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TMI Blog2022 (11) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... the segregation of the international transaction of payment of Group fees from the other international transactions. Services received by the assessee against which the payment in question was made - HELD THAT:- An owner of an asset cannot be called upon to pay for its use. The ld. AR did not have any idea about the outcome of the huge R D costs shared by the assessee over the period. There can be another possibility that R D cost sharing is for a subject different from the use of Technology and Know-how against which the assessee paid Royalty. If both the payments are for two different air-tight things, without any overlapping, then there can be no embargo on allowing the deduction for both, after the ALP determination of the R D Cost sharing. However, the ld. AR did not have any record to show the nature of benefit received for payment of royalty and R D cost sharing. While evaluating the consideration for the R D Cost sharing payment, the AO will look into the above discussed factors also. Having discussed about the examination of the availment of actual services by the assessee, the next step is to determine the ALP of the international transaction of payment of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee aggregated all the international transactions, including, Raw material and components; Payment of Royalty; Payment of Group fees, Payment of Professional expenses; Payment for Training availed and declared them to be at ALP by applying the Transactional Net Margin Method (TNMM) on an aggregate basis. The TPO did not accept the aggregation approach adopted by the assessee. He separated the international transaction of Group fees and called upon the assessee to show, inter alia, the evidence of actual receipt of services from its Associated Enterprise (AE) for which the payment of Rs.6,12,48,544/- was made; and also whether such services were needed or gave any benefit to it. The assessee furnished some details including certain e-mails, which, in the opinion of the TPO, did not prove any actual rendition of services by the AE. In the absence of the assessee establishing the receipt of services, the TPO, applied the Comparable Uncontrolled Price (CUP) method and determined Nil ALP of the transaction. The TPO separately discussed the payment made by the assessee towards `Research and Development costs shared amounting to Rs.4.21 crore, which amount was paid to Faurec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the satisfaction of the TPO. It came out with certain other additional evidence in support of the receipt of services, running into around 1200 pages before the DRP. The Panel refused to admit it. The ld. AR brought to our notice that similar position prevailed for the immediately preceding assessment year for which the assessee unsuccessfully tried to furnish additional evidence before the DRP, but the Tribunal restored the matter directing reconsideration of such evidence. 5. It hardly needs to be emphasized that receipt of services is sine qua non for justifying deduction towards their payment. The ALP cannot be of any hypothetical services but of the actual services received inasmuch as it is determined of a transaction and not of the payment against the transaction. If no services are established to have been actually received from the AE and still some payment is made, obviously, the ALP of the transaction would be Nil for there being no quid pro quo for the payment. Ex consequenti, no deduction can be allowed for payment towards non-services. It is only when the services are received that the deduction, as a consequence of the ALP determination, can follow to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that the assessee paid the amount to Faurecia, France, which is in addition to payment of another sum of Rs.2.20 crore under the international transaction of `Payment of Royalty for use of Technology and Knowhow owned by the AE. A pertinent question that has rightly been raised by the TPO is that if the assessee has to contribute towards Research Development costs incurred by its AE for development of technology and know-how, then where is the point for making any payment separately towards Royalty? When the attention of the ld. AR was drawn towards this point, he submitted that the assessee was carrying on certain Research Development activity at its own end and the AE assisted in such activity for which a sum of Rs.4.21 crore was paid. On being called upon to substantiate the claim with the help of the expenditure incurred by the assessee on its own Research Development debited either to the Profit and loss account or shown in the Balance sheet, the ld. AR, on examination of the Annual accounts of the assessee, candidly admitted that no such expenditure was appearing therein. This shows that the theory of the assessee carrying out its own Research Development has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors also. 10. Having discussed about the examination of the availment of actual services by the assessee, the next step is to determine the ALP of the international transaction of payment of Group fees . The TPO invoked the CUP method and determined Nil ALP on the ground that no evidence of receipt of services was provided. Once, on a fresh examination of the evidence to be filed by the assessee, if the TPO comes to the conclusion that the services were actually availed, then he will proceed to determine the ALP of the international transaction afresh. It is made clear that all the methods for determination of the ALP are open before the TPO, who, depending upon the facts and circumstances, would be competent to adopt any one of them as the most appropriate method. In the ultimate analysis, we set-aside the impugned order and remit the matter of transfer pricing addition of Rs.10.34 core to the AO/TPO for a fresh determination in the hue of discussion made above. Needless to say, the assessee will be allowed reasonable opportunity of hearing. 11. Ground No. C about disallowance of Excise Duty amounting to Rs.6,49,823/- u/s.43B of the Act was not pressed by the ld. AR. The sa ..... 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