HENKEL CHEMBOND SURFACE TECHNOLOGIES LTD, NAVI MUMBAI V. DCIT CIR 7(1)(2), MUMBAI

ITA 1049/MUM/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1483 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN ANSARI
• Keywords: Gift; Transfer pricing; Search and seizure; International transaction; Revenue expenditure; Capital expenditure
• Section: 92C; 143(3); 37(1); 143(1); 143(2); 13; 37

Judgement Text

ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 1 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.1049/MUM/2016 (ASSESSMENT YEARS: 2011 - 12) HENKEL CHEMBOND SURFACE TECHNOLOGIES LIMITED (NOW KNOWN AS HENKEL SURFACE TECHNOLOGIES PVT.LTD.) B - 23, TODI INDUSTRIAL ESTATE, 2 ND FLOOR, SUN MILL COMPOUND, LOWER PAREL, MUMBAI 400 013 VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(2), ROOM NO. 130, 1 ST FLOOR, AAYAKAR BHAVAN , M.K. ROAD, MUMBAI 400 020 PAN AAACH7282G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MADHUR AGRAWAL, A.R RESPONDENT BY: SHRI AKHTAR HUSSAIN ANSARI , D.R DATE OF HEARING: 23 .10.2020 DATE OF PRONOUNCEMENT: 09 .12 .2020 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE COMPANY IS DIRECTED AGAINST THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 31.12.2015 FOR A.Y. 2011 - 12. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUND S OF APPEAL BEFORE US: GROUNDS RELATING TO TRANSFER PRICING ADJUSTMENT 1. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE TPO/AO HAS ERRED IN MAKING AN 100% ADJUSTMENT OF THE ENTIRE EXPENDITURE ON ACCOUNT OF REGIONAL MANAGEMENT CHARGES (RMC) THEREBY COMPUTING A TOTAL TRANSFER PRICING ADJUSTMENT OF RS.2,61,63,288 / - ON THE GROUND THAT THE CLAIM OF SERVICES AVAILED DOES ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 2 NOT GET PROVED WITHOUT ISSUING ANY SPECIFIC SHOW CAUSE NOTICE TO THIS EFFECT. 2. LOOKING TO THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE TPOIAO HAS ERRED I N MAKING AN 100% ADJUSTMENT OF THE EXPENDITURE ON ACCOUNT OF REGIONAL MANAGEMENT CHARGES ON THE GROUND THAT THE CLAIM OF SERVICES AVAILED DOES NOT GET PROVED IN SPITE OF EVIDENCE ESTABLISHING THE FACT OF RECEIPT OF SERVICES BY THE ASSESSEE. 3. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE TPO HAS ERRED IN DETERMINING THE ARMS LENGTH PRICE AT RS. NIL IN RESPECT OF THE EXPENDITURE ON ACCOUNT OF REGIONAL MANAGEMENT CHARGES ON THE GROUND THAT THE CLAIM OF SERVICES AVAILED DOES NOT GET PROVED WHICH ACTION IS WITHOUT JURISDICTION AND BEYOND THE DOMAIN OF THE TPO AND THE CORRECT JURISDICTION IS WITH THE AO. 4. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE T PO/AO HAS ERRED IN DETERMINING THE ARMS LENGTH PRICE AT RS. NIL IN RESPECT OF THE EXPENDITURE ON ACCOUNT OF REGIONAL MANAGEMENT CHARGES BY ERRONEOUSLY DISREGARDING THE TRANSFER PRICING ANALYSIS CARRIED OUT BY THE ASSESSEE IN COMPLIANCE WITH THE PROVISIONS OF SECTION 92C(1) ONLY AS FAR AS THE SAME IS CONCERNED WITH RMC WHILE ACCEPTING THE VERY SAME ANALYSIS FOR OTHER INTERNATIONAL TRANSACTIONS SUCH AS PURCHASES. ETC. 5. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER (AO) H AS ERRED IN REFERRING THE COMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO THE ASSESSEE S INTERNATIONAL TRANSACTIONS TO THE TRANSFER PRICING OFFICER (TPO) WITHOUT SPECIFYING THE REASONS AS TO HOW HE CONSIDERS IT NECESSARY OR EXPEDIENT TO DO SO. 6. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER (AO) HAS ERRED IN REFERRING THE MATTER TO THE TPO WITHOUT SPECIFYING THE REASONS BY WHICH CONDITIONS SPECIFIED UNDER SECTION 92C(3) OF THE I. I. ACT 1961 GET SATISFIED. 7. L OOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE TPO HAS ERRED IN DETERMINING THE ARMS LENGTH PRICE AT RS. NIL BY PRESUMABLY TAKING RECOURSE TO THE PROVISIONS OF SECTION 92C(1)(F) WHICH ARE NOT APPLICABLE FOR AY 2011 - 12. 8. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE TPO HAS ERRED IN DETERMINING THE ARMS LENGTH PRICE AT RS. NIL IN SPITE OF THE FACT THAT NONE OF THE CONDITIONS SET OUT IN SECTION 92C(3) OF THE ACT ARE SATISFIED AND THAT THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS O F SECTION 92C(1) AND 92C (2) OF THE ACT. GROUNDS RELATING TO DOMESTIC TAX : 9. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE A.O HAS ERRED IN MAKING DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF PROFESSIONAL CHARGES RS.3,62,693/ - PAID TO DESAI & DEWANJI ON THE GROUND THAT DETAILS THEREOF WERE NOT PROVIDED AND IT WAS NOT SUBSTANTIATED THAT THE SAME WAS FOR THE PURPOSE OF BUSINESS . ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 3 10. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE AO HAS ERRED IN MAKING DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF SALES PROMOTION EXPENSES RS.19,68,708/ PAID TO COX & KINGS LTD. ON THE GROUND THAT DET AILS THEREOF WERE NOT PROVIDED AND IT WAS NOT SUBSTANTIATED THAT THE SAME WAS FOR THE PURPOSE OF BUSINESS. 11. LOOKING TO THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DRP HAS ERRED IN DIRECTING AND THE AO HAS ERRED IN MAKING DISALLOWANCE OF EXPENDITURE AGGREGATING RS.1,84,946/ - DEBITED TO SALES PROMOTION EXPENSES INCURRED ON ACCOUNT OF PURCHASE OF GOLD COIN ETC. AND DISTRIBUTED AS GIFTS ON THE GROUND THAT DETAILS AS TO WHOM THE GIFTS WERE GIVEN WAS NOT PROVIDED AND THAT IT WAS NOT POSSIBLE TO VERIFY THE GENUINENESS OF THE EXPENDITURE. 12. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND, TO WITHDRAW, TO DELETE THE ABOVE GROUNDS OF APPEAL OR ANY ONE OF THEM AT THE TIME OF HEARING. 2. BRI EFLY STATED, THE ASSESSEE COMPANY WHICH IS PRIMARILY ENGAGED IN THE BUSINESS OF MANUFACTURING/TRADING OF CHEMICALS IS A JOINT VENTURE COMPANY WHEREIN 51% OF THE EQUITY IS HELD BY HENKEL AG & CO. KGAA , GERMANY AND 49% IS HELD BY CHEMBOND CHEMICALS LTD., IND IA. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 29.11.2011 , DECLARING ITS TOTAL INCOME AT RS.17,52,45,539/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE O F THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. OBSERVING, THAT THE ASSESSEE HAD CARRIED OUT INTERNATIONAL TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION , THE A.O IN THE COURSE OF THE ASSESSMENT PROCEEDINGS MADE A REFERENCE UNDER SEC. 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (FOR SHORT TPO) FOR DETERMINING THE ARMS LENGTH PRICE (FOR SHORT ALP) OF THE SAID INTERNATIONAL TRANSACTIONS. ON THE BASIS OF HIS ORDER PASSED UNDER SEC. 92CA(3), DATED 19 .01.20 15 THE TPO INTER ALIA DETERMINED THE ALP OF THE R EGIONAL M ANAGEMENT S ERVICES RECEIVED BY THE ASSESSEE FROM ITS AE , VIZ. HENKEL AG & COMPANY KGAA AT RS.NIL , AS AGAINST AN AMOUNT OF RS. 2,61,63,288/ - SHOWN BY THE ASSESSEE. ACCORDINGLY, THE TPO VIDE HIS ORDER PASSED UNDER SEC. 92CA(3), DATED 19.01.2015 SUGGESTED AN ADJUSTMENT OF RS.2,61,6 3 ,288/ - . ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 4 3. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 19.01.2015, THEREIN PASSED A DRAFT ASSESSMENT ORDER UNDER SEC. 143(3) R.W.S 144 C(1), DATED 27.02.2015 WHEREIN HE PROPOSED THE FOLLOWING ADDITIONS TO THE RETURNED INCOME OF THE ASSESSEE: SR. NO. PARTICULARS AMOUNT 1. TP ADJUSTMENT (BY DETERMINING THE ALP OF RMC SERVICE AT RS.NIL RS.2,61,63,288/ - 2. DISALLOWANCE OF PROFESSIONAL CHARGES CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT RS. 3,62,693/ - 3. DISALLOWANCE OF SALES PROMOTION E XPENSES CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID TO M/S COX & KINGS LTD. RS. 19,68,708/ - 4. DISALLOWAN CE OF SALES PROMOTION EXPENSES. RS. 1,84,946/ - ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE A.O PROPOSED TO ASSESS THE INCOME OF THE ASSESSEE COMPANY AT RS. 20,39,25,170/ - . 4. THE ASSESSEE OBJECTED TO THE ADDITIONS/ADJUSTMENTS AS WERE PROPOSED BY THE A.O VIDE HIS ORDER PASSED UNDER SEC. 143(3) R.W.S 144C(1), DATED 27.02.2015 BEFORE THE DISPUTE RESOLUTION PANEL - 1, MUMBAI (FOR SHORT DRP). THE DRP VIDE ITS ORDER PASSED UNDER SEC.144C(5), DATED 14.11.2015 REJECTED THE OBJECTIONS FILED BY THE ASSESSE E. 5. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE DRP UNDER SEC. 144C(5 ), DATED 14.11.2015 THEREIN PASSED THE FINAL ASSESSMENT ORDER UNDER SEC. 143(3) R.W.S. 144C(1 3 ) OF THE ACT, DAT ED 31.12.2015 AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 20,39,25,170/ - . 6. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(1 3 ), DATED 31.12.2015 HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE TOOK US THR OUGH THE ISSUE S ON THE BASIS OF WHICH THE ASSESSMENT ORDER HAD BEEN ASSAILED BEFORE US. IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO HAD EXCEEDED HIS JURISDICTION AND WORKED OUT THE ALP OF THE REGIONAL MANAGEMENT ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 5 SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE, VIZ. HENKEL AG & COMPANY KGAA AT RS.NIL , AS AGAINST THAT SHOWN BY THE ASSESSEE AT RS.2,61,63,288/ - . IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO HAD INTER ALIA ARRIVED AT THE ALP OF THE REGIONAL MANAGEMENT SERVICES AT RS.NIL ON THE GROUND THAT THE ASSE SSEE HAD FAILED TO PROVIDE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAME. REBUTTING THE AFORESAID OBSERVATION OF THE TPO/DRP, IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE IN ORDER TO SUBSTANTIATE THE FACTUM OF HAVING RECEIVED REGIONAL MANAGEMENT SER VICES FROM ITS AE VIZ. HENKEL AG & CO. KGAA HAD PLACED ON RECORD SUPPORTING DOCUMENTARY EVIDENCE, VIZ. COPY OF THE REGIONAL SERVICE AGREEMENT DATED 23 .11.2010 EXECUTED BETWEEN THE ASSESSEE AND ITS AE HENKEL AG & CO. KGAA, COMPLETE DETAILS OF THE R EGIONAL M ANAGEMENT C HARGES, COPIES OF THE DEBIT NOTES RAISED ON THE ASSESSEE BY ITS AE , DESCRIPTION OF THE SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE, INFORMATION IN RELATION TO VISITS BY THE OVERSE A S EMPLOYEES FOR RENDER ING THE SERVICES, AND ALSO THE BACK UP DO CUMENT S SUBSTANTIAT ING THE BENEFITS WHICH WERE RECEIVED BY THE ASSESSEE FROM RENDERING OF THE AFORESAID SERVICES BY ITS AE. I T WAS VEHEMENTLY SUBMITTED BY THE LD. A.R THAT THE LOWER AUTHORITIES HAD ERRED IN OBSERVING THAT THE ASSESSEE HAD FAILED TO PLACE O N RECORD DOCUMENTARY EVIDENCE IN SUPPORT OF THE REGIONAL MANAGEMENT SERVICES WHICH WERE PROVIDED TO IT BY ITS AE. IN ORDER TO DRIVE HOME HIS AFORESAID CLAIM THE LD. A.R TOOK US THROUGH THE RELEVANT PAGES OF THE ASSESSEES PAPER BOOK. APART FROM THAT, IT WAS AVERRED BY THE LD. A.R THAT THE TPO WHILE ARRIVING AT THE ALP OF THE REGIONAL MANAGEMENT SERVICES AT RS.NIL, FOR THE REASON, THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE RENDERING OF THE AFORESAID SERVICES BY ITS AE, VIZ. HENKEL AG & CO. KGAA HAD EXCEEDED HIS JURISDICTION AND HAD WRONGLY ASSUMED THE POWERS WHICH FALL IN THE EXCLUSIVE DOMAIN OF THE A.O . IN FURTHERANCE OF HIS AFORESAID CLAIM, IT WAS SUBMITTED BY THE LD. A.R THAT ON A REFERENCE MADE TO THE TPO UNDER SEC. 92CA(1) THE LAT TERS JURISDICTION IS LIMITED TO DETERMINING OF THE ALP OF THE INTERNATIONAL TRANSACTIONS AND NOT FOR DETERMINING AS TO WHETHER THE DOCUMENTARY EVIDENCE SUPPORTING SUCH INTERNATIONAL TRANSACTIONS WERE ADEQUATE OR NOT. IT WAS AVERRED BY THE LD. A.R ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 6 THAT THE AFORESAID JURISDICTION TO DECIDE THE ADEQUACY OR SUFFICIENCY OF THE DOCUMENTARY EVIDENCE FOR THE PURPOSE OF ALLOWABILITY OF AN EXPENDITURE UNDER SEC. 37(1) OF THE ACT IS VESTED WITH THE A.O AND NOT WITH THE TPO. IN THE BACKDROP OF HIS AFORESAID CLAIM, IT WAS AVERRED BY THE LD. A.R THAT THE TPO IN THE PRESENT CASE BY DWELLING ON THE ISSUE PERTAINING TO SUFFICIENCY OF THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE REGIONAL MANAGEMENT SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE, VIZ. HENKEL AG & COMPANY KGAA , H AD THEREIN ASSUMED THE JURISDICTION WHICH WAS EXCLUSIVELY VESTED WITH THE A.O UNDER SEC. 37 OF THE ACT. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE TPO BY DETERMINING THE ALP OF THE REGIONAL MANAGEMENT SERVICES AT RS. NIL WITHOUT FOLLOWING ANY ONE OF THE PRESCRIBED METHODS CONTEMPLATED IN LAW HAD CLEARLY EXCEEDED HIS JURISDICTION . IT WAS AVERRED BY THE LD. A.R THAT THE TPO/DRP HAD ERRED IN OBSERVING THAT THE ASSESSEE H AD FAILED TO ESTABLISH RENDERING OF REGIONAL MANAGEMENT SERVICES BY ITS AE VIZ. HENKEL AG & COMPANY KGAA IN LIEU WHEREOF AN AMOUNT OF RS.2,61,63,288/ - WAS THEREIN PAID TO THE LATTER. IN ORDER TO BUTTRESS HIS CLAIM THAT THE OBSERVATIONS OF THE TPO/DRP WERE CONTRARY TO THE FACTS BORNE FROM THE RECORDS THE LD. A.R TOOK US THROUGH TH E RELEVANT PAGES OF THE ASSESSEES PAPER BOOK. FURTHER, THE LD. A.R ASSAILED THE CORPORATE ADDITIONS/DISALLOWANCES MADE BY THE A.O WHILE FRAMING THE ASSESSMENT , VIZ. (I) DISALLOWANCE OF PROFESSIONAL CHARGES; AND (II) DISALLOWANCE OF SALES PROMOTION EXPENSE S. IT WAS SUBMITTED BY THE LD. A.R THAT THOUGH THE ASSESSEE HAD PLACED ON RECORD THE REQUISITE SUPPORTING DOCUMENTARY EVIDENCE, H OWEVER, THE LOWER AUTHORITIES L O SING SIGHT OF THE SAME HAD THEREIN PROCEEDED WITH AND DISALLOWED THE ASSESSEES CLAIM FOR DEDUC TION OF THE AFOREMENTIONED EXPENSES. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD FAILE D TO PLACE ON RECORD DOCUMENT S WHICH WOUL D EVIDENCE REND ERING OF REGIONAL MANAGEMENT SERVICES BY THE AE, THEREFORE, THE A.O/TPO HAD RIGHTLY WORKED OUT THE ARMS LENGTH PRICE (FOR SHORT ALP) OF THE SAID SERVICES AT RS.NIL. AS REGARDS THE ASSESSEES CLAIM FOR DEDUCTION OF EXPENSES ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 7 VIZ. (I) PROFES SIONAL CHARGES: RS.3,62,693/ - ; (II) SALES PROMOTION EXPENSES: RS.19,68,708/ - ; AND (III) EXPENSES INCURRED TOWARDS PROVISION OF GIFTS TO CLIENTS : RS.1,84,946/ - , IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD FAILED TO PROVE THAT THE SAID EXPENSES WERE INCURRED IN THE COURSE OF ITS BUSINESS, THEREFORE, THE A.O/DRP HAD RIGHTLY DISALLOWED THE SAME. I N THE BACKDROP OF HIS AFORESAID SUBMISSION S IT WAS AVERRED BY THE LD. D.R THAT THE APPEAL FILED BY THE ASSESSEE BEING DEVOID AND BEREFT OF ANY MERIT WAS L IABLE TO BE DISMISSED. 8. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD AS WELL AS THE JUDICIAL PRONOUNCEMENTS PRESSED INTO SERVICE BY THEM TO DRIVE HOME THEIR RESPECTIVE CONTENTIONS. AS OBSERVED BY US HEREINABOVE , THE A.O WHILE FRAMING THE ASSESSMENT HAD MADE A REFERENCE UNDER SEC. 92CA(1) TO THE TPO FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION . THEREAFTER, THE TPO VIDE HIS ORDER PASSED UNDER SEC. 92CA(3), DATED 19.01.2015 AFTER DELIBERATING ON THE MULTIPLE SERVICES CLAIMED BY THE ASSESSEE TO HAVE BEEN RECEIVED FROM ITS AE , VIZ. HENKEL AG & COMPANY KGAA, HAD OBSERVED , THAT DE HORS SUPPORTING DOCUMENTARY EVIDENCE THE ASSESSEES CLAIM OF HAVING RECEIVED R EGIONAL M ANAGEMENT S ERVICES FROM ITS AE COULD NOT BE ACCEPTED. ACCORDINGLY, THE TPO BACKED BY HIS AFORESAID OBSERVATION HAD DETERMINED THE ALP OF THE REGIONAL MANAGEMENT SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE AT NIL , AS AGAINST THAT CLAIMED BY THE ASSESSEE AT RS. 2,61,63,288/ - , OBSERVING AS UNDER: NATURE OF SERVICES AS PER SUBMISSION LETTER DATED 13.12.2014 AMOUNT PAID TO AES (AS SUBMITTED BY THE ASSESSEE VIDE SUBMISSION LETTER DATED 13.1 2.2014 DOCUMENTARY EVIDENCE SUBMITTED BY ASSESSEE (AS SUBMITTED BY ASSESSEE VIDE LETTER DATED 11.12.2014 & 31.12.2014) TPOS COMMENTS REGIONAL PLANNING & GUIDING SERVICES ASSESSEE HAS FAILED TO PROVIDE THE AMOUNT PAID TO AE FOR AVAILING THIS SERVICE COPY OF REGIONAL SERVICE AGREEMENT DATED 1.1.2010 DEBIT NOTES RAISED BY AE THE ASSESSEE HAS NO T PRODUCED ANY DOCUMENTARY EVIDENCES IN SUPPORT OF ACTUAL SERVICES RECEIVED. BY MERE SUBMISSION OF ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 8 AGREEMENT COPY AND DEBIT NOTES, THE CLAIM OF SERVICE AVAILED DOES NO T PROVED. MARKETING ASSESSEE HAS FAILED TO PROVIDE THE AMOUNT PAID TO AE FOR AVAILING THIS SERVICE - COPY OF REGIONAL SERVICE AGREEMENT DATED 1.01.2010 - DEBIT NOTES RAISED BY AE. - EMAIL CORRESPONDENCE (ANNEXURE 6E OF SUBMITTED DATED 31.12.2014) THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCES IN SUPPORT OF ACTUAL SERVICES RECEIVED. BY MERE SUBMISSION OF AGREEMENT COPY, EMAIL CORRESPONDENCE AND DEBIT NOTES, THE CLAIM OF SERVICE AVAILED DOES NOT PROVED. SUPPLY CHAIN & OPERATIONAL SUPPORT SERVIC ES. ASSESSEE HAS FAILED TO PROVIDE THE AMOUNT PAID TO AE FOR AVAILING THIS SERVICE. NO SPECIFIC DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE. ON PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE IT IS OBSERVED THAT ASSESSEE HAS MERELY ENLISTED VARIOUS SERVICES TO BE AVAILED. HOWEVER, ASSESSEE HAS NOT SUBMITTED A SINGLE DOCUMENT IN SUPPORT OF SERVICE S AVAILED FROM AE EXCEPT AGREEMENT COPY AND DEBIT NOTE. HUMAN RESOURCES ASSESSEE HAS FAILED TO PROVIDE THE AMOUNT PAID TO AE FOR AVAILING THIS SERVICE - COP IES OF EMAIL CORRESPONDENCE (ANNEXURE 3A,3B,3C OF SUBMITTED DATED 31.12.2014) ON PERUSAL OF EMAIL DETAILS IT IS OBSERVED THAT MAILS ARE GENERAL IN NATURE SUCH AS PROVIDING GUIDELINES AND INSTRUCTIONS HOW TO START ONLINE PO RTAL FOR RECRUITMENT, ACCESS TO PE RFORMANCE MANAGEMENT FORMS ETC. THESE DOCUMENTS NOWHERE PROVE THAT ASSESSEE HAS ACTUALLY RECEIVED ANY SERVICES. FURTHER, THE AFORESAID VIEW OF THE TPO WAS UPHELD BY THE DRP VIDE ITS ORDER PASSED UNDER SEC.144C(5), DATED 14.11.2015. REBUTTING THE AFORESA ID OBSERVATIONS OF THE TPO/DRP IT HAS BEEN THE CLAIM OF THE ASSESSEE THAT SUPPORTING DOCUMENTARY EVIDENCE , VIZ. COPY OF THE REGIONAL SERVICE AGREEMENT, DATED 23.11.2010 EXECUTED BETWEEN THE ASSESSEE AND ITS AE VIZ. HENKEL AG & CO. KGAA, COPIES OF DEBIT NOT ES RAISED ON THE ASSESSEE BY ITS AE FOR THE REGIONAL MANAGEMENT SERVICES PROVIDED , AND OTHER DOCUMENTARY ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 9 EVIDENCE ETC. IN SUPPORT OF RECEIPT OF R EGIONAL M ANAGEMENT S ERVICES BY THE ASSESSEE FROM ITS AE , VIZ. HENKEL AG & COMPANY KGAA WERE DULY PLACED ON RECORD BEFORE THE LOWER AUTHORITIES. ACCORDINGLY, IT HAS BEEN THE CLAIM OF THE ASSESSEE THAT THE VIEW TAKEN BY THE LOWER AUTHORITIES THAT THE ASSESSEE HAD FAILED TO ESTABLISH RENDERING OF THE REGIONAL MANAGEMENT SERVICES BY ITS AE , VIZ . HENKEL AG & COMPANY KGAA ON THE BASIS OF SUPPORTING DOCUMENTARY EVIDENCE WAS ABSOLUTELY INCORRECT AND CONTRARY TO THE MATERIAL AVAILABLE ON RECORD. APART FROM THAT, WE FIND , THAT THE ASSESSEE HAD ALSO ASSAILED THE DETERMINATION OF THE ALP OF THE REGIONAL MANAGEMENT SERVICES BY THE TPO AT NIL WITHOUT FOLLOWING ANY ONE OF THE PRESCRIBED METHODS CONTEMPLATED IN SEC.92C(1) OF THE ACT . IN THE BACKDROP OF THE AFORESAID FACTS , THE ASSESSEE HAS ASSAILED THE DETERMINATION OF THE ALP OF THE R EGIONAL M ANAGEMENT S ERV ICES BY THE AO/TPO AT RS. NIL PRIMARILY ON TWO GROUNDS VIZ. (I) THAT THE AO/TPO HAD ERRONEOUSLY OBSERVED THAT THE ASSESSEE HAD FAILED TO PLACE ON RECORD SUPPORTING DOCUMENTARY EVIDENCE WHICH WOULD ESTABLISH RECEIPT OF R EGIONAL M ANAGEMENT S ERVICES BY THE AS SESSEE FROM ITS AE; AND (II) THAT THE AO/TPO HAD ERRED IN LAW IN DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF RENDERING OF R EGIONAL M ANAGEMENT S ERVICES TO THE ASSESSEE BY ITS AE AT NIL I.E WITHOUT FOLLOWING ANY ONE OF THE PRESCRIBED METHODS CON TEMPLATED IN SEC.92C(1) OF THE ACT . 9. WE SHALL FIRST DEAL WITH THE ASSESSEES CLAIM THAT SUPPORT ING DOCUMENTARY EVIDENCE CLEARLY ESTABLISHING RENDERING OF REGIONAL MANAGEMENT SERVICES BY THE AE WAS DULY PLACED ON RECORD IN THE COURSE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES , VIZ. (I) COPY OF R EGIONAL M ANAGEMENT S ERVICES AGREEMENT , DATED 23.11.2010 EXECUTED BETWEEN THE ASSESSEE AND ITS AE I.E HENKEL AG & COMPANY KGAA ; (II) DETAILS OF R EGIONA L M ANAGEMENT C HARGES; AND (III) . COPIES OF DEBIT NOTES RAISED ON THE ASSESSEE BY ITS AE TOWARDS REGIONAL MANAGEMENT CHARGES. APART FROM THAT, WE FIND THAT THE ASSESSEE VIDE ITS LETTER DATED 31.12.2014 HAD SUBMITTED WITH THE LOWER AUTHORITIES THE STATEME NT OF COST BENEFIT ANALYSIS OF REGIONAL MANAGEMENT COST FOR THE YEAR UNDER CONSIDERATION ALONG WITH DETAILS VIZ. (I) REQUIREMENT TO AVAIL THE ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 10 REGIONAL MANAGEMENT SERVICES; (II) DESCRIPTION OF SERVICES RECEIVED FROM THE AE; (III) INFORMATION IN RELATION T O THE VISITS BY THE OVERSEAS EMPLOYEES FOR RENDERING THE SERVICES; AND (IV) BACK UP DOCUMENTATION SUBSTANTIATING THE BENEFITS RECEIVED BY THE ASSESSEE IN LIEU OF THE SERVICES PROVIDED BY ITS AE. ON A PERUSAL OF THE REGIONAL MANAGEMENT AGREEMENT , DATED 23 .11.2010 EXECUTED BETWEEN THE ASSESSEE AND ITS AE , VIZ. HENKEL AG & COMPANY KGAA , WE FIND, THAT THE DETAILS OF VARIOUS SERVICES RECEIVED BY THE ASSESSEE COMPANY ARE THEREIN DULY SPECIFIED. IT HAS BEEN THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE REGIONAL MANAGEMENT SERVICES PROVIDED BY ITS AE , VIZ. HENKEL AG & COMPANY KGAA HAD ASSISTED IT IN ITS DECISION MAKING AND ADOPTION OF THE BEST POLICIES AND PRACTISES WHICH HAD THEREIN RESULTED IN A BETTER MARKET POSITION AND ULTIMATE INCREASE IN ITS SALES. AS OBSERVED BY US HEREINABOVE, THE A.O/TPO HAD DETERMINED THE ALP OF THE REGIONAL MANAGEMENT S ERVICES RECEIVED BY THE ASSESSEE FROM ITS AE AT RS.NIL, FOR THE REASON, THAT NO MATERIAL WAS PLACED ON RECORD BY THE ASSESSEE WHICH WOULD EVIDENCE AVAILING OF ANY SUCH SERVICES BY THE ASSESSEE FROM ITS AE. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AND ARE AFRAID THAT THE AFORESAID OBSERVATIONS OF THE LOWER AUTHORITIES DO NOT FIND FAVOUR WITH US. ON A PERUSAL OF THE REGIONAL SERVICES AGREEMENT , DATED 23.11.2010 EXECUTED BETWEEN THE ASSESSEE AND ITS AE, VIZ. HENKEL AG & COMPANY, KGAA, WE FIND THAT THE COMPLETE DETAILS OF THE R EGIONAL M ANAGEMENT S ERVICES TO BE RENDERED BY THE AE TO THE ASSESSEE ARE TH EREIN CLEARLY DESCRIBED AT LENGTH. FURTHER, THE ASSESSEE HAD IN THE COURSE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES PLACED ON RECORD THE COPIES OF THE DEBIT NOTES WHICH WERE RAISED ON IT BY ITS AE VIZ. HENKEL AG & COMPANY, KGAA FOR RENDERING OF TH E AFORESAID SERVICES. ALSO, COPIES OF THE VARIOUS E - MAIL CORRESPONDENCES BETWEEN THE ASSESSEE AND ITS AFORESAID AE SUPPORTING THE FACTUM OF RENDERING OF REGIONAL MANAGEMENT SERVICES BY THE AE TO THE ASSESSEE COMPANY WERE FILED IN THE COURSE OF THE PROCEEDI NGS BEFORE THE LOWER AUTHORITIES. IN FACT, THE ASSESSEE HAD ALSO PLACED ON RECORD THE COMPLETE DETAILS OF THE PAYMENT S MADE BY THE ASSESSEE TO ITS AE FOR PROVISION OF R EGIONAL M ANAGEMENT S ERVICES. COST ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 11 BENEFIT ANALYSIS OF REGIONAL MANAGEMENT COST (RMC) PER TAINING TO A RANGE OF REGIONAL SERVICES RENDERED BY THE AE WITHIN THE GROUP , VIZ.(I) REGIONAL PLANNING AND GUIDING SERVICES; (II) REGIONAL MARKETING SERVICES; (III) REGIONAL SUPPLY AND CHAIN OPERATIONAL SUPPORT SERVICES; AND (IV) REGIONAL SAFETY, HEALTH AN D ENVIRONMENT SUPPORT COMPLIANCE SERVICES, THEREIN EXPLAINING THE BENEFITS DERIVED BY THE ASSESSEE FROM THE SERVICES RENDERED BY THE AE WERE ALSO FILED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES I N ORDER TO DRIVE HOME ITS CLAIM OF HAVING RECEIVED THE AF ORESAID SERVICES ALONG WITH BENEFIT DERIVED THEREFROM. IN THE BACKDROP OF THE AFORESAID DOCUMENTARY EVIDENCE, WE ARE UNABLE TO COMPREHEND AS TO HOW THE AO/TPO HAD CONCLUDED THAT THE ASSESSEE HAD FAILED TO FURNISH THE REQUISITE DOCUMENTARY EVIDENCE WHICH WOULD SUBSTANTIATE RENDERING OF REGIONAL MANAGEMENT SERVICES BY THE AE , VIZ. HENKEL AG & COMPANY, KGAA TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERED VIEW , THE MATERIAL PLACED ON RECORD BY THE A SSESSEE DOES CONSTITUTE SUBSTANTIAL EVIDENCE WHICH CLEARLY ESTABLISHES THAT THE ASSESSEE HAD RECEIVED REGIONAL MANAGEMENT SERVICES FROM ITS AE , VIZ. HENKEL AG & COMPANY, KGAA . WE FIND THAT THE ASSESSEE HAD ENTERED INTO THE REGIONAL MANAGEMENT SERVICE AGRE EMENT WITH ITS AE , VIZ. HENKEL AG & COMPANY, KGAA PRIMARILY TO BENEFIT FROM THE SERVICES PROVIDED BY THE LATTER ON THE BASIS OF ITS EXPERIENCE D PERSONNEL WHO WERE POSSESSED OF RICH EXPERIENCE IN UNDERSTANDING THE PRACTICAL ASPECTS OF THE NATURE OF BUSINES S OF THE ASSESSEE ALONG WITH ITS SERVICE REQUIREMENT. FACT THAT THE SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE HAD VASTLY BENEFITTED IT CAN ALSO SAFELY BE GATHERED FROM THE COST BENEFIT ANALYSIS OF RMC AS WAS SUBMITTED BY THE ASSESSEE WITH THE AO/TPO. I N THE BACKDROP OF OUR AFORESAID DELIBERATIONS, WE ARE UNABLE TO CONCUR WITH THE OBSERVATION S OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD FAILED TO PLACE ON RECORD DOCUMENTARY EVIDENCE WHICH WOULD SUBSTANTIATE THE RENDERING OF REGIONAL MANAGEMENT SERVICE S BY ITS AE , VIZ. HENKEL AG & COMPANY, KGAA TO THE ASSESSEE COMPANY . WE ARE PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE LD. A.R THAT AS THE R EGIONAL M ANAGEMENT S ERVICES RECEIVED BY THE ASSESSEE FROM ITS AE ARE INTANGIBLE IN NATURE, THEREFORE, EVIDENCE IN ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 12 SU PPORT OF AVAILING OF SUCH SERVICES AND THE BENEFIT RECEIVED THEREFROM CAN ONLY BE DEMONSTRATED BY NARRATIONS, DESCRIPTIONS AND DOCUMENTARY EVIDENCE. AS OBSERVED BY US HEREINABOVE, THE ASSESSEE IN ORDER TO SUPPORT ITS CLAIM OF HAVING RECEIVED THE AFORESAID SERVICES HAD PLACED ON RECORD DOCUMENTARY EVIDENCE IN THE FORM OF E - MAILS, CORRESPONDENCES, REPORTS ETC, WHICH IN OUR CONSIDERED VIEW CLEARLY ESTABLISH RENDERING OF THE SAID SERVICES BY THE AE TO THE ASSESSEE. CONSIDERING THE FACT THAT THE AFORESAID SERVIC ES RENDERED BY THE AE TO THE ASS ESSEE ARE INTANGIBLE IN NATURE, WE ARE IN AGREEMENT WITH THE CLAIM OF THE LD. A.R THAT IT WOULD BE DIFFICULT TO PLACE ON RECORD CONCRETE EVIDENCE WHICH WOULD IRREFUTABLY PROVE TO THE HILT RENDERING OF SUCH SERVICES. IN FACT, A COORDINATE BENCH OF THE TRIBUNAL I.E ITAT, HYDERABAD IN THE CASE OF TNS INDIA PVT. LTD. VS. ACIT, ITA NO. 944/HYD/2007, HAD OBSERVED , THAT IN ORDER TO PROVE RENDERING OF ADVICE BY VARIOUS GROUP CENTRES TO THE GROUP C OMPANIES IN DAY TO DAY MANNER IT WOULD BE DIFFICULT TO PLACE ON RECORD CONCRETE EVIDENCE, BUT THEN, THE SAME CAN BE ESTABLISH ED AND PERCEIVED AFTER CONSIDERING THE WAY BUSINESS IS CONDUCTED. INTERESTINGLY , THE TRIBUNAL HAD COMPARED THE ADVISORY SERVICES RE NDERED BY THE ASSESSEE BEFORE THEM TO ITS GROUP COMPANIES WITH THE ROLE PLAYED BY AN ANAESTHESIOLOGIST WHILE ASSISTING A SURGEON IN AN OPERATION . IT WAS OBSERVED BY THE TRIBUNAL THAT JUST LIKE IN A CASE WHERE AN OPERATION IS PERFORMED BY A SURGEON THE SUTU RES AND SCARS THEREIN LEFT WOULD EVIDENCE THE ROLE OF THE SURGEON BUT THAT OF AN ANAESTHESIOLOGIST CANNOT BE SIMILARLY EVIDENCED ON THE BASIS OF SIMILARLY PLACED EVIDENCE . THE TRIBUNAL WHILE CONCLUDING AS HEREINABOVE HAD OBSERVED AS UNDER: EVEN THOUG H SOME CORRESPONDENCE WAS PLACED ON RECORD WITH REFERENCE TO THE ADVISE GIVEN TO ASSESSEE, PROVIDING A CONCRETE EVIDENCE WITH REFERENCE TO THE SERVICES IN THE NATURE OF SPECIFIC ACTIVITIES IS DIFFICULT, LIKE PROVING THE ROLE OF AN ANESTHESIAN IN AN OPERATI ON CONDUCTED BY A SURGEON. THERE MAY BE AN EVIDENCE OF OPERATION BEING PERFORMED BY THE DOCTOR IN THE FORM OF SUTURES OR SCARS ETC, WHICH CAN BE PROVED LATER BUT THE ROLE OF AN ANESTHESIAN BEFORE OPERATION AND AFTER GAINING CONSCIOUSNESS IS DIFFICULT TO PR OVE AS THAT IS NOT TANGIBLE IN NATURE. LIKEWISE, FOR THE ADVISE GIVEN BY VARIOUS GROUP CENTRES TO THE GROUP COMPANIES IN DAY - TO - DAY MANNER IS DIFFICULT TO PLACE ON RECORD BY WAY OF ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 13 CONCRETE EVIDENCE BUT THE WAY BUSINESS IS CONDUCTED, ONE CAN PERCEIVE THE SAME... ON THE BASIS OF OUR AFORESAID OBSERVATIONS, WE ARE OF A STRONG CONVICTION THAT THE MATERIAL PLACED ON RECORD BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF HAVING RECEIVED REGIONAL MANAGEMENT SERVICES FROM ITS AE , VIZ. HENKEL AG & COMPANY, KGAA THE REIN CLEARLY ESTABLISHES THE SAME. W E THUS ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW TAKEN BY THE AO/TPO THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM OF HAVING RECEIVED REGIONAL MANAGEMENT SERVICES FROM ITS AE DURING THE YEAR UNDE R CONSIDERATION. 10. APART FROM OUR AFORESAID OBSERVATIONS WHEREIN IT STANDS CLEARLY ESTABLISH ED THAT THE ASSESSEE HAD RECEIVED R EGIONAL M ANAGEMENT S ERVICES FROM ITS AE , VIZ. HENKEL AG & COMPANY, KGAA, WE ARE EVEN OTHERWISE UNABLE TO CONCUR TO THE DETERMI NING OF THE ALP OF THE REGIONAL MANAGEMENT SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE, VIZ. HENKEL AG & COMPANY, KGAA BY THE TPO AT RS. NIL I.E WITHOUT FOLLOWING ANY ONE OF THE PRESCRIBED METHODS CONTEMPLATED IN SEC.92C(1) OF THE ACT , AS AGAINST THAT DETERMINED BY THE ASSESSEE AT RS. RS.2,61,63,288/ - BY ADOPTING TNMM AS THE MOST APPROPRIATE METHOD. IN FACT, OUR AFORESAID VIEW THAT THE TPO IS DIVESTED OF HIS JURISDICTION IN BENCHMARKING T HE INTERNATIONAL TRANSACTIONS OF AN ASSESSEE AT NIL OR IN AN AD HOC MANNER WITHOUT FOLLOWING ANY ONE OF THE PRESCRIBED METHODS IS FORTIFIED BY THE JUDGMENTS OF THE HONBLE HIGH COUR T OF BOMBAY VIZ. (I) CIT VS. MERC K LIMITED . (ITA NO. 272 OF 2014), DATED 08.08.2016 ; (II) CIT VS. LEVER INDIA EXPORTS LIMIT ED (ITA NO.1306, 130 7 AND 1349 OF 2014), DATED 23.01 .2017 ; (III) CIT VS. JOHNSON & JOHNSON LTD. (ITA NO.1030 OF 2014), DATED 07.03.2017 ; AND (IV) CIT VS. KODAK INDIA PVT. LTD. (ITA NO.15 OF 2014 ) , DATED 11.07.2016. AS OBSERVED BY THE HONBLE HIGH COURT OF B OMBAY IN THE AFOREMENTIONED CASES , THE TPO IS NOT PERMITTED TO DETERM INE THE ALP OF THE INTERNATIONAL TRANSACTIONS WITHOUT FOLLOWING ANY ONE OF THE METHOD S PRESCRIBED UNDER SEC. 92C(1) OF THE ACT . ACCORDINGLY, IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS WE ARE UNABLE TO SUSTAIN THE DETERMINATION OF THE ALP OF THE R EGIONAL M ANAGEMENT S ERVICES RECEIVED BY THE ASSESSEE FROM ITS AE , VIZ. HENKEL AG & ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 14 COMPANY, KGAA, AT RS. NIL BY THE TPO WITHOUT RESOR TING TO ANY TRANSFER PRICING EXERCISE AS PER ANY OF THE METHOD PRESCRIBED IN SEC.92C (1) OF THE ACT, AS AGAINST THAT DETERMINED BY THE ASSESSEE AT RS. 2,61,63,288/ - BY ADOPTING TNMM AS THE MOST APPROPRIATE METHOD. W E THUS IN TERMS OF OUR AFORESAID DELIBERAT IONS VACATE THE ADDITION TOWARDS TP ADJUSTMENT OF RS.2,61,63,288/ - MADE BY THE AO/TPO. THE GROUND S OF APPEAL NO. 1 TO 8 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 11. WE SHALL NOW ADVERT TO THE OTHER DISALLOWANCES MADE BY THE A.O WHILE FRAMING TH E ASSESSMENT. AS IS DISCERNIBLE FROM THE ASSESSMENT ORDER, THE ASSESSEE HAD CLAIMED DEDUCTION OF PROFESSIONAL CHARGES OF RS.3,62,693/ - WHICH WERE STATED TO HAVE BEEN PAID TO M/S DESAI & DEWANJI. IT WAS THE CLAIM OF THE ASSESSEE IN THE COURSE OF THE ASSESSM ENT PROCEEDINGS THAT THE AFORESAID AMOUNT WAS PAID TOWARDS CONSULTING FEE PERTAINING TO AN ACQUISITION CARR IED OUT BY IT . HOWEVER, AS THE ASSESSEE FAILED TO SUBSTANTIATE ITS AFORESAID CLAIM BY PLAC ING ON RECORD THE DETAILS OF THE ASSETS UNDER ACQUISITION , AND ALSO , AS TO HOW THE AFORESAID EXPENDITURE WAS INCURRED FOR THE PURPOSE OF ITS BUSINESS, THE A.O , THERE FORE , DISALLOWED THE SAME. THEREAFTER, THE DRP VIDE ITS ORDER PASSED UNDER SEC. 144C(5), DATED 14.11.2015 NOT FINDING FAVOUR WITH THE CONTENTIONS RAI SED BY THE ASSESSEE SUSTAIN ED THE AFORESAID ADDITION. 12. AGGRIEVED , THE ASSESSEE HA S ASSAILED THE DISALLOWANCE OF THE AFORESAID CLAIM OF PROFESSIONAL CHARGES IN APPEAL BEFORE US. IT HAS BEEN THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES , AS WELL BEFORE US , THAT AS THE AFORESAID LEGAL AND PROFESSIONAL FEES INCURRED BY IT WAS NEITHER IN THE NATURE OF A CAPITAL EXPENDITURE NOR OF A PERSONAL NATURE, THEREFORE, THE SAME HAVING BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS WAS ALL OWABLE AS A REVENUE EXPENDITURE UNDER SEC. 37 OF THE ACT. HOWEVER, THE ASSESSEE EXCEPT FOR RAISING THE AFORESAID HOLLOW CONTENTION HAD ABSOLUTELY FAILED TO SUBSTANTIATE ITS CLAIM OF HAVING INCURRED THE AFORESAID EXPENDITURE IN THE COURSE OF ITS BUSINESS. E XCEPT FOR PLACING ON RECORD THE BIFURCATED DETAILS OF PROFESSIONAL CHARGES INCURRED DURING THE YEAR UNDER CONSIDERATION , WE FIND ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 15 THAT, THE ASSESSEE HAD FAILED TO PLACE ON RECORD ANY SUCH MATERIAL WHICH WOULD SUBSTANTIATE ITS CLAIM OF HAVING INCURRED THE SO CALLED PROFESSIONAL CHARGES WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. ACCORDINGLY , IN THE ABSENCE OF ANY SUPPORTING DOCUMENTARY EVIDENCE WHICH WOULD JUSTIFY THE AFORESAID CLAIM OF EXPENDITURE SO RAISED BY THE ASSESSEE, WE FIND NO INFIRMITY I N THE VIEW TAKEN BY THE A.O/DRP WHO IN OUR OPINION HAD RIGHTLY DISALLOWED THE SAME. THE GROUND OF APPEAL NO. 9 IS DISMISSED. 13. WE SHALL NOW ADVERT TO THE CLAIM OF THE ASSESSEE THAT THE A . O/DRP HAD ERRED IN DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION OF SALES PROMOTION EXPENDITURE OF RS.19,68,708/ - PAID TO M/S COX & KINGS LTD. ON ACCOUNT OF TRAVEL UNDER TAKEN BY ITS EMPLOYEES FOR ATTENDING A CONFERENCE. AS IS DISCERNIBLE FROM THE ASSESSMENT ORDER, DE HORS ANY MATERIAL SUBSTANTIATING THE FACT THAT THE AFORESAID EXPENSES WERE INCURRED IN RELATION TO ANY CONFERENCE ATTEND ED BY ITS EMPLOYEES, AS WELL AS THE FACT THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS, THE A . O/DRP HAD DISALLOWED THE AFOR ESAID CLAIM FOR DEDUCTION RAISED BY THE ASSESSEE. 14. AGGRIEVED, THE ASSESSEE HAS ASSAILED THE DISALLOWANCE OF THE AFORESAID SALES PROMOTION EXPENSES IN APPEAL BEFORE US. THE LD. A.R IN THE COURSE OF HEARING OF THE APPEAL HAD DRAWN OUR ATTENTION TO THE BIF URCATED DETAILS OF THE SALES PROMOTION EXPENSES FOR THE YEAR UNDER CONSIDERATION. ON A PERUSAL OF THE AFORESAID DETAILS, WE FIND , THAT THE IMPUGNED AMOUNT OF RS.19,68,708/ - IS CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE TO M/S COX AND KINGS LTD. TOWARDS TRAV EL EXPENSES BY AIR OF ITS EMPLOYEES FOR THE PURPOSE OF ATTENDING A CONFERENCE. HOWEVER, E XCEPT FOR HARPING ON THE AFORESAID UNSUBSTANTIATED DETAILS THE ASSESSEE HAD FAILED TO PLACE ON RECORD ANY SUCH MATERIAL WHICH WOULD SUBSTANTIATE ITS CLAIM THAT THE AFO RESAID EXPENSES WERE ACTUALLY INCURRED IN THE COURSE OF ITS BUSINESS TOWARDS TRAVEL EXPENSES OF ITS EMPLOYEES FOR ATTENDING A CONFERENCE. ACCORDINGLY, IN THE ABSENCE OF ANY MATERIAL SUPPORTING THE CLAIM OF THE ASSESSEE OF HAVING INCURRED THE AFORESAID ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 16 EXPE NSES WHOLLY AND EXCLUSIVELY IN THE COURSE OF ITS BUSINESS, WE FIND NO INFIRMITY IN THE VIEW TAKEN BY THE LOWER AUTHORITIES WHO HAD RIGHTLY REJECTED THE SAME. WE THUS UPHOLD THE DISALLOW ANCE OF RS.19,68,708/ - CARRIED OUT BY THE AO. THE GROUND OF APPEAL NO. 10 IS DISMISSED. 15. WE SHALL NOW TAKE UP THE CLAIM OF THE ASSESSEE THAT THE A . O/DRP HAD ERRED IN DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION OF SALES PROMOTION EXPENSES OF RS.1,84,946/ - INCURRED TOWARDS PURCHASE OF GOLD COIN S ETC. WHICH ARE STATED TO HAVE BEEN DISTRIBUTED AS GIFTS TO CLIENTS IN THE NORMAL COURSE OF ITS BUSINESS. AS CAN BE GATHERED FROM THE ASSESSMENT ORDER, THE A.O IN THE ABSENCE OF ANY SUPPORTING DOCUMENTARY EVIDENCE WHICH WOULD ESTABLISH THE FACTUM OF INCURRING OF THE AFORE SAID EXPENSES BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS, HAD THUS , DISALLOWED THE SAME. BEFORE US, THE ASSESSEE EXCEPT FOR PLACING ON RECORD THE BIFURCATED DETAILS OF THE GIFTS WHICH ARE STATED TO HAVE BEEN GIVEN TO CERTAIN PERSONS , HAD HOWEVER , FAILED TO PLACE ON RECORD ANY SUCH MATERIAL WHICH COULD FORTIFY ITS CLAIM OF HAVING INCURRED THE SAID EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. ACCORDINGLY, IN THE ABSENCE OF ANY MATERIAL HAVING BEEN PLACED ON RECORD BY THE ASSESSEE WHI CH WOULD PERSUADE US TO DISLODGE THE VIEW TAKEN BY THE A.O , WE THUS , FINDING NO INFIRMITY IN THE VIEW THEREIN TAKEN BY HIM UPHOLD THE DISALLOWANCE OF RS.1,84,946/ - . THE GROUND OF APPEAL NO. 11 IS DISMISSED. 16. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRON OUNCED IN THE OPEN COURT ON 09 .12.2020 SD/ - SD/ - PRAMOD KUMAR RAVISH SOOD ( VICE PRESIDENT ) ( JUDICIAL MEMBER) MUMBAI, DATE: 09 .12 .2020 R. KUMAR ITA NO.1049/MUM/2016 A.Y. 2011 - 12 HENKEL CHEMBOND SURFACE TECHNOLOGY LTD. VS. ACIT,CIRCLE 7(1)(2) 17 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR K BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI