Atotech India Ltd., Gurgaon V. ACIT, Gurgaon

ITA 104/DEL/2012

• Counselvise Citation: 10420114 RSA 2012
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 29-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AKSHIT KOHLI
• Keywords: Transfer pricing; Business expenditure; International transaction; Wholly owned subsidiary
• Section: 92D; 10B

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SHRI J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO.-104/DEL/2 012 (ASSESSMENT YEAR-2007-08) ATOTECH INDIA LIMITED, 66 KM STONE, NH-8, DELHI JAIPUR HIGHWAY, VILL:-SIDHRAWALI, GURGAON P AN-AACCM0338G (APPELLANT) VS ACIT, CIRCLE-2, GURGAON, 4 TH FLOOR, HSIDC BUILDING, UDYOG VIHAR, PHASE-V, GURGAON (RESPONDENT) APPELLANT BY SH. RAHUL KR. MITRA, CA, SH. RAMIT KATYAL, CA, SH. GAURAV GUPTA, CA AND SH. AKSHIT KOHLI, CA RESPONDENT BY SH. PEEYUSH JAIN, CIT DR, SH. YOGESH KUMAR VERMA, CIT DR ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER DATED 31.10.2011 WHICH IS PASSED IN PURSUANCE TO THE DIRE CTION OF THE DRP U/S 144C(5) DATED 02.08.2011 PERTAINING TO 2007-08 ASSESSMENT Y EAR ON THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER ('AO') / TR ANSFER PRICING OFFICER ('TPO') IS BAD IN LAW AND VOID-AB-INITIO. 2. THE LD. AO/TPO ERRED ON FACTS AND LAW IN DETERMI NING THE ARM'S LENGTH PRICE (ALP') OF THE APPELLANT'S INTERNATIONAL TRAN SACTIONS PERTAINING TO PAYMENT OF MANAGEMENT COST CONTRIBUTIONS TO ITS ASSOCIATED ENT ERPRISE ('AE') AS NIL AGAINST THE SUM OF RS.33,177,975/- INCURRED BY THE APPELLANT AN D THEREBY RECOMMENDING AN ADDITION OF RS.33,177,975/- ON THAT ACCOUNT TO THE APPELLANT'S INCOME AND IN DOING SO HAVE GROSSLY: IT A NO.-104/DEL/2012 2 2.1 ERRED BY DISREGARDING THE ALP, AS DETERMINED B Y THE APPELLANT IN THE TP DOCUMENTATION MAINTAINED BY IT IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE RULES. 2.2 ERRED BY HOLDING THAT THE TRANSACTIONS ARE COV ERED UNDER INTRA GROUP SERVICES AND BY DOING SO HAVE GROSSLY ERRED BY: 2.2.1 NOT APPRECIATING THAT THE PAYMENT WAS MADE U NDER A COST CONTRIBUTION AGREEMENT ('CCA') 2.2.2 NOT APPRECIATING THAT THE APPELLANT RECEIVED ECONOMIC AND COMMERCIAL BENEFIT FROM PARTICIPATING IN THE CCAS A ND THE SERVICES RECEIVED WERE NOT INCIDENTAL OR DUPLICATE. 2.3 ERRED IN HOLDING THAT THE BENCHMARKING DONE BY THE APPELLANT IN RESPECT OF TRANSACTION RELATING TO PAYMENT OF MANAGEMENT COST CONTRIBUTIONS IS NOT IN ACCORDANCE WITH THE LAW AND HAVE GROSSLY ERRED BY: 2.3.1 NOT APPRECIATING THAT PAYMENT OF MANAGEMENT COST CONTRIBUTIONS IS CLOSELY LINKED TO THE MANUFACTURING FUNCTION OF THE APPELLANT AND ERRED IN ANALYSING THE TRANSACTION SEPARATELY FOR THE DETERM INATION OF ALP 2.3.2 REJECTING TRANSACTIONAL NET MARGIN METHOD (' TNMM') ADOPTED BY THE APPELLANT, AS THE MOST APPROPRIATE METHOD FOR B ENCHMARKING THE TRANSACTION FOR PAYMENT OF MANAGEMENT COST CONTRIBU TIONS 2.3.3 APPLYING CUP METHOD IN CONTRAVENTION OF THE PROVISIONS OF RULE 10B OF THE INCOME TAX RULES, 1962 2.3-4 IGNORING THE REPORT OBTAINED BY THE PARTICIP ANTS OF THE CCA FROM THE INDEPENDENT AUDITORS DOCUMENTING THE QUANTUM, MANNE R AND THE METHODOLOGY FOR COMPUTING THE CONTRIBUTION TO BE MA DE BY EACH PARTICIPATING GROUP ENTITY WHILE APPLYING CUP METHO D 2.3.5 CONSIDERING THE ALP OF THE TRANSACTION TO BE NIL BY INAPPROPRIATE APPLICATION OF CUP METHOD MERELY BASED ON PRESUMPTI ONS WITHOUT FURNISHING DETAILS OF PRICE CHARGED IN ANY COMPARAB LE UNCONTROLLED TRANSACTION ERRED IN HOLDING THAT THE APPELLANT HAS NOT IDENTIFIED PAYMENT FOR EACH AND EVERY SERVICE AND ASSERTING THAT IDENT IFICATION OF SEPARATE PAYMENT FOR EACH SERVICE IS NECESSARY TO DETERMINE ARM'S LENGTH NATURE OF THE TRANSACTION. 2.4. ERRED IN HOLDING THAT THE APPELLANT HAS NOT ID ENTIFIED PAYMENT FOR EACH AND EVERY SERVICE AND ASSERTING THAT IDENTIFICATION OF SEPARATE PAYMENT FOR EACH SERVICE IS NECESSARY TO DETERMINE ARMS LENGTH NATURE OF TH E TRANSACTION. 2.5. ERRED BY IGNORING THE SUBMISSIONS AND DOCUMENT S SUBMITTED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS AND HOLDING THAT THE APPELLANT HAS NOT FURNISHED/FURNISHED ONLY GENERIC DOCUMENTARY EVIDEN CE TO DEMONSTRATE THE BENEFITS RECEIVED FROM THE AE. 2.6. ERRED IN HOLDING THAT THE APPELLANT HAS NOT AB LE TO ESTABLISH THE NEED FOR THE SERVICES RECEIVED FROM AES BASED ON THE PREMISES TH AT NO COST BENEFIT ANALYSIS WAS UNDERTAKEN WITH REGARD TO COST OF SERVICES AND BENE FIT RECEIVED FROM AES VIS--VIS INDEPENDENT PARTIES. 2.7. ERRED BY ALLEGING THAT NEITHER THE APPELLANT H AS RECEIVED ANY SERVICE UNDER THE CCA NOR THERE WAS ANY NEED FOR SUCH SERVICES AN D THEREBY CHALLENGING THE COMMERCIAL WISDOM OF THE APPELLANT IN MAKING SUCH P AYMENTS WHILE PASSING THE IT A NO.-104/DEL/2012 3 ORDER IN CONTRAST WITH THE RECENT PRONOUNCEMENTS OF THE HONBLE INCOME TAX APPELLATE TRIBUNAL (ITAT). 3. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, WHILE SUGGESTING THE ADDITION, THE LD. AO/TPO HAVE INTER- ALIA GROSSLY ERRED IN MAKING INCORRECT STATEMENTS IN THE ORDER, BASED ON HIS CON JECTURES AND SURMISES, WHICH ARE NOT IN ACCORDANCE WITH FACTS OF THE CASE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO HAS ERRED IN PROPOSING TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY ADEQUATE REA SONS FOR SUCH INITIATION. THAT THE ABOVE GROUNDS AND SUB GROUNDS OF OBJECTION S ARE WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND OR WITHD RAW ALL OR ANY FO THE GROUNDS OF OBJECTIONS HEREIN OR ADD ANY FURTHER GRO UNDS AS MAY BE CONSIDERED NECESSARY AND TO SUBMIT SUCH STATEMENTS, DOCUMENTS AND PAPERS AS MAY BE CONSIDERED NECESSARY EITHER BEFORE OR DURING THE HE ARING. 2. THE RELEVANT FACTS QUA THE ISSUE ARE THAT THE AS SESSEE WHO AS PER PARA 2 OF THE ASSESSMENT ORDER IS STATED TO BE FORMED IN 1993 WIT H THE MERGER OF M&T HARSHAW, A SUPPLIER OF GENERAL METAL FINISHING CHEMISTRY AND P ROCESS FOR PRINTED CIRCUIT BOARD MANUFACTURING AND ELECTROPLATING DIVISION OF SCHERI NG AG, A MANUFACTURER OF PRINTED CIRCUIT BOARD CHEMISTRY, GENERAL METAL FINI SHING CHEMISTRY AND EQUIPMENT FOR THE SAME. THE COMBINATION OF THESE COMPANIES IS ST ATED TO HAVE PRODUCED A LEADING ELECTROPLATING CHEMICALS AND EQUIPMENT SUPPLY COMPA NY IN THE WORLD WITH OVERALL RESEARCH AND DEVELOPMENT, ANALYTICAL AND PRODUCTION CAPABILITIES FOR THE PRODUCTION OF ELECTROPLATING CHEMICALS THAT SERVES NUMEROUS IN DUSTRIES AND MARKETS. 2.1. THE RECORD SHOWS THAT THE ASSESSEE FILED A RET URN OF INCOME OF RS.10,62,69,389/- WHICH WAS SUBJECTED TO SCRUTINY A SSESSMENT AFTER THE ISSUANCE OF NOTICE ETC. THE A.O REFERRED THE ISSUE TO THE TRAN SFER PRICING OFFICER (HEREINAFTER REFERRED AS TO TPO) TO DETERMINE THE ARMS LENGTH PRICE (HEREINAFTER REFERRED AS TO ALP) IN RESPECT OF THE INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE. A PERUSAL OF THE RECORD SHOWS THAT THE TPO VIDE HIS O RDER DATED 15.10.2010 PLACED AT PAGES 55-72 OF THE APPEAL SET IN HIS ORDER U/S 92CA (3) MADE THE FOLLOWING OBSERVATIONS IN REGARD TO THE PROFILE OF THE ASSESS EE AND THE INTERNATIONAL TRANSACTIONS DISCLOSED IN FORM -3CEB BY THE ASSESSEE:- IT A NO.-104/DEL/2012 4 PROFILE OF THE ASSESSEE 2.1 ATOTECH INDIA LIMITED IS A WHOLLY OWNED SUBSIDIARY OF ATOTECH BV, A COMPANY INCORPORATED IN THE NETHERLANDS. PRIOR TO T HIS, ATOTECH INDIA WAS OPERATING IN INDIA AS MAX ATOTECH LIMITED, A 50:50 JOINT VENTURE BETWEEN ATOTECH BV AND MAX INDIA LIMITED. ATOTECH INDIA WAS INCORPO RATED IN MARCH 1996 TO MEET THE REQUIREMENTS FOR PLATING CHEMICALS IN THE COUNT RY. AS PART OF ITS STRATEGY TO EXIT NON-CORE BUSINESS, MAX INDIA LIMITED SOLD ITS EQUIT Y STAKE IN MAX ATOTECH TO ATOTECH BV IN JULY 2001. 2.2 ATOTECH INDIA LIMITED IS A WHOLLY OWNED SUBSIDIARY OF ATOTECH BV, A COMPANY INCORPORATED IN THE NETHERLANDS. ATOTECH IN DIA IS IN THE BUSINESS OF MANUFACTURING AND MARKETING OF SPECIALTY CHEMICALS AND COMPOUNDS USED FOR GENERAL METAL FINISHING AND PRODUCTION OF PRINTED C IRCUIT BOARDS. THE PRESENT OWNERSHIP STRUCTURE OF ATOTECH INDIA IS AS UNDER: ATOTECH BV NETHERLANDS 99.99% SHAREHOLDING INDIVIDUALS, NOMINEES OF ATOTECH BV HOLDING 06 SH ARES 3. INTERNATIONAL TRANSACTIONS: 3.1 THE INTERNATIONAL TRANSACTIONS REPORTED IN FORM NO.3CEB ARE SUMMARIZED AS UNDER: S. NO. DESCRIPTION OF TRANSACTION METHOD VALUE (IN RS.) 1 PURCHASE OF RAW MATERIAL & COMPONENTS TNMM 6,16,83,891 2 COST SHARING EXPENSE PAID MANAGEMENT GROUP COST RS.33,177,975 R & D ASSISTANCE COST RS.49,008,527 TNMM 8,21,86,502 3 COMMISSION INCOME RECEIVED/RECEIVABLE TNMM 85,32,795 4 COST RECHARGES TNMM 13.41.309 5 SALE OF GOODS TNMM 1,21,55,637 6 PURCHASE OF CAPITAL EQUIPMENT TNMM 9,48,725 2.2. THE TRANSFER PRICING APPROACH ADOPTED BY THE A SSESSEE WAS SUMMED UP BY THE TPO IN THE FOLLOWING MANNER:- 4. TRANSFER PRICING APPROACH ADOPTED BY THE ASSESS EE: 4.1 THE ASSESSEE COMPANY HAS SELECTED TRANSACTIONAL NET MARGIN METHOD (TNMM) WITH OPERATING PROFIT MARGIN (OP/SALES) AS T HE MOST APPROPRIATE METHOD AND PROFIT LEVEL INDICATOR RESPECTIVELY TO DETERMIN E THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS MENTIONED AT SL. NO. 1 T O 6. FOR THE PURPOSE OF TRANSFER PRICING ANALYSIS THE ASSESSEE COMPANY HAS BEEN CHOS EN AS TESTED PARTY AS IT HAS BEEN HELD THAT IT IS A LESS COMPLEX ENTITY IN COMPA RISON TO ITS ASSOCIATED ENTERPRISES. THE PROFIT ANALYSIS OF ATOTECH INDIA F OR THE YEAR ENDED MARCH 31, 2006 HAS BEEN SUBMITTED AT APPENDIX F OF THE TRANSFER PRICING REPORT. PARTICULARS 31-MAR-07 IT A NO.-104/DEL/2012 5 AMOUNT IN RS. SALES/OPERATING INCOME 737,613,896 LESS; TOTAL COSTS 620,650,453 OPERATING PROFIT 1,16,463,443 ADD: OTHER INCOME 7,56,894 LESS: OTHER NON OPERATING EXPENSES .N.5W.T1 PROFIT FOR THE YEAR 109,120,366 OP/SALES 15.86% 2.3. THE FUNCTIONS PERFORMED RISKS UNDERTAKEN AND ASSETS UTILIZED BY THE ASSESSEE ADDRESSED BY THE TPO IS EXTRACTED FROM HIS ORDER A ND READS AS UNDER :- SUMMARY OF FUNCTIONS PERFORMED, RISKS UNDERTAKEN A ND ASSET UTILIZED: 4.2 ATOTECH INDIA, THE ASSESSEE IS A ROUTINE MANUFACTUR ER AND MARKETER OF SPECIALTY CHEMICALS & COMPOUNDS USED FOR GENERAL ME TAL FINISHING AND PRODUCTION OF PRINTED CIRCUIT BOARDS. IT CARRIES OUT ROUTINE F UNCTIONS AND ASSUMES NORMAL RISKS ASSOCIATED WITH CARRYING OUT SUCH BUSINESS. IT ALSO INVOLVED IN THE COMMISSION OF CERTAIN CHEMICALS AND CAPITAL EQUIPMENTS TO CERTAIN CUSTOMERS IN INDIA. AS A PART OF THIS ARRANGEMENT, THE ASSESSEE ALSO PROVIDED AFTER SALES SERVICE TO THE CUSTOMERS FOR THE CHEMICALS COMMISSIONED. AT PRESENT, HOWEVER THI S ACTIVITY FORMS A VERY SMALL PORTION OF THE TOTAL INCOME. ATOTECH INDIA UTILIZES ITS MANUFACTURING FACILITIES , DISTRIBUTING INFRASTRUCTURE, OFFICE PREMISES, WAREHOUSING FACILITIES, COMMUNICATION FAC ILITIES ETC. FOR THE PURPOSE OF ITS BUSINESS. ON ACCOUNT OF ACQUISITIONS, IT HAS COME T O ACQUIRE CERTAIN ROUTINE INTANGIBLES SUCH AS GOODWILL, INTELLECTUAL PROPERTY RIGHTS AND NON-COMPETE FEES. IT DOES NOT UNDERTAKE ANY SIGNIFICANT R & D ON ITS ACC OUNT THAT LEADS TO THE DEVELOPMENT OF NON-ROUTINE INTANGIBLES. HOWEVER IT CONTRIBUTES TO THE ATOTECH GROUPS R & D COSTS. IT USES THE TRADEMARKS, PROCES S, KNOWHOW, TECHNICAL DATA SOFTWARE, OPERATING/QUALITY STANDARDS ETC. DEVELOPE D/OWNED BY ATOTECH GROUP. 3. THE TPO IN PARA 5 ADDRESSES THE FACT THAT THE AS SESSEE HAD ENTERED INTO A CONTRACT OF ACCESSION WITH ITS AE WHEREIN THE ASSES SEE HAD CONCLUDED 2 UNDERLYING COST SHARING AGREEMENTS/COST CONTRIBUTION ARRANGEME NTS EFFECTIVE FROM 01.01.2002. IN TERMS OF THE AGREEMENTS, THE ASSESS EE PAID 4,90,08,527/- AS R&D COST AND ANOTHER SUM OF RS.3,31,77,975/- AS MANAGEM ENT GROUP COST. THE TPO REQUIRED THE ASSESSEE TO EXPLAIN THE SAME. CONSIDE RING THE EXPLANATION OF THE ASSESSEE, THE RESEARCH AND DEVELOPMENT ASSISTANCE C OST PAID TO THE EXTENT OF RS.4,90,085770. WAS NOT DISTURBED, HOWEVER THE MAN AGEMENT GROUP COST OF RS. IT A NO.-104/DEL/2012 6 3,31,1,77,975/- WAS FOUND TO BE NOT AT ARMS LENGTH. IN SUPPORT OF ITS CLAIM IT WAS CANVASSED THAT THE MANAGEMENT GROUP COST SHARING AG REEMENT INVOLVED THE SHARING OF COMMON GENERAL MANAGEMENT AND ADMINISTRA TIVE COSTS (SUCH AS MARKETING/FINANCE/HUMAN RESOURCE/ QUALITY CONTROL/ SAFETY AND HOST OF OTHER CRITICAL MANAGEMENT FUNCTIONS THAT ARE OF GLOBAL STRATEGIC I MPORTANCE). THE FUNCTIONS AND SERVICES COVERED UNDER THIS AGREEMENT WERE STATED T O INCLUDE :- PRODUCT MANAGEMENT GLOBAL MANAGEMENT FUNCTIONS NETWORK ADMINISTRATION GENERAL JOINT ADMINISTRATION FUNCTIONS 3.1. IN ADDITION TO THE ABOVE, THE COMPANY IT WAS S TATED WAS ALSO AVAILING THE BENEFITS FROM EUROPEAN REGIONAL COST SHARING AGREEM ENT (EU-RCSA) ENTERED INTO BY IT WITH EFFECT FROM JANUARY 1, 2004. THE R ECORD SHOWS THAT THE ASSESSEE TRIED TO JUSTIFY THE ALP OF THE TRANSACTION ARGUING THAT THE TRANSACTIONAL NET MARGIN METHOD (HEREINAFTER REFERRED AS TO TNMM) WAS THE MOST APPROPRIATE METHOD. WE MAY REFER THAT IN THE COURSE OF THE ARGUMENTS ADVAN CED BEFORE THE BENCH, LD. AR, SH.RAHUL KUMAR MITRA CATEGORICALLY STATED THAT THER E IS NO DOUBT THAT CUP IS THE MOST APPROPRIATE METHOD. ACCORDINGLY TAKING INTO C ONSIDERATION THE STAND ON BEHALF OF THE ASSESSEE IT IS NOT NECESSARY TO DWELL AT LEN GTH ON THE REASONING OF THE TPO OVERRULING THE ASSESSEES STAND BEFORE HIM TO HOLD THAT TNMM IS NOT THE MOST APPROPRIATE METHOD AND INFACT CUP IS THE MOST APPRO PRIATE METHOD AS THE ASSESSEE IS NOT CONTESTING THE ISSUE. ACCORDINGLY FOR BENCH-MA RKING PURPOSES THE APPLICABILITY OF CUP METHOD APPLIED BY THE TPO AND UPHELD BY THE DRP IN VIEW OF THE STAND OF THE LD. AR IS CONFIRMED. 3.2 A PERUSAL OF PARA 7.4 OF THE TPOS ORDER SHOWS THAT THE RENDERING OF THE SERVICES HAS NOT BEEN DOUBTED BY THE REVENUE. THE A SSESSEES CLAIM HAS BEEN REJECTED ON THE GROUND THAT THE ASSESSEE HAD NOT ID ENTIFIED THE PAYMENT FOR EACH AND IT A NO.-104/DEL/2012 7 EVERY SERVICE. THE STAND OF THE TPO WAS THAT UNLESS THE VALUE OF A PARTICULAR SERVICE IS NOT KNOWN IT CANNOT BE DETERMINED AS TO WHAT SHO ULD BE THE ARMS LENGTH PRICE OF THAT SERVICE. THE FOLLOWING EXTRACT FROM HIS ORDER ADDRESSES THE TPOS STAND :- 7.4. IT CAN BE SEEN FROM THE ABOVE THAT THE NATURE OF SERVICES RECEIVED BY THE ASSESSEE ARE OF DIFFERENT KINDS, HOWEVER THE PAYMEN T HAS BEEN CLUBBED BY THE ASSESSEE IN FOUR DIFFERENT HEADS. THE ASSESSEE HAS NOT IDENTIFIED PAYMENT FOR EACH AND EVERY SERVICE WHICH IT WAS REQUIRED TO FURNISH. IN FACT IN ORDER TO BENCHMARK THE PAYMENT FOR RECEIPT OF EACH AND EVERY SERVICE I T IS NECESSARY TO KNOW AS TO WHAT ARE THE DIFFERENT SERVICES AND WHAT IS THE PAYMENT MADE FOR THAT PARTICULAR SERVICE. UNLESS IT IS KNOWN AS TO WHAT IS THE VALUE OF A PAR TICULAR SERVICE THAT THE ASSESSEE HAS PAID TO THE AE, IT CANNOT BE DETERMINED AS TO W HAT WOULD BE THE ARMS LENGTH PRICE OF THAT SERVICE. THE ONUS WAS ON THE ASSESSE E TO FURNISH THIS INFORMATION HOWEVER THE ASSESSEE HAS NOT FURNISH THE INFORMATIO N FOR THE REASONS BEST KNOWN TO IT. 3.3. THE TPO AS PER PARA 7.5 OF HIS ORDER REJECTED THE EXPLANATION OF THE ASSESSEE ON THE FOLLOWING REASONING:- 7.5. I HAVE ALSO PERUSED THE EVIDENCES FURNISHED B Y THE ASSESSEE WITH RESPECT TO EACH AND EVERY SERVICE PURPORTEDLY ACHIEVED BY THE ASSES SEE. MY COMMENTS ON EACH SERVICE ARE AS UNDER :- PRODUCT MANAGEMENT THIS INCLUDES: MANAGEMENT OF THE PRODUCT PORTFOLIO PER PRODUCT GROUP PRODUCT BRANDING DEVELOPMENT OF PRODUCT DOCUMENTATION FOR EXISTING AND NEW PRODUCTS INTRODUCTION MAINTAINING THE INTRANET CONTENT ORGANIZATION OF THE REGIONAL AND WORLDWIDE PRODUCT GROUP WORKSHOPS STRATEGIC SALES SUPPORT IN COUNTRIES (THROUGH PRESENTATIONS, TRADE SHOWS ETC) MARKET OBSERVATION AND ANALYSIS MONTHLY REPORTING AND ANALYSIS FOR SALES DEVELOPMENT AND SPECIAL CUSTOMER PROJECTS OTHERS (PRODUCT RELOCATION WITHIN THE GROUP AND WRITING OF PUBLICATIONS) THE ASSESSEE HAS SUBMITTED SEVERAL DOCUMENTS INCLUDING GROUP PRESENTATIONS AND INTERNAL CORRESPONDENCE BUT STILL OVERALL THE ASSESSEE HAS NOT DEMONSTRATED CLEARLY WHAT ARE THE BENEFITS BEING REALIZED FROM THE PRODUCT MANAGEMENT FUNCTIONS. FOR EXAMPLE, THE ASSESSEE WAS REQUIRED TO CLEARLY SHOW WHAT IS THE REVENUE GENERATED FROM EACH PRODUCT IN THE PORTFOLIO THAT IS BEING MANAGED ON A JOINT OR ON A BEING MANAGED ON A JOINT OR ON A SHARED BASIS. WHAT HAS BEEN THE SALES/PROFIT REALIZED FROM THE NEW PRODUCT INTRODUCED ETC AND SIMILAR QUANTIFICATIONS WHICH HAVE NOT BEEN FURNISHED. IT A NO.