred in directing the AO to consider the Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r want of evidence in support of receipt of services from AE for management support services. 9.2 On the other hand, learned counsel for the assessee submitted that pursuant to remand order passed by this Tribunal, the TPO had accepted the evidence filed in support of receipt of management services fee and made nil adjustment for assessment year 2008-09. For assessment year 2007-08 also, this Tribunal has set aside the issue to the file of the AO to examine evidence in support of receipt of services. Therefore, he submitted that the issue may be remitted back to the file of the AO for de novo examination of the evidence. 10. We heard rival submissions and perused the material on record. The issue in present appeal is whether the DRP was justified in directing deletion of ALP adjustment in respect of payment made towards management support services by the respondent-assessee-company to its AE. The TPO has suggested ALP adjustment treating service charges fees at nil on the ground that the respondent-assessee-company failed to prove receipt of actual services as well as justification for payment of such fees. However, the DRP has deleted ALP adjustment taking into conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 21 (Delhi) vii. DSM Anti-Infectives India Ltd. v. Addl. CIT [2014] 50 taxmann.com 239 (Chd. - Trib.) viii. TNS India (P.) Ltd. v. Asstt. CIT [2014] 48 taxmann.com 128/[2015] 152 ITD 123 (Hyd. - Trib.) ix. Atotech India Ltd. v. Asstt. CIT [2014] 148 ITD 670/42 taxmann.com 468 (Delhi - Trib.) x. Nippon Leakless Talbros v. ACIT [IT Appeal No. 5931 (Delhi) of 2012] xi. Nippon Leakless Talbros v. ACIT [IT(TP) Appeal No. 475 (Delhi) of 2015] xii. Hughes Systique India (P.) Ltd. v. Asstt. CIT [2013] 36 taxmann.com 41 (Delhi - Trib.) xiii. Knorr-Bremse India (P.) Ltd. v. Asstt. CIT [2013] 56 SOT 349/[2012] 27 taxmann.com 16 (Delhi - Trib.) xiv. Thyssen Krupp Industries India (P.) Ltd. v. Asstt. CIT [2013] 55 SOT 497/[2012] 27 taxmann.com 334 (Mum. - Trib.) xv. LG Polymers India (P.) Ltd. v. Addl. CIT [2011] 48 SOT 269/15 taxmann.com 79 (Visakha). 12. Thus in the light of the above legal position, the ALP of services of AE cannot be determined at Nil by questioning the necessity of benefits of expenditure incurred. But the matter does not end there. The onus lies on the assessee to prove that the services are actually rendered by the AE. But t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndled with other transactions cannot be accepted. 11. In the present case, the assessee-company had not filed any evidence before lower authorities or before this Tribunal to substantiate receipt of services from AE. Therefore,, the ratio of the decision in the case of the assessee for the assessment year 2009-10 is squarely applicable wherein this Tribunal had refused to remand the matter to the file of the AO for fresh consideration. The relevant part of the order is extracted below: 10. We heard rival submissions and perused the material on record. The issue of determining ALP adjustment in respect of management fee to intra-group services, had come up before the coordinate bench. to which the Hon ble Accountant Member is the author, in the case of M/s. 3M India Ltd.,in IT(TP)A No.725/Bang/2011 dated 13/05/2016. No ALP adjustment can be made in respect of intra-group services for the reason that no benefit was derived by the assessee-company by incurring such expenditure and also the TPO cannot question necessity of incurring such expenditure. This Tribunal held that it is incumbent upon the assessee-company to prove that services are actually received by the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt to decide which of them should have been employed when the Court is deciding a question under Section 12(2) of the Income Tax Act . It was further held in this case that it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned . In CIT v. Walchand Co. etc., (1967) 65 ITR 381, it was held by the Supreme Court that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. It was further observed that the rule that expenditure can only be justified if there is corresponding increase in the profits was erroneous. It has been classically observed by Lord Thankerton in Hughes v. Bank of New Zealand, (1938) 6 ITR 636 that expenditure in the course of the trade which is unremunerative is none the less a proper deduction if wholly and exclusively made for the purposes of trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense . The question whether an expenditure can be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have incurred the same or that in the view of the Revenue the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/ brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal, to which one of us i.e. the Accountant Member is the author of the order, in the case of M/s.B Fouress Pvt. Ltd. vs. DCIT in ITA Nos.847 847/Bang/2014 dated 30/12/2015 held as follows: ............Thus, the assessee failed to discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business. We may further add that the Hon ble Supreme Court in the case of CIT Vs Imperial Chemical Industries (Ind.) Pvt. Ltd (1969) 74 ITR 17 has unequivocally held that the burden of proving that a particular expenditure had been aid out or incurred wholly and exclusively for the purpose of business entirely lies on the assessee. The discharge of the burden had to be effective and meaningful and not to cover up by merely book entries and paper work. The mere fact of payment of commission by account payee cheques and compliances with the TDS provisions shall not alone enable the assessee to claim deduction unless and amount has been expended wholly and exclusively for the purpose of business. 11. A Co-ordinate Bench Tribunal of Delhi in the case of Kanu Kitchen Kulture (P)Ltd Vs DCIT (2013) 28 ITR (T) 49 (Del.-Trib. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved at without any long standing relationship having been established between the assessee and M/s Ram Agencies. It seems a bit out of place that the parties entered into an oral business relationship involving such huge amounts of money over a period of time . 13, The Co-ordinate Bench of Delhi in the case of Printer House Pvt.Ltd. Vs DCIT (Del.) authored by Accountant Member, after referring to the above precedence on this issue held as follows: Thus, having regard to the ratio laid down in the above cases that in the absence of proof in support of the services rendered by the commission agent, no commission can be allowed as a deduction. Therefore, we dismiss the appeal filed by the assessee and allow the appeals filed by the revenue . 14. In the present case, the learned CIT(A) had not examined any evidence to show that the agents have actually rendered their services. The learned CIT(A) had totally misdirected himself by examining the issue from the angle of tax deducted at source and he had failed to examine whether the services are actually rendered by the commission agents or not. Therefore, we are unable to sustain the order of the learned CIT(A) and hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assesseecompany cannot be given a second innings to patch up the weak parts of its case. Reliance can be placed on the following decision of the ITAT: i. Asst. CIT vs. Anima Investment Ltd. (2000) 73 ITD 125(Delhi); ii. Asst. CIT vs. Arunodoi Apartments (P) Ltd. (2002) 123 Taxman 48(Gau.) The Courts have held that appeals are not to be decided for giving one more innings to the lower authorities in the appellate jurisdiction. i. Rajesh Babubhai Damania vs. CIT (2001) (251 ITR 541)(Guj. ii. CIT vs. Harikishan Jethalal Patel (1987) 168 ITR 472 (Guj) Remand not for the benefit of the party seeking it to fill up gaps. Even the Hon ble jurisdiction High Court in the case of Karnataka Wakf Board vs. State of Karnataka, reported in AIR 1996 Kar.55 at pages 63 64 held as under: Where the party had an opportunity of adducing evidence in the case but with open eyes failed to adduce that evidence, the case should not be remanded to give a second chance to the party to adduce that evidence. The policy of the law is that once that matter has been fairly tried between the parties, it should not, except in special circumstances, be reopened and retri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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