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TMI Blog2018 (2) TMI 1986X X X X Extracts X X X X X X X X Extracts X X X X ..... only trying to highlight the fact that the said expenses are in relation to the tested transaction and therefore there is no justification in not considering them while computing the arm s length price. The plea of the Revenue based on the observation of the CIT(A) that the expenses have not been shown in the Profit Loss Account, and therefore, it cannot be taken into consideration, is to say the least, avoiding the obvious. Ostensibly, if such expenses were to be debited to the Profit Loss Account, it would require simultaneous equivalent credit to the Profit Loss Account on account of reimbursements. Ostensibly, if one is to determine the rate charged by the assessee from its associate enterprise per crew per month, it would entail taking into consideration the recoveries by way of reimbursements also; and, as the Tabulation reproduced by us earlier shows that once such recoveries are also factored into the rate charged from the associated enterprise, the rate comes to US$ 150.28 per crew per month and upon comparison with the rate of US$ 150 adopted by the TPO, the amount recovered by the assessee from the associate enterprise compares favourably, and, thus it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss of ₹ 2,08,90,645, which was subject to a scrutiny assessment whereby the total income has been assessed at ₹ 4,89,55,180. The substantive difference between the returned and the assessed income of ₹ 6,82,62,138 is based on the order of the Transfer Pricing Officer (in short TPO ) passed under section 92CA(3) of the Act, wherein arm s length price of the international transaction of Providing Manning Services to the associated enterprise has been determined above the stated values by the aforesaid amount. Since the dispute revolves around the said addition, our further discussion relates to the facts relevant for such addition. The appellant before us is a subsidiary of Barber International Ltd., Hongkong, which in turn is fully owned by Wilh Wlhelmsen ASA Norway. The assesse company had undertaken certain international transactions within the meaning of section 92B of the Act, with its associate enterprise, M/s. Barber Ship Management Ltd., Hong Kong, which inter-alia, included Providing of Manning Services. Notably, the assesse recruits seafarers for the vessels owned or managed by its associate enterprise. In the course of such activity, the assesse compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied the Comparable Uncontrolled Price (CUP) method to benchmark the transactions. The relevant discussion in the order of TPO reveals that he called for a list of concerns who were engaged in similar activities. The TPO sought information under section 133(6) of the Act from two such concerns, viz. Mitsui OSK Lines Maritime India Pvt. Ltd. and Confidence Shipping Pvt. Ltd. The information so obtained by the TPO has been treated as the relevant data to apply the CUP method. The discussion in the order of TPO also reveals that ultimately he has relied upon the data obtained from Confidence Shipping Pvt. Ltd. only and therefore our further discussion is confined to the same. At this point, we may bring out that before us various arguments have been raised to assail the addition, but a pertinent issue has been raised which relates to the efficacy of the CUP data which has been used by the TPO. For the present, we are confining ourselves to the facts relevant to the aforesaid aspect only. 4. The TPO adopted the rate quoted by Confidence Shipping Ltd. of US$ 150 as an arm s length rate for the manning services provided by the assessee and accordingly worked out the adjustment of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89,565,189 No. of man months as per TPO 12,213 Therefore, charge per man month 7,334 Exchange rate as per TPO 48.80 Therefore, charge per man month in US$ as per BSMI 150.28 Charge per man month as per TPO in US$ 150.00 Excess received by BSMI in US$ 0.28 2 As per TPO/ITO: Manning fee as per TPO @ US$ 150/- per man month for 12,213 man months 89,325,960 3 On Received basis : Manning fee included in P L A/c 21,697,822 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead based on a negotiated rate of ₹ 2000 per crew per month, as is evident by page 8 of the Paper Book wherein is placed the relevant annexure to the Technical Management and Consultancy Agreement with the associate enterprise. 8. Be that that it may, we have considered the said alternate plea of the assessee and find that the same is potent. The relevant details which we have extracted above, clearly suggest that assessee incurred expenses for providing manning services to the extent of ₹ 6,38,78,901 which were reimbursed by its associate enterprise. At the time of the hearing, our attention has also been drawn to the payments terms and conditions annexed to the Technical Management and Consultancy Agreement, which inter-alia, included clause 5 which reads as under:- 5. First Party shall provide free of cost following facilities to the personnel deputed by Second Party and for that purpose reimburse expenses incurred by the Second Party on behalf of First Party. a) Salaries and perquisites of personnel. b) Approriate lodging and boarding facilities. c) Local transportation for due performance of duties and personal use. d) To and fro air passage. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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