-104/DEL/2012 8 NETWORK ADMINISTRATION BROADLY, THIS INCLUDES IMPLEMENTATION AND MANAGEMENT OF IT SYSTEMS. IT ENTAILS: IT STRATEGY ALIGNMENT DECISION ON GLOBAL IT STANDARDS DECISION ON ATOTECHS GLOBAL IT PROJECT ROADMAP OUTSTANDING ISSUE RESOLUTION IT FUNCTION IS BY NATURE SO LOCALIZED THAT IT SEEMS HARD TO COMPREHEND HOW THE DAY TO DAY FUNCTIONING OF THE IT SYSTEMS CAN BE UNDERTAKEN ON A JOINT/SHARED BASIS. EVEN THE PRODUCT MANAGEMENT FUNCTION STATES THAT INTRANET CONTENT IS BEING MAINTAINED. HENCE, THERE IS CLEAR OVERLAPPING BETWEEN PRODUCT MANAGEMENT AND NETWORK ADMINISTRATION. GLOBAL MANAGEMENT FUNCTIONS AND REGIONAL COST SHARING (EU) THESE FUNCTIONS ARE UNDERTAKEN AND OVERSEEN BY THE OPERATION COMMITTEE (OC) COMPRISING OF KEY SENIOR PEOPLE SUCH AS THE PRESIDENT, FUNCTIONAL HEADS, THE BUSINESS UNIT VICE PRESIDENTS AND REGIONAL VICE PRESIDENTS. THE FUNCTIONS INCLUDE: - CREDIT CONTROL (SETTING CREDIT LINES, MINIMIZING CREDIT RISK ETC) - LIQUIDITY FUNCTION - OTHER FINANCE FUNCTIONS SUCH AS TREASURY MONITORING AND STEERING - CORPORATE HR SERVICES (RECRUITING, SUCCESSION PLANNING, CAREER DEVELOPMENT) - GLOBAL HR SERVICES (ASSISTANCE IN JOB DESCRIPTION, PERSONNEL POLICIES, TRAINING AND RECRUITMENT ETC) AT THE OUTSET, THESE FUNCTIONS APPEAR TO BE EXTREMELY VAGUE AND GENERAL IN NATURE. THE ASSESSEE HAS IN PLACE AN ARRANGEMENT FOR GLOBAL SHARING AND OVER AND ABOVE THAT IT HAS ALSO ENTERED INTO A REGIONAL COST SHARING ARRANGEMENT BUT THE ASSESSEE HAS NOT BEEN ABLE CLEARLY DEMARCATE WHO DOES WHAT OR WHAT WAS THE NEED TO ENTER INTO BOTH SUCH ARRANGEMENTS WHEN THEY BOTH RELATE TO MANAGEMENT. FOR EXAMPLE THE CORPORATE HR SERVICES AND THE GLOBAL HR SERVICES BOTH APPEAR TO BE DOING MORE OR LESS THE SAME FUNCTION OF HUMAN RESOURCE MANAGEMENT. CLEARLY THERE IS AN IMMENSE OVERLAP/DUPLICATION OF SERVICES THAT IS HAPPENING HERE. 3.4. THE TPO ALSO AS PER PARA 8-8.8 DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE WHO AS PER RECORD WAS REQUIRED TO JUSTIFY THE COST BENEFIT ANALYSIS WITH REFERENCE TO THE COST OF THE SERVICES AND BENEFIT RECEIVED THERE FROM AND SERVICES RECEIVED FROM THE AE VIS--VIS THE INDEPENDENT PARTIES. IT A NO.-104/DEL/2012 9 3.5 THE TPO ALSO FAULTED THE ASSESSEE ON THE GROUN D THAT ACCORDING TO HIM ON A PERUSAL OF THE P&L ACCOUNT IT WAS NOTICED THAT THE ASSESSEE HAD CLAIMED VARIOUS EXPENSES WHICH SHOWED THAT THE PAYMENT TO THE AE WA S OF THE NATURE OF DUPLICATION OF SERVICES. THE FOLLOWING EXPENSES WERE TAKEN INT O CONSIDERATION BY THE TPO :- PERSONNEL EXPENSES RS.46,561,999 LEGAL AND PROFESSIONAL EXP. RS.54,56,424 SEMINAR & CONFERENCE EXP. RS.60,62,192 3.6. ADDRESSING THE SAID CONCERN THE FOLLOWING EXPL ANATION WAS OFFERED BY THE ASSESSEE:- WITH REGARD TO THE COST BENEFIT ANALYSIS IT IS SUB MITTED THAT THE CCA ENTERED INTO BY THE ASSESSEE IS IN EXISTENCE SINCE 1993, WHEREAS , THE ASSESSEE HAS ONLY ENTERED INTO THIS AGREEMENT FROM 1 JANUARY, 2002. IT IS WO RTH MENTIONING THAT ALL PATENTS AND KNOW-HOW ARE JOINTLY OWNED BY THE PARTIES TO TH E CCA AND ALL SUCH INTANGIBLES CAN ONLY BE AND EXCLUSIVELY BE USED IN THE SALES TE RRITORY OF EACH PARTY INVOLVED. THE COMPANY ALSO BENEFITED BY WAY OF INCREASED SALE S, LOWER NEED TO MAINTAIN AND HIRE RESOURCES AND COMPETITIVE ADVANTAGE BY ACCESS TO INTANGIBLES WITHOUT MAKING A BUY-IN PAYMENT. 3.7. THE EXPLANATION OFFERED BY THE ASSESSEE WAS NO T ACCEPTED BY THE TPO WHO CONCLUDED AS UNDER:- 9. FINDINGS ON THE BASIS OF ABOVE:- 9.1. ON THE BASIS OF THE ABOVE FOLLOWING POINTS ARE NOTI CED: THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THE BENEFIT S THAT IT HAD DERIVED FROM THE SERVICES PURPORTEDLY PROVIDED BY THE AE. NO IN DEPENDENT ENTITY WOULD PAY FOR SUCH SERVICES WITHOUT ANY COST BENEFIT ANAL YSIS. THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE AS TO T HE COST BENEFIT ANALYSIS WITH REGARD TO THE INDEPENDENT SUPPLIERS. NO THIRD PARTY WOULD LIKE TO AVAIL SERVICES WITHOUT ANY COST BENEFIT ANALYSIS WITH REG ARD TO AE VS INDEPENDENT SUPPLIER. THE DOCUMENTATION PRODUCED BY THE ASSESSEE TO SUPPO RT ITS CLAIM FOR THE RECEIPT OF MANAGEMENT SERVICES IS TOO GENERIC. THE BENCHMARKING DONE BY THE ASSESSEE IS NOT IN ACC ORDANCE WITH THE LAW AND THEREFORE CUP METHOD IS REQUIRED TO BE APPLIED IN THIS CASE. 9.2 AS PER THE COMMENTS ABOVE IT CAN BE SEEN THAT N ONE OF THE BENEFITS ARE TANGIBLE OR REAL. A MERE FAADE HAS BEEN RAISED TO GIVE AN IMPRESSIONS THAT SOME VITAL BENEFIT HAS PASSED TO THE ASSESSEE, WHICH IS ACTUALLY NOT THE CASE. RELATED PARTIES ARE QUITE LIKELY TO GIVE A FORM THAT WILL G IVE AN IMPRESSION THAT A REAL SERVICE IS BEING RENDERED BY ONE TO ANOTHER. BUT THE NECES SITY TO LOOK BEYOND THE VEIL IS RECOGNIZED ACROSS TAX JURISDICTIONS. IN THE ABOVE CIRCUMSTANCES THE PAYMENT OF IT A NO.-104/DEL/2012 10 SERVICE FEE IS ONLY AN ARRANGEMENT TO CHANGE TAX BA SE WITHOUT ANY ECONOMIC SUBSTANCE IN THE TRANSACTION. 3.8. IN SUPPORT OF THE SAID CONCLUSION ON FACTS, RE LIANCE WAS PLACED UPON VARIOUS DECISIONS AND OECD GUIDELINES. WE DO NOT PROPOSE T O REFER TO THESE IN THE PRESENT PROCEEDINGS AS IT WOULD BE MORE APPROPRIATE TO SPEC IFICALLY ADDRESS THE ARGUMENTS ADVANCED BY THE PARTIES BEFORE THE BENCH AS THESE W OULD BE REFERRED TO SUBSEQUENTLY. HOWEVER, FOR THE PURPOSES OF THE PRESENT PROCEEDING S FOR THE SAKE OF COMPLETENESS, IT WOULD BE FIRST APPROPRIATE TO SET OUT HOW THE IS SUE WAS CONSIDERED BY THE DRP. FOR READY REFERENCE THE SAME IS EXTRACTED HEREUNDER :- 4.2.4. ON ANALYSIS, THE DRP FINDS THAT THE SERVICE S AVAILED CAN BE GROUPED, AS DONE BY ASSESSEE, UNDER THE FOLLOWING HEADS: 1) PRODUCT MANAGEMENT 2) NETWORK ADMINISTRATION 3) MANAGEMENT COST 4) REGIONAL COST SHARING 4.2.5. THE TPO HAS ANALYSED EACH HEAD IN DETAIL. HE HAS VERIFIED EVIDENCE REGARDING AVAILING OF THESE SERVICES, WHETHER THEY ARE DUPLICATIVE OR NOT AND FINALLY WHETHER THEY HAVE BENEFITED THE INDIAN ENTITY IN CO MMERCIAL TERMS. HE HAS GIVEN DETAILED FINDINGS ON ALL THESE ASPECTS. FURTHER BANGALORE IT AT IN CASE OF GEMPLUS INDIA PVT. LTD. HAS UPHELD TPO'S FINDINGS REGARDING ACTUAL AVAILING OF SERVICES, WHETHER CHARGES ALLOCATED ARE BASED ON APPROPRIATE KEYS, WHETHER ADEQUATE BENEFITS DERIVED OR NOT. SO IN OUR VIEW, SIMILAR TE STS APPLIED BY THE TPO IN THIS CASE ARE RELEVANT AND APPROPRIATE. THE TPO HAS IN THIS C ONTEXT DISCUSSED RELEVANCE OF OECD GUIDELINES AND PRACTICE IN OTHER COUNTRIES ALS O. 4.2.6 AFTER CONSIDERING ALL EVIDENCES AND SUBMISSIO NS, WE FIND THAT THERE IS NO INFIRMITY IN CONCLUSION DRAWN BY TPO WITH REGARD TO MANAGEMENT GROUP COST (GLOBAL AND REGIONAL). THESE SERVICES NEED TO BE VE RIFIED AND SUBJECTED TO BENEFIT TEST. THIS POSITION IS ALSO SUPPORTED BY BANGALORE ITAT DECISION (SUPRA). ON EXAMINATION OF DETAILS PROVIDED BY THE ASSESSEE IN THIS REGARD SHOWS THERE IS NO DIRECTLY IDENTIFIABLE ECONOMIC OR COMMERCIAL VALUE FOR THE INDIAN COMPANY. WE DO NOT FIND THAT THE INDIAN ENTITY, THE RECIPIENT, HAS BENEFITED FROM THESE KIND OF SERVICES. 'THE BENEFIT TEST IS GENERALLY HELD TO BE MET IF, UNDER COMPARABLE CIRCUMSTANCES, AN UNCONTROLLED TAX-PAYER WOULD BE W ILLING TO PAY AN UNCONTROLLED PARTY TO PERFORM THE SAME OR A SIMILAR ACTIVITY OR IF THE RECIPIENT WOULD OTHERWISE HAVE PERFORMED THE SAME ACTIVITY OR A SIMILAR FOR I TSELF (INCREMENTED VALUE STANDARD). '(TRANSFER PRICING AND THE ARM'S LENGTH PRINCIPLE IN INTERNATIONAL TAX LAW, JENS WITTEN DORFF, PG 486). US, ALSO ADOPTS BE NEFIT APPROACH SINCE 2009, FROM THE PERSPECTIVE OF THE RECIPIENT OF THE SERVICE NOT OF THE SERVICE PROVIDER. SIMILAR IS THE POSITION OF OECD GUIDELINES OF 1979 WHICH PROVIDES FOR A BENEFIT TEST FROM THE PERSPECT IVE OF THE RECIPIENT. IT A NO.-104/DEL/2012 11 4.2.7 DURING THE COURSE OF DRP HEARING THE ASSESSEE WAS ALSO ASKED TO GIVE DETAILS OF COSTS AND THEIR ALLOCATION WORLDWIDE. THE ASSESS EE HAS EXPLAINED COST BENEFIT, BY STATING THAT IT BENEFITED BY WAY OF INCREASED SALES AND LOWER NEED TO MAINTAIN AND HIRE RESOURCES. FROM SUBMISSION, IT IS CLEAR, THERE IS NO COST BENEFIT ANALYSIS. BUT COST ALLOCATION MUST BE SUPPORTED BY EVIDENCE RELAT ING TO RENDERING OF SERVICES OTHERWISE THE UNDERLYING ASSUMPTION WOULD BE THAT S ERVICES HAVE NOT BEEN PROVIDED. IN FACT NO EVIDENCE HAS BEEN PUT ON RECOR D TO SHOW THESE SERVICES WERE NEEDED AND HENCE PROVIDED. THERE IS NO COST ALLOCAT ION KEY WITH REFERENCE TO INDIVIDUAL INDIRECT COSTS EITHER. SO WE FIND THAT T HE TPO HAS RIGHTLY REJECTED THE ECONOMIC ANALYSIS OF THE ASSESSEE AND APPLIED CUP A ND TAKING ALP AT NIL, COMPUTED THE ARMS LENGTH PRICE FROM THE PERSPECTIVE OF RECIPIENT. SO THE OBJECTION IS REJECTED. 4. AGGRIEVED BY THE FINDING WHICH LED TO THE PASSIN G OF THE FINAL ASSESSMENT ORDER PURSUANT TO THE DRPS DIRECTIONS, THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE US. THE LD. AR RIGHT AT THE OUTSET SUBMITTED THAT THE ASSESSEE CONCEDES THAT THE MOST APPROPRIATE METHOD IS NOT TN MM AND CUP METHOD WHICH POSITION IS AGREED TO AND NO LONGER DISPUTED ON BEH ALF OF THE ASSESSEE. IT WAS HIS ARGUMENT THAT HOWEVER THE RELEVANT FACTS HAVE NOT B EEN TAKEN INTO CONSIDERATION. THE FACTS IT WAS HIS SUBMISSION HAVE TO BE TAKEN IN TO CONSIDERATION IN THE LIGHT OF THE SETTLED LEGAL PRINCIPLES ON THE ISSUE WHERE MANAGEM ENT COST CHARGES HAVE BEEN TAKEN INTO CONSIDERATION BY VARIOUS DECISIONS AND J UDGMENTS. REFERRING TO THE SYNOPSIS FILED IN THE COURT ADDRESSED AT THE TIME O F HEARING, ATTENTION WAS INVITED TO PARA 6 OF THE SAME SO AS TO CONTEND THAT THE ASSESS EE HAD EXECUTED 3 CONTRACTS. FOR READY-REFERENCE, WE REPRODUCE FROM THE WRITTEN SUBM ISSIONS FILED AS A SYNOPSIS ON WHICH THE LD. AR HAS BASED HIS CLAIM:- 6. THE APPELLANT HAD EXECUTED THREE CONTRACTS OF A CCESSION WITH ITS AE, ATOTECH DEUTSCHLAND GMBH, WHEREIN THE APPELLANT CON CLUDED THREE UNDERLYING COST-SHARING AGREEMENTS (CSAS)/ CCAS., NAMELY REG IONAL COST SHARING AGREEMENT (PG 66 TO 76), RESEARCH AND DEVELOPMENT C OST SHARING AGREEMENT (PG 78 TO 88) AND MANAGEMENT GROUP COST SHARING AGREEMENT (PG 78 TO 80 & 89 TO 99), SUBMITTED TO THE LD. TPO AS ANNEXURE 1 TO THE SUBMI SSION DATED 06 SEPTEMBER 2010. THE R&D AND MANAGEMENT GROUP COST SHARING AG REEMENTS ARE EFFECTIVE JANUARY 2002 WHEREAS, THE REGIONAL COST SHARING AGR EEMENT IS EFFECTIVE JANUARY 2004. 7. THE R&DTSS-CSA INVOLVES THE SHARING OF R&D AND T ECHNICAL SALES SERVICE SUPPORT COSTS. THE AGREEMENT REQUIRES FROM ATOTECH GROUP TO MAINTAIN IT A NO.-104/DEL/2012 12 LABORATORIES, PRODUCT DEVELOPMENT CENTRES, TECHNICA L CENTRES AND A STAFF OF EXPERTS, ENGINEERS AND SCIENTISTS TO CONDUCT R&D AND PROVIDE RELATED ENGINEERING /TECHNICAL SUPPORT AND SERVICES TO THE WORLD-WIDE GROUP ENTITI ES. ATOTECH INDIA, AS A JOINT OWNER, HAS UNRESTRICTED ACCESS TO THE EXISTING R&D DATE, RELATED KNOWLEDGE AND INTELLECTUAL PROPERTIES ON A ROYALTY FREE BASIS. 8. THE LD. TPO ACCEPTED THE PAYMENT MADE TOWARDS TH E RESEARCH AND DEVELOPMENT COST SHARING AGREEMENT AMOUNTING TO RS. 4,90,08,527 TO BE AT ARMS LENGTH. HOWEVER, THE LD. TPO DETERMINED THE ARMS LENGTH PRICE OF PAYMENTS TOWARDS GLOBAL MANAGEMENT COST SHARING AND REGIONAL COST SHARING AGREEMENT AMOUNTING TO RS.2,69,90,392 AND RS.61,87,583 RESPEC TIVELY TO BE AT NIL. 9. THE MCSA INVOLVES THE SHARING OF COMMON GENERAL MANAGEMENT AND ADMINISTRATIVE COSTS (SUCH AS MARKETING/FINANCE/HUM AN RESOURCE/QUALITY CONTROL/SAFETY AND HOST OF OTHER CRITICAL MANAGEMEN T FUNCTIONS THAT ARE OF GLOBAL STRATEGIC IMPORTANCE). THE FUNCTION AND SERVICES C OVERED UNDER THIS AGREEMENT INCLUDE:- PRODUCT MANAGEMENT GLOBAL MANAGEMENT FUNCTIONS NETWORK ADMINISTRATION GENERAL JOINT ADMINISTRATIVE FUNCTIONS 4.1. REFERRING TO THE SUBSEQUENT PARAS WHICH ELABOR ATE PRODUCT MANAGEMENT; GLOBAL MANAGEMENT FUNCTIONS; NETWORK ADMINISTRATION ; AND GENERAL JOINT ADMINISTRATIVE FUNCTIONS IT WAS SUBMITTED THAT THES E ARE ELABORATED AND THE DOCUMENTARY EVIDENCE QUA THE SAME HAS BEEN COPIOUSL Y RELIED UPON BEFORE THE DEPARTMENT QUA EACH OF THESE AND NONE OF IT HAS NOT BEEN TAKEN INTO CONSIDERATION AND THE ISSUE HAS BEEN CONCLUDED AGAINST THE ASSESS EE IGNORING THE RELEVANT FACTS. THE DOCUMENTATION AND FACTS IGNORED HAS BEEN ELABOR ATED IN THE SYNOPSIS, THE SAME IS REPRODUCED HEREUNDER:- PAYMENT OF COST SHARING EXPENSES UNDER THE COST CON TRIBUTION AGREEMENT 6. THE APPELLANT HAD EXECUTED THREE CONTRACTS OF ACCES SION WITH ITS AE, ATOTECH DEUTSCHLANDGMBH, WHEREIN THE APPELLANT CONCLUDED TH REE UNDERLYING COST-SHARING AGREEMENTS('CSAS'CCAS. , NAMELY REGIONAL COST SHARI NG AGREEMENT (PG 66 TO 76), RESEARCH AND DEVELOPMENT COST SHARING AGREEMENT (PG 78 TO 88) AND MANAGEMENT GROUP COST SHARING AGREEMENT (PG 78 TO 80 &89TO99), SUBMI TTED TO THE LD. TPO AS ANNEXURE 1 TO THE SUBMISSION DATED 06 SEPTEMBER2010.THER&DAND MANAGEMENT GROUP COST SHARING AGREEMENTS ARE EFFECTIVE JANUARY2002WHEREAS ,THEREGIONALCOST SHARING AGREEMENT IS EFFECTIVE JANUARY 2004. 7. THE R&DTSS-CSA INVOLVES THE SHARING OF R&D AND TECH NICAL SALES SERVICE SUPPORT COSTS. THE AGREEMENT REQUIRES FROM ATOTECH GROUP TO MAINTAIN LABORATORIES, PRODUCT DEVELOPMENT CENTRES, TECHNICAL CENTRES AND A STAFF OF EXPERTS, ENGINEERS AND SCIENTISTS TO CONDUCT R&D AND PROVIDE RELATED ENGINEERING 1 TECHNICAL SUPPORT AND SERVICES TO THE IT A NO.-104/DEL/2012 13 WORLD-WIDE GROUP ENTITIES. ATOTECH INDIA, AS A JOIN T OWNER, HAS UNRESTRICTED ACCESS TO THE EXISTING R&D DATA, RELATED KNOWLEDGE AND INTELLECTU AL PROPERTIES ON A ROYALTY FREE BASIS. 8. THE LD. TPO ACCEPTED THE PAYMENT MADE TOWARDS THE R ESEARCH AND DEVELOPMENT COST SHARING AGREEMENT AMOUNTING TO RS 4,90,08,527 TO BE AT ARM'S LENGTH. HOWEVER, THE LD. TPO DETERMINED THE ARMS LENGTH PRICE OF PAYMENTS TOWARDS GLOBAL M ANAGEMENT COST SHARING AND REGIONAL COST SHARING AGREEMENT AMOUNTI NG TO RS.2,69,90,392/- AND RS.61,87,583/- RESPECTIVELY TO BE AT NIL. 9. THE MCSA INVOLVES THE SHARING OF COMMON GENERA L MANAGEMENT AND ADMINISTRATIVE COSTS (SUCH AS MARKETING/FINANCE/HUMAN RESOURCE/QUALITY C ONTROL/SAFETY AND HOST OF OTHER CRITICAL MANAGEMENT FUNCTIONS THAT ARE OF GLOBAL STRATEGIC IMPORTANCE). THE FUNCTIONS AND SERVICES COVERED UNDER THIS AGREEMENT INCLUDE: - PRODUCT MANAGEMENT GLOBAL MANAGEMENT FUNCTIONS NETWORK ADMINISTRATION GENERAL JOINT ADMINISTRATIVE FUNCTIONS 10. THE GENERAL MATTERS PERTAINING TO MANAGEMENT F UNCTIONS PERFORMED AT GROUP LEVEL INCLUDE THE FOLLOWING: PRODUCT MANAGEMENT- PRODUCT MANAGEMENT COMPRISES OF THE FOLLOWING TASKS AND RESPONSIBILITIES- A. CREATION OF MARKET INTRODUCTION DOCUMENTATION EGO P RODUCT NAME, PRICE GUIDELINES, TECHNICAL FEATURES ETC. B. PREPARATION OF BROCHURES, ADVERTISEMENTS, POSTERS A ND PRESS RELEASES. C. PUBLICATION OF TECHNICAL PAPERS AND PARTICIPATION A T CONFERENCES AND TRADESHOWS, D. MANAGEMENT OF ATOTECH WEBSITE, IN TERNET CONTENT. E. PUBLICATION OF NEWSLETTERS ETC. F. TRAININGS/WORKSHOPS FOR LOCAL PRODUCT MARKETING MAN AGERS IT IS PERTINENT TO NOTE THAT THE PRODUCT MANAGEMENT FUNCTIONS PERFORMED BY AES ARE ESSENTIAL TO THE SUCCESS OF ATOTECH INDIA'S PRODUCTS. IN THE ABSENCE OF THE ABOVE PRODUCT MANAGEMENT FUNCTIONS PERFORMED BY THE AES, ATOTECH INDIA WOULD NOT BE IN A POSITION TO EXPLAIN THE FUNCTIONS, UTILITY AND FEATURES OF THE NEW PRODUCTS TO POTENTIAL CUSTOMERS . IN ORDER TO ENSURE THE SUCCESS OF ANY NEW INDUSTRIAL PRODUCT LAUNCHED BY THE APPELLANT, IT IS IMPERATIVE THAT MARKETING PERSONNEL OF THE APPELLANT ARE AWARE ABOUT THE TECHNICAL ASPECTS OF THE PRODUCT. IT IS ALSO IMPORTANT TO NOTE THAT ATOTECH INDIA DOES NOT HAVE ITS OWN R & D DEPARTMENT. THE COMPANY HAS A VERY THIN PRODUCT MANAGEMENT TEAM WHICH WORKS CLOSELY WITH ATOTECH BU SINESS TECHNOLOGY TEAMS FOR DEALING IN MORE THAN 500 PRODUCTS AND OVER 1000 CUSTOMERS SPANNING THE WHOLE OF INDIA AND SAARC COUNTRIES. RATHER IT RECEIVES MARKETING MATERIALS F ROM THE CENTRAL MARKETING DEPARTMENTS OF ATOTECH,GROUP-IN THE FORM OF NEWSLETTERS, PROMOTION AL LITERATURE, QUARTERLY MAGAZINES, JOURNALS AND THE LIKE. IF THESE PRODUCT MANAGEMENT, MARKETIN G AND PROMOTIONAL ACTIVITIES WERE NOT CARRIED OUT IN THE CENTRALIZED DEPARTMENTS, THEN ATOTECH IN DIA WOULD DEFINITELY NEED TO EMPLOY SEVERAL FUNCTIONS. NONETHELESS IT WOULD NOT BE POSSIBLE TO EFFECTIVELY ACHIEVE THE REQUIRED GLOBAL STANDARDS. IT A NO.-104/DEL/2012 14 DOCUMENTARY EVIDENCE THE APPELLANT SUBMITTED THE FOLLOWING DOCUMENTS BEF ORE THE TPO ON A SAMPLE B ASIS EVIDENCING THE RECEIPT OF ECONOMIC BENEFIT BY THE APPELLANT FROM T HE PRODUCT MANAGEMENT ACTIVITY PERFORMED BY THE AE: LIST OF TRAININGS AND WORKSHOPS ATTENDED BY EMPLOYE ES OF APPELLANT COMPANY OVERSEAS WHICH WERE CONDUCT GLO BAL PRODUCT MANAGEMENT TEAM OF AE DURING THE FINANC IAL YEAR 2006-07 (REFER PAGE 160 OF THE PAPER BOOK) LIST OF ATOTECH GROUP EMPLOYEES WHO VISITE D ATOTECH INDIA FOR PROVIDING TECHNICAL, PRODUCT MANAGEMENT AND GENERAL MANAGEMENT SUPPORT ALONG-WIT H TRAINING MATERIAL RECEIVED BY ATOTECH EMPLOYEES IN THE TRAININGS ATTENDED (REFER PAGE 1126 6 OF THE PAPER BOOK GLOBAL MANAGEMENT FUNCTION - THIS FUNCTION INVOLVES THE COST TOWARDS THE FOLLOWI NG- A. FINANCE & TREASURY B. LEGAL ASSISTANCE C. RISK MANAGEMENT AND INTERNAL CONTROL D. HUMAN RESOURCES E. HEALTH, SAFETY, ENVIRONMENT AND SECURITY WITH ACTIVE SUPPORT AND GUIDANCE BY THE GROUP, ATOT ECH INDIA IS ABLE TO MANAGE WITH A HEADCOUNT OF ONE PERSON IN HUMAN RESOURCES, ONE PERSON IN IT, ONE PERSON IN ADMINISTRATIVE ASSISTANCE AND FIVE PERSONS IN FINANCE AND ACCOUNTS. IN THE ABSENCE OF THIS SUPPORT, ATOTECH INDIA WOULD NEED TO EMPLOY ADDITIONAL PERSONNEL IN THE AB OVE FUNCTIONS AS WELL. DOCUMENTARY EVIDENCE THE APPELLANT SUBMITTED THE FOLLOWING DOCUMENTS BEF ORE THE TPO ON A SAMPLE BASIS EVIDENCING THE RECEIPT OF ECONOMIC BENEFIT BY THE APPELLANT FROM THE GLOBAL MANAGEMENT FUNCTION PERFORMED BY THE AE: REPORT FROM SITE VISIT DONE BY GRAHAM ORGILL AT CUS TOMER LOCATIONS (1127 TO 1134) SAFETY DATA SHEET - IDENTIFICATION OF SUBSTANCE, HA ZARDOUS IDENTIFICATION, COMPOSITION INFORMATION ON INGREDIENTS, FIRST AID MEASURES, FIR E FIGHTING MEASURES, ACCIDENTAL RELEASE MEASURES, HANDLING AND STORAGE, EXPOSURE CONTROL AND PERSONAL PROTECTION ETC. (REFER PAGE 1313 TO 1318 O F THE PAPER BOOK) LEGAL SUPPORT DOCUMENTS (REFER PAGE 1319 TO 1339 OF THE PAPER BOOK) NETWORK ADMINISTRATION- NETWORK MANAGEMENT REFERS TO THE ACTIVITIES, METHODS, PROCEDURES, AND TOOLS THAT PERTAIN TO THE OPERATION, ADMINISTRATION, MAINTENANCE, AND PROVISIONING OF NETWORKED SYSTEMS. IN THIS REGARD THE FOLLOWING FUNCTIONS ARE PERFORMED BY GROUP COMPANIES- A. SAP BASIS TEAM - THE BASIS TEAM IS IN CHARGE OF RUNNING ALL NECESSARY SYSTEMS TO RUN THE SAP SYSTEM ARCHITECTUR E FOR ATOTECH. B.GLOBAL SAP COMPETENCE CENTRE TEAM - IN CHARGE OF MAINTAINING ,SUPPORTING AND ENHANCING THE SYSTEM SE TTINGS AND THE BUSINESS PROCESSES. IT A NO.-104/DEL/2012 15 C. GLOBAL LOTUS NOTES COMPETENCE CENTRE TEAM- _IN CHARGE OF MAINTAINING, SUPPORTING AND ENHANCING T HE SYSTEM SETTINGS. D . GLOBAL INFRASTRUCTURE COMPETENCE TEAM - THE CENTRAL TEAM IS IN CHARGE OF MAINTAINING, SUPPORTING AND EN HANCING THE SYSTEM SETTINGS OF THE RELEVANT INFRASTRUCTURE TO A SSURE A PROPER WORKING OF ALL USERS. IN ADDITION THE TEAM IS IN CH ARGE OF DEVELOPING NEW CONCEPTS AND EVALUATING NEW FEATU RES AND TOOLS TO ASSURE THE NECESSARY LEVEL OF SECURITY AND STANDARD IZATION. IN ADDITION TO THE ABOVE ATOTECH INDIA RECEIVES CER TAIN NETWORK ADMINISTRATION ANDIT SECURITY SERVICES FROM THE TOTAL GROUP ALSO. DOCUMENTARY EVIDENCE THE APPELLANT SUBMITTED THE FOLLOWING DOCUMENTS BEF ORE THE TPO ON A SAMPLE BASIS EVIDENCING THE RECEIPT OF ECONOMIC BENEFIT BY THE APPELLANT FROM THE NETWORK ADMINISTRATION FUNCTION PERFORMED BY THE AE: DOCUMENTATION PERTAINING TO NOMATE KID SOLUTION FOR MING PART OF IT SUPPORT SERVICES TOWARDS INTRODUCTION OF SECURED NE TWORK ACCESS (REFER PAGE 1135 TO 1225 OF THE PAPER BOOK. TECHNICAL GUIDANCE ON IMPLEMENTING ACCESS CONTROL S YSTEM IN INDIA (REFER PAGE 1243 TO 1312 OF THE PAPER BOOK) REGIONAL COST SHARING:- PAYMENT TOWARDS REGIONAL COST SHARING INVOLVES CO STS TOWARDS THE FOLLOWING:- A. WORLDWIDE PURCHASING FOR ENSURING OPTIMUM PRICI NG FOR INPUT MATERIAL. B. LOGISTICS AND INVENTORY MANAGEMENT. C. QUALITY CONTROL IT IS RESPECTFULLY SUBMITTED THT THE ACTUAL COST IN CURRED BY THE AES FOR PERFORMANCE OF ABOVE FUNCTIONS IS ALLOCATED TO THE APPELLANT. IT WOULD THEREFORE BE APPRECIATED THAT THE COST SHARING PAYMENT MADE BY THE APPELLANT ESSENTIALLY REPRESENTS THIRD PARTY COSTS INCURRED BY THE ASSOCIATED ENTERPRISES. SUCH ALLOCATION IS ALSO SUPPORTED BY A CERTIFICATE FROM AN INDEPENDENT AUDI TOR. 11. THE DETAILS OF THE SERVICES COVERED UNDER EACH OF THE AFOREMENTIONED HEADS WERE SUBMITTED WITH THE LD. TPO AS ANNEXURE 2 TO OUR SUB MISSION DATED 06 SEPTEMBER 2010 (PLACED AT PAGES 134 TO 138 OF PAPER BOOK). 12. THE ABOVE PAYMENT HAS BEEN QUANTIFIED BY AN ALL OCATION METHODOLOGY ADOPTED BY THE PARTICIPANTS TO THE CCA. THE COST ALLOCATED SO LELY RELATES TO THE ABOVE MENTIONED ACTIVITIES PERFORMED BY THE AES FOR THE B ENEFIT OF PARTICIPATING ENTITIES. THE APPELLANT SUBMITTED A DETAILED REPORT OBTAINED BY THE PARTICIPANTS OF THE CCA FROM THE INDEPENDENT AUDITORS DOCUMENTING THE QUANT UM, MANNER AND THE METHODOLOGY FOR COMPUTING THE CONTRIBUTION TO THE M ADE BY EACH PARTICIPATING GROUP ENTITY AS ANNEXURE 6 TO SUBMISSION DATED 06 S EPTEMBER 2010 (PLACED AT PAGES 1341 TO 1394 OF PAPER BOOK). THE AUDIT REPOR T ON THE APPROPRIATENESS OF THE COSTS GATHERED AT ATOTECH GERMANY EXAMINEES WHETHER THE COSTS HAVE BEEN PROPERLY ALLOCATED AMONG THE GROUP COMPANIES (CHARGE-IN) A CCORDING TO THE TERMS OF THE AGREEMENT. 13. THE TPO HOWEVER, DID NOT ACCEPT THE VALUE OF TH E PAYMENTS MADE BY THE APPELLANT TOWARDS MANAGEMENT GROUP COST TO BE T ARMS LENGTH AND DETERMINED THE ARMS IT A NO.-104/DEL/2012 16 LENGTH PRICE OF SUCH PAYMENTS TO BE NIL. 4.2. IT WAS SUBMITTED THAT ALLOCATION KEY USED BY T HE ASSESSEE HAS BEEN PROVIDED TO THE REVENUE. FOR READY REFERENCE WE REPRODUCE AGAIN FROM THE SYNOPSIS FILED:- APPELLANTS CONTENTIONS: 14. THE CONTENTIONS OF THE APPELLANT AGAINST THE F INAL ORDER OF THE AO ARE BRIEFLY EXPLAINED BELOW: 1. APPROPRIATE ALLOCATION KEY USED THE CCA ENTERED INTO BE APPELLANT, IS A FUNCTIONS, BENEFITS AND COST POOL WHERE ATOTECH GROUP COMPANIES PERFORMED R&D, MANAGEMENT TASKS AND SAMPLE TESTS, UPON AGREEMENT FOR THEIR JOINT BENEFIT. THE COMPLETE COSTS IN THI S RELATION TO ABOVE ARE GATHERED AND ALLOCATED TO THE PARTICIPANTS BY ATOTECH DEUTSCHLAN D GMBH/GROUP CONTROLLING DEPARTMENT AS OPERATOR OF THE POOL. THE COSTS ARE ALLOCATED IN THE FOLLOWING MANNER UNDER THE COST SHARING AGREEMENT: CHARGE-OUT: THE ENTITIES WITH CENTRAL FUNCTIONS CHARGE CENTRA L COSTS INCURRED BY THEM TO THE CSA POOL ADMINISTERED BY GROUP CONTROLLING DEPARTMENT. CHARGE-IN: GROUP CONTROLLING DEPARTMENT ALLOCATES THE TOTAL CE NTRAL COSTS TO ALL THE GROUP ENTITIES INCLUDING THE CHARGE OUT PARTIES IN THE PR OPORTION OF COSTS INCURRED TO TOTAL EXTERNAL SALES. 15. THE DRP COMMENTED THAT THERE IS NO COST ALLOCATION KEY WITH REFERENCE TO INDIVIDUAL INDIRECT COSTS. HOWEVER, THE AUDIT REPORTS ISSUED BY INDEPENDENT AUDITORS, CLEARLY CONFIRM THE COST ALLOCATION METHODOLOGY WITH THE CC A ENTERED BETWEEN PARTIES. (PLACED AT PAGES 1341 TO 1394 OF THE PAPER BOOK). 16. FURTHERMORE, THE APPELLANT HUMBLY SUBMITS THAT THE AUDIT REPORT CONTAINS, INTER-ALIA QUANTUM, COST ALLOCATION METHODOLOGY AND THE ALLOCA TION KEYS FOR COMPUTING THE CONTRIBUTION TO BE MADE BY EACH PARTICIPATING GROUP ENTITY AND ACCORDINGLY, SUCH ANALYSIS CANNOT BE REJECTED WITHOUT DETAILS REASONS . 4.3 THE COST ALLOCATION METHODOLOGY WITH THE CCA EN TERED BETWEEN THE PARTIES, IT WAS STATED IS AVAILABLE AT PAGES 1341-1394 OF THE P APER BOOK. IT WAS HIS SUBMISSION THAT THE EVIDENCE PLACED BEFORE THE TPO AND THE AGR EEMENTS AVAILABLE WERE NOT CONSIDERED AND DISCUSSED BY THE TPO, AS HE HAD PROC EEDED ON THE FOOTING THAT THERE WAS DUPLICATION OF PAYMENTS AND FURTHER THE ASSESSE E WAS TO PROVIDE A COST BENEFIT ANALYSIS. THE DRP IT WAS SUBMITTED HAS CONFIRMED H IS ACTION RELYING UPON THE DECISION OF THE BANGLORE BENCH IN THE CASE OF GEM P LUS INDIA PVT. LTD. VS. ACIT IN ITA NO-352/BANGLORE/2009 ON THE PRINCIPLE OF APPROP RIATENESS OF THE ALLOCATION KEYS AND HAS FAILED TO CONSIDER, DISCUSS AND DECIDE CONSIDERING THE FACTS OF ASSESSEES CASE. IT WAS HIS SUBMISSION THAT THE D RP HAS NOT IDENTIFIED THE SPECIFIC IT A NO.-104/DEL/2012 17 DEFICIENCY IN THE ALLOCATION METHODOLOGY ADOPTED BY THE ASSESSEE. IN THIS FACTUAL BACKGROUND IT WAS HIS ARGUMENT THAT THE ISSUE IS FU LLY COVERED IN ASSESSEES FAVOUR BY THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNA L (COPY PLACED AT PAGES 38-57) IN THE CASE OF DRESSER RAND INDIA PVT. LTD VS. ACIT WHEREIN THE CO-ORDINATE BENCH IN ITS ORDER DATED 07.09.2011 IN ITA NO-8753/MUM/20 10 HELD AS UNDER :- THERE IS NO OBJECTIVE WAY IN WHICH USE OF SERVICES CAN BE MEASURED AND AS IS THE COMMERCIAL PRACTICE EVEN IN MARKET FACTORS DRIVEN S ITUATION, THE COSTS ARE SHARED IN ACCORDANCE WITH SOME OBJECTIVE CRITERION, INCLUDING SALES REVENUES AND NUMBER OF EMPLOYEES. 4.4. IT WAS FURTHER STATED THAT THE SAID POSITION W AS FOLLOWED BY THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 18.11.2011 IN CUSHMAN & WAKEFIELD INDIA PVT. LTD. VS ACIT IN ITA NO-3933/DEL/2010 (COPY PLACED AT PAGES 58-93 OF THE PAPER BOOK) AND ORDER DATED 04.01.2013 IN THE CASE OF M/S FESTO PVT . LTD. VS DCIT IT(TP) (COPY PLACED AT PAGES 152-165). 4.5 ADDRESSING THE CASE OF GEM PLUS INDIA CITED SU PRA RELIED UPON BY THE DRP, IT WAS HIS SUBMISSION THAT IN THE FACTS OF THAT CASE N O DETAILS HAD BEEN SUBMITTED BY THE ASSESSEE IN RESPECT OF THE NATURE OF THE SERVICES R ENDERED WHEREAS IN THE FACTS OF THE PRESENT CASE THE ASSESSEE HAS SUPPORTED THE NATURE OF SERVICES BY FILING SUPPORTING DOCUMENTS. 4.6 APART FROM THE ABOVE ARGUMENTS VARIOUS OTHER AR GUMENTS WERE ADVANCED BY THE LD. AR IN SUPPORT OF THE ASSESSEES CLAIM. FOR READY REFERENCE THE RELEVANT EXTRACT FROM THE SYNOPSIS FILED IS REPRODUCED HEREU NDER:- 18. THE APPELLANT BY WAY OF THE CCA HAS ACCESS TO GREATER AND GLOBAL EXPERIENCE OF THE ATOTECH GROUP FOR ALL THE MANAGEM ENT RELATED ACTIVITIES AND THUS CAN BENEFIT FROM THE GLOBAL BEST PRACTICES. THIS A DVANTAGE IS EVIDENT FROM THE INCREASE IN SALES ACHIEVED BY ATOTECH INDIA OVER TH E YEARS. THIS SALES GROWTH WAS ACHIEVED, INTER ALIA, BY INCURRING COSTS IN RELATIO N TO THE MANAGEMENT SERVICES RECEIVED. 19. AS SUBMITTED ABOVE, THE APPELLANT HAS PLACED ON RECORD VARIOUS SUPPORTING DOCUMENTS (PLACED AT PAGES 160 TO 1339 OF PAPER BOO K), EVIDENCING THE RECEIPT OF ECONOMIC BENEFIT BY THE APPELLANT FROM ITS AE BY EN TERING INTO CCA, IT A NO.-104/DEL/2012 18 20. IN VIEW OF THE ABOVE, THE COSTS INCURRED BY THE APPELLANT TO AVAIL THE MANAGEMENT GROUP BENEFITS ARE COMMENSURATE WITH THE BENEFITS RECEIVED BY THE APPELLANT, CONSIDERING THE NATURE OF THE FUNCTIONS PERFORMED BY THE AE AND COSTS ALLOCATIONS CHARGED TO THE APPELLANT IN LIEU THEREO F. HOWEVER, THE LD. TPO FAILED TO APPRECIATE AND IGNOR ED THE DOCUMENTS SUBMITTED BY THE APPELLANT WITH RESPECT TO THE MANAGEMENT COST C ONTRIBUTIONS WHILE ACCEPTING THE ALP OF TRANSACTION RELATING TO R&D CROSS CHARGES. IN THIS REGARD, THE APPELLANT WOULD ALSO LIKE TO PLACE RELIANCE ON THE ITAT RULIN GS IN THE FOLLOWING CASES WHEREIN THE PAYMENTS MADE BY THE APPELLANT TO THE AES TOWAR DS COST SHARING HAVE BEEN HELD TO BE AT ARMS LENGTH BASED ON THE DOCUMENTARY EVID ENCES FURNISHED BY THE APPELLANT. ALSO, IT HAS BEEN STATED THAT THE COMME RCIAL WISDOM OF AN APPELLANT IN ENTERING INTO A TRANSACTION CANNOT BE QUESTIONED BY THE REVENUE AUTHORITIES: DRESSER-RAND INDIA PVT. LTD. VS ACIT [ITA NO.-8753/ MUM/2010] CUSHMAN & WAKEFIELD INDIA PVT. LTD. VS. ACIT [ITA N O.- 3933/DEL/2010] MECANN ERICKSON INDIA PVT. LTD. [ITA NO-5871/DEL/20 11] EKL APPLIANCES LTD [TS-206-HC-2012 (DEL)] ERICSSON INDIA PRIVATE LTD. [TS-319-ITAT-2012 (DEL) ] FESTO CONTROLS [TS-4-ITAT-2013 (BANG)] SC ENVIRO AGRO INDIA PVT. LTD. [TS-749-ITAT-2012 (M UM)] 21. WITH RESPECT TO THE COST BENEFIT ANALYSIS, IT I S HUMBLY SUBMITTED THAT THE APPELLANT HAS PRODUCED DOCUMENTARY EVIDENCE ON SAMP LE BASIS AS TO THE TANGIBLE BENEFITS OBTAINED BY THE APPELLANT UNDER THE CCA AN D THE COST BENEFIT ANALYSIS OF THE APPELLANT AFTER ENTERING INTO THE CCA. THE APP ELLANT HAS MADE IT ADEQUATELY CLEAR THAT THE COMPARABLE MANAGEMENT FUNCTIONS UNDE R A CCA AMONGST THIRD PARTIES ARE NOT AVAILABLE IN PUBLIC DOMAIN AND THE CCA ENTERED INTO BY THE APPELLANT IS SPECIFIC TO THE NEED OF THE APPELLANT FOR WHICH EXTERNAL COMPARABLE UNCONTROLLED PRICE IS NOT AVAILABLE. 22. IN THE ORDER, THE LD. TPO HAS MENTIONED THAT TH E APPELLANT HAS MADE PAYMENT ON ACCOUNT OF PERSONNEL EXPENSES (RS.46,561 ,999/-); LEGAL AND PROFESSIONAL EXPENSES (RS.5,456,424/-); AND SEMINAR AND CONFERENCE EXPENSES (RS.6,062,192/-) AMOUNTING TO RS.58,080,615/- AS AP PEARING IN THE PROFIT AND LOSS ACCOUNT AND CONCLUDED WITHOUT RECORDING ANY REASONS OR FACTS THAT THE CONTRIBUTION OF AES ON THIS ACCOUNT IS NOT DISCERNIBLE. THE LD. TPO MENTIONED IN HIS ORDER THAT THE PAYMENT MADE BY THE APPELLANT IS IN THE NATURE OF DUPLICATE SERVICES. THE LD. TPO FAILED TO APPRECIATE THE DISTINCTION BETWEEN TH E ABOVE MENTIONED SPENT AND THE MANAGEMENT COST CONTRIBUTIONS INCURRED IN ACCORDANC E WITH THE CCA ENTERED INTO WITH THE AE. IN THIS REGARD, THE APPELLANT WOULD ALSO LIKE TO ST ATE THAT THE COMMERCIAL WISDOM OF AN APPELLANT IN MAKING PAYMENTS TO THEIR AES UNDER AN AGREEMENT FOR AVAILING SERVICES, CANNOT BE QUESTIONED BY THE REVENUE AUTHO RITIES AND IT IS NOT FOR THE TAX AUTHORITIES TO DICTATE THE LEGITIMATE NEEDS OF A BU SINESS. IT IS ONLY THE BUSINESSMAN WHO CAN JUDGE THE LEGITIMACY OF BUSINESS NEEDS AND THAT THE BUSINESS MANS POINT OF VIEW MUST BE SEEN. 23. FURTHERMORE, THE APPELLANT WOULD LIKE TO HIGHLI GHT THAT THE COST INCURRED FOR PERFORMING SHAREHOLDERS FUNCTIONS WAS NOT CHARGED TO CCA MEMBERS (INCLUDING IT A NO.-104/DEL/2012 19 THE APPELLANT). ACCORDINGLY, THE COST ALLOCATED TO ATOTECH INDIA REPRESENTS EXPENDITURE INCURRED FOR PERFORMING MANAGEMENT FUNC TIONS WHICH ARE NOT IN THE NATURE OF SHAREHOLDERS FUNCTIONS. THE SAME HAS BE EN SUBMITTED BEFORE THE LD. TPO IN OUR SUBMISSION DATED 20 SEPTEMBER 2010. (PLA CED AT PAGE 94 TO 95 OF THE PAPER BOOK). 4.7. SPECIFIC ATTENTION WAS INVITED TO THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF EKL APPLIANCES [TS-206-HC-2012 (DEL) ] (COPY PLACED AT PAGES 94- 118 OF THE PAPER BOOK). INVITING SPECIFIC ATTENTIO N TO PAGES 115-117 AND PARAGRAPH 21,22 OF THE SAME, IT WAS HIS SUBMISSION THAT THE A PPROACH OF THE REVENUE IS NOT LEGALLY CORRECT AS THE JURISDICTIONAL HIGH COURT CO NSIDERING THE RELEVANT RULE I.E RULE 10B (1) (A)HOLDS THAT IT DOES NOT AUTHORIZE THE D ISALLOWANCE OF ANY EXPENSE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HAVE INCURRED THE SAME; OR THAT IN VIEW OF THE REVENUE THE EXPENSE WA S UNREMUNERATIVE; OR THAT IN VIEW OF THE CONTINUED LOSSES SUFFERED BY THE ASSESS EE IN HIS BUSINESS HE COULD HAVE FARED BETTER HAD HE NOT INCURRED THE SAID EXPENSE. IT WAS HIS SUBMISSION THAT ON ALL THESE GROUNDS, THE JURISDICTIONAL HIGH COURT HAS HE LD THAT THE REVENUE CANNOT DISALLOW EVEN CONSIDERING THE SAID RULE AND ALL THA T THE TPO CAN DO IS EXAMINE THE QUANTUM OF THE EXPENSE AND HE HAS NO AUTHORITY TO DISALLOW THE ENTIRE EXPENSE. FOR READY-REFERENCE, WE REPRODUCE THE PARA 21 & 22 FROM THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT, IN THE CASE OF EKL APPLI ANCE(CITED SUPRA) WHICH IS HEAVILY RELIED UPON BY THE LD. AR:- 21. THE POSITION EMERGING FROM THE ABOVE DECISIONS IS THAT IS NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY LEGITIMATE EXPENDITUR E INCURRED BY HIM WAS ALSO INCURRED OUT OF NECESSITY. IT IS ALSO NOT NECESSAR Y FOR THE ASSESSEE TO SHOW THAT ANY EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF BUSI NESS CARRIED ON BY HIM HAS ACTUALLY RESULTED IN PROFIT OR INCOME EITHER IN THE SAME YEAR OR IN ANY OF THE SUBSEQUENT YEARS. THE ONLY CONDITION IS THAT THE E XPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE O F BUSINESS AND NOTHING MORE. IT IS THIS PRINCIPLE THAT INTER ALIA FINDS EXPRESSION IN THE OECD GUIDELINES, IN THE PARAGRAPHS WHICH WE HAVE QUOTED ABOVE. 22. EVEN RULE 10B(1)(A) DOES NOT AUTHORIZE DISALLOW ANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HAVE INCURRED THE SAME OR THAT IN VIEW OF THE CONTINUED LOSSES S UFFERED BY THE ASSESSEE IN HIS IT A NO.-104/DEL/2012 20 BUSINESS, HE COULD HAVE FARED BETTER HAD HE NOT INC URRED SUCH EXPENDITURE. THESE ARE IRRELEVANT CONSIDERATIONS FOR THE PURPOSE OF RU LE 10B. WHETHER OR NOT TO ENTER INTO THE TRANSACTION IS FOR THE ASSESSEE TO DECIDE. THE QUANTUM OF EXPENDITURE CAN NO DOUBT BE EXAMINED BY THE TPO AS PER LAW BUT IN J UDGING THE ALLOWABILITY THEREOF AS BUSINESS EXPENDITURE, HE HAS NO AUTHORITY TO DIS ALLOW THE ENTIRE EXPENDITURE OR A PART THEREOF ON THE GROUND THAT THE ASSESSEE HAS SU FFERED CONTINUOUS LOSSES. THE FINANCIAL HEALTH OF ASSESSEE CAN NEVER BE A CRITERI ON TO JUDGE ALLOWABILITY OF AN EXPENSE; THERE IS CERTAINLY NO AUTHORITY FOR THAT. WHAT THE TPO HAS DONE IN THE PRESENT CASE IS TO HOLD THAT THE ASSESSEE OUGHT NOT TO HAVE ENTERED INTO THE AGREEMENT TO PAY ROYALTY/BRAND FEE, BECAUSE IT HAS BEEN SUFFERING LOSSES CONTINUOUSLY. SO LONG AS THE EXPENDITURE OR PAYMEN T HAS BEEN DEMONSTRATED TO HAVE BEEN INCURRED OR LAID OUT FOR THE PURPOSES OF BUSINESS, IT IS NO CONCERN OF THE TPO TO DISALLOW THE SAME ON ANY EXTRANEOUS REASONIN G. AS PROVIDED IN THE OECD GUIDELINES, HE IS EXPECTED TO EXAMINE THE INTERNATI ONAL TRANSACTION AS HE ACTUALLY FINDS THE SAME AND THEN MAKE SUITABLE ADJUSTMENT BU T A WHOLESALE DISALLOWANCE OF THE EXPENDITURE, PARTICULARLY ON THE GROUNDS WHICH HAVE BEEN GIVEN BY THE TPO IS NOT CONTEMPLATED OR AUTHORIZED. 4.8. INVITING ATTENTION TO THE ORDER OF THE CO-ORDI NATE BENCH IN THE CASE OF ERICSON INDIA PVT. LTD. (COPY PLACED AT PAGES 119-151 OF TH E PAPER BOOK) IN ITA NO- 5141/DEL/2011 (TS 319 ITAT) IT WAS SUBMITTED THAT T HE JUDGEMENT IN THE CASE OF EKL APPLIANCES OF THE JURISDICTIONAL HIGH COURT HAS BEEN FOLLOWED BY THE CO- ORDINATE BENCH AS WOULD BE EVIDENT FROM PAGE 148 OF THE COMPILATION OF CASE LAWS BEFORE THE BENCH. BASED ON THE PRINCIPLE LAID DOWN IT WAS SUBMITTED THAT THE CO- ORDINATE BENCH HELD THAT THERE WAS NO FORCE IN THE REVENUES CLAIM IN HOLDING THAT FOR AVAILING THE SERVICES THE ASSESSEE WAS NOT REQU IRED TO MAKE ANY PAYMENT. IT WAS HIS SUBMISSION THAT NO DOUBT IN THE FACTS OF THAT C ASE THERE WERE DIRECT EXPENSES WHICH WERE BEING CONSIDERED BY THE CO-ORDINATE BENC H HOWEVER THE LEGAL PRINCIPLE CONSIDERING RULE 10B(1)(A) ADDRESSING THE NECESSITY OF THE EXPENDITURE ON THE PART OF THE ASSESSEE FOR INCURRING THE SAME WAS A LEGAL PRI NCIPLE FOLLOWED. 4.9 INVITING FURTHER ATTENTION TO THE COMPILATION OF CASE LAW RELIANCE WAS FURTHER PLACED ON THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF DRESSER RAND INDIA PVT. LTD. VS DCIT COPY PLACED AT PAGES 38-57. IT WAS SUB MITTED THAT THE RATIO IS DIRECTLY APPLICABLE TO THE CASE AT HAND AS THEREIN IDENTICAL CLAIMS OF THE REVENUE WAS IT A NO.-104/DEL/2012 21 CONSIDERED. THE ARGUMENT THEREIN ADVANCED BY THE RE VENUE WAS CONSIDERED NAMELY THE ASSESSEE DID NOT NEED THE SERVICES AS IT HAD SU FFICIENT EXPERTS OF ITS OWN WHO WERE COMPETENT TO DO THE WORK. THIS IS FOUND CONSI DERED IT WAS SUBMITTED IN PARA 8 OF THE SAID ORDER PLACED AT PAGES 47 TO 48 OF THE C OMPILATION. RELYING ON THE SAME IT WAS ARGUED THAT THE CO-ORDIN ATE BENCH UPHOLDING THE RIGHT OF THE ASSESSEE TO DECIDE HOW TO CONDUCT ITS BUSINESS AND HOLDING THAT IT IS THE PREROGATIVE OF THE ASSESSEE TO DECIDE ITS BUSINESS NEEDS FURTHER HELD THAT IT IS NOT FOR THE REVENUE AUTHORITIES TO DECIDE WHAT IS NECESSARY AND WHAT IS NOT. IT WAS SUBMITTED THAT THE CO-ORDINATE BENCH HAS CONSIDERED THAT THE ASSESSEE MAY HAVE ANY NUMBER OF QUALIFIED ACCOUNTANTS AND MANAGEMENT EXPERTS ON IT S ROLLS AND YET IT MAY STILL DECIDE TO ENGAGE THE SERVICES OF OUTSIDE EXPERTS FO R AUDITING AND MANAGEMENT CONSULTANCY AND IT IS NOT FOR THE REVENUE OFFICERS TO QUESTION THE ASSESSEES WISDOM. THE CO-ORDINATE BENCH IT WAS SUBMITTED HAS AN OCCAS ION TO CONSIDER THE REVENUES ARGUMENTS THAT NO BENEFIT IN FINANCIAL TERMS RESULT ED IN FAVOUR OF THE ASSESSEE FROM THESE SERVICES AND THE SAID ARGUMENT IT WAS SUBMITT ED HAS BEEN HELD TO BE AN IRRELEVANT ARGUMENT. IT WAS SUBMITTED THAT THE CO- ORDINATE BENCH HAD ALSO CONSIDERED THAT IN THE EARLIER YEARS THE SERVICES M AY HAVE BEEN PROVIDED ON A GRATUITOUS BASIS BUT THIS DOES NOT MEAN THAT THE AL P OF THESE SERVICES IS NIL. IN THE SAID BACKGROUND IT WAS HIS PRAYER THAT ONCE THE PRI NCIPLE IS SETTLED THAT IT IS FOR THE ASSESSEE TO DETERMINE HOW TO CONDUCT ITS BUSINESS A ND WHERE RENDERING OF SERVICES HAS NOT BEEN DOUBTED, THE EVIDENCES WHICH WERE RELI ED UPON BEFORE THE TPO & DRP MAY BE DIRECTED TO BE CONSIDERED AND A JUDICIAL VIE W IN THE LIGHT OF THE SETTLED LEGAL PRINCIPLES MAY BE TAKEN AS NON-CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD MAKES THE IMPUGNED ORDER VULNERABLE TO REJECTION. 5. THE LD. CIT DR ON THE OTHER HAND STATED THAT THE LEGAL PRINCIPLES THAT THE REVENUE CANNOT STEP INTO THE SHOES OF THE ASSESSEE IS WELL ACCEPTED AND A SETTLED LEGAL PRINCIPLE AND ON CONSIDERATION OF THE TPOS O RDER ON WHICH RELIANCE WAS IT A NO.-104/DEL/2012 22 PLACED BY THE REVENUE IT WAS STATED THAT NO DOUBT R ENDERING OF SERVICES HAS NOT BEEN DOUBTED BY THE REVENUE HOWEVER THE ASSESSEE IS FAUL TED ON THE GROUND THAT FIRSTLY THE ASSESSEE HAS NOT BENCH-MARKED THE TRANSACTION A ND AS PER ITS TP STUDY PROVIDED HAS PROVIDED A COMBINED TNMM AS THE MOST APPROPRIAT E METHOD. SINCE THE SAID ISSUE HAD ALREADY BEEN CONCEDED BY THE LD. AR ON BE HALF OF THE ASSESSEE, THE LD. CIT DR WAS REQUIRED TO ADDRESS HIS ARGUMENTS IN TH E LIGHT OF THE ASSESSEES STAND. RESUMING HIS ARGUMENTS FROM THE POINT THAT CUP HAS BEEN CONCEDED BY THE ASSESSEE AS THE MOST APPROPRIATE METHOD WHICH IS IN LINE WIT H THE CONCLUSION OF THE TPO UPHELD BY THE DRP. ADDRESSING THE OTHER ARGUMENTS OF THE ASSESSEE IT WAS HIS SUBMISSION THAT THE ASSESSEES CASE DESERVES TO BE DISMISSED. RELIANCE IN SUPPORT OF THE IMPUGNED ORDER WAS PLACED UPON THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF KNORR BREMSE INDIA PVT. LTD. 2012-TII-138-ITAT-D EL-TP RENDERED BY THE CO- ORDINATE BENCH VIDE ITS ORDER DATED 31.10.2012 IN I TA NO.-5097/DEL/2011. ADDRESSING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LD. AR IN THE CASE OF EKL APPLIANCES LTD. IT WAS HIS SUBM ISSION THAT THE SAID DECISION WAS IN THE CONTEXT OF WHERE THE ASSESSEE IS SHOWING CON TINUOUS LOSSES. INVITING ATTENTION TO PAGE 149 OF THE PAPER BOOK WHICH IS THE DECISION IN THE CASE OF ERICSON INDIA PVT. LTD. RELIED UPON BY THE ASSESSEE, IT WAS HIS SUBMIS SION THAT NO DOUBT THE CO-ORDINATE BENCH HELD CONSIDERING THE DECISION OF THE JURISDIC TIONAL HIGH COURT AS PER PARA 30 THAT IT WOULD BE WRONG TO HOLD THAT THE EXPENDITURE SHOULD BE DISALLOWED ONLY ON THE GROUND THAT THESE EXPENSES WERE NOT REQUIRED TO BE INCURRED BY THE ASSESSEE PAID BY THE ASSESSEE AT ARMS LENGTH. IN THE CONTEXT OF THIS SPECIFIC CAUTION EXERCISED BY THE CO-ORDINATE BENCH IN KNORR BREMSE CASE HEAVY RELIAN CE WAS PLACED UPON THE SAID ORDER WHEREIN DECISION HAD BEEN ARRIVED AT, AFTER C ONSIDERING THE DECISION IN THE CASE OF DELOITTE CONSULTING INDIA PVT. LTD. VS DCIT IN I TA NO.-579, 1272 & 1273/MUM/2011. IT WAS FURTHER HIS STAND THAT THE D ECISION IS LATEST IN POINT OF TIME AND HAS NOT ONLY CONSIDERED THE DECISION OF EKL APP LIANCES AND M/S ERICSON INDIA IT A NO.-104/DEL/2012 23 PVT. LTD BUT ALSO THE DECISION IN THE CASE OF DRESS ER RAND INDIA PVT. LTD AND AFTER THAT IT HAS BEEN HELD THAT THERE WAS NO NECESSITY F OR THE SAID PAYMENT. ACCORDINGLY THE DECISION IN KNORR-BREMSE INDIA PVT. LTD WAS HEA VILY BEING RELIED UPON FOR THE REVENUE. 6. IN REPLY THE LD. AR INVITING ATTENTION TO THE OR DER OF KNORR BREMSE SUBMITTED THAT IN THE FACTS OF THAT CASE THE COST ALLOCATION KEY WAS NOT PROVIDED TO THE REVENUE AND IN THE ABSENCE OF THE SAME THE DRPS ORDER WAS U PHELD AS SUCH THE CASE WAS DISTINGUISHABLE ON FACTS. FOR THE SAID PURPOSE THE FOLLOWING PARA FROM THE SAID ORDER WAS HIGHLIGHTED:- THE APPELLANT HAS ALSO ASSAILED THE ADDITION MAD E ON ACCOUNT OF INTERNATIONAL TRANSACTIONS (RS.1,52,07,206/- TOWARDS PROFESSIONAL CONSULTANCY AND RS.1,40,56,800/- TOWARDS MANAGEMENT FEE FOR SUPPORT SERVICES), BY DE TERMINING NIL VALUE S THE ALP. THE TPO FOUND THAT THESE SERVICES PROVIDED BY THE A E ARE VERY GENERAL IN NATURE AND SUCH A SUPPORT IS EXPECTED FROM AE EVEN WITHOUT PAY MENT OF ANY SUCH CHARGE. THE ASSESSEE ARGUED THAT THE AUTHORITIES BELOW ARE STAT ED TO HAVE ACTED BEYOND THEIR JURISDICTION IN TOUCHING UPON THE COMMERCIAL EXPEDI ENCY OF THE TRANSACTIONS. THE DRP, HOWEVER, HAS FOUND THAT EMAILS BROUGHT ON RECORD ME RELY JUSTIFY PRESENCE OF MS. RITA RICKEN AS TEAM LEADER OF SALES LOGISTICS, WHICH IS ONLY AN EFFORT TO JUSTIFY HER PRESENCE. SHE IN FACT IS SAFEGUARDING GROUP INTEREST/SHAREHOL DER INTEREST. THE TPO HAS ANALYSED EACH SERVICE AND BENEFIT RECEIVED BY ASSESSEE IN DE TAIL. NO COST ALLOCATION KEY HAS BEEN FURNISHED TO THE DRP EITHER WHICH CONFIRMED THE ADD ITION MADE FOR BOTH SUCH SERVICES CLAIMED BY THE ASSESSEE . 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION OF THE SAME AND IN THE L IGHT OF THE SUBMISSIONS ADVANCED BY THE PARTIES BEFORE THE BENCH AND CONSIDERING THE LEGAL PRINCIPLES LAID DOWN IN THE ORDERS AND DECISIONS RELIED UPON, WE WOULD FIRST FO R THE SAKE OF COMPLETENESS RE- ADDRESS THE FACTS QUA THE ISSUE BRIEFLY. THE RECOR D SHOWS THAT THE ISSUE BEFORE THE TPO AND THE DRP AS FAR AS THE ASSESSEE IS CONCERNED HAS BEEN CONTESTED IN THE LIGHT OF THE STAND TAKEN THAT TNMM WAS THE MOST APPROPRIA TE METHOD. IT IS ALSO SEEN THAT ASSAILING THE TPOS STAND BEFORE THE DRP THAT CUP I S THE MOST APPROPRIATE METHOD THE ASSESSEE DID LEAD EVIDENCE AND ARGUMENTS AND DO CUMENTATION IN ORDER TO JUSTIFY IT A NO.-104/DEL/2012 24 THAT NO ADJUSTMENT WAS REQUIRED TO BE DONE EVEN IF CUP IS TAKEN AS THE MOST APPROPRIATE METHOD. IT IS SEEN THAT THE RELEVANT D OCUMENTATION AGREEMENTS ETC. FOR DECIDING THE ISSUE HAVE NOT BEEN CONSIDERED EITHER BY THE TPO OR BY THE DRP AS THE FOCUS OF THE DEPARTMENTS ATTENTION NECESSARILY HAS REMAINED ASSAILING THE ASSESSEES STAND THAT TNMM IS THE MOST APPROPRIATE METHOD. TH E DEPARTMENT JUSTIFYING ITS STAND AND ASSAILING THE STAND OF THE ASSESSEE HAS A CCORDINGLY REMAINED FOCUSED ON THE POSITION THAT CUP IS THE MOST APPROPRIATE METHO D. IT IS A MATTER OF RECORD AS HAS BEEN ELABORATED IN THE EARLIER PART OF THE ORDER TH AT THE STAND WAS GIVEN UP ON BEHALF OF THE ASSESSEE BY THE LD. AR WHO HAS CANDIDLY STAT ED THAT CUP IS THE MOST APPROPRIATE METHOD AND THE ASSESSEE IN THIS BACKGRO UND WOULD WANT TO RELYING ON LEGAL PRECEDENT REQUEST THAT SPECIFIC FACTS QUA THE ASSESSEE HOLDING CUP AS THE MOST APPROPRIATE METHOD BE CONSIDERED. IT IS BORNE OUT FOR RECORD THAT RELEVANT DOCUMENTATION, AGREEMENTS, CONTRACTS, ARRANGEMENTS, INVOICES QUA THE CLAIM HAVE NOT BEEN CONSIDERED. ACCORDINGLY IN THE LIGHT OF T HE STAND OF THE ASSESSEE WHO NOW ACCEPTS THAT CUP IS THE MOST APPROPRIATE METHOD, WE ARE OF THE VIEW THAT IN THESE PECULIAR FACTS AND CIRCUMSTANCES IT WOULD BE APPROP RIATE TO RESTORE THE ISSUE BACK TO THE FILE OF THE TPO. 7.1 ADDRESSING THE ARGUMENTS ADVANCED BEFORE US ON THE LEGAL ISSUE WE HOLD THAT ON CONSIDERING THE PRECEDENT LAID DOWN BY THE JURIS DICTIONAL HIGH COURT IN THE CASE OF EKL APPLIANCES (CITED SUPRA)THAT THE DEPARTMENTA L STAND CANNOT BE APPROVED WHEN THE ISSUE IS CONSIDERED FROM THE ASPECT OF APP ROPRIATENESS OF THE EXPENDITURING. SIMILARLY, THE NEED AND NECESSITY FOR THE ASSESSEE TO INCUR THE EXPENDITURING; ALSO CANNOT BE HELD TO BE AN ACCEPTABLE CRITERIA. NOR C AN THE NECESSITY OF THE EXPENDITURE FROM THE BENEFIT ACCRUED TO THE ASSESSEE POINT OF V IEW HAS BEEN APPROVED AS A RELEVANT CRITERIA BY THE JURISDICTIONAL HIGH COURT. IT WOULD ALSO BE APPROPRIATE TO CONSIDER THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF KNORR BREMSE WHICH HAS BEEN HEAVILY RELIED UPON BY THE REVENUE. THE LD. C IT DR IT IS SEEN HAS MADE A IT A NO.-104/DEL/2012 25 VALIANT EFFORT TO SHOW THAT ON FACTS RELYING ON THE AFORE-MENTIONED ORDER. THE REVENUE WAS JUSTIFIED TO REJECT THE CLAIM. A PERUSA L OF THE SAID ORDER SHOWS THAT THE FINDING GIVEN BY THE CO-ORDINATE BENCH, IS BASED ON A PECULIAR SET OF FACTS NAMELY THAT THE ASSESSEE IN THE FACTS OF THAT CASE CONSIST ENTLY FAILED TO PROVIDE A COST ALLOCATION KEY NOT ONLY BEFORE THE TPO/DRP BUT EVE N BEFORE THE TRIBUNAL. WE ARE OF THE VIEW THAT THE FINDING ARRIVED AT IN THESE PE CULIAR FACTS DOES NOT DETRACT FROM THE LEGAL POSITION AS CONSIDERED BY THE JURISDICTIO NAL HIGH COURT IN THE CASE OF EKL APPLIANCES. IT MAY BE RELEVANT TO KEEP IN MIND THE FACT THAT BEFORE THE HONBLE HIGH COURT THE ISSUE PERTAINED TO DIRECT EXPENSES WHICH ADMITTEDLY ARE EASIER TO DEMONSTRATE AND VERIFY. IN THE FACTS OF THE PRESEN T CASE THE EXPENSES ARE NOT DIRECT EXPENSES HOWEVER THE ORDER OF THE CO-ORDINATE BENCH IN DRESSER RANDS HAS CONSIDERED INDIRECT EXPENSES WHICH POSITION APPAREN TLY HAS NOT BEEN UPSET BY ANY HIGHER FORUM. ACCORDINGLY, IN THESE PECULIAR FACTS AND CIRCUMSTANCES IN THE ABSENCE OF ANY SERIOUS DISCUSSION ON FACTS SPECIFICALLY ADD RESSING THE DETAILED DOCUMENTATION PLACED ON RECORD BY THE ASSESSEE, WE DEEM IT APPROP RIATE TO RESTORE THE ISSUE BACK TO THE TPO SETTING ASIDE THE IMPUGNED ORDER WITH THE D IRECTION THAT THE TPO SHALL ADJUDICATE THE ISSUE AFRESH BY WAY OF A SPEAKING OR DER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEI NG HEARD. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH OF JANUARY 2014. SD/- SD/- (J.S.REDDY) (D IVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED:- 10/01/2014 *AMIT KUMAR/R.NAHEED * IT A NO.-104/DEL/2012 26 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI