DCIT (IT) 2(1)(2), MUMBAI vs. DET NORSKE VERITAS- INDIA BRANCH OFFICE, MUMBAI

Revenue by : Shri Rignesh K.Das-Ld. DR Assessee by : None सुनवाईक"तार"ख/ : 18/07/2019 Date of Hearing घोषणाक"तार"ख / : 23/07/2019 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1. Aforesaid appeal by Revenue for Assessment Year [in short referred to as ‘AY’] 2007-08 contest the order of Ld. Commissioner of Income-Tax (Appeals)-56, Mumbai, [in short referred to as ‘CIT(A)’], Appeal No. 2 Det Norske Veritas Assessment Year-2007-08 CIT(A)—56/ADIT (IT)-1(2)/2014-15/264-D dated 28/03/2016 on following grounds of appeal: -

1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer on regional office expenses of Rs. 78,02,774/-relying on the Mumbai Tribunal's decision in the appellant's own case despite the facts of the case being different from the A.Y. 2008-09 in so far as the ITAT had disallowed the ad-hoc disallowance whereas in the year under consideration the disallowance is not on ad-hoc basis.

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in relying on the ITAT decision in the assessee's case for A.Y. 2008-09 where the adjustment was made on ad-hoc basis as against the adjustment for year under consideration, which was made as assessee had not provided documentary evidence in support of the expenses claimed. None has appeared for assessee and no valid adjournment application is on record which leave us with no option but to proceed with the matter ex- parte qua the assessee.

2. Facts on record would reveal that the assessee being non-resident corporate assessee was assessed for impugned AY u/s 143(3) r.w.s. 144C(3) vide order dated 07/02/2011. The assessee is stated to be branch office of Det Norske Veritas AS Norway which is part of DNV group. The assessee was inter-alia, saddled with Transfer Pricing adjustment of Rs.167.94 Lacs as proposed by Ld. Transfer Pricing Officer in its order u/s 92CA (3) dated 29/10/2010 which was computed in the following manner: - No. Particulars Amount (Rs.) 1. 20% of Total Software Charges 83,41,958/-

2. Regional Office Expenses paid to DNV Shanghai 78,02,774/-

3. Unexplained Variance in Regional Office Expenses 6,49,750/- Total Adjustment 1,67,94,482/- 3 Det Norske Veritas Assessment Year-2007-08 The perusal of the order of Ld. TPO establishes that the Arm’s Length Price of the stated transactions have been computed to the best of judgment and the same has not been arrived at after following any of the method as prescribed u/s 92C(1).

3. Upon further appeal, first appellate authority deleted the additions by relying upon the order of this Tribunal in assessee’s own case for AY 2008- 09 dated 29/02/2016. Aggrieved, the revenue is in further appeal before us with respect to deletion of adjustment pertaining to regional office expenses for Rs.78.02 Lacs. The Ld. DR has submitted that the facts in AY 2008-09 were different since in that year the adjustment was made on adhoc basis as against the fact that for this year, the assessee did not file any documentary evidences in support of the expenses claimed.

4. Upon careful consideration, we do not agree with the submissions made by Ld. DR since in AY 2008-09, Ld. TPO had proposed adhoc adjustment of 20% of regional office expenses whereas in the impugned year, Ld. TPO has proposed 100% adjustment. In both the years, Ld. TPO has not followed any of the prescribed method u/s 92C(1) while arriving at Arm’s Length Price of the transactions which is against the provisions of law. This observation has already been made by the co-ordinate bench of the Tribunal in assessee’s own case for AY 2008-09 ITA No.200/Mum/2014 order dated 29/02/2016, the operative portion of which has already been extracted in the impugned order on page-11. For the same very reason, the first appellate authority has deleted the additions. Therefore, no infirmity could be found in the same.