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TMI Blog2016 (10) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... details or complete break up of how the cost has been allocated could not be furnished before the completion of the proceedings before the TPO/DRP, since these details were to be obtained from its AE Germany. We find that the details now produced have an important bearing for resolving the transfer pricing dispute and therefore in the interest substantial justice and equity, we admit the same on record. Since the additional evidence is admitted on record the same needs to verify by the TPO/AO. Thus the issue under consideration is set aside to the file of the AO/TPO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Adjustment on account of payment of royalty - HELD THAT:- As decided in own case [ 2016 (2) TMI 1306 - ITAT DELHI ] for the assessment year 2009-10 as per the ratio decidendi of Cushman Wakefield India (P.) Ltd. [ 2014 (5) TMI 897 - DELHI HIGH COURT ] the TPO was required to simply determine the ALP of this transaction unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1) of the Act. Thus we set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (ii) cost are charged on allocation basis and therefore, some of the group cost may be loaded in appellant share of corporate charges. 2.2 That the assessing officer/TPO erred on facts and in law in not appreciating that the payment of corporate charges was appropriately benchmarked applying TNMM as most appropriate method and that no adverse inference could be drawn on this account. 2.3 That the assessing officer/TPO erred on facts and in law in computing adjustment on account of international transaction of payment of corporate charges without reasonably applying any prescribed methods, thereby, violating the basic principles of TP regulations. 2.4 That the assessing officer/TPO erred on facts and in law in undertaking cost benefit analysis to determine the arm's length price of payment of corporate charges without appreciating that cost ITA benefit analysis is not a prescribed method under Rule 10B of Income Tax Rules, 1963. 2.5 That the assessing officer/TPO erred on facts and in law in applying CUP method for benchmarking the transaction of payment of corporate charges without placing on record any comparable data for comparison. 2.6 That the assessing officer/TPO erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the appellant has wide experience and expertise in the manufacturing of products for which fees for technical know-how is paid and should in turn charge royalty from AE for the technology and technical know-how given. 3.5 That the Dispute Resolution Panel erred on facts and in law in confirming the adjustment made by the TPO with regard to the payment of royalty by relying on its order for AY 2009-10 and holding that (i) there is no change in the business model of the appellant (ii) no change in the items manufactured by the appellant on payment of royalty; (iii) royalty payment has no bearing on exports. 4. That the assessing officer/TPO erred on facts and in law in making an adjustment of ₹ 18,70,633 allegedly considering the delay in receipt of receivables from the associated enterprise in the nature of unsecured loans. 4.1 That the assessing officer/TPO erred on facts and in law in not appreciating that delay in receipt of receivable is not an international transaction as defined in section 92B of the Act, but is a consequence of an internal transaction undertaken in the form of sales made to the associated enterprise. 4.2 That the assessing officer/ TPO erred on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer pricing adjustment of ₹ 2,62,53,680/- made by the AO on account of corporate expenses. 5. Facts of the case related to this issue in brief are that the assessee e-filed its return of income declaring total income of ₹ 7,28,40,766/-. Since the assessee had undertaken international transactions with its associated enterprises (AE), the AO made a reference to the TPO, New Delhi u/s 92CA(1) of the Act vide order dated 23.12.2013. During the year under consideration, the assessee in terms of agreement dated 20.10.2006 for availing the technical, marketing and administrative support services had entered into, inter alia, international transaction for payment of corporate charges amounting to ₹ 2,62,53,680/- with its AE. In the transfer pricing document maintained by the assessee, the said transaction for the purpose of benchmarking was aggregated with other international transactions and benchmarked by applying TNMM as the most appropriate method with OP/OC as the Profit Level Indicator (PLI). The assessee submitted that since the operating profit margin to operating cost (OP/OC) percentage of the assessee at 12.10% was higher than the weighted average pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not procure summary of the invoices raised on it by its AE and could not furnish the specific details or complete break-up of how the cost had been allocated, during the proceeding before the TPO or DRP. Therefore, this issue was set aside to the file of the TPO/AO in the appeal relating to the assessment year 2008-09 and the said order has been followed by the ITAT in ITA No. 455/Del/2014 for the assessment year 2009-10. The relevant findings have been given vide para 4.5 of the order dated 29.08.2014 in ITA No. 5765/Del/2012 for the assessment year 2008-09 which read as under: 4.5. We have heard the rival submissions and perused the material on record. The assessee, in accordance with the terms of service agreement dated 20.10.2006 received various technical, marketing and administrative support service from its AE. The TPO had restricted the payment of service fee to an amount of ₹ 7,20,010/- (5% of the total payment) as against 1,58,01,22/- determined by the assessee. The DRP on its part has made an increase of deduction from 5% allowed by the TPO to 10% of the total expenditure. Broad details of various technical, marketing and administrative support service were furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons the ld. DR could not controvert the aforesaid contention of the ld. Counsel for the assessee. 13. After considering the submissions of both the parties and the material on record, it is noticed that an identical issue having similar facts has already been adjudicated by this bench of the Tribunal in ITA No. 455/Del/2014 for the assessment year 2009-10 in assessee s own case vide order dated 18.02.2016 wherein relevant findings have been given in paras 8 to 11 of the said order which read as under: 8. We have heard the rival submissions and perused the relevant material on record. It is observed that the TPO has computed ALP of the international transaction of `Payment of Royalty at Nil by holding that the assessee did not avail any benefit and the services provided by the foreign AEs were unwarranted. In doing so, he rejected the assessee s adoption of TNMM as the most appropriate method and followed the CUP method. That is how, he computed ALP of this international transaction at Nil. The AO in his order has simply incorporated the conclusion of the TPO in determining the ALP of this international transaction at Nil without carrying out any independent analysis or evaluation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below have acted in contradiction to the ratio laid down in Cushman Wakefield (supra), we set aside the impugned order on this score and remit the matter to the file of AO/TPO for deciding it in conformity with the law laid down by the Hon'ble jurisdictional High Court in the case of Cushman Wakefield (India) (P.) Ltd. (supra). 14. So, respectfully following the aforesaid referred to order for the assessment year 2009-10 in assessee s own case, this issue is set aside to the file of the AO/TPO to be adjudicated as directed vide order dated 18.02.2016 in assessee s own case in ITA No. 455/Del/2014 for the assessment year 2009-10. 15. Another issue raised by the assessee vide Ground Nos. 4 to 4.8 relates to the adjustment of interest amounting to ₹ 18,70,633/- on account of delay in receipt of receivables from the associated enterprise and considering the same as unsecured loans. 16. The facts related to this issue in brief are that during the year under consideration the assessee raised invoices for export of automotive power transmission V-belts and industrial power transmission V-belts to the AEs. The receivables were, however, received after some time lag than the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decisions of the ITAT rendered in the following cases: DCIT Vs Indo American Jewellery Ltd. in ITA No. 5872/Mum/2009 Baush and Laumb Eyecare India Pvt. Ltd. Vs ACIT in ITA No. 3861/Del/2010 19. Alternatively, it was submitted that in a number invoices raised on the AE, the assessee had received remittances well in advance and was under liability to pay to its AE for the services rendered by them and did not incur any expense on such payables to its AE. Therefore, when the assessee had not incurred any expenses on payables to its AE and had received payment in advance, there could not be any adverse inference with regard to delay in receipt of receivables against the provision of services. It was emphasized that the DRP vide its order dated 03.11.2014, directed the TPO to deduct the interest forgone on outstanding due to AE from the arm s length on receivables due from AE. A reference was made to page no. 15 of the DRP s order. It was stated that the TPO disregarded the direction of the DRP and proceeded to make adjustment considering only the delay in receipt of receivables. It was further stated that the direction of the DRP, to net off the interest expenses while comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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