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Income Tax Appellate Tribunal, DELHI BENCHES : I-1 : NEW DELHI
Before: SHRI R.S. SYAL & SMT. BEENA A. PILLAI
per the mandate of rule 10B(1)(a)(i). Not even a single comparable case has been brought on record to facilitate a comparison between the price for the services availed by the assessee vis-à-vis that paid by other comparables in similar circumstances.
Even otherwise, we notice that the action of the TPO in determining Nil ALP of the eleven services and Rs.48.00 lac of Information technology on the ground that no such services were required to be availed or it was a case of duplication of services or shareholders’ services and then the AO making addition simply on the basis of recommendation of the TPO, is not Hon’ble jurisdictional High Court in CIT v. Cushman & Wakefield (India) (P.) Ltd. (2014) 367 ITR 730 (Del), in which it has been held that the authority of the TPO is limited to conducting transfer pricing analysis for determining the ALP of an international transaction and not to decide if such services exist or benefits did accrue to the assessee. Such later aspects have been held to be falling in the exclusive domain of the AO. In that case, it was observed that the e- mails considered by tribunal from Mr. Braganza and Mr. Choudhary dealt with specific interaction and related to benefits obtained by assessee, providing a sufficient basis to hold that benefit accrued to assessee. As the details of specific activities for which cost was incurred by both AEs (for activities of Mr. Braganza and Mr. Choudhary), and attendant benefits to assessee were not considered, the Hon'ble High Court remanded the matter to file of concerned AO for an ALP assessment by TPO, followed by AO's assessment order in accordance with law considering the deductibility or otherwise as per section 37(1) of the Act.
When we advert to the facts of the instant case, it turns out that the TPO proposed the transfer pricing adjustment of Rs.25.74 crore and odd 8
almost equal to the stated value of the international transaction by holding that no benefit was received by the assessee as a result of availing these services or these amounted to duplication of services or shareholders’ services and hence no payment on these scores was warranted. The AO in his draft order has taken ALP of these international transaction at Rs.48.00 lac on the basis of recommendation of the TPO without carrying out any independent investigation in terms of the deductibility or otherwise of such payment in terms of section 37(1) of the Act. The addition has been made by the AO in his final assessment order giving effect to the direction given by the DRP and not by invoking section 37(1) of the Act. As per the ratio decidendi of Cushman & Wakefield India (P.) Ltd. (supra), the TPO was required to simply determine the ALP of the international 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. As the TPO in the instant case initially determined Rs.48.00 lac as the ALP of the international transaction of Rs.26.22 crore by holding that no benefit etc. accrued to the assessee and the AO made the addition without examining the applicability of section 37(1) of the Act, we 9
AO/TPO running in contradiction with the ratio laid down in Cushman & Wakefield (supra). Following this decision and the discussion made supra, we are of the considered opinion that the impugned order cannot stand. The same is, therefore, set aside and the matter is remitted to the file of AO/TPO for determining the ALP of the international transaction of `Receipt of business support services’ de novo as per law after allowing a reasonable opportunity of hearing to the assessee. The ld. AR has undertaken to extend full co-operation to the AO/TPO by supplying all the relevant material and evidence as demanded.
Ground No.6 is against the disallowance of interest aggregating to Rs.9,39,413/- which was paid on account of late payment of Central Sales- tax, Service Tax and Value Added Tax. The ld. AR contended that the assessee filed rectification application before the DRP, which was disposed of vide order dated 21.05.2015. A copy of such order has been placed on record. Similar to Ground No.6 raised in the Memorandum of Appeal before the Tribunal, the assessee raised Objection No.2 before the DRP in rectification application against the disallowance of interest paid on Central Sales-tax, Service Tax and Value Added Tax. The DRP has decided this 10
3.2 of its direction given in rectification proceedings. The A.O. is directed to give effect to such directions, which the ld. AR states has not been done so far.
Ground No.7 is against the disallowance of interest on payment of advance tax amounting to Rs.8,86,431/-. This issue has also been dealt with by the DRP by holding that no deduction can be allowed in respect of interest paid for payment of advance tax. It goes without saying that the decision taken by the DRP is unimpeachable as has also been conceded by the ld. AR that the payment of such interest cannot be allowed. The ld. AR, however, submitted that the deduction on account of such interest claimed by the assessee has been voluntarily reversed by the assessee in the succeeding year. In our considered opinion, the suo motu offering of income in a later year, will not make the amount deductible in the year under consideration, which has been rightly held to be not deductible. The assessee is at liberty to take remedial action in respect of such offering of income in a later year in appropriate proceedings.
Ground No.8 is against not setting off of brought forward unabsorbed depreciation of Rs.9,60,34,623/- while computing income of the assessee.
The A.O. is directed to examine this contention and deal with the same as
per law.
The last ground regarding levy of interest u/s 234B is consequential.
In the result, the appeal is allowed for statistical purposes only.
The order pronounced in the open court on 21.08.2018.