DCIT, CIRLCE- 1(1) (1), INTERNATIONAL TAXATION , NEW DELHI V. AMERICAN EXPRESS BANKING CORP. (INDIA BRANCH), NEW DELHI

ITA 165/DEL/2019

AI Insights

The case involves American Express Banking Corp. (India Branch) appealing against the order of the Commissioner of Income Tax (Appeals)-44, New Delhi, which upheld the TPO's decision to apply the Comparable Uncontrolled Price (CUP) method instead of the Transactional Net Margin Method (TNMM) for benchmarking international transactions. The TPO had questioned the choice of the tested party and the accuracy of the data used by the assessee, leading to a significant adjustment in the income declared by the assessee. The Income Tax Appellate Tribunal (ITAT) found merit in the assessee's arguments regarding the application of the CUP method and the selection of comparables, leading to a remittance of the matter back to the TPO for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 22916 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Other Referred Cases: Aztec Software Technology, Honeywell Ltd., Customer Services India (P) Ltd., Schefenacker Motherson Ltd., Geodis Overseas (P) Ltd., TNT India Pvt. Ltd., NGC Network (India) Pvt. Ltd., ADP Private Limited, Birla Soft Limited, Exxon Mobil Company India Pvt. Ltd., Symantec Software Solutions Pvt. Ltd., ST Micro Electronics, Haworth (India) Pvt. Ltd., Deloitte Consulting India Pvt. Ltd., Denso Haryana Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAGESWAR RAO
• Assessee Lawyers: S.K. JHADAV
• Keywords: Transfer pricing; International transaction; Commercial expediency; Presumptive income
• Section: 13; 20

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.542/Del./2019, A.Y. 2011-12 American Express Banking Corpo. (India Branch) Metropolitan Saket, 7th Floor District Centre, Saket, New Delhi-110017 PAN: AAGCA9055N Vs. Deputy Commissioner of Income Tax, Circle-1(1)(1), International Taxation, Civic Centre, Minto Road New Delhi (Appellant) (Respondent) ITA No.165/Del./2019, A.Y. 2011-12 Deputy Commissioner of Income Tax, Circle-1(1)(1), International Taxation, Civic Centre, Minto Road New Delhi Vs. American Express Banking Corpo. (India Branch) Metropolitan Saket, 7th Floor, District Centre, Saket, New Delhi-110017 PAN: AAGCA9055N (Appellant) (Respondent) Appellant by Sh. Nageswar Rao, Advocate Sh. Parth, Advocate Respondent by Sh. S. K. Jhadav, CIT-DR Date of Hearing 02/01/2025 Date of Pronouncement 02/04/2025 ORDER PER AVDHESH KUMAR MISHRA, AM These contra appeals of the assessee and the Revenue for the Assessment Year (hereinafter, the ‘AY’) 2011-12 are directed against the ITA No. 542 & 165/Del/2019 American Express Banking Corp. 2 order dated 27.10.2018 of the Commissioner of Income Tax (Appeal)-44, New Delhi (hereinafter ‘CIT(A)’). 2. These appeals contain common facts; therefore, these were heard together and are being disposed off by this common order. 3. Vide various grounds, issues raised in these appeals are summed up as under: Assessee’s appeal (ITA No.542/Del/2019): The assessee; vide 15 grounds (some grounds include sub-grounds also), has raised three issues: (i) Rejection of TP study [Ground No.3] (ii) Adoption of Comparable Uncontrolled Price (hereinafter, the ‘CUP’) method instead of TNMM for benchmarking international transactions [Ground Nos. 4 to 7] (iii) Issues relating to Indian & Foreign Associate Enterprises (hereinafter, the ‘AE’) [Ground Nos. 8 to 11]. 3.1 Ground Nos. 1, 2, 12 and 13 being general, don’t require specific adjudication. Hence, these are dismissed as such. Ground Nos. 14 and 15 are consequential and premature in nature; hence, these are also dismissed. 3.2 The Revenue has raised following grounds: - ITA No. 542 & 165/Del/2019 American Express Banking Corp. 3 “1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in holding that the TPO has re-characterized the Intra Group Services Transaction? 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in not appreciating that TPO has not disallowed the Intra Group Services merely on the issue of non-substantiation of commercial expediency by the assessee but on several factors? 3. Whether Ld. CIT(A) was right in making lumpsum adjustment to the extent of 50% of Intra Group Services without using any of the transfer pricing method prescribed in the statute which goes against the basic principles of transfer pricing? 4. The appellant craves to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.” 4. The relevant facts giving rise to these appeals are that the assessee, a non-resident company, incorporated under the United States of America (USA) is engaged in the business of banking. Its Indian Branch, set up in Financial Year 2007-08, which carries out following activities: - (i) Credit Card Business (ii) Service in relation to sale of TCs and (iii) Acceptance of institutional deposits as defined by RBI The assessee filed its Income Tax Return (hereinafter, the ‘ITR’) on 30.11.2011 declaring loss of Rs. (-)11,01,01,306/-. The case was picked up for scrutiny. Since the assessee was engaged in various international transactions worth INR 2,660,007,780/-, therefore, the Assessing officer (hereinafter, the ‘AO’) referred this case to the Transfer Pricing Officer (hereinafter, the ‘TPO’). Adjustments were done in respect of following international transactions: - ITA No. 542 & 165/Del/2019 American Express Banking Corp. 4 S. No. Nature of Transaction Method Amount (INR) 1. Receipt of back-office support service from American Express Sdn. Bhd. TNMM 10,985,701 2. Receipt of back-office support services from American Express Australia Ltd. TNMM 50,118,358 3. Receipt of back-office support services from American Express International Inc. Hong Kong TNMM 2,327,141 4. Receipt of Global Card Services from AEAL Australia TNMM 136,244,855 5. Receipt of risk management services from American Express Travel Related Services Company TNMM 30,494,774 6. Receipt of transfer pricing services from AETRS TNMM 6,012,283 7. Receipt of regional headquarter services from AEII Singapore TNMM 4,652,403 8. Receipt of marketing services from American Express Services India TNMM 446,517,083 9. Recovery of expenses from AEII Singapore N.A. 1,135,352 10. Receipt of back office support services from American Express Travel Related Services Company TNMM 6,251,594 11. Receipt of technical support services from AESEL UK TNMM 333,211 5. The assessee benchmarked its international transactions on TNMM; however, the Ld. TPO applied CUP method. Objections raised by the assessee were addressed by the Ld. TPO as evident from his order. The assessee raised the issue of multiyear data as against current years’ data. However, the Ld. TPO, emphasizing on the Rule 10B(4) of the Income Tax Rules, had held that the multiyear data could be used only when the ITA No. 542 & 165/Del/2019 American Express Banking Corp. 5 assessee had demonstrated that the data of current year were dependent on specific abnormal factors and thus, unreliable. However, the assessee had not brought on the record any evidence justifying such factors not only before us but also before the authorities below. The Ld. TPO had also held that the Rule 10B(4) of the Income Tax Rules did not mandate the use of multiyear data in general and that is why the Rule contains the word ‘may’ instead of ‘shall’. The Ld. TPO took the current year data placing reliance on following case laws: - a. Aztec Software Technology [294 ITR (AT) (32) (Bang) (SB)] b. Honeywell Ltd. [2009-TIOL-104-ITAT-Pune] c. Customer Services India (P) Ltd. [2009-TIOL-424-ITAT-Del] d. Schefenacker Motherson Ltd. [2009-TIOL-376-ITAT-Del] e. Geodis Overseas (P) Ltd. [2011-TII-34-ITAT-Del-TP] f. TNT India Pvt. Ltd. [2011-TII-39-ITAT-Bang-TP] g. NGC Network (India) Pvt. Ltd. [2011-TII-45-ITAT-Mum-Intl] h. ADP Private Limited [2011-TII-44-ITAT-Hyd-TP] i. Birla Soft Limited ]2011-TII-70-ITAT-Del-TP] j. Exxon Mobil Company India Pvt. Ltd. [2011-TII-68-ITAT-Mum-TP] k. Symantec Software Solutions Pvt. Ltd. [2011-TII-60-ITAT-Mum-TP l. ST Micro Electronics [2011-TII-ITAT-Del-TP) m. Haworth (India) Pvt. Ltd. [2011-TII-ITAT-Del-TP] n. Deloitte Consulting India Pvt. Ltd. [ITA No. 1082/Dyd./2010] ITA No. 542 & 165/Del/2019 American Express Banking Corp. 6 o. Denso Haryana Pvt. Ltd. [2009-TIOL-696-HC-Del-IT] 6. The Ld. TPO questioned the choice of tested party. The assessee had taken its foreign AEs except one as tested party and compared the arm’s length margins of services with those of foreign comparables. However, the Ld. TPO had held the assessee as a tested party instead of its foreign AEs. Further, the Ld. TPO, keeping in view the Rule 10B(2)(d) of the Income Tax Rules and availability of data of foreign comparables in public domain might not be sufficient and accurate for proper benchmarking purpose, held that the domestic comparables should be better choice. To buttress the above inference, the Ld. TPO, keeping in view various market parameters, locations, market competitions, place of services rendered, etc., took the assessee as a tested party and indigenous comparables for benchmarking. Various shortcoming in the benchmarking done by the assessee were pointed out by the Ld. TPO. Thereafter, the Ld. TPO applied CUP method for determining the arm’s length margin. The relevant part of the Ld. TPO’s order reads as under: - Choice of method 20. In its reply to the show cause notice the assessee has stated that TNMM is the most appropriate method to be applied in the case. The assessee has objected to the use of CUP as the most appropriate method on the grounds that (i) the assessee does not render same or similar services to third parties (ii) the AEs do not receive same or similar services from third parties in India under similar conditions and (iii) there is no publicly available information of prices charged in independent transactions of similar or identical nature. ITA No. 542 & 165/Del/2019 American Express Banking Corp. 7 21 The assessee has also claimed that the TPO has used the Bright Line test (BLT) and applied that as CUP. 22. It may be useful to elaborate on the methodology used for the application of CUP. The assessee has entered into an international transaction of receipt of services. It has exchanged a price with the AEs, for this transaction. That price is nestled under the head of 'law charges and other expenses under the expense head of 'operating expenses' (schedule 16 to profit and loss account). This is a fact and not a figment of the TPOs imagination. 23. We now have an international transaction and we have a price. It just happens that the price appears as a cost in the assessee's accounts. The TPO has compared this price that the assessee has paid with the price that has been paid by the comparables. This completely fulfils the requirement of CUP under Rule 108(1). The TPO has not compared the price in absolute terms as that would not have been reasonable. The TPO has compared the price paid as a ratio of sales. 24. Therefore the use of CUP for benchmarking this class of international transactions is appropriate. It has already been brought out earlier in this order that the benchmarking approach that has been followed by the assessee, while suffering from some serious fallacies, does not in substance amount to a separate benchmarking of this international transaction. 25. The assessee has not provided any alternative approach. Therefore, for the merits of the methodology proposed by this office, it shall be persisted with. 26. The assessee has called the approach used by the TPO, the use of BLT. This name was not provided by the TPO. Without getting into the semantics, it is clarified, that the approach of setting up a comparison between the ratio of IGS payment to sales of the assessee with the ratio of similar expenses to sales of the comparables, is a mathematical tool to arrive at the arm's length price. All prescribed methods will necessarily require the deployment of an analytical tool to arrive at the arm's length price. ITA No. 542 & 165/Del/2019 American Express Banking Corp. 8 27. The TPO has never mentioned BLT to be the method in the show cause notice. The method was and remains CUP. 28. The assessee has stated CUP is not applicable as the assessee does not render similar services to third parties and the AEs do not receive similar services from third parties. This argument of the assessee would have had some force if only internal CUP was acceptable under Indian transfer pricing rules. That is not the case. We can use prices exchanged between unrelated parties for the rendering/receipt of services between them. That is what the TPO has used in this case. Relation between payment for IGS and Sales 29. The assessee has in its reply contended that there is no relation between the services received and the sales that it makes. The assessee states that it is not necessary that all the benefits that the assessee receives through these services, be quantifiable in numbers or translate into increase in profits and sales. The assessee has also cited some judicial decisions to support its point. 30. At the outset, it may be clarified that the ratio for comparing this ratio lies in the fact that this service that has been obtained by both the assessee and the comparables in order to run their business. The point that the TPO was making in the show cause was related to the question as what should be the denominator in the ratio that was being applied by the TPO. The question was whether it should be cost or sales. It is reasonable to believe that the assessee and the comparables are obtaining these services because they have a business to run. 31. The argument that the assessee has taken that the benefit that it receives through these services need not be quantifiable in numbers. Such an argument does not belong to the world of arm's length behavior. It can be said with reasonable certainty that no independent party would make a payment of Rs.76 Crores unless there was a visible benefit. The assessee has quoted some portions of the OECD ITA No. 542 & 165/Del/2019 American Express Banking Corp. 9 transfer pricing guidelines, 2010 (OECD TPG) to support its contention. Let us examine what the OECD TPG has to say about this. 32. Para 7.23 of the OECD TPG reads as below. 7.23 In such cases, MNE groups may find they have few alternatives but to use cost allocation and apportionment methods which often necessitate some degree of estimation or approximation, as a basis for calculating an arm's length charge following the principles in Section B.2.3 below. Such methods are generally referred to as indirect-charge methods and should be allowable provided sufficient regard has been given to the value of the services to recipients and the extent to which comparable services are provided between independent enterprises. These methods of calculating charges would generally not be acceptable where specific services that form a main business activity of the enterprise are provided not only to associated enterprises but also to independent parties. While every attempt should be made to charge fairly for the service provided, any charging has to be supported by an identifiable and reasonably foreseeable benefit. Any indirect-charge method should be sensitive to the commercial features of the individual case (e.g. the allocation key makes sense under the circumstances), contain safeguards against manipulation and follow sound accounting principles, and be capable of producing charges or allocations of costs that are commensurate with the actual or reasonably expected benefits to the recipient of the service. [Emphasis supplied) 33. As can be seen above, the OECD TPG also does not foresee the exchange of services between the members of a MNE group without the promise of benefit. An entity within an MNE group is not expected to be a charitable organization that distributes its profits in the form of intra- group payments without any benefit accruing to it. If the assessee indeed contends that there is no foreseeable benefit it gets from this service, then it would be better to abandon this approach and simply reduce the ALP of this international transaction to 'nil'. Because no independent entity would make payment of such a huge amount if it gets no benefit in return. ITA No. 542 & 165/Del/2019 American Express Banking Corp. 10 34. The point that has been made by the OECD TPG is also found in United Nations Transfer Pricing Manual for Developing Countries (UN TP manual). Relevant portions of the UN TP manual read as below. 1.6.8. An intro-group service, as the name suggests, is a service provided by one enterprise to another in the same MNE group. For a service to be considered an intro-group service it must be similar to a service which an independent enterprise in comparable circumstances would be willing to pay for in house or else perform by itself if not, the activity should not be considered as an intra- group service under the arm's length principle. The rationale is that if specific group members do not need the activity and would not be willing to pay for it if they were independent, the activity cannot justify a payment, Further, any incidental benefit gained solely by being a member of on MNE group. without any specific services provided or performed, should be ignored. (Emphasis supplied) 1.6.10. If a direct charge method is difficult to apply, the MNE may apply the charge indirectly by cost sharing, by incorporating a service charge or by not charging at all. Such methods would usually be accepted by the tax authorities only if the charges are supported by foreseeable benefits for the recipients of the services, the methods are based on sound accounting and commercial principles and they are capable of producing charges or allocations that are commensurate with the reasonably expected benefits to the recipient. In addition, tax authorities might allow a fixed charge on intra-group services under safe harbour rules or a presumptive taxation regime, for instance where it is not practical to calculate an arm's length price for the performance of services and tax accordingly [Emphasis supplied] 35. As can be seen the UN TP manual also accepts the possibility of such an international transaction existing only in the face of benefit flowing to the entity that receives the service. 36. The judicial decisions that the assessee has cited have been rendered in scenario's where the ALP of the international transaction ITA No. 542 & 165/Del/2019 American Express Banking Corp. 11 as this kind has been reduced to nil. That is not the proposed course of action in this order. 37. Be that as it may, ignoring the hasty arguments made by the assessee, this office has no quarrel with the assessee obtaining this service. It is assumed that the assessee is a mature commercial entity and would have carried out a benefit test before it sought these services. The question before the TPO is just how much the assessee ought to have paid for these services in an arm's length environment. Choice of comparable 38. The assessee has made an objection to the use of Kotak Mahindra Ltd (Kotak) as a comparable. The assessee has made copious arguments against the use of this company as a comparable. 39. It may be mentioned here that this company was presented as a comparable by the assessee and not by this office. Second, it was mentioned in the show cause notice and is reiterated here that this debate is largely academic as it is not the objective of this office to test the overall margin of the assessee. Kotak is being used as a comparable to compare the level of relevant expenses to sales. 40. However, since the assessee has taken pains to make a case here, let us examine the issue. The assessee earned its incomes from interest income of various kinds. So does Kotak. The risks that the assessee faces are akin to the risks that Kotak faces in its segments. The different business segments of the assessee as per its TP report are - Charge and credit card business - Services in relation to Travel cards and - Acceptance of institutional deposits as defined by RBI 41. It must also be recognised that the assessee is a branch. In that capacity it shares the entrepreneurial risks of its head office. The notes to accounts to the audited accounts (see schedule 18) mention that the American Express Banking Corp has been granted license by the Reserve Bank of India to carry ITA No. 542 & 165/Del/2019 American Express Banking Corp. 12 out banking business in India. The assessee is the branch in India and the related FAR is carried on its shoulders. The details of the investments are described as bank would describe its investments. On going through these details, there is no doubt that the functions of the assessee are that of a bank. Therefore, Kotak is a good comparable. 42. The assessee has made an overall margin of 5% against 24% made by Kotak. Therefore, the analysis that this office set out to make, that is, to arrive at an arm's length level of expenditure to earn a margin as much as the assessee, can be made using Kotak as a comparable. Calculation of the arm's length level of expenditure 43. The assessee has sought that the expenditure under the head of other expenditure in the case of Kotak also be include to arrive at the arm's length level of expenditure. That is accepted as the assessee's IGS expense is also accounted for under this head. The amended calculation is given below. S. N. Name Operating Income (INR) Law charges and Professional charges (INR) Other expense (INR) Law and professional charges/Sales (%) A B C D=(B+C/A) 1. Kotak Mahindra Bank Ltd. 61,414,352,000 1,796,162,000 2,464,593,000 6.93 Transfer pricing proceedings of AE 44. The assessee has made a plea that since no transfer pricing adjustment has been made in one of the AEs providing the service, namely, American Express Services India Ltd (AESIL), the transactions with that AE should be deemed to be at arm's length. 45. The assessee must understand that if there is no action taken at one end of an international transaction, it does not presuppose that the transfer pricing proceeding in the case of the enterprise at the other end of the transaction is a dead letter. The transfer pricing proceedings in the assessee's case are independent of what happened in the case of AESIL. In the case of AESIL, this was a receipt transaction. It is only ITA No. 542 & 165/Del/2019 American Express Banking Corp. 13 logical that the matter will be examined in the case of the entity making the payment, which is the assessee. 46. The assessee has relied upon the proviso of section 92C(4) to support its claim. Let us examine what the proviso says. It states Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm's length price paid to another associated enterprise from which tax has been deducted for was deductible) under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm's length price in the case of the first mentioned enterprise. 47. What this proviso lays down is that if that an adjustment is made in the case of one AE, that adjustment cannot be made a basis for an adjustment in the other case. It does not mean that if no adjustment is made in one case, no adjustment can be made in the other case. Therefore, the assessee's reliance on this proviso is misplaced. 48. The assessee has also made a plea that no adjustment is made as both the assessee and AEs in India like AESİL will be paying tax on the same income. It is a universally accepted possibility that transfer pricing adjustments can give rise to double taxation. There are other methods under Indian law (like Mutual Agreement Procedures) that will provide relief from double taxation. The assessee is encouraged to take recourse to those provisions. No relief can be provided under the transfer pricing rules. [Emphasis has been supplied by us] 7. Aggrieved, the assessee filed appeal, who, following her predecessor finding in preceding year; AY 2009-10, allowed relief of 50%. The Ld. TPO has determined the cost of Intra Group Services @ 50% of the adjustment as against NIL taken by the Ld. TPO on the reasoning that the assessee ITA No. 542 & 165/Del/2019 American Express Banking Corp. 14 failed to corroborate its claim vis-à-vis services rendered by its AEs along with the basis of working the arm’s length margin of such transactions. 8. At the outset, the Ld. Counsel submitted that the assessee’s income did not consist mainly of interest income as in the case of Kotak Mahindra Ltd. (hereinafter, the ‘Kotak’. It was further submitted that the Kotak’s unadjusted arm’s length margin worked out at loss of (-) 76.47% on operating revenue of AY 2011-12, whereas it was profit in the present case. It was also submitted that the assessee’s case of AY 2009-10 were factually different than the present case; hence, the Ld. CIT(A) erred in placing reliance on the finding of the AY 2009-10. It was contended that the material brought before the Ld. TPO and the Ld. CIT(A) were enough to conclude that the assessee had received services from its AEs and made payments in lieu thereof only. It was contended that the Ld. CIT(A) erred in concluding that there was enough material on record to infer that some services were availed by the assessee. However, the Ld. TPO had held otherwise on same sets of facts and documents. Such contradictions clearly demonstrated that none authorities below had appreciated the case properly after analyzing the material on the record. 8.1 The Ld. Counsel specifically submitted that the assessee had received technology services like Strategic Quality Plan (\"SQP\") Development, Maintenance, Technologies Infrastructure, Support Services, Application ITA No. 542 & 165/Del/2019 American Express Banking Corp. 15 Infrastructure Uplift (\"AIU\"), Centralized Group and Security & Compliance, Business Consultancy, etc. Had the assessee not received such services, it would have not done its business at all. It was categorically submitted that the Ld. TPO’s finding that the assessee failed to submit corroboratory evidence which could establish that the assessee received such services was not factually correct as the same got disproved and disbelieved by the Ld. CIT(A) by allowing part relief on the same sets of evidence. 8.2 The Ld. Counsel arguments were two fold; firstly, the applicability of CUP instead of TNMM for determining arm’s length margin and secondly, the selection of tested party along with comparables. It was specifically submitted that the Ld. TPO had applied the principle of Bright Line Test by applying the CUP. The principle of Bright Line Test had been rejected off by the Hon’ble Delhi High Court in cases of Sony Ericsson Mobile Communications India Pvt. Ltd. (374 ITR 118 and of Maruti Suzuki India Ltd. (381 ITR 117). Hence, the same needed to be reversed, contended the Ld. Counsel. Further, it was submitted by the Ld. Counsel that the Kotak case was not taken as comparable in subsequent years. It showed that the Kotak was not worth comparable. The tested party and comparables as per the TP Study of the assessee thus needed to be considered for deciding the issue of benchmarking. It was further submitted that the Ld. TPO had not properly analyzed the data of Kotak with respect to the business that carried out by the assessee. The Ld. Cousel drawn our attention to the ITA No. 542 & 165/Del/2019 American Express Banking Corp. 16 financial of Kotak to show that there was loss in credit card business whereas it was profit in the assessee’s case. 9. Per Contra, the Ld. CIT-DR submitted that the case in hand was quite similar to the assessee’s case of the AY 2009-10. It was specifically submitted that the assessee had failed to give any basis for the cost allocation for the receipt of claimed services from its AEs. The assessee had also failed to demonstrate that the sales achieved were indeed the result of services provided by its AEs. The Ld. CIT-DR further submitted that the assessee failed to bring any evidence before the Income Tax Authorities to show direct nexus between payment made in lieu of service provided to it and actual services provided by its AEs along with the costing thereof. Thus, in such circumstances, the Ld. TPO had rightly taken the cost of the services at NIL as against 50% held by the Ld. CIT(A), argued the Ld. CIT- DR. 9.1 The Ld. CIT-DR submitted that the assessee had received very generic service, if any, from its AEs as the assessee failed to demonstrate that it would had not performed had it not received such services. It was claimed by the assessee that the services received by it were broadly categorized as Technology Services, Risk Information Management, Head Quarter & Back Office support services etc. However, the assessee had not furnished any supporting documentary evidence establishing the receipt of ITA No. 542 & 165/Del/2019 American Express Banking Corp. 17 the specific services from the AEs. The Ld. CIT-DR vehemently argued that the Ld. CIT(A) had not given any specific justification for allowing 50% relief. The impugned order could be termed as non-speaking order as it did not contain any categorical finding with reasoning in its operating part. Thus, he prayed for dismissal of the assessee’s appeal and allowance of the Revenue appeal. At most, in view of the finding of the coordinate bench of the Tribunal in the assessee’s case of the AY 2009-10, the Revenue appeal might be considered for reverting back to the Ld. CIT(A) for fresh adjudication, submitted the Ld. CIT-DR. 10. We have heard both parties and have perused the material available on the record. The first issue is the rejection of TP Study of the assessee. The Ld. TPO held that the tested party is the foreign AE except one. Those tested parties are service providers unlike the assessee. The selection of tested parties was questioned by the Ld. TPO on the basis of functionality along with the geographical area and various market factors affecting the overall pricing, margin and cost of the services. Further, the TPO has questioned the data of foreign comparables on the reasoning that the inaccuracy and insufficiency of data could not be ruled out. Before us, the Ld. Counsel did not bring any material on the record to rule out the Ld. TPO’s finding with respect to the inaccuracy and insufficiency of data of the tested parties and foreign comparables. In such circumstances, the Ld. TPO took assessee as the tested party and Indian Comparables as tested party. ITA No. 542 & 165/Del/2019 American Express Banking Corp. 18 10.1 We have perused the orders of authorities below, material on the records and arguments/contentions/submissions of both parties. Since no material was brought on the records by the assessee to contradict the finding of the authorities below. We therefore, of the considered view that there is no infirmity in the finding of the authorities below that the assessee should be the tested party and comparables should be indigenous instead of foreign AE service providers and foreign comparables. Similar issue raised in the assessee’s case in the ITA No. 6253/Del/2017 was also upheld in principle by the coordinate bench. Thus, in view of the above, we, in principle, also upheld the finding of the authorities below rejecting the TP Study of the assessee. The relevant ground(s) in this regard thus, disposed off accordingly. 11. Now the next issue is the adoption of CUP method instead of TNMM for benchmarking international transactions [Ground Nos. 4 to 7]. The Ld. Counsel arguments revolve around the issue of Bright Line Test, non- rendering of similar services to third parties by the assessee, non-receipt of similar services by AEs of the assessee from third parties and non- availability of information of prices charged in independent transactions of similar or identical nature in public domain. The Ld. TPO has compared the price that the assessee paid for receipt of services from its AEs with the price paid by the indigenous comparables. Since TP Study of the assessee was rejected by the Ld. TPO; therefore, the Ld. TPO applied CUP method for ITA No. 542 & 165/Del/2019 American Express Banking Corp. 19 benchmarking particularly when the assessee failed to bring anything on the records suggesting alternative benchmarking approach. The Ld. TPO has categorically held that he has not applied the principle of Bright Line Test in the guise of CUP method. The Ld. TPO has done comparison between the ratio of Intra Group Services payment to sales of the assessee with the ratio of similar expenses to sales of the comparables. Here, the Ld. TPO has done comparison of the prices paid by the unrelated parties for rendering/receiving similar services amongst them. It is not a case of internal CUP. 11.1 We have perused the orders of authorities below, material on the records and arguments/contentions/submissions of both parties. Since no material was brought on the records by the assessee to contradict the finding of the authorities below. We therefore, of the considered view that there is no infirmity in the finding of the authorities below applying the CUP method for benchmarking. Similar issue raised in the assessee’s case in the ITA No. 6253/Del/2017 was also upheld in principle by the coordinate bench. Thus, in view of the above, we, in principle, also upheld the finding of the authorities below applying the CUP method for benchmarking. The relevant grounds in this regard thus, disposed off accordingly. ITA No. 542 & 165/Del/2019 American Express Banking Corp. 20 12. The last issue is related to Kotak. Kotak as comparable is the choice of the assessee before the Ld. TPO. The issue of dispute revolves around the nature of services of Kotak vis-à-vis services of the assessee taken for comparison along with the pricing/costing of the same. We have heard both parties at length and have perused the material available on the records. We are of the considered view that Kotak is suitable comparison provided their similar services are compared amongst themselves along with the specific data in that regard only for arriving the correct benchmarking. Ordered accordingly. 12.1 Considering the facts in entirety, we find that the Ld. TPO is not justified in arriving the ALP at NIL on the reasoning that the assessee failed to submit any corroboratory evidence for receipt/rendering of services by its AEs. The TPO should have looked into all the evidences submitted by the assessee and give finding thereafter. It is an accepted fact that the transactions between the assessee and AE will be always subjective in nature. It may be advantageous to the assessee to engage its AE for Intra Group Services as a business model. The costing of the same therefore, required proper analysis and examination to rule out any payment made than that of arm’s length price. For that purpose, the TPO should verify and work out the arm’s length margin by applying applicable transfer pricing mechanism as per Income Tax Rules and determine the quantum of the adjustment thereon, if any. In view of the above, we remit the matter to ITA No. 542 & 165/Del/2019 American Express Banking Corp. 21 the file of the TPO for determining the arm’s Lenth margin afresh. Thus, the respective grounds are partly allowed for statistical purpose. Revenue’s Appeal: 13. We are of the considered view that the Revenue’s appeal is squarely covered by the decision of the Co-ordinate Bench in the ITA Nos. 6253 & 6455/Del/2017 (order dated 07/08/2024). Respectfully following the reasoning given by the Co-ordinate Bench in the said decision (supra), the appeal of revenue is remitted back to the TPO for determined the adjustment accordingly. 14. In the result, both appeals are allowed for statistical purposes as above. Order pronounced in Open Court on 02 April, 2025 Sd/- Sd/- (VIKAS AWASTHY) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 02/04/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. CIT-DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "