M/S. THE BANK OF TOKYO-MITSUBISHI UFJ LTD.,NEW DELHI vs. DDIT, NEW DELHI

सुनवाई क" तारीख / घोषणा क" तारीख / Date of Hearing : 30.01.2020 Date of Pronouncement: 21.05.2020 आदेश आदेश / ORDER आदेश आदेश PER SUSHMA CHOWLA, V.P. The present appeal filed by assessee is against order of DDIT (International Taxation), New Delhi dated 29.01.2014 relating to assessment year 2009-10 against the order passed under section 143(3)/144C(13) of the Income-tax Act, 1961 (in short ‘the Act’). Assessment Year: 2009-10

1. Disallowance of salary paid overseas to expatriates of the Appellant working in India by the Head Office and the Indian taxes paid thereon by the Head Office: Rs. 161,332,006 That on the facts and in the circumstances of the case and in law, the Hon’ble Dispute Resolution Panel ('DRP') erred in confirming the addition, as proposed in the draft assessment order, in respect of a sum of Rs. 161,332,006 paid as salaries by the Head Office overseas, in foreign currency, to the expatriates working in India exclusively for the permanent establishment (‘PE’) of the Appellant in India, on which taxes have been duly deducted/deposited in India, and accordingly the order of the Ld. AO, based on the DRP’s directions is erroneous in law as well as on facts on the following counts: That the Hon’ble DRP and Ld. AO have failed to appreciate a) that the salary has been paid to the expatriates who are stationed in India and are working exclusively for business operations of the Indian PE of the Appellant and is thus an allowable expenditure as per Article 7(3) of India-Japan DTAA (‘DTAA’) That the Hon’ble DRP and Ld. AO have erred in observing b) that the nature of expense is covered under section 44C of the Income- tax Act, 1961 read with clause (b) of Explanation (iv) to the section, even though, the said amount is incurred exclusively and for direct benefit of Indian operations of the Appellant.

2. Addition on account of interest paid to Head Office and other overseas branches of the Bank amounting to Rs. 339,135,887 That on the facts and circumstances of the case and in law, the Hon’ble DRP erred in confirming the addition proposed by the Ld. AO in the draft assessment order by holding that the Appellant was required to deduct tax at source under section 195 of the Act on the payment of interest to overseas branches/head office, and accordingly, the order passed by the Ld. AO on the basis of DRP’s directions, is bad in law on the following counts: That the Hon’ble DRP and Ld. AO have erred in not a) appreciating the fact that there is no requirement to deduct tax at source on the payment which is not taxable under the Act being payment to self and interest paid is allowable as deduction under the DTAA.

2 Assessment Year: 2009-10 That the Hon’ble DRP and Ld. AO have erred in not b) following the direct judgment of the Mumbai Special Bench in the case of Sumitomo Mitsui Banking jj Corporation (136 ITD 66) wherein the Appellant was an intervener. That the Hon’ble DRP and Ld. AO have erred in placing c) reliance on the CBDT Circular No. 740 dated 17 April 1996 in order to disallow the interest paid to overseas branches/head office, without comprehending the true import of the circular.

3. Addition on account of income of the Appellant pertaining to receipt of interest from Indian branches amounting to Rs. 339,135,887 That on the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the separate addition of Rs. 339,135,887, as proposed in the draft assessment order, with respect to the interest paid by Indian branches of the Appellant to head office/overseas branches, and accordingly the order of the Ld. AO based on DRP’s instructions is incorrect, unjustified and bad-in law as well as on facts, on the following counts: a) The Hon’ble DRP and Ld. AO have erred in not appreciating that the receipt of the interest from the Indian branches is not taxable under the provisions of the Act, being ‘receipt from self. b) The Hon’ble DRP and Ld. AO have erred in making addition in respect of the receipt of interest from Indian branches by making the following observations: That provisions of section 9(1)(v)(c) of the Act are • applicable. That the CBDT circular No. 740 is applicable to the • Appellant’s case. c) The Hon’ble DRP and Ld. AO have erred in not appreciating the contention of the Appellant that it has opted to be governed by the provisions of the DTAA (so far as they are more beneficial) and has wrongly applied the provisions of Act. d) The Hon’ble DRP and Ld. AO have erred in not appreciating that in terms of the provisions of Article 11 of the DTAA, dealing with the taxability of Interest, the interest received by the Appellant from the Indian branches is not in respect of a ‘debt- claim’ as contemplated under Article 11 of the DTAA. e) That the Hon’ble DRP and Ld. AO have erred in not following the direct judgment of the Mumbai Special Bench in the case of Sumitomo Mitsui Banking Corporation (136 ITD 66) wherein the Appellant was an intervener.

