9911796707
TMI Blog2017 (6) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... sentatives of Gruner AG, Germany visited India from time to time to render the technical services. 2.4. incorrectly assuming multiple year data has been used for the purpose of TNMM method. 3. Ld. DRP erred by failing to appreciate that a comparable under TNMM may not be a comparable under CUP method. 3.1. Failed to appreciate instructions followed by Hon'ble ITAT on same issue in AY 2011-12. 3.2. erred in correctly identifying the proportion of the controlled transaction of royalty undertaken by Havells India Limited. 3.3. erred by incorrectly deriving the amount of royalty to be paid as percentage of Non-AE sale of assessee. 4. Ld. DRP erred by confirming the rejection of 7 comparables out of total 9 comparables determined in TP study on incorrectly assuming that they are not incurring expenditure on Royalty/ FTS. 5. Ld. DRP has erred in law and on facts of the case by confirming to benchmark under CUP Method the transactions of Royalty and FTS payments even when these are justified under TNMM. 6. Ld. DRP failed to appreciate the judgment of Hon'ble Delhi High Court in the similar issue in case of Magneti Marelli Powertrain India Pvt. Ltd. 7. Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid 2 transactions out of 6 transactions under the aggregation approach under TNMM adopted by the assessee and made an adjustment of Rs.8,35,79,699/-. The TPO identified CUP as the most suitable method for the aforesaid 2 transactions by comparing the payment of royalty/FTS of the set of 9 comparables identified under TNMM by the assessee. Accordingly, the TPO proposed the addition of Rs.8,35,79,669/- on account of Arm's Length Price. 7. Being aggrieved the assessee filed the objection before the Dispute Resolution Panel (DRP) u/s 144C(5) of the Act. However, the ld. DRP relied on the decision of the ITAT for the assessment year 2011-12 in assessee's own case wherein the decision of the TPO to segregate international transactions of payment of royalty and FTS from other international transactions was upheld. However, regarding the direction of the ITAT to apply the CUP method, the ld. DRP observed that in the absence of comparable data provided by the assessee, the method suggested by the ITAT cannot be applied. The relevant findings are given in para 9.4.1 of the order of the DRP dated 21.12.2016 which read as under: "9.4.1 The Panel has considered the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply TNMM as the MAM and upholds CUP as the MAM. The Panel also upholds the selection of comparables by the TPO and the computation of arm's length as determined by the TPO. The Panel thus, refuses to interfere with the order of the TPO/AO." On the direction of the ld. DRP, the AO passed the impugned order and made the addition of Rs.8,35,79,669/-. 8. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee submitted that in the preceding year, the ITAT in ITA No.6794/Del/2105 observed that the approach adopted by the TPO was not proper and against the methodology of CUP. A reference was made to page nos. 83 to 87 of the assessee's paper book which is relevant portion of the order of the ITAT for the assessment year 2011-12. It was further submitted that the ITAT rejected the panel of selection of comparable under CUP but the DRP failed to follow those instructions which were placed on record before the ld. DRP. It was pointed out that against the order dated 29.04.2016 of the ITAT in ITA No. 6794/Del/2015, the assessee filed an appeal before the Hon'ble Delhi High Court vide Appeal No. 708/2016 on the following issues: "-Whether out of total 6 transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... best recourse available. It was pointed out that the ld. DRP failed to acknowledge the ruling of the Hon'ble Delhi High Court in the case of Magneti Marelli (supra), which was placed before the ld. DRP vide submission dated 07.12.2016, in this regard a reference was made to page no. 43 of the assessee's paper book. It was prayed that the assessee's case should be viewed on the basis of the ruling of Hon'ble Delhi High court in the assessee's own case for the assessment year 2011-12 and in the case of M/s Magneti Marelli (supra). 12. In his rival submissions the ld. DR strongly supported the order of the authorities below. 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that an identical issue was involved in assessee's own case in the assessment year 2011-12 in ITA No. 6794/Del/2015 which was decided by the ITAT "I-2" Bench, New Delhi vide order dated 29.04.2016. Against the said order, the assessee preferred an appeal to the Hon'ble Delhi High Court at New Delhi in ITA 708/2016 wherein vide order dated 20.12.2016, the issue was remanded back to the file of the TPO and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts and technology developed by it. The assessee argued that without receiving such technology/technical know-how/ information/assistance from the overseas AE, the assessee would not be able to conduct/carry out manufacturing and sales of ECUs in India at all. The assessee strengthened this contention by saying that it earned revenue of Rs.42.23 crores from the sale of ECUs using the above mentioned technical knowhow as a result of payment of Rs.38.59 crores during FY 2008-09. Further, the assessee also earned aggregate revenue of Rs.174.89 crores during a period of 3 consecutive years (i.e. FY 2008-09, FY 2009-10 and FY 2010-11) against a total payment of US $ 8,000,000, equivalent to Rs.38.59 crores paid in FY 2008-09. During the transfer price proceedings, the assessee was unable to substantiate the need for payment of technical assistance fees to its foreign AE. The TPO has observed that the assessee tried to establish its case for the arm's length nature of the transaction by stating that it gained in the form of higher sales. The TPO observed that neither any cost benefit analysis nor any benchmarking exercise was undertaken at the time of entering into the agreement. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The remit directed by the impugned order is, therefore, upheld. 10. In the light of the above discussion, it is held that the entire issue as to whether aggregation is warranted in the circumstances, should be gone into afresh in view of the law declared in Sony Ericsson (supra) and clarified in Magneti Marelli (supra) above. 11. As far as the issue of most appropriate method is concerned, this Court is of the opinion that no definitive ruling ought to be given at this stage. As to whether in the event of de-segregation the CUP method is the most appropriate rather than TNM method should in our opinion be left open for consideration depending on the determination of the issue of aggregation/ de-segregation itself. In other words, that whether in the event of desegregation, which would be the appropriate method, should be left to the TPO to decide, after hearing counsel for the parties. However, we clarify that in the event it is held that aggregation is permissible in the facts of this case, the findings of the Revenue authorities and the Tribunal that the TNMM method was warranted, would not be disturbed. 12. In the light of the above findings, the appeal is partly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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