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TMI Blog2020 (3) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, in order to bench mark this transaction and to determine proper ALP, of the international transaction, we are inclined to remit this issue back to TPO/AO to determine the ALP afresh as per Rule 10B 10AB of the I.T. Rules. Needless to order that before making fresh bench marking in accordance with Rule 10AB 10B read with section 92C, the TPO/ AO shall provide opportunity of hearing to the assessee. Accordingly, the Ground No 1 of the appeal is allowed for statistical purpose. - ITA NO. 7320/Mum/2018 - - - Dated:- 4-3-2020 - Shri Pawan Singh (JM) And Shri S. Rifaur Rahman (AM) For the Appellant : Shri Nitesh Joshi (A.R.) For the Respondent : Shri A Mohan (CIT, DR) ORDER PER PAWAN SINGH, JM : 1. This appeal by assessee is directed against the assessment order dated 31-10-2018. The assessee has raised the following grounds of appeal:- 1. Ground No. 1 - Transfer Pricing adjustment in respect of Technical know-how fees of INR 11,02,52,900 paid by Appellant to its Associated Enterprise ('AE') 1.1. On the facts and circumstances of the case and in law, the learned Transfer Pricing Officer ('TPO') / Assessing Officer (' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t maintained as per Section 92D of the Act read with Rule 10D of the Rules. 4. Ground No. 4 - Erred in using single year data for margin computation 5.1. On the facts and in circumstances of the case and in law, the learned AO / TPO erred and Hon'ble DRP further erred in not considering the requirement of proviso to Rule 10B(4) of the Rules while analyzing the data for comparability of companies. 2. At the outset of hearing, the learned authorised representative (Ld.AR) of the assessee submits that he did not want to press grounds 2,3 4 due to low tax effect. The Ld.AR submits that non pressing of these grounds of appeal should not be considered as admission on the part of assessee as similar grounds of appeal on similar addition / adjustment has been raised by assessee in other assessment years. 3. On the other hand, the learned departmental representative (Ld.DR) for the revenue submits that he had no objection if the assessee did not contest these grounds of appeal on merit and that the same may be dismissed as not pressed. 4. We have considered the submission of both the parties and treated the grounds 2, 3 4 and dismissed the grounds of appeal being not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 92C read with Rules 10B of the I.T. Rules. 8. We have considered the submissions of both the parties, perused the records carefully and have gone through the orders of authorities below as well as the order passed by the co-ordinate bench for assessment year 2013-14 dated 27-09-2019. 9. We have noted that consequent upon reporting international transaction by assessee with its AE in its return of income in Form - 3CEB, the AO made reference to Transfer Pricing Officer (TPO) for computation of ALP of international transactions. The assessee besides other international transaction, reported transaction of payment of technical assistant fee to UPSAI of ₹ 110,252,900/-. The assessee in its Transfer Pricing Study Report (TPSR), has adopted Transaction Net margin Method (TNMM), as most appropriate. The assessee identified 6 comparable companies. The assessee has shown its Profit level indicator (PLI) at 6.36% against the arithmetical mean of 6 comparable companies at 2.48% and claimed that its transaction was at arm s length. The TPO rejected two of assessee s comparables and on the basis of final set of four comparables, the TPO determined arithmetic mean at 1.31 again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to assessee by its AE. There is no training from AE. The TPO concluded that the assessee failed to benefit test. The assessee has not submitted any document to establish that assessee has received the training, technology, etc. No evidence is furnished to substantiate for the need of such payment. As benefit received for above expenses has not been substantiated, the ALP is determined as Nil. The TPO concluded in the following manner:- Therefore, the assessee has failed the Benefit test. Assessee has not submitted any document to establish that assessee has received the training, technology etc. Assessee, has failed to substantiate with evidence the need for the said payments. Since the benefit received for the above expense has not been substantiated, the ALP is determined as NIL, as in a Arm's Length scenario no independent person would make any payments without benefits received. Further, during the course of hearing, the assessee was asked to demonstrate the fact that services were actually rendered. The other aspect to note is the manner in which the technical know how fees is determined. The same is determined as 50% of the profit or 2% of the revenue whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in the Act, which has been set aside by the Tribunal. We have further noted that in AY 2013-14 the ld. DR for the revenue also made prayed to restore the issue to the file of TPO for fresh determination of ALP; the same was not accepted by the coordinate bench, in the earlier. 14. However, for the year under consideration (AY 204-15), we notice that TPO has applied Benefit Test which is not as per the rules prescribed under Rule 10B 10AB of Income Tax Rules. In our view, the payment of Technical knowhow was never bench marked in the earlier AYs. Considering the totality of the facts and circumstances and the fundamental question that revenue should not be deprived of legitimate tax due to the exchequer. Therefore, in order to bench mark this transaction and to determine proper ALP, of the international transaction, we are inclined to remit this issue back to TPO/AO to determine the ALP afresh as per Rule 10B 10AB of the I.T. Rules. Needless to order that before making fresh bench marking in accordance with Rule 10AB 10B read with section 92C, the TPO/ AO shall provide opportunity of hearing to the assessee. Accordingly, the Ground No 1 of the appeal is allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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