3 Assessment Year: 2009-10 f) Without prejudice to Ground no. 2, the Hon’ble DRP and Ld. AO have erred in not appreciating that separate addition of Rs. 339,135,887 relating to interest paid on borrowings from HO/overseas branches would tantamount to double taxation, which is against all canons of taxation.

4. Interest amounting to Rs 15,956,253 accrued/ received by the Indian PE from its HO/ overseas branches. That on the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the addition, as proposed in the draft assessment order, for an amount of Rs. 15,956,253 being the interest accrued/ received by the Indian PE of the Appellant on funds with the Head office / overseas branches and accordingly the order of the AO based on DRP’s instructions is bad in law as well as on facts, on the following counts: a) The Hon’ble DRP and Ld. AO have erred in not appreciating that the interest received by the Indian branches is not chargeable to tax in India in accordance with the provisions of the Act, being 'receipts from self’. b) The Hon’ble DRP and Ld. AO have erred in not appreciating that in terms of the provisions of Article 11 of the DTAA, dealing with the taxability of Interest, the interest received by the Indian branches from the head office/overseas branches is not in respect of a ‘debt-claim’ as contemplated under Article 11 of the DTAA.

5. Non-applicability of the provisions of Sec 115JB of the Act relating to Minimum Alternate Tax (‘MAT’) That on the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the action of the Ld. AO of invoking the provisions of 115JB of the Act, as proposed in the draft assessment order, and accordingly the order of the AO based on DRP’s directions is bad in law on the following counts: The Hon’ble DRP and the Ld. AO have erred in not a) appreciating the contention of the Appellant that being a banking company, the provisions of section 115JB of the Act is not applicable to the Appellant for the subject year. The Hon’ble DRP and Ld. AO have erred in not appreciating b) the contention of the appellant that operations of its Indian PE are taxable in accordance with provisions of Article 7(3) of the DTAA and in view of the provisions of section 90 of the Act, the provisions of section 115JB of the Act cannot be applied. The Hon’ble DRP and Ld. AO have erred in distinguishing c) the relevant binding judgments referred to by the Appellant, which substantiates the view of the Appellant that provisions of section 115JB of the Act cannot be applied on the facts of the Appellant’s 4 Assessment Year: 2009-10 case and have further erred in relying on the decision of the Advance Rulings Authority (‘AAR’), which is distinguishable on facts and is not applicable at all.

6. Addition on account of interest received on External Commercial Borrowings (‘ECBs’) given to Indian Borrowers That on the facts and in the circumstances of the case and in law, the Hon’ble DRP erred in confirming the addition, as proposed in the draft assessment order, in respect of interest received by the Appellant on ECBs given to Indian borrower parties, and accordingly the order of the Ld. AO based on DRP’s directions is bad in law as well as on facts on the following counts: a) The Hon’ble DRP and Ld. AO have erred in not appreciating that under the provisions of Article 7 of the DTAA, an amount, commensurate with the role played by the PE, has already been offered to tax by the Appellant, in computation of its income taxable in India as per the provisions of the DTAA; and therefore nothing further could be brought to tax in India. b) The Hon’ble DRP and Ld. AO has erred in observing that the interest would continue to be taxable under Article 11 of the DTAA, even though it has been acknowledged by the AO himself that the ECBs may be partially connected with the PE. Such an observation is contrary to the express provisions of Article 11 of the DTAA, which clearly provides that in the event debt-claim is connected with the PE, the taxability of the interest shifts from Article 11 to Article 7 of the DTAA completely, and not partially, and accordingly, the findings of the Ld. AO are incorrect and bad in law. The Hon’ble DRP and Ld. AO have erred in taxing the c) interest which is not taxable in terms of Article 11 (3) and 11 (4) of the DTAA.

Without prejudice to above, the Ld. AO has erred in levying d) tax @ 10% on amount of interest allegedly received (grossed up), by ignoring the fact that by grossing up the interest in the first place, the AO acknowledged that the said interest was subject to TDS, and the interest shown to have been received by the Appellant was net of TDS, and therefore, since the Appellant has received only net interest, no recovery can be made from the Appellant as per the provisions of section 205 of the Act.

Without prejudice to the above, the Hon’ble DRP and Ld. AO e) have erred in not allowing the credit for the TDS, deducted by the Indian borrower parties before making the payment of interest to the Appellant. 5 Assessment Year: 2009-10 Without prejudice to the above, the Ld. AO has erred in f) charging interest under section 234B of the Act in respect of the aforesaid interest on ECB, even though it has been held in the assessment order that such interest is subject to TDS. 7 Deduction under section 44C of the Act Without prejudice to Grounds 1 to 6 above, on the facts and circumstances of the case and in law, the Ld. AO has erred in not determining the correct amount of deduction under section 44C of the Act, by ignoring the addition made to the total income on account of interest received by the Appellant on ECBs. 8 Treatment in respect of Deferred Bank Guarantee Commission. That on the facts and circumstances of the case and in law, a) the Hon’ble DRP and Ld. AO have erred in treating the commission received on guarantee as taxable on receipt basis in the year in which the commission is received. That on the facts and circumstances of the case and in law, b) the Hon’ble DRP and Ld. AO have failed to appreciate that the Appellant follows mercantile method of accounting according to which, the commission falling due for the relevant previous year on accrual basis can only be taxed. That on the facts and circumstances of the case and in c) law, the Hon’ble DRP and Ld. AO have erred in not following the decision of the Hon’ble Calcutta High Court in the Appellant’s own case for the Assessment Year 1981-82.

9. Non-grant of tax credit amounting to Rs.64,314,230 On the facts and circumstances of the case and in law, the Ld. Assessing Officer has erred in not providing the tax credit of Rs. 64,314,230 (resulting from the excess advance tax/TDS paid by the Appellant for Assessment Year 2009-2010) while raising the impugned tax demand by ignoring the fact that no refund has been received by Appellant.

10. Erroneous withdrawal of interest under section 244A of the Act On the facts and circumstances of the case and in law, the Ld. AO has erred in withdrawing the interest under section 244A(3) of the Act without appreciating the fact that no refund has been received by the Appellant for Assessment Year 2009- 2010.

12. Transfer Pricing adjustment a) That on the facts and circumstances of the case and in law, the Hon’ble DRP and Ld. AO/TPO have erred in rejecting the primary as well as corroborative analysis undertaken by the Appellant for determining the arm’s length price (‘ALP’) of the international transaction, “guarantee commission” (impugned international transaction), in accordance with the provisions of the Act read with the Income Tax Rules, 1962 (‘Rules’). b) That on the facts and circumstances of the case and in law, the Hon’ble DRP and Ld. AO/ TPO have erred in characterizing the impugned international transaction as corporate/ financial guarantee without appreciating the distinction in functions performed, risks undertaken & asset utilized (‘FAR’) between the two transactions. c) That on the facts and circumstances of the case and in law, the Hon’ble DRP and Ld/ AO/TPO have erred in using erroneous comparable uncontrolled price data, obtained by issuance of 133(6) notice for computing the ALP of the impugned international transaction. d) That on the facts and circumstances of the case and in law, the Hon’ble DRP and Ld/ AO/TPO have erred in not providing any opportunity to cross examine the 133(6) data relied for the purpose of determining the ALP of the impugned transaction thereby violating the principle of natural justice. e) That on the facts and circumstances of the case and in law, the Hon'ble DRP and Ld. AO/TPO have erred in not considering the principle of consistency while determining the ALP of the impugned transaction.

13. That on the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has erred in initiating penalty proceedings, being against the provisions of the Act.”

7 Assessment Year: 2009-10

Hence, the objections filed by the assessee were rejected. The Assessing Officer in the final assessment order passed on 29.01.2014 made the addition on account of disallowance of salary paid overseas to expatriates of the assessee working in India by the Head office and the Indian taxes paid thereon by the Head Office at Rs.16,13,32,006/-.

9. We further find that the appeals of the Revenue have been dismissed by consolidated order passed by the Hon’ble Delhi High Court in & 605/2015, vide order dated 08.04.2016. The Hon’ble High Court while deciding the issue of whether deduction is to be allowed, on account of salary paid to expatriates, observed as under:-

10. This Court has perused the order of the Bombay High Court in Emirates Commercial (supra) where on identical facts, the issue was decided in favour of the Assessee. This order of the Bombay High Court has been affirmed by the Supreme Court by order dated 26th August 2008 in Commissioner of Income tax vs. M.//s. Emirates Commercial bank Ltd. which in turn referred to an order of the same date in Commissioner of Income Tax vs Deutsche Bank AG (CA No.1544 of 2006).”

10 Assessment Year: 2009-10

11. The second issue raised vide Ground No.2 is on account of interest paid to Head Office and other overseas branches of the bank amounting to Rs.33,91,35,887/-.

12. Ground of appeal No.3 raised by the assessee is against the addition on account of income of assessee pertaining to receipt of interest from Indian branches amounting to Rs.33,91,35,887/-.

11 Assessment Year: 2009-10

14. The Assessing Officer was of the view that for the purpose of taxation, PE of the assessee was a separate entity and hence, there was obligation to deduct tax at source u/s 195 of the Act. Since the assessee had failed to deduct tax at source, the amount was proposed to be disallowed and also reference was made to CBDT Circular No.740 dated 17.04.1996. The Assessing Officer placed reliance on the assessment order relating to Assessment Year 2007-08 and disallowed the said amount in the hands of the assessee. The DRP upheld the order of the Assessing Officer and the final assessment order was thus passed.

13. On this issue, the Court further finds that the order of the Calcutta High Court dated 17th November 2014 in of 2004 (Bank of Tokyo- Mitsubishi Ltd. v. Director of Income Tax, International Taxation, Mumbai) has also decided this issue in favour of the Assessee by following its judgment of ABN Amro Bank/supra}. The two specific questions urged by the Assessee in that case were answered in its favour:

(i) Whether interest payment made by the Indian Branch of the appellant to its head office abroad was to be allowed as a deduction in computing the profits of the appellant's branch in India?

(ii) Whether making such payment to the head office, the appellant's said branch was required to deduct tax at source under section 195 of the Income Tax Act, 1961? 14. It is significant that in the aforementioned order, the Calcutta High Court noted the fact that the Special Leave Petition preferred by the 13 Assessment Year: 2009-10 Revenue against the judgment of the Calcutta High Court in ABN Amro Bank(supra) was dismissed by the Supreme Court on 3rd August 2012. 15. Accordingly, this Court declines to frame any question on this issue of interest paid to the HO as well as the interest received from the Indian branches.”

Following the same parity of reasoning, we hold that there is no merit in both the additions made in the hands of the assessee in this regard. Ground of appeal Nos. 2 & 3 raised by the assessee are thus allowed in favour of the assessee.

15 Assessment Year: 2009-10

Credit Agricole Indoseuz (supra). The said proposition has been applied by the Tribunal while deciding the appeals in Assessment Years 2010-11 & 2011-12. The Tribunal also noted the fact that while deciding the issue in Assessment Years 2007-08 & 2008-09, the Tribunal did not have the benefit of the decision of the Hon’ble Bombay High Court. Applying the same parity of reasoning, we find no merit in the aforesaid addition made in the hands of the assessee and the same is deleted. Ground of appeal No.4 raised by the assessee is thus allowed.

24. The issue raised in Ground No.5 by the assessee is whether the provisions of section 115JB of the Act are applicable or not. The case of the assessee before the authorities below was that it was carrying on the banking business through its branches and was preparing the P&L A/c for Indian operation in accordance with the Banking Regulation Act and the second plea raised by the assessee was that it was a foreign company and the provisions of the India-Japan Treaty override the provision of Income Tax Act; hence the provision of section 115JB of the Act were not applicable. The Assessing Officer held otherwise and the objection filed by the assessee was dismissed and final assessment order was passed by the Assessing Officer.

16 Assessment Year: 2009-10

17 Assessment Year: 2009-10

20. “The ITAT has after an elaborate discussion had come to the conclusion that the Assessee's claim for lower tax will have to be accepted because Section 115JB is subject to Section 90(2) of the Act and the taxable income of the Assessee would have to be computed in terms of Article 7(3) of the DTAA. What is significant is that the profit and loss account of the Assessee has not been prepared in terms of Part II of Schedule VI of the Companies Act, 1956 and in fact could not have been prepared in terms thereof. Consequently, the question of applicability of Section 115JB did not arise. As rightly pointed out till the insertion of Section 115JB, banking companies were required to prepare their accounts in terms of special acts that they were governed by, and therefore there were no computation provisions as regards such banking companies. The change brought out by Section 115JB was therefore not retrospective.

21. The reasoning and the conclusion of the IT AT on this issue appears to suffer from no legal infirmity. Consequently, the Court declines to frame any question on this issue as well.”

29. The next issue raised vide Ground No.6 is against the taxability of interest received on ECB, given to Indian Borrowers.

The Assessing Officer rejecting the plea of the assessee brought to tax interest on ECBs in the hands of the assessee, in turn relying on the assessment order for Assessment Year 2007-08 and passed final assessment order as DRP rejected the objections of the assessee.

35. The issue raised in Ground Nos. 9 & 10 by the assessee are not pressed and the same are dismissed.

36. The issue raised in Ground No.11 by the assessee is treatment in respect of Deferred Bank Guarantee Commission.

16. “ITA 244/2014, also in the case of assessee Shin, was preferred by the Revenue against the order of the ITAT applying the judgment of Asia Satellite Telecommunication Co. Ltd. '.I' case (supra). Here too the ITAT had overturned the Assessment Order dated 09.04.2012. The order was similar if not wholly identical to the one passed in ITA 500/2012. 20 Assessment Year: 2009-10

17. ITA 473/2012 and 474/2012 are filed by the Revenue against the order of the ITAT overturning common assessment order dated 17.08.2011, in the case of assessee New Skies. Here the return of income for the AY 2008-09 was tiled on 10.10.2008 declaring NIL income. For the same reasons as above, the AO held the income taxable under Section 9(I)(vi). However, in addition to this, the AO also went into the difference between the definition of royalty under Section 9(1)(vi) and the treaty, in that case, the Indo-Netherlands DT AA. Here, the definition of royalty under Article 12(4) is as follows: 'The terms "royalties" as used in this Article means payments of any kind received as a consideration for the use of or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, any patent, trademark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience.' Compared to the definition in Explanation 2(iii) of 9(1 )(vi) the only distinction between the two was one of punctuation, specifically, the existence of a single "comma" following the word "process" in Article 12(4), a comma which is absent from the definition under domestic law. The only question was whether this comma dictated a particular consequence, namely whether its presence would mean that the word secret did qualify the word process in Article 12(4), and that its absence under domestic law would mean that it did not. In other words, if the comma was allowed to influence the interpretation of Article 12(4), it would mean that for the purposes of consideration to be termed as royalty under the DT AA, the process utilized would necessarily have to be a "secret process", whereas the position under domestic law is that the secrecy or not of the process utilized is irrelevant. After delving into a list of case law which lay down the rules for when punctuation is not to be taken seriously while interpreting an act or treaty, the AO decided that the presence of the comma was inconsequential. Here too, without prejudice to its above finding, the AO held that the process of providing the transponder would still qualify as a secret process. Quoting the Oxford Dictionary, the AO held that secret means kept or meant to be kept private, unknown or hidden from all but a few. It was held that the process was within the exclusive knowledge of the assessee. The customer is neither in the know nor is it empowered to use the process in its own way.”

Ground of appeal No.8 is thus allowed.

40. The issue raised vide Ground No.11 is against the applicable rate of tax on the income of the assessee attributable to its PE in India.

41. Briefly in the facts of the case the Assessing Officer had observed that the rate of tax applicable to the assessee would be @ 40% being the rate of tax applicable to the foreign companies. The assessee is aggrieved by the order of the Assessing Officer as the applicable rates of tax to the domestic companies was 30%. The contention of the assessee in this regard is application of Article 24 of the DTAA. The Ld.AR for the assessee pointed out that the Tribunal in Assessment Year 2000-01 had adjudicated the said issue. However, the Hon’ble High Court of Calcutta vide judgement dated 07.08.2019 held that the rate of tax applicable would be lower rate i.e. rate on domestic companies. He further referred that the amendment in the Income Tax Act which was not before the Hon’ble High Court. Referring to the amendment i.e. Explanation (1) to section 90 of I.T.Act, it was pointed out by the Ld.AR for the assessee that the aforesaid amendment cannot override the terms of DTAA. He placed reliance on the decisions of Hon’ble Delhi High Court in DIT vs New Skies Satellite BV [2016] 68 taxmann.com 8 (Del.). The Ld.AR for the assessee also pointed out that though the tax treaty between India and Japan is silent whether different rate could be applied, but suo motto application of higher 22 Assessment Year: 2009-10 rates of tax by the Revenue authorities was discrimination. He also pointed out that the Explanation (1) to section 90 of the Act applies to domestic companies but cooperative societies are not covered by the amendment. He further pointed out that different treaties have used different languages i.e. in DTAA between India and UK, there is a provision for charging higher rate of tax to the PE of a foreign company than Indian company and the same would not be discriminatory.

order dated 13.09.2019 vide paras 13 to 16 which read as under:-

16. The matter has been decided in favour of the assessee in their own case by the order of the Hon’ble Calcutta High Court in of 1998 dated 07.08.2019 for the assessment year 1991-92 by referring to the provisions of Article 24 of the DTAA. We also find that the Explanation 1 to Section 90 has not been considered by the Hon’ble High Court of Calcutta while dealing with the case of the assessee for the assessment year 1991-92. However, for assessment year 1998-99, this issue has been dealt with by the Co-ordinate Bench of ITAT Delhi and decided against the assessee vide order dated 03.06.2019 in ITA No. 1783/Kol/2002 by taking into consideration the 25 Assessment Year: 2009-10 provisions of Explanation 1 to Section 90(2) of the Act. The ld. AR has submitted that the issue for that year is still pending with the Hon’ble High Court of Delhi. Hence, keeping in view, the entirety of the facts, we hereby hold that the assessee cannot be regarded as treated less favourably by taxing at a higher rate. As a result the appeal of the assessee on this ground is dismissed.

no.12 is against the transfer pricing adjustment made on account of Receipt of guarantee commission. The assessee while benchmarking its international transactions in the transfer pricing report applied combined approach and has benchmarked under TNMM method. The case of the assessee is that the Transfer pricing analysis undertaken by 29. Assessment Year: 2009-10 applying TNMM method on combined approach should be accepted, as the margins of the assessee has been accepted and no adjustment has been made in the hands of the assessee. The only adjustment which was made in the hands of the assessee was on account of Receipt of guarantee commission. The case of the assessee before us is that as PE in India, it has limited role and was not bearing any risks. The assessee received part of guarantee commission in its capacity as facilitator only. When the persons needed guarantee in India to participate in a tender, then service of the Bank was utilized for issuing guarantee in favour of the beneficiary. The evaluation of the beneficiary for the creditworthiness of the customers was performed by the overseas branches, whereas the assessee had limited role in issuing letter of guarantee, it received 1% guarantee commission. In these facts, there is no merit in comparing the rate received by the assessee with the rate charged by different banks who are operational in India and providing financial guarantee to its customers, with all risk involved therein. In such facts and circumstances, the Assessing Officer/TPO erred in applying the rate charged by Axis Bank, Canara Bank, Punjab National Bank and State Bank of India, etc. with arithmetic mean of 2.71% to benchmark the international transactions between the assessee and its overseas branches of receipt of bank guarantee commission. The details of the international transaction are tabulated in the order of the TPO itself and the same clearly reflect that no transaction is undertaken except with overseas branches. The assessee undoubtedly is also providing the services to its customers in India where it a risk bearing entity. We are of the view that where the assessee has undertaken bundle of international transactions with its AE

30. Assessment Year: 2009-10 and the same has been benchmarked by applying combined approach and the method of TNMM has been used and the margins shown by the assessee have been accepted; then there is no merit in segregating the international transaction of the receipt of the guarantee commission and benchmarking the same separately. The margins of the combined approach has been accepted at Arm’s Length. Consequently, there is no merit in the transfer pricing adjustment made in the hands of the assessee. The same is thus directed to be deleted. The ground of appeal No.12 is thus deleted.