DOW AGROSCIENCES INDIA P.LTD, MUMBAI V. ASST CIT RG 14(1)(2), MUMBAI

ITA 1051/MUM/2015

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8809 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR JHA
• Keywords: Transfer pricing; Search and seizure; International transaction; Additional evidence; Initiation of penalty proceedings; Wholly owned subsidiary; Right to appeal; Commercial expediency; TDS
• Section: 271(1)(c); 92C; 143(3); 234B; 10B; 143(1); 201; 274; 143(2); 264; 43; 48; 72; 13; 22; 92CA; 92

Judgement Text

ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(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.1051/MUM/2015 (ASSESSMENT YEAR : 2010 - 11 ) DOW AGROSCIENCES INDIA PRIVATE LIMITED, 1 ST FLOOR, BLOCK B, GODREJ IT PARK, PIROJSHANAGAR, VIKHROLI (W) MUMBAI 400079 VS. ACIT, RANGE - 14(1)(2) ROOM NO. 460, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 PAN AAACD3812H (APPELLANT) (RESPONDENT) IT(TP) A. NO.203 /MUM/2016 (ASSESSMENT YEAR: 2011 - 12 ) DOW AGROSCIENCES INDIA PRIVATE LIMITED, 1 ST FLOOR, BLOCK B, GODREJ IT PARK, PIROJSHANAGAR, VIKHROLI (W) MUMBAI 400079 VS. DCIT, RANGE - 14(1)(1 ) ROOM NO. 460, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 PAN AAACD3813 H (APPELLANT) (RESPONDENT) IT(TP)A. NO.1528/MUM/2017 (ASSESSMENT YEAR: 2012 - 13) DOW AGROSCIENCES INDIA PRIVATE LIMITED, 1 ST FLOOR, BLOCK B, GODREJ IT PARK, PIROJSHANAGAR, VIKHROLI (W) MUMBAI 400079 VS. INCOME TAX OFFICER , RANGE - 14(1)(3 ) ROOM NO. 458 , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 PAN AAACD3813 H (APPELLANT) (RESPONDENT) ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 2 APPELLANT BY: SHRI P.J. PARDIWALA, SENIOR ADVOCATE A/W SHRI. HITEN CHANDE RESPONDENT BY: SHRI SUNIL KUMAR JHA , CIT D.R DATE OF HEARING: 23 . 10 .2020 DATE OF PRONOUNCEMENT: 11 . 01 .202 1 O R D E R PER RAVISH SOOD, JM THE CAPTIONED APPEALS FILED BY THE ASSESSEE COMPANY ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961(FOR SHORT ACT) FOR A.Y. 2010 - 11, A.Y. 2011 - 12 AND A.Y. 2012 - 13. AS COMMON ISSUES ARE INVOLVED IN THE AFORESAID APPEALS, THE SAME ARE THEREFORE BEING TAKEN UP AND DISPOSED OFF TOGETHER BY WAY OF A CONSOLIDATED ORDER. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y 2010 - 11. THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, DOW AGROSCIENCES INDIA PRIVATE LIMITED (HEREI NAFTER REFERRED TO AS THE APPELLANT') RESPECTFULLY CRAVES TO PREFER AN APPEAL AGAINST THE ORDER ISSUED BY THE ASSISTANT COMMISSIONER OF INCOME - TAX, RANGE 14(1)(2), MUMBAI [HEREINAFTER REFERRED TO AS THE 'ASSESSING OFFICER'] UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE INCOME - TAX ACT, 1961 ('THE ACT') IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE HON'BLE DISPUTE RESOLUTION PANEL - I, (HERE INAFTER REFERRED TO AS THE HONBL E DRP') ON THE FOLLOWING GROUNDS, EACH OF WHICH ARE WITHOUT PREJUDICE TO ONE AN OTHER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO/ ADDITIONAL COMMISSIONER OF INCOME - TAX (TRANSFER PRICING) - 1(3) ('TPO') ON FACT AND IN LAW HAS: GENERAL 1. ERRED IN ASSESSING THE TOTAL INCOME AT RS.88,34,41,810 AS AGAINST RETURNED INCOME OF RS.80,04,98,533 COMPUTED BY THE APPELLANT. TRANSFER PRICING ADJUSTMENTS PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISE ('AE' ) GENERAL 2. ERRED IN MAKING AN ADJUSTMENT OF RS 4,29,47,493 TO THE TOTAL INCOME OF THE APPELLANT UNDER SECTION 92CA(3) OF THE ACT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 3 REJECTION OF ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT 3. ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT INCLUDING THE ANALYSIS USING THE TRANSACTIONAL NET MARGIN METHOD ('TN MM'), IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME - TAX RULES, 19 62 ('THE RULES'), FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY. REJECTION OF COMPARABLE UNCONTROLLED PRICE ('CUP') AS THE APPROPRIATE METHOD 4. ERRED IN NOT CONSIDERING APPROVALS RECEIVED FROM SECRETAR IAT OF INDUSTRIAL ASSISTANCE ('SIA'), MINISTRY OF INDUSTRY AND RESERVE BANK OF INDIA ('RBI') AS VALID CUP AND REJECTING THE CUP ANALYSIS UNDERTAKEN BY THE ASSESSEE AS A PRIMARY ANALYSIS. DISREGARDING THE COMMERCIAL BENEFITS RECEIVED FROM THE AE 5. ERRED IN N OT APPRECIATING THAT THE TECHNICAL KNOWHOW LICENSED BY THE AE TO THE ASSESSEE WAS AN INVALUABLE AND UNIQUE INTANGIBLE WHICH YIELDED COMMERCIAL BENEFITS TO THE APPELLANT. 6. ERRED IN NOT APPRECIATING THE COMMERCIAL RATIONALE OF THE ASSESSEE FOR EXTENDING THE TECHNOLOGY AGREEMENT AS WELL AS MAKING ROYALTY PAYMENT TO THE AE AND THEREBY APPLYING BENEFIT TEST' TO HOLD NO BENEFIT IS RECEIVED BY THE APPELLANT. INAPPROPRIATELY CONSIDERED CONTROLLED TRANSACTION AS CUP 7. ERRED IN COMPARING, ON WITHOUT PREJUDICE BASIS, T HE RATE OF ROYALTY PAID BY THE APPELLANT TO ITS AE, DOW AGROSCIENCES B.V (DOW NETHERLANDS) WITH A CONTROLLED TRANSACTION (I.E. THE ROYALTY RATE PAID BY UK KING LYNNS PLANT (DOW UK), ANOTHER AE OF THE APPELLANT TO DOW AGROSCIENCES B.V (DOW NETHERLANDS) 8. WITH OUT PREJUDICE TO THE ABOVE , ERRED IN IGNORING THE FACT THAT PRICES OF THE PRODUCTS IN UK IS MUCH HIGHER AS COMPARED TO INDIA, SINCE UK IS A DEVELOPED COUNTRY AND THEREBY THE ROYALTY PAID BY DOW UK CANNOT BE COMPARED WI TH THE ROYALTY PAID BY THE APPELL ANT. 9. WITHOUT PREJUDICE TO THE ABOVE , EVEN IF CONTROLLED RATE OF ROYALTY PAID BY DOW UK TO DOW NETHERLANDS IS TAKEN AS CUP, APPROPRIATE ADJUSTMENT SHOULD BE PROVIDED ON THE SAME TO ELIMINATE THE DIFFERENCES. INAPPROPRIATELY CONSIDERED SUPPLEMENTARY AGREEMENT AS CUP 10. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN DIRECTING THE APPELLANT TO CARRY OUT A FRESH SEARCH FOR IDENTIFYING COMPARABLE ROYALTY AGREEMENTS USING 'ROYALTYSTAT DATABASE (DURING THE REMAND PROCEEDINGS) AS THE SAME WAS BEYOND THE POWERS OF THE LEARNED TPO 11. WITHOUT PREJUDICE TO THE ABOVE, FAILED TO APPRECIATE THAT NONE OF THE AGREEMENTS DERIVED FROM THE ABOVE SEARCH WERE CONSIDERED COMPARABLE BY THE APPELLANT. 12. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN CONSIDERING THE AGREE MENT BETWEEN HERC PRODUCTS AND C CT CORPORATION AS COMPARABLE AGREEMENT WITHOUT GIVING ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 4 COGNIZANCE TO THE VALIDITY OF THE AGREEMENT AS WELL AS THE FACT THAT THE COMPLETE INFORMATION ABOUT THE AGREEMENT IS NOT AVAILABLE. VARIATION OF 5% FROM THE ARITHMETIC MEAN 13. THE BENEFIT OF PROVISO TO SECTION 920(2) OF THE ACT SHOULD BE GRANTED TO THE APPELLANT, IF THE TRANSACTION PAYMENT OF ROYALTY IS WITHIN SUCH RANGE. II. AVAILING OF INFORMATION TECHNOLOGY SERVICES, FINANCE AND TREASURY SUPPORT SERVICES, FINANCIAL AND ACCOUNTI NG SUPPORT SERVICES AND LEGAL AND ADMINISTRATIVE SUPPORT SERVICES FROM AES GENERAL 14. ERRED IN MAKING AN ADJUSTMENT OF RS 3,99.95,779 TO THE TOTAL INCOME OF THE APPELLANT UNDER SECTION 92CA(3) OF THE ACT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF AVAILING OF INFORMATION TECHNOLOGY SERVICES, FINANCE AND TREASURY SUPPORT SERVICES, FINANCIAL AND ACCOUNTING SUPPORT SERVICES AND LEGAL AND ADMINISTRATIVE SUPPORT SERVICES. REJECTION OF THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT 15. ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT INCLUDING THE ANALYSIS USING TNMM, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT REA D WITH THE RULES, FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT FOR AVAILING OF SERVICES. 16. ERRED IN REJECTING THE AGGREGATION APPROACH ADOPTED BY THE ASSESSEE USING TNMM TO BENCHMARK THE SAID INTERNATIONAL TRANS ACTION AND NOT APPRECIATING THAT THESE S6IVICS ARE CLOSELY CONNECTED WITH THE MAIN BUSINESS OF THE APPELLANT IN RELATION TO MANUFACTURING, TRADING AND INDENTING . INAPPROPRIATE APPLICATION OF CUP METHOD TO BENCHMARK THE INTERNATIONAL TRANSACTION 17. ERRED IN NOT USING ANY OF THE FIVE METHOD PRESCRIBED UNDER SECTION 92C TO BENCHMARK THE INTERNATIONAL TRANSACTION OF PAYMENT FOR AVAILING OF SERVICES. 18. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN CONSIDERING HYPOTHETICAL CUP (AS AGAINST TNMM ADOPTED BY THE APPELLAN T), FOR DETERMINATION OF ARM'S LENGTH PRICE, WHEREIN THE LEARNED AO/ TPO HELD THAT THIRD PARTY WILL NOT PAY ANYTHING FOR THESE SERVICES. BENEFIT TEST/ COMMERCIAL EXPEDIENCY FOR AVAILING SERVICES 19. FAILED TO APPRECIATE THE BUSINESS MODEL AND BUSINESS REALITIE S OF THE APPELLANT AND THE ROLE OF ITS AES AND CONCLUDING THAT NO SERVICE IS RECEIVED OR BENEFITS HAVE BEEN AVAILED BY THE APPELLANT. IGNORED EVIDENCES SUBMITTED FOR SERVICE AVAILED AND BENEFITS DERIVED 20. ERRED IN BRUSHING ASIDE THE ADDITIONAL EVIDENCES SUBMITTED BY THE APPELLANT TO PROVE EXISTENCE/ BENEFIT RECEIVED BY THE APPELLANT. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 5 SHORT GRANTING OF CREDIT OF ADVANCE TAX PAID 21. ERRED IN ONLY GRANTING CREDIT OF ADVANCE TAX OF AS 23,0000.000 AS AGAINST THE TOTAL ADVANCE TAX PAID BY THE APPELLANT OF AS. 27,70,00,000. SHORT GRANT OF CREDIT FOR TAX DEDUCTED AT SOURCE ('TDS') 22. ERRED IN ONLY GRANTING CREDIT OF TDS OF AS. 1,35,18.126 AS AGAINST THE CREDIT OF TOTAL TDS CREDIT CLAIMED BY THE APPELLANT OF AS 1,46,98,582. 23. L EVY OF INTEREST UNDER SECTION 234B OF THE ACT 24. ERRED IN LEVYING OF INTEREST UNDER SECTION 234B OF THE ACT OF AS. 3,29,22,946. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT 25. ERRED IN LEVYING OF INTEREST UNDER SECTION 234C OF THE ACT OF AS. 61.07,852. 26. ERRED IN NOT APPRECIATING THAT INTEREST UNDER SECTION 234C WOULD BE APPLICABLE ONLY ON THE RETURNED INCOME AS AGAINST ON ASSESSED INCOME LEVIED BY THE LEARNED AC. INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT 27. ERRED IN INITIATING THE PENAL TY PROCEEDINGS UNDER SECTION 274 READ WITH SECTION 271 (1)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , DELETE OR WITHDRAW ANY OR ALL OF THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL SO AS TO ENABLE THE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING TO LAW. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF PESTICIDES , AGRO CHEMICALS & SEEDS HAD FILED ITS RETURN OF INCOME FOR A.Y. 2010 - 11 ON 30.09.2010, DECLARING ITS TOTAL INCOME AT RS.80,04,09,533/ - . THE RETURN OF INCOME WAS INITIALLY PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. OBSERVING THAT THE ASSESSEE COMPANY HAD DURING THE YEAR UNDER CONSIDERATION ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES (FOR SHORT AES ), THE A.O MADE A REFERENCE UNDER SEC. 92CA(1) OF THE ACT TO THE ADDL. CIT, TRANSFER PRICING OFFICER - 1(3), MUMBAI (HEREINAFTER REFERRED TO AS TPO ) FOR DET ERMINING THE ARMS LENGTH PRICE OF THE SAID ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 6 TRANSACTIONS. THE TPO VIDE HIS ORDER PASSED UNDER SEC. 92CA(3), DATED 29.01.2014 MADE AN ADJUSTMENT OF RS.8,29,43,272/ - TO THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE, AS UNDER: SR. NO. PARTICULARS AMOUNT 1. (A). ADJUSTMENT TO THE ALP OF ROYALTY PAID BY THE A SSESSEE TO ITS AE VIZ. DOW AGROS CIENCES BV BY COMPUTING THE SAME AT RS.NIL AS AGAINST THE ALP OF RS.4,29,47,493/ - DETERMINED BY THE ASSESSEE. (B). ALTERNATIVELY, THE TPO BY APPLYING CUP METHOD HAD SUGGESTED ADJUSTMENT OF RS. 1,37,52,774/ - THAT WAS TO BE INVOKED ONLY IF THE PRIMA RY ADJUSTMENT OF TAKING THE ALP OF THE ROYALTY TRANSACTION AT NIL WAS VACATED BY THE LOWER AUTHORITIES. RS.4,29,47,493/ - - 2. ADJUSTMENT TO THE ALP ON ACCOUNT OF INTRA GROUP SERVICES RS.3,99,95,779/ - . TOTAL RS.8,29,43,272/ - 4. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 29.01.2014 PASSED A DRAFT ASSESSMENT ORDER UNDER SEC. 143(3) R.W.S 144C(1), DATED 05.03.2014 AND PROPOSED TO ASSESS THE INCOME OF THE ASSESSEE COMPANY AT RS.88,34,41,810/ - . 5 . OBJECTING TO THE ADDITIONS PROPOSED BY THE A.O , THE ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE RESOLUTION PANEL - 1, MUMBAI (FOR SHORT DRP ). AS REGARDS THE TRANSFER PRICING ADJUSTMENT OF RS.4,29,47,493/ - MADE BY THE TPO IN RESPECT OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE, VIZ. DOW AGROSCIENCES BV, NETHERLAND, IT WAS OBSERVED BY THE DRP THAT THE BENCHMARKING OF THE ROYALTY TRANSACTION WAS A RECURRING ISSUE OVER THE YEARS. AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE, TH E DRP WAS OF THE VIEW THAT NO INFIRMITY COULD BE RELATED TO THE DETERMINING OF THE ALP OF ROYALTY AT NIL BY THE TPO. FURTHER, IT WAS OBSERVED BY THE DRP THAT THE ISSUE OF BENCHMARKING OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE HAD E ARLIER CAME UP BEFORE THE PANEL IN THE ASSESS EES CASE FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2009 - 10 AND THE TRANSFER PRICING ADJUSTMENT MADE BY THE TPO WAS CONFIRMED. ALSO, IT WAS NOTICED BY THE DRP THAT INVOLVING IDENTICAL FACTS THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003 - 04 IN ITA NO. 630/MUM/2011 , DATED 30.01.2014 HAD PRINCIPALLY UPHELD THE APPLICATION OF ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 7 THE APPROACH THAT WAS ADOPTED BY THE LOWER AUTHORITIES FOR BENCHMARKING THE TRANSACTION OF PAYMENT OF ROYALTY. ACCORDINGLY, THE DRP UP HELD THE DETERMINING OF THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION BY THE TPO AT N IL. ADVERTING TO THE ALTERNATIVE VIEW OF THE TPO WHEREIN USING THE CUP METHOD HE HAD CONSIDER ED THE ROYALTY PAID BY AN ANOTHER AE OF THE ASSESSEE , VIZ. DOW U . K TO DOW NETHERLAND S AS A COMPARABLE TRANSACTION AND DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT 5% OF ITS NET EXPORT SALE S, AND HAD SUGGESTED AN ALTERNATE ADJUSTMENT OF RS.1,37,57,774/ - THAT WAS TO BE SUBSTITUTED IN CASE THE PRIMARY ADJUSTMENT OF TAKING THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION AT N IL WAS VACATED BY THE APPELLATE AUTHORIT IES, T HE DRP WAS OF THE VIEW THAT AS THE SAID OBSERVATION OF THE TPO WAS IN CONFORMITY WITH THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y. 2003 - 04, THEREFORE, NO INFIRMITY COULD BE RELATED TO THE SAME. ACCORDINGLY, ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE DRP UPHELD BOTH THE PRIMARY AND ALTERNATE TRANSFER PRICING ADJUSTMENT S MADE BY THE TPO PERTAINING TO TH E TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. AS REGARDS THE OBJECTION PERTAINING TO THE TRANSFER PRICING ADJUSTMENT OF RS. 3,99,95,779/ - MADE BY THE A . O REGARDING THE INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES, THE DRP WAS OF THE VIEW THAT AS THE ASSESSEE HAD NEITHER FILED EVIDENC E SUBSTANTIATING THE RENDERING OF SERVICES BY THE AES AND RECEIPT OF TANGIBLE BENEFIT S THERE FROM NOR PLACED ON RECORD THE DETAILS OF TOTAL COST S THAT WERE INCURRED BY THE AES OR THE BASIS OF COST ALLOCATION, THEREFORE, THE TPO HAD FOR JUSTIFIABLE REASON TAKEN THE ARMS LENGTH PRICE OF THE I NTRA - G ROUP S ERVICES AT N IL. AS REGARDS THE ADDITIONAL DOCUMENTARY EVIDENCE THAT WAS FILED BY THE ASSESSEE TO SUPPORT ITS CLAIM OF RENDITION OF I NTRA - G ROUP SERVICES BY IT AES, THE DRP CALLED FOR A REMAND REPORT FROM THE TPO . AFTER CONSIDERING THE REMAND REPORT AND THE REJOINDER FILED BY THE ASSESSEE, THE DRP CONCURRED WITH THE VIEW TAKEN BY THE TPO THAT THE DOCUMENTS SO FILED WERE IN THE NATURE OF A GENERAL CORRESPONDENCE AND DID NOT PROVE THE AMOUNT OF CONTRIBUTION THE AE S BY RENDERING THE SERVICES HAD MADE TO THE ASSESSEE. IT WAS FURTHER OBSERVED BY THE DRP THAT ON A PERUSAL OF THE E - MAILS FILED BY THE ASSESSEE AS ADDITIONAL ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 8 EVIDENCE , IT COULD NOT B E GATHERED THAT AS TO WHY PAYMENT S WERE MADE BY IT TO THE AE S . AFTER DELIBERATING AT LENGTH ON THE CONTENTIONS ADVANCED BY THE ASSESSEE IN THE BACKDROP OF THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD, THE DRP WAS OF THE VIEW THA T THE TPO HAD RIG HTLY DETERMINED THE ALP OF THE I NTRA - G ROUP SERVICE AT N IL. 6 . AFTER RECEIVING THE ORDER PASSED BY THE DRP UNDER SEC. 144C(5), DATED 19.12.20 14 THE A.O FRAMED THE ASSESSMENT UNDER SEC. 143(3) R.W.S 144C(13), DATED 19.01.2015 AND DETERMINED THE TOTAL INCOME OF THE ASSESSE E COMPANY AT RS.88,34,41,810/ - . 7 . AGGRIEVED , THE ASSESSEE HAS ASSAILED THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C( 13), DATED 19.01.2015 IN APPEAL BEFORE US. AS OBSERVED BY US HEREINABOVE, THE ASSESSEE IS AGGRIEVED WITH THE ASSESSMENT ORDER ON ACCOUNT OF THE AFORESAID TWO TRANSFER PRICING ADJUSTMENTS CARRIED OUT BY THE A.O/TPO, VIZ. (I) TRANSFER PRICING ADJUSTMENTS AS REGARDS THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE VIZ. DOW AGROSCIENCES BV : RS.4,29,47,493/ - ; AND (II) TRANSFER PRICING ADJUSTMENT AS REGARDS THE I NTRA - G ROUP S ERVICES: RS.3,99,95,779/ - . 8 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD , AS WELL AS CONSIDERED THE JUDICIAL PRONOUNCEMENT S THAT HAVE BEEN PRESSED INTO SERVICE BY THEM TO DRIVE HOME THEIR RESPECTIVE CONTENTIONS. FOR A FAIR A PPRECIATION OF THE ISSUE S UNDER CONSIDERATION WE SHALL BRIEFLY CULL OUT THE FACTS AS REGARDS THE SAME, AS UNDER: (A) . TRANSFER PRICING A DJUSTMENT AS REGARDS THE ROYALTY PAID BY THE ASSESSEE TO ITS AE : RS.4,29,47,493/ - : THE ASSESSEE COMPANY HAD ENTERED INTO A P ROCESS T ECHNOLOGY A GREEMENT, DATED 23.01.1997 WITH ITS AE, VIZ. DOW AGROSCIENCES, BV (FORMERLY KNOWN AS DOW ELANCO BV) AS PER WHICH THE ASSESSEE WAS OBLIGATED TO PAY ROYALTY TO ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 9 THE AFORE SAID AE ON MANUFACTURING OF CHLOR P YRIFOS @ 5% AND @ 8% OF ITS NET DOMESTIC SALES AND EXPORT SALES, RESPECTIVELY . AS STATED BEFORE US, THE AFORESAID AGREEMENT WAS APPROVED BY THE SECRETARIAT OF INDUSTRIAL APPROVAL, MINISTRY OF INDUSTRY (GOVERNMENT OF INDIA) VIDE ITS LETTER DATED 17.09.1996. AS PER THE APPROVAL THE ROYALTY WAS TO BE PAID BY THE ASSESSEE FOR A PERIOD OF 7 YEARS DURING THE PERIOD OF THE AGREEMENT . SUBSEQUENTLY, THE AFORESAID AGREEMENT WAS ALSO APPROVED BY THE RESERVE BANK OF INDIA (FOR SHORT RBI), VIDE ITS APP ROVAL DATED MARCH 11, 1997. ON 8 TH SEPTEMBER, 2000, THE GOVERNMENT OF INDIA ISSUED A PRESS NOTE NO. 9 (2000 SERIES ) , AS PER WHICH , THE WHOLLY OWNED SUBSIDIARIES WERE ALLOWED TO MAKE PAYMENT OF ROYALTY @ 5% AND @ 8% OF THEIR NET DOMESTIC SALES AND EXPORT SALES, RESPECTIVELY, WITHOUT ANY RESTRICTION ON THE DURATION OF THE ROYALTY PAYMENT. AS SUCH, THE DURATION OF PAYMENT OF ROYALTY FOR A MAXIMUM PERIOD OF 7 YEARS AS WAS EARLIER CONTEMPLATED WAS DISPENSED WITH BY THE G OVERNMENT. BUT THEN, AS THE ASSESSEE COMPANY WAS A J OINT VENTURE BETWEEN DOW MAURITIUS AND NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. AND NOT A WHOLLY OWNED SUBSIDIARY , THEREFORE, THE AFORESAID RELAXATION WAS OF NO AVAIL TO IT. ON 24 TH JUNE, 2003, THE GOVERNMENT OF I NDIA ISSUED A PRESS NOTE NO.2 (2000 SERIES ) WHEREIN IT FURTHER RELAXED THE PROVISIONS RELATING TO PAYMENT OF ROYALTY , AND NOW, THOUGH ALL THE COMPANIES IRRESPECTIVE OF THE EXTENT OF FOREIGN HOLDING WERE ALLOWED TO PAY ROYALTY WITHOUT ANY RESTRICTI ON ON T HE DURATION OF THE SAME, THE CAP ON THE QUANTUM OF THE ROYALTY THAT COULD BE PAID CONTINUED AS EARLIER. IN VIEW OF THE ABOVE RELAXATION PROVIDED BY THE GOVERNMENT OF INDIA THE AE OF THE ASSESSEE RE NEGOTIATED AND EXECUTED AN AGREEMENT , DATED 8 TH JUNE, 200 5 AND MODIF IED THE EARLIER P ROCESS T ECHNOLOGY A GREEMENT , DATED 23 RD JANUARY, 1997, WHEREBY THE TIME DURATION OF 7 YEARS FOR PAYMENT OF ROYALTY WAS REMOVED AND THE RATE OF ROYALTY @ 5% A ND @ 8% OF THE NET DOMESTIC SALES AND EXPORT SALES TILL THE TIME TECHNOLOGY WAS USED BY THE ASSESSEE COMPANY FOR MANUFACTURE AND SALE OF THE PRODUCT VIZ. CHL ORPYRIFOS WAS AGREED UPON . 9 . I N THE BACKDROP OF THE AFORESAID FACTS THE ASSESSEE DURING THE YEAR UNDER ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 10 CONSIDERATION PAID A ROYALTY OF RS. 4,29,47, 493/ - I.E @ 8% OF ITS NET EXPORT SALES TO ITS AE, VIZ. DOW AGROSCIENCES BV . CUP METHOD WAS USED BY THE ASSESSEE AS A PRIMARY ANALYSIS BASIS FOR BENCHMARKING THE AFORESAID INTERNATIONAL TRANSACTION. U SING THE CUP METHOD THE ASSESSEE HAD CONSIDERED THE AFORE SAID APPROVAL RECEIVED FROM THE GOVERNMENT OF INDIA AND RBI FOR THE PURPOSE OF BENCHMARKING THE AFORESAID TRANSACTION . AS THE ROYALTY PAID BY THE ASSESSEE COMPANY TO ITS AE WAS APPROVED BOTH BY THE GOVERNMENT OF INDIA AND RBI, VIDE THEIR RESPECTIVE APPROVA LS DATED 17 TH SEPTEMBER, 1996 AND 22 ND JANUARY 1997, THEREFORE, THE AFORESAID TRANSACTION WAS CONSIDERED BY THE ASSESSEE TO BE AT ARMS LENGTH. ALTERNATIVELY, THE ASSESSEE AGGREGATED THE TRANSACTION OF PAYMENT OF ROYALTY WITH ITS OTHER INTERNATIONAL TRANSACTIONS CARRIED OUT IN THE MANUFACTURING SEGMENT, FOR THE REASON, THAT SUCH OTHER TRANSACTIONS VIZ. IMPORT OF RAW MATERIAL AND EXPORT OF FINISHED GOODS IN THE MANUFACTURING SEGMENT WERE CLOSELY CONNECTED WITH THE TRANSACTION OF PAYMENT OF ROYALTY. ADO PTING TNM METHOD AS A BASIS FOR A SECONDARY ANALYSIS THE ASSESSEE BENCHMARKED THE MANUFACTURIN G SEGMENT, AND FINDING THE NET MARGIN OF THE SAID SEGMENT DURING THE YEAR UNDER CONSIDERATION HIGHER THAN THE NET MARGIN OF THE COMPARABLES, THE PAYMENT OF ROYALT Y TO ITS AE WAS CLAIMED AS BEING AT ARMS LENGTH. 10 . OBSERVING THAT THE APPROVAL THAT WAS PROVIDED BY THE RBI DID NOT CONSTITUTE A VALID CUP METHOD SINCE THE LATTER WHILE GRANTING THE APPROVAL DID NOT TAKE INTO ACCOUNT THE TRANSFER PRICING PROVISION S TO DETERMINE THE APPROPRIATE RATES WHICH COULD BE CONSIDERED AS THE ARMS LENGTH PRICE FOR THE PAYMENT OF ROYALTY , THE TPO REJECTED THE BENCHMARKING OF THE ROYALTY PAYMENT CARRIED OUT BY THE ASSESSEE BY ADOPTING THE CUP METHOD. IN ORDER TO SUPPORT HIS AFORESA ID VIEW THE TPO RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN THE CASE OF COCA COLA INDIA INC. VS. ASST. CIT ( 2009) 309 ITR 194 (P&H) AND CERTAIN OTHER ORDERS OF THE TRIBUNAL. ADVERTING TO THE ALTERNATE BENCHMARKING THAT WAS CARRIED OUT BY THE ASSESSEE BY AGGREGATING THE INTERNATIONAL TRANSACTIONS AND APPLYING TNM METHOD AT ENTERPRISE LEVEL, THE SAME TOO DID NOT FIND FAVOUR WITH THE TPO. OBSERVING THAT EACH TRANSACTION WAS ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 11 TO BE BENCHMARKED SEPARATELY, THE TPO WAS OF THE VIEW THAT MERELY BECAUSE BY APPLYING TNM METHOD AT AN ENTERPRISE LEVEL THE MARGIN OF THE ASSESSEE WAS FOUND TO BE AT ARMS LENGTH WOULD NOT MEAN THAT THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS A E WAS TO BE TAKEN AS BEING AT ARMS LENGTH. BACKED BY HIS AFORESAID CONVICTION, THE TPO WAS OF THE VIEW THAT EACH TRANSACTION WAS TO BE BENCHMARKED SEPARATELY AND THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE WAS TO BE DETERMINED BY APPLYING CUP METHOD. FURTHER, IT WAS OBSERVED BY THE TPO THAT AS PER CLAUSE 6.1 OF THE ORIGINAL AGREEMENT , DATED 23 RD JANUARY, 1997 THAT WAS ENTERED INTO BY THE ASSESSEE WITH ITS AFORESAID AE VIZ. DOW AGROSCIENCES BV, THE ASSESSEE WAS LIABLE TO PAY ROYA LTY TO ITS AE FOR A PERIOD OF 7 YEARS, AND THEREAFTER, IT WAS TO BE VESTED WITH A NON - ASSIGNABLE AND NON - TRANSFERABLE RIGHT FOR USE OF SUCH TECHNOLOGY. IT WAS OBSERVED BY THE TPO THAT AS PER C LAUSE 11.1(B) OF THE AFORESAID AGREEMENT , DATED 23.01.1997 A N EW AGREEMENT WAS TO BE EXECUTED ONLY IN THE EVENT THE ASSESSEE RECEIVED ADDITIONAL TECHNOLOGY. ACCORDINGLY, THE TPO WAS OF THE VIEW THAT THE ASSESSEE AFTER THE CONSUMMATION OF THE ORIGINAL AGREEMENT, DATED 23.01.1997 REMAINED UNDER NO OBLIGATION TO PAY ANY ROYALTY TO ITS AE UNLESS ANY NEW TECHNOLOGY WAS RECEIVED BY IT DURING THE YEAR UNDER CONSIDERATION. IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS THE TPO DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESS E E TO ITS AE , VIZ. DOW AGROSC IENCES BV AT NIL. ALTERNATIVELY, THE TPO ADOPT ED THE CUP METHOD AND CONSIDERING AN AGREEMENT ENTERED INTO BETWEEN TWO GROUP COMPANIES OF THE ASSESSEE , VIZ. DOW UK KING LYNN PLANT (DOW, UK) WITH DOW B . V, AS PER WHICH THE FORMER I.E DOW , UK WAS OBLIGATED TO PAY A ROYALTY @ 3% AND @ 5% OF ITS DOMESTIC SALES AND EXPORT SALES, RESPECTIVELY, FOR MANUFACTURE AND SALE OF CHLORPYRIFOS , DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE I.E DOW AGROSCIENCES, BV AT 5% OF ITS EXPORT SALES FOR THE YEAR UNDER CONSIDERATION . ON THE BASIS OF HIS AFORESAID ALTERNATE WORKING THE TPO SUGGESTED A N ALTERNATE TRANSFER PRICING ADJUSTMENT OF RS.1,37,52,774/ - , WHICH HOWEVER WAS TO BE INVOKED ONLY IN CASE THE DETERMINATION OF THE ARMS LENGTH PRICE AT NIL WAS SUBSEQUENTLY VACATED BY THE APPELLATE AUTHORITIES. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 12 11 . AS OBSERVED BY US HEREINABOVE, THE DRP HAD UPHELD THE VIEW TAKEN BY THE TPO BOTH AS REGARDS THE ADOPTION OF THE ALP OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT N IL, AND ALSO, THE ALTERNATE ADJUSTMENT OF RS.1,37,52,774/ - THAT WAS SUGGESTED BY HIM IN CASE THE PRIMARY ADJUSTMENT W AS VACATED BY THE APPELLATE AUTHORIT IES . ON A PERUSAL OF THE ORDER OF THE DRP , WE FIND THAT THE ASSESSEE HAD IN THE COURSE OF THE PROCEEDIN GS SUBMITTED ADDITIONAL EVIDENCE TO SUBSTANTIATE THAT IT HAD DURING THE YEAR UNDER CONSIDERATION RECEIVED TECHNICAL ASSISTANCE AND GUIDANCE FROM ITS AE TO ENSURE INCREASE D EFFICIENCY OF ITS MANUFACTURING PROCESS AND IMPROVEMENT IN THE QUALITY OF THE PROD UCT. ON BEING CONFRONTED WITH THE AFORESAID DOCUMENTS, WE FIND THAT THE TPO VIDE HIS REMAND REPORT , DATED 13.11.2014 HAD ACCEPTED THAT THE ASSESSEE COMPANY DURING THE YEAR IN QUESTION HAD RECEIVED TECHNICAL ASSISTANCE FROM ITS AE. BUT THEN, IT WAS OBSERV ED BY THE TPO THAT THE ASSISTANCE THAT WAS RECEIVED BY THE ASSESSEE COMPANY FROM ITS AE WAS GENERAL IN NATURE AND NO NEW TECHNOLOGY WAS RECEIVED. ON THE BASIS OF HIS AFORESAID OBSERVATION, THE TPO WAS OF THE VIEW THAT THE ASSESSEE SHOULD HAVE ONLY REIMBURS ED THE EXPENSES FOR THE TECHNICAL ASSISTANCE RECEIVED FROM ITS AE AND WAS UNDER NO OBLIGATION TO PAY ANY ROYALTY. FURTHER, THE TPO IN HIS REMAND REPORT HAD SUBMITTED AN OTHER ALTERNATE BENCHMARKING BY SELECTING AN AGREEMENT BETWEEN TWO PARTIES, VIZ. AAR C CORPORATION AND CCT CORPORATION (HERC AGREEMENT AS REFERRED BY THE TPO) FROM THE R OYALTYSTAT DATABASE, AND HAD REQUESTED THE DRP TO ADOPT 2% ROYALTY RATE AS FOUND IN THE AFORESAID AGREEMENT AS THE ARMS LENGTH PRICE FOR THE PURPOSE OF BENCHMARKING THE TR ANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. AS SUCH, THE TPO IN HIS REMAND REPORT HAD PROPOSED AN ALTERNATE ADJUSTMENT WHICH WAS TO BE APPLIED, IN THE EVENT , THE DETERMINATION OF THE ARMS LENGTH PRICE BY HIM VIDE HIS ORDER PASSED U/S 92CA (3) OF THE ROYALTY TRANSACTION WAS NOT ACCEPTED BY THE APPELLATE AUTHORITIES . ON A PERUSAL OF THE ORDER PASSED BY THE DRP, WE FIND, THAT IT HAD UPHELD THE DETERMINATION OF ALP AT N IL BY THE TPO , FOR THE REASON, THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH RECEIPT OF NEW TECHNOLOGY FROM ITS AE . ALSO, THE DRP HAD UPHELD THE ALTERNATE BENCHMARKING THAT WAS CARRIED OUT BY THE TPO BY APPLYING CUP ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 13 METHOD AND ADOPTING THE RATE PROVIDED IN THE ROYALT Y AGREEMENT BETWEEN TWO GROUP CONCERN S OF THE ASSESSEE COMPANY , VIZ. DOW UK AND DOW NETHERLAND . LASTLY, THE DRP HAD ALSO FOUND FAVOUR WITH THE ADDITIONAL BENCHMARKING THAT WAS SUGGESTED BY THE TPO IN HIS REMAND REPORT BY TAKING THE RATE ADOPTED IN AN AGREEMENT BETWEEN TWO PARTIES, VIZ. AARC CORPORATION AND CCT CORPORATION , AS PER WHICH , THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE WAS TO BE TAKEN AT THE RATE OF 2% OF ITS EXPORT SALES . TO SUM UP, THE DRP HAD UPHELD THE VIEW TAK EN BY THE TPO BOTH AS REGARDS, VIZ. (I). THE DETERMINING OF THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AS PER HIS ORDER PASSED U/S 92CA(3) I.E (A). PRIMARY ADJUSTMENT OF TAKING THE ALP OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT NIL AND (B). THE ALTERNATE WORKING OF THE ALP ON THE BASIS OF AN AGREEMENT BETWEEN TWO GROUP CONCERNS OF THE ASSESSEE AT RS.1,37,52,774/ - ; AND (II). THE TRANSFER PRICING ADJUSTMENT OF THE ROYALTY TRANSACTION @2% OF THE EXPORT SALES AS WAS SUGGESTED BY THE TPO IN HIS REMAND REPORT, DATED 13.11.2014. 12 . WE SHALL NOW DEAL WITH THE SUSTAINABILITY OF THE VIEW ARRIVED AT BY THE TPO/DRP AS REGARDS THE DETERMINATION OF THE ALP OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE , VIZ. DOW AGROSCIENCES BV. AS OBSERVED BY US AT LENGTH HEREINABOVE, THE TPO/DRP WERE OF THE VIEW THAT AS PER THE P ROCESS T ECHNOLOGY A GREEMENT, DATED 23 RD JANUARY, 1997, THE ASSESSEE WAS OBLIGATED TO PAY ROYALTY TO ITS AE VIZ. DOW AGROSCIENCES BV ON MANUFACTUR ING OF CHLORPYRIFO S FOR A PERIOD OF ONLY 7 YEARS. LOWER AUTHORITIES WERE OF THE VIEW THAT AS PER C LAUSE 11.1 OF THE AFORE SAID AGREEMENT , THE ASSESSEE AFTER FULLY MEETING ALL ITS OBLIGATIONS PROVIDED IN THE AGREEMENT WOULD BE VESTED WITH A FULLY PAID, NON - ASSIGNABLE AND N ON - EXCLUSIVE RIGHT FOR THE PROCESS UTILIZING TECHNOLOGY RECEIVED PRIOR TO CONSUMMATION OF THE SAME . FURTHER, IT WAS OBSERVED BY THE LOWER AUTHORITIES THAT AS PER C LAUSE 11.1 A FRESH AGREEMENT WAS TO BE ENTERED INTO ONLY IN THE EVENT NEW TECHNOLOGY WAS RECEIVED BY THE ASSESSEE COMPANY. BEING OF THE VIEW THAT AS THE ASSESSEE HAD NOT RECEIVED ANY NEW TECHNOLOGY FROM ITS AE, THE TPO/DRP HELD A CONVICTION THAT THE ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 14 ASSESSEE WAS UNDER NO OBLIGATION TO PAY ANY ROYALTY TO THE AE BEYOND THE AFORESAID STIPULATED P ERIOD OF 7 YEARS . BACKED BY THEIR AFORESAID CONVICTION, THE T PO/DRP HAD DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT NIL. 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID OBSERVATION S OF THE LOWER AUTHORI TIES AND FOR A FAIR APPRECIATION OF THE ISSUE UNDER CONSIDERATION CULL OUT THE RELEVANT EXTRACT OF C LAUSE 11.1 OF THE AFORESAID AGREEMENT , DATED 23.01.1997 , WHICH READS AS UNDER : A RTICLE 11 - TERM AND TERMINATION 11.1 THIS AGREEMENT SHALL COMMENCE ON THE EFFECTIVE DATE AND CONSUMMATE AT THE END OF THE LATER OF (A) TEN (10) YEARS AFTER THE EFFECTIVE DATE, OR (B) SEVEN (7) YEARS AFTER THE COMMENCEMENT OF PRODUCTION DATE UNLESS OTHERWISE EXTENDED, CANCELLED OR TERMINATED U NDER THE PROVISIONS OF THIS AGREEMENT. THE OBLIGATIONS OF THE PARTIES FOR FURTHER TECHNOLOGY EXCHANGE UNDER ARTICLE 4 SHALL CEASE AT THE END OF THE SEVENTH (7TH) YEAR AFTER THE COMMENCEMENT OF PRODUCTION DATE. A. UPON FULLY MEETING ALL ITS OBLIGATIONS UNDER THIS AGREEMENT, LICENSEE SHALL HAVE A FULLY - PAID, NON - ASSIGNABLE, NON - EXCLUSIVE RIGHT, WITHOUT THE RIGHT TO SUB - LICENSE: TO PRACTICE, ONLY AT THE PLANT, THE PROCESS UTILIZING TECHNOLOGY RECEIVED PRIOR TO SUCH CONSUMMATION, AND TO USE AND SELL PRODUCT MADE THEREBY AND PRODUCT FORMULATIONS FORMULATED FROM SUCH PRODUCTS, IN INDIA AND EXPORT FOR SALE TO SUCH COUNTRIES OUTSIDE INDIA AS MAY BE MUTUALLY AGREED IN WRITING FROM TIME TO TIME BETWEEN LICENSOR AND LICENSEE. B. IN THE EVENT LICENSEE SUBSEQUENTLY WISHES TO RECEIVE FROM LICENSO ANY ADDITIONAL TECHNICAL INFORMATION RELATED TO THE PRODUCTION OF PRODUCT OR TO USE TECHNOLOGY RECEIVED UNDER THIS AGREEMENT OUTSIDE THE SCOPE O THE LICENSE GRANTED IN THIS ARTICLE 11.1 SUBSEQUENT TO CONSUMMATION OF THIS AGRE EMENT, IT SHALL FIRST NEGOTIATE A NEW TECHNOLOGY LICENSE AGREEMENT WITH LICENSOR. ON A PERUSAL OF THE AFORESAID CLAUSE, WE FIND THAT THE SAME INTER ALIA PLACES THE RESPECTIVE PARTIES AT A LIBERTY TO EXTEND THE SAME. AS PER THE AGREEMENT THE LICENSEE I.E THE ASSESSEE AFTER MEETING ALL ITS OBLIGATIONS UNDER THE ORIGINAL AGREEMENT , DATED 23.01.1997 WOULD STAND VESTED WITH A FULLY PAID , NON - ASSIGNABLE AND NON - EXCLUSIVE RIGHT, THOUGH WITHOUT ANY RIGHT TO SUB - LICENSE , AND WOULD BE ENTITLED TO PRACTICE, ONLY AT THE PLANT, THE PROCESS UTILIZING TECHNOLOGY THAT WAS RECEIVED PRIOR TO THE CONSUMMATION OF THE SAID AGREEMENT. IT WAS ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 15 THEREIN FURTHER PROVIDED THAT IF THE LICENSEE I.E THE ASSESSEE SUBSEQUENT TO CONSUMMATION OF THE AFORESAID AGREEMENT WISHED TO RECEIV E FROM THE LICENSOR I.E ITS AE , VIZ. DOW AGROSCIENCES BV ANY ADDITIONAL TECHNICAL INFORMATION RELATED TO THE PRODUCTION OF PRODUCT OR TO USE TECHNOLOGY RECEIVED UNDER THE AFORESAID AGREEMENT , IT WOULD BE REQUIRED TO NEGOTIATE A NEW TECHNOLOGY LICENSE AGREEMENT WITH THE AFORESAID LICENSOR. IT IS THE CLAIM OF THE LD. A.R THAT THE LOWER AUTHORITIES HAD ERRED IN DRAWING ADVERSE INFERENCES AS REGARDS THE ROYALTY PAID BY THE ASSESSEE TO ITS AE DURI NG THE YEAR UNDER CONSIDERATION, FOR THE REASON, THAT THEY WERE OF THE VIEW THAT AS THE ASSESSEE HAD NOT RECEIVED ANY NEW TECHNOLOGY FROM THE AE DURING THE YEAR , IT WAS , THUS , NOT OBLIGATED TO PAY ANY ROYALTY TO ITS AE . REBUTTING THE AFORESAID OBSERVATIONS OF THE LOWER AUTHORITIES , IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO VIDE HIS REMAND REPORT , DATED 14 TH , NOVEMBER, 2014 HAD ACCEPTED THAT THE ASSESSEE HAD RECEIVED TECHNICAL ASSISTANCE FROM ITS AE. HOWEVER, THE TPO OBSERV ED THAT AS THE TECHNICAL ASSIS TANCE RECEIVED BY THE ASSESSEE FROM ITS AE WAS GENERAL IN NATURE AND NO NEW TECHNOLOGY WAS RECEIVED FROM THE AE , THEREFORE, THE ASSESSEE WAS NOT OBLIGATE D TO PAY ANY ROYALTY TO ITS AFORESAID AE. IN OTHER WORDS, THE TPO WAS OF THE VIEW THAT IT WAS ONLY IF T HE ASSESSEE AFTER THE CONSUMMATION OF THE AFORESAID ORIGINAL AGREEMENT WISHED TO RECEIVE ANY NEW ADDITIONAL TECHNOLOG Y , IT WAS ONLY THEN REQUIRED TO ENTER INTO A NEW AGREEMENT WITH ITS AE . BACKED BY HIS AFORESAID OBSERVATION, THE TPO WAS OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE ONLY REIMBURSED THE EXPENSES FOR THE TECHNICAL ASSISTANCE RECEIVED FROM ITS AE AND WAS NOT REQUIRED TO PAY ANY ROYALTY. ON A PERUSAL OF THE AFORESAID C LAUSE 11.1 (B) , WE FIND THAT THE SAME PROVIDE S THAT IF THE ASSESSEE AFTER THE CONSUMMATION OF THE ORIGINAL AGREEMENT WISHED TO RECEIVE FROM THE LICENSOR I.E THE AE ANY ADDITIONAL TECHNICAL INFORMATION RELATED TO THE PRODUCTION OF PRODUCT OR TO USE TECHNOLOGY RECEIV ED UNDER THE TERMS OF THE SAID AGREEMENT , IT WOULD BE REQUIRED TO NEGOTIATE A NEW TECHNOLOGY LICENSE AGREEMENT WITH THE LICENSOR. HOWEVER, WE FIND THAT THE DRP HAD WRONGLY OBSERVED THAT AS PER C LAUSE 11.1 OF THE AFORESAID AGREEMENT THE NEW AGREEMENT WA S TO BE EXECUTED ONLY IF THE ASSESSEE COMPANY RECEIVED ANY ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 16 ADDITIONAL TECHNOLOGY. AS OBSERVED BY THE DRP, SINCE THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE OF HAVING RECEIVED ANY NEW TECHNOLOGY, THEREFORE, IT WAS NOT OBLIGATED TO PAY ANY ROYALTY TO ITS AE. S UM MING UP, THE C LAUSE 11.1 REQUIRED THE AE TO PROVIDE ADDITIONAL INFORMATION IN RELATION TO THE TECHNOLOGY ALREADY PROVIDED. IN THE BACKDROP OF THE OBSERVATION OF THE TPO IN HIS REMAND REPORT THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION GOT SOME KIND OF TECHNICAL SUPPORT FROM ITS AE, WE ARE UNABLE TO COMPREHEND AS TO ON WHAT BASIS IT HAS THEREAFTER BEEN CONCLUDED BY THE LOWER AUTHORITIES THAT NO NEW AGREEMENT WAS REQUIRED TO BE EXECUTED BY THE ASSESSEE WITH ITS AE . ADMITTEDLY, AFTER CONSUMMATION OF THE ORIGINAL AGREEMENT, DATED 23.01.1997 THE ASSESSEE WAS TO BE VESTED WITH A FULLY PAID, NON - ASSIGNABLE AND NON - EXCLUSIVE RIGHT , THOUGH WITHOUT ANY RIGHT TO SUB - LICENSE, AND WOULD BE ENTITLED TO PRACTICE, ONLY AT THE PL ANT, THE PROCESS UTILIZING TECHNOLOGY THAT WAS RECEIVED DURING THE PERIOD OF THE AFORESAID ORIGINAL AGREEMENT , DATED 23.01.1997 , AND THUS, REMAINED UNDER NO OBLIGATION TO PAY ANY ROYALTY TO ITS AE FOR USE OF THE AFORESAID TECHNOLOGY. BUT THEN, IF THE ASS ESSEE AFTER THE CONSUMMATION OF THE ORIGINAL AGREEMENT WISHED TO RECEIVE FROM THE LICENSOR I.E THE AE ANY ADDITIONAL TECHNICAL INFORMATION RELATED TO THE PRODUCTION OF PRODUCT OR TO USE TECHNOLOGY RECEIVED UNDER THE TERMS OF THE SAID AGREEMENT , IT WAS RE QUIRED TO NEGOTIATE A NEW TECHNOLOGY LICENSE AGREEMENT WITH THE LICENSOR. AT THE OUTSET, WE MAY HEREIN OBSERVE THAT WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CONSTRUING OF C LAUSE 11.1 OF THE ORIGINAL AGREEMENT BY THE DRP . AS OBSERVED BY US HEREINABOVE, IF THE ASSESSEE AFTER THE CONSUMMATION OF THE ORIGINAL AGREEMENT WISHED TO RECEIVE ANY ADDITIONAL TECHNICAL INFORMATION RELATED TO THE PRODUCTION OF THE PRODUCT OR TO USE THE TECHNOLOGY RECEIVED UNDER THE SAID AGREEMENT , THEN, IT WAS REQUIRED TO NEGOTIATE A NEW TECHNOLOGY LICENSE AGREEMENT WITH THE LICENSOR I.E THE AE. ON A PERUSAL OF THE REMAND REPORT OF THE TPO, WE FIND THAT HE HAD ACCEPTED THAT THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION RECEIVED TECHNICA L ASSISTANCE FROM ITS AE . WE MAY HEREIN OBSERVE THAT IT IS THE CLAIM OF THE ASSESSEE THAT AS IT DOES NOT CARRY ANY RESEARCH ACTIVITY IN RESPECT OF THE PRODUCT VIZ. CHLORPYRIFOS MANUFACTURED BY IT, ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 17 AND FOR THE TECHNOLOGY SUPPORT IS COMPLETELY DEPENDANT ON ITS AE WHICH CARRIES OUT THE RESEARCH ACTIVITY, THEREFORE, IN THE ABSENCE OF CONSTANT SUPPORT IN TERMS OF IMPROVEMENTS, NEW PROCESS AND LATEST UPDATES IT WOULD NOT HAVE BEEN ABLE TO MANUFACTURE AND SELL THE COMPETITIVE PRODUCTS. IN ORDER TO DRIVE HOME ITS CLAIM THAT IT HAD DURING THE YEAR UNDER CONSIDERATION RECEIVED ADDITIONAL TECHNICAL INFORMATION RELATED TO THE PRODUCTION OF THE PRODUCT OR TO USE THE TECHNOLOGY RECEIVED UNDER THE ORIGINAL AGREEMENT , THE ASSESSEE HAD FILED WITH THE DRP BY WAY OF ADDIT IONAL EVIDENCE A LETTER DATED 19.09.2014, ( PAGE 467 476 OF APB) DEMONSTRATING AT LENGTH THE AFORESAID FACTUAL POSITION. AS OBSERVED BY US HEREINABOVE, THE TPO AFTER PERUSING THE AFORESAID ADDITIONAL EVIDENCE HAD ACCEPTED THAT THE ASSES S EE HAD RECEIVED TECHNICAL ASSISTANCE FROM ITS AE. IN OUR CONSIDERED VIEW THE RECEIPT OF TECHNICAL ASSISTANCE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FROM ITS AE BEING RELATED TO THE PRODUCTION OF THE PRODUCT AND/OR USE OF THE TECHNOLOGY RECEIVED AS PER THE O RIGINAL AGREEMENT, AFTER ITS CONSUMMATION, SAFELY JUSTIF IED NEGOTIATION OF THE NEW TECHNOLOGY LICENSE AGREEMENT BETWEEN THE ASSESSEE AND THE LICENSOR I.E THE AE, AND THUS, THE PAYMENT OF ROYALTY AS PER THE TERMS THEREIN CONTEMPLATED. ALSO, WE FIND SUBS TANTIAL FORCE IN THE CLAIM OF THE LD. A.R THAT THE TPO/DRP HAD WRONGLY CONSTRUED THE CLAUSE 11.1(B) OF THE ORIGINAL AGREEMENT. ALL THAT CLAUSE 11.1(B) REQUIRED WAS RECEIPT OF ADDITIONAL TECHNICAL INFORMATION IN RELATION TO THE TECHNOLOGY ALREADY RECEIVED BY THE ASSESSEE AS PER THE ORIGINAL AGREEMENT. HOWEVER, THE LOWER AUTHORITIES HAD WRONGLY OBSERVED THAT THE AGREEMENT REQUIRED RECEIPT OF NEW TECHNOLOGY BY THE ASSES S EE FROM ITS AE. BE THAT AS IT MAY, WE FIND SUBSTANTIAL FORCE IN THE CLAIM OF THE ASS ESSEE THAT NOW WHEN ON THE BASIS OF THE SUPPLEMENTARY ROYALTY AGREEMENT, DATED 08 TH JUNE, 2005 THAT WAS MADE EFFECTIVE FROM 01 ST JUNE, 2004, I.E A.Y 2005 - 06 THE ASSESSEE HAD RECEIVED NECESSARY TECHNICAL KNOW - HOW AND ASSISTANCE FROM ITS AE, WHICH HAD CONS ISTENTLY BEEN ACCEPTED BY THE DEPARTMENT UPTO A.Y 2009 - 10, THEREFORE, IN RESPECT OF THE SAME AGREEMENT THE DEPARTMENT COULD NOT TAKE A CONTRARY STAND DURING THE YEAR UNDER CONSIDERATION AND THEREIN ASSAIL THE VERY EXISTENCE OF THE SAME. TO SUM UP, IT IS THE CLAIM OF THE ASSESSEE THAT NOW WHEN ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 18 THE DEPARTMENT HAD FOR THE PERIOD A.Y 2005 - 06 TO A.Y 2009 - 10 ACCEPTED THE TECHNICAL KNOW - HOW AND ASSISTANCE RECEIVED BY THE ASSESSEE FROM ITS AE, IT COULD NOT DURING THE YEAR IN QUESTION I.E A.Y 2010 - 11 ASSAIL THE VA LIDITY OF THE SAID AGREEMENT. ADMITTEDLY, THE AFORESAID SUPPLEMENTARY ROYALTY AGREEMENT, DATED 08 TH JUNE, 2005 (EFFECTIVE FROM 01 ST JUNE, 2004) HAD BEEN ACCEPTED BY THE DEPARTMENT FOR THE PERIOD A.Y 2005 - 06 TO A.Y 2009 - 10. APROPOS THE REJECTION OF THE SUPPLEMENTARY ROYALTY AGREEMENT WHICH REMAINS THE SAME DURING THE YEAR UNDER CONSIDERATION, WE ARE OF THE CONSIDERED VIEW THAT THE DEPARTMENT BY SO DOING IS TRYING TO APPROBATE AND REPROBATE THE SAME I.E QUOD APPROBO NO REPROBO , WHICH IS NOT PERMISSIBLE . ON THE BASIS OF OUR AFORESAID OBSERVATIONS, WE NOT BEING ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE VIEW TAKEN BY THE TPO/DRP THAT THE ASSESSEE AFTER CONSUMMATION OF THE ORIGINAL AGREEMENT WAS NOT OBLIGATED TO PAY ANY ROYALTY TO ITS AE, VACATE THE S AME. 14 . WE SHALL NOW DEAL WITH THE OBSERVATION OF THE TPO/DRP THAT THE APPROVAL PROVIDED BY THE RBI WOULD NOT CONSTITUTE A VALID CUP DATA , SINCE THE RBI DOES NOT TAKE INTO ACCOUNT THE TRANSFER PRICING PROVISION S TO DETERMINE THE APPROPRIATE RATES WHICH CAN BE CONSIDERED AS THE ARMS LENGTH PRICE FOR THE PAYMENT . AS OBSERVED BY US HEREINABOVE, ROYALTY PAID BY THE ASSESSEE HAD BEEN APPROVED BY THE SECRETARIAT OF INDUSTRIAL APPROVAL, MINISTRY OF INDUSTRY ( GOVERNMENT OF INDIA ) AND RBI, VIDE THEIR APPR OVALS, DATED 17 TH SEPTEMBER, 1996 AND 22 ND JANUARY, 1997, RESPECTIVELY. APART FROM THAT, THE ROYALTY PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION I.E @ 8% OF ITS NET EXPORT SALES WAS ALSO IN CONFORMITY WITH THE PRESS NOTE NO. 2 (2003 SERIES) THAT WAS ISSUED BY THE GOVERNMENT OF INDIA ON 24 TH JUNE, 2003. RULE 10B(2)(D) OF THE INCOME TAX RULES, 1962 INTER ALIA PROVIDES THAT FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE, THE LAWS AND GOVERNMENT ORDERS IN FORCE MUST BE CONSIDERED. FOR THE SAKE OF CLARITY THE RELEVANT EXTRACT OF RULE 10B IS REPRODUCED AS UNDER: (D) CONDITIONS PREVAILING IN THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INCLUDING THE GEOGRAPHICAL LOCATION AND SIZ E OF THE MARKETS, THE LAWS AND GOVE RNME NT ORDERS IN FORCE , COSTS OF LABOUR AND CAPITAL ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 19 IN THE MARKETS, OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPLETION AND WHETHER THE M ARKETS ARE WHOLESALE OR RETAIL. ACCORDINGLY, NOW WHEN THE ROYALTY PAID BY THE ASSESSEE TO ITS AE WAS APPROVED BY THE GOVERNMENT OF INDIA AND RBI BY THEIR RESPECTIVE APPROVAL S DATED 17 TH SEPTEMBER, 1996 AND 22 ND JANUARY, 1997, AND THE SAME WAS ALSO IN CONFORMITY WITH THE RATES THAT WERE PRESCRIBED IN THE PRESS NOTE NO. 2 (2003 SERIES) , DATED 24 TH JUNE, 2003 , THEREFORE, NO INFIRMITY COULD BE RELATED TO THE ASSESSEE IN CONSIDERING THE SAME FOR BENCHMA R KING THE ROYALTY PAID BY THE ASSESSEE TO ITS AE USING CUP METHOD. INSOFAR THE RELIANCE PLACED BY THE TPO ON THE JUDGMENT OF THE HONBLE HIGH COURT OF PUNJAB AND HARYANA IN T HE CASE OF COCA COLA INDIA INC. VS. ASST. CIT (2009) 309 ITR 194 (P&H) , WE FIND THAT THE SAID ORDER HAD BEEN RELEGATED BY THE HONBLE SUPREME COURT VIDE ITS ORDER, VIZ. M/S COCA COLA INDIA INC. VS. ADDL. CIT & ORS. [SLP (CIVIL) NO(S). 646/2009, DATED 25.1 0.2010] TO THE FILE OF THE LOWER AUTHORITIES BEFORE WHOM THE PROCEEDINGS WERE PENDING. ALSO, WE FIND, THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. SI GROUP INDIA LTD. (2019) 107 TAXMANN.COM 314 (BOM) AND CIT VS. SGS INDIA PVT. LTD. (2015) 94 CCH 338 (BOM) , HAD HELD , THAT WHERE THE PAYMENT MADE BY THE ASSESSEE TO ITS AE IS WITHIN THE LIMITS PRESCRIBED BY THE GOVERNMENT OF INDIA , THEN, THE SAME CAN BE CONSIDERED AS BEING AT ARMS LENGTH. IN FACT, WE FIND THAT THE DRP IN THE ASSESSEES OWN CAS E FOR A.Y 2012 - 13 BY RELYING ON THE JUDGEMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF SGS INDIA PVT. LTD. ( SUPRA) HAD THOUGH ACCEPTED THAT THE ISSUE AS REGARDS DETERMINING OF THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION WAS IN FAVOUR OF THE ASSESSEE, HOWEVER, ONLY FOR THE PURPOSE OF KEEPING THE ISSUE ALIVE IT HAD DECLINED TO ACCEPT THE SAID CLAIM OF THE ASSESSEE. ALSO , A SIMILAR VIEW HAD BEEN TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2004 - 05 TO A.Y 2009 - 10 , AND IT HAS BEEN HE LD THAT THE ROYALTY PAID BY THE ASSESSEE TO ITS AE HAVING BEEN APPROVED BY THE GOVERNMENT OF INDIA/RBI AND BEING AS PER THE RATES PRESCRIBED IN THE PRESS NOTE NO. 2 (2000 SERIES) WAS TO BE TAKEN AS BEING AT ARMS LENGTH. IN THE BACKDROP OF THE AFORESAID FA CTS, WE ADOPT A SIMILAR VIEW AND CONCLUD E THAT AS THE ROYALTY PAID DURING THE YEAR UNDER ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 20 CONSIDERATION BY THE ASSESSEE TO ITS AE @ 8% OF ITS NET EXPORTS WAS APPROVED BY THE GOVERNMENT OF INDIA AND RBI, AND ALSO, IN CONFORMITY WITH THE RATES PRESCRIBED IN PRESS NOTE NO. 2 (2003 SERIES), THUS , THE SAME ON THE SAID COUNT TOO WAS TO BE HELD AS BEING AT ARMS LENGTH. 15 . WE SHALL NOW ADVERT TO THE CONTENTIONS ADVANCED BY THE LD. A.R THAT THE LOWER AUTHORITIES COULD NOT HAVE QUESTIONED THE COMMERCIAL EXPEDIENCY OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE , AS THEIR JURISDICTION UNDER CHAPTER X OF THE ACT WAS RESTRICTED TO DETERMINATION OF THE A RMS L ENGTH P RICE BY FOLLOWING ONE OF THE METHODS PROVIDED IN SEC. 92C OF THE ACT . AS OBSERVED BY US HEREINABOVE, IT IS A MATTER OF FACT BORNE FROM THE RECORDS THAT THE TPO IN THE COURSE OF THE REMAND PROCEEDINGS HAD VIDE HIS REPORT DATED 14 TH NOVEMBER, 2014 ACCEPTED THAT THE ASSESSEE HAD RECEIVED TECHNICAL ASSISTANCE FROM IT S AE. ON A PERUSAL OF THE ORDER PASSED BY THE TPO, WE FIND THAT HE HAD WITHOUT FOLLOWING ANY OF THE METHODS PRESCRIBED IN SEC. 92C OF THE ACT DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO IT S AE AT N IL, FOR THE REASON, THAT AS PE R HIM THE ASSESSEE WAS NOT REQUIRED TO PAY ANY ROYALTY WITHOUT RECEIVING ANY NEW TECHNOLOGY FROM THE AE . IN OUR CONSIDERED VIEW THE TPO HAD CLEARLY TRAVERSED BEYOND SCOPE OF HIS JURISDICTION WHICH IS RESTRICTED TO DETERMINATION OF THE ARMS LENGTH PRICE OF THE TRANSACTION BY FOLLOWING ANY OF THE METHOD PROVIDED IN SEC. 92C OF THE ACT. ALSO , THE TPO IS NOT VESTED WITH ANY JURISDICTION TO QUESTION THE COMMERCIAL EXPEDIENCY OF THE TRANSACTION CARRIED OUT BY THE ASSESSEE WITH ITS AE , AND HIS JURISDICTION IS RESTRICTED TO DETERMIN ING OF THE ARMS LENGTH PRICE OF THE TRANSACTION . OUR AFORESAID VIEW IS FORTIFIED BY THE FOLLOWING JUDICIAL PRON OUNCEMENTS: (A) CIT VS. LEVER INDIA EXPORTS LTD. (78 TAXMANN.COM 88) (B) CIT VS. MERCK LTD. (73 TAXMANN.COM 23) (C) CIT VS. JOHNSON & JOHNSON (80 TAXMNN.COM 269) (D) CIT VS. RK CER AM ICS IN DIA P. LTD. (78 TAXMANN.COM 230 ) (E) FIRMENICH AROMATICS INDIA (P) LTD. VS. DCIT (96 TAXMANN.COM 649) IN THE BACKDROP OF THE AFORESAID FACTS, NOW WHEN THE TPO WITHOUT FOLLOWING ANY OF THE METHODS PRESCRIBED UNDER SEC. 92C OF THE ACT HAD DETERMINED THE ALP ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 21 OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT N IL, THE SAME , ON THE SAID COUNT ALSO IS LIABLE TO BE STRUCK DOWN. 16 . WE SHALL NOW DEAL WITH THE SUSTAINABILITY OF THE ALTERNATE TRANSFER PRICING ADJUSTMENT OF RS.1,37,52,774/ - THAT WAS MADE BY THE TPO BY SELECTING CUP METHOD AND CONSIDERING AN AGREEMENT ENTERED INTO BETWEEN TWO GROUP COMPANIES OF THE ASSESSEE I.E DOW UK K ING LYNN PLANT (DOW, UK) WITH DOW BV (DOW NETHERLAND) , WHEREBY DOW, UK HAD PAID ROYALTY @ 3% OF ITS DOMESTIC SALES AND @ 5% OF ITS EXPORT SALES FOR MANUFACTURE AND SALE OF CHLORPYRIFOS . ADOPTING THE AFORESAID COMPARABLE, THE TPO BY CONSIDERING THE ROYALT Y @ 5% OF THE EXPORT SALES AS BEING AT ARMS LENGTH HAD SUGGESTED AN ALTERNATE ADJUSTMENT OF RS.1,37,52,774/ - . AS PER THE TPO, THE AFORESAID ALTERNATE ADJUSTMENT WAS TO BE INVOKED IF THE PRIMARY ADJUSTMENT I.E DETERMINING OF THE ALP OF ROYALTY PAID BY THE ASSESSEE TO ITS AE AT NIL WAS DELETED BY THE APPELLATE AUTHORITIES. AS OBSERVED BY US HEREINABOVE, THE DRP HAD ALSO UPHELD THE DETERMINING OF THE ALTERNATE ADJUSTMENT OF THE ALP BY THE TPO. 17. WE HAVE DELIBERATED AT LENGTH ON THE AFORESAID ISSUE AND ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE DETERMINING OF THE ALTERNATE TRANSFER PRICING ADJUSTMENT OF 5% OF THE EXPORT SALES MADE BY THE TPO. ADMITTEDLY, THE AFORESAID TRANSACTION ACTED UPON BY THE TPO FOR BENCHMARKING THE ROYALTY PAID BY THE ASSESSEE TO ITS AE IS A TRANSACTION BETWEEN TWO AE S AND HENCE, THE SAME BY NO MEANS COULD HAVE BEEN REGARDED AS A VALID COMPARABLE. AS PER SEC. 92F(II) OF THE ACT, THE ARMS LENGTH PRICE MEANS A PRICE WHICH IS APPL IED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEE N PERSONS OTHER THAN ASSOCIATED ENTERPRISES IN UNCONTROLLED CONDITIONS. ALSO, RULE 10B(1)(A) PROVIDE S THAT FOR THE PURPOSE OF APPLYING CUP METHOD THE PRICE PAID BY THE ASSESSEE TO ITS AE IS TO BE COMPARED WITH AN UNCONTROLLED TRANSACTION. INSOFAR THE DEFIN ITION OF U NCONTROLLED TRANSACTION IS CONCERNED, THE SAME IS PROVIDED IN RULE 10A(AB), AS PER WHICH, THE SAME MEANS A TRANSACTION BETWEEN ENTERPRISE S OTHER THAN ASSOCIATED ENTERPRISE S , WHETHER RESIDENT OR NON - RESIDENT. AS THE AFORESAID TRANSACTION CONSIDERED BY THE TPO IS BETWEEN TWO AES , THE SAME, THUS, BEING ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 22 IN BLATANT VIOLATION OF THE MANDATE OF SEC.92F(II) R.W. RULE 10B(I)(A) COULD NOT HAVE BEEN CONSIDERED FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE . OUR AFORESAID VIEW IS SUPPORTED BY THE DECISION OF A THIRD MEMBER OF THE ITAT, MUMBAI IN THE CASE OF TECNIMONT ICB P. LTD. VS. ADDL. CIT ( 2012) 24 TAXMAN N .COM 28 (MUM) (TM) . IN THE SAID CASE, IT HAS BEEN HELD BY THE TRIBUNAL THAT A CONTROLLED TRANSACTION OR A TRANSACTION WITH AN AE CANNOT BE TAKEN AS A COMPARABLE FOR THE PURPOSE OF DETERMINING THE ARM S LENGTH PRICE OF AN INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH ITS AE . ACCORDINGLY, IN THE BACKDROP OF OUR AFORESAID DELIBERATIONS, WE HEREI N VACATE THE ALTERNATE TRANSFER PRICING ADJUSTMENT OF RS.1,37,52,774/ - MADE BY THE TPO. 18. WE SHALL NOW DEAL WITH THE SUSTAINABILITY OF THE ARMS LENGTH PRICE DETERMINED BY THE TPO IN THE COURSE OF THE REMAND PROCEEDINGS BY BENCHMARKING THE ROYALTY TRANSACTION ON THE BASIS OF AN AGREEMENT BETWEEN AARC CORPORATION AND CCT CORPORATION FOUND IN THE R OYALT STAT DATABASE. AS OBSERVED BY US HEREINABOVE, THE TPO IN T HE COURSE OF THE REMAND PROCEEDINGS BY S ELECTING AN AGREEMENT BETWEEN TWO PARTIES VIZ. AARC CORPORATION AND CCT CORPORATION FROM THE ROYALTSTAT DATABASE HAD IN HIS REMAND REPORT, DATED 13.11.2014 SUGGESTED TO THE DRP AN ALTERNATE ARMS LENGTH PRICE FOR THE ROYALTY PAID BY THE ASSESSEE TO ITS AE @ 2% OF THE EXPORT SALES. AS SUCH , THE TPO HAD PROPOSED AN ALTERNATE ADJUSTMENT IN THE EVENT THE DETERMINATION OF THE ARMS LENGTH PRICE BY HIM VIDE HIS ORDER PASSED U/S 92CA(3) DID NOT FIND FAVOUR WITH THE APPEL LATE AUTHORITIES. AS OBSERVED BY US HEREINABOVE, THE AFORESAID VIEW OF THE TPO WAS ALSO APPROVED BY THE DRP. 19 . THE LD. A.R HAD OBJECTED TO THE ADOPTION OF THE ROYALTY AGREEMENT BETWEEN THE AFORESAID THIRD PARTIES, VIZ. AARC CORPORATION AND CCT CORPORATIO N FOR BENCHMARKING OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE. IN ORDER TO DRIVE HOME HIS CLAIM THAT THE AFORESAID AGREEMENT COULD NOT BE CONSIDERED FOR THE PURPOSE OF BENCHMARKING , THE LD. A.R HAD DRAWN OUR ATTENTION TO THE AFORESAID AGREEMENT, P AG E 1983 OF APB. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 23 20 . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE OBJECTIONS RAISED BY THE LD. A.R AS REGARDS SELECTION OF THE AFORESAID AGREEMENT FOR BENCHMARKING THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AND FIND FAVOUR WITH THE SAME, FOR THE REASONS CULLED OUT AS UNDER : (I) ON A PERUSAL OF THE RECORDS , WE CONCUR WITH THE LD. A.R THAT WHAT HAS BEEN RELIED AND ACTED UPON BY THE TPO IS ONLY AN AMENDMENT AGREEMENT AND AS THE FULL AGREEMENT IS NEITHER AVAILA BLE IN THE R OYAL T STAT DATABASE N OR IN THE PUBLIC DOMAIN , THEREFORE, IN THE ABSENCE OF THE TERMS AND CONDITIONS BEING AVAILABLE THE SAME COULD NOT HAVE BEEN ADOPTED FOR BENCHMARKING THE PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. (II) AS PER THE AFORESAID AMENDMENT AGREEMENT ROYALTY AT THE RATE OF 2% WAS PAYABLE ONLY UP TO 31 ST DECEMBER, 2006 , AND FOR THE YEAR UNDER CONSIDERATION THE ROYALTY WAS PAYABLE AS PER C LAUSE C.9(B) , AS IT WAS NOT APPLICABLE DURING THE YEAR IN QUESTION BEFORE US. AS PER RULE 10B(4) , THE DATA TO BE USED FOR ANALYSING THE COMPARABILITY OF AN UNCONTROLLED TRANSACTION SHALL BE THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO BETWEEN THE ASSESSEE AND ITS AE . SINCE THE AGREEMENT SELECTED BY THE TPO WAS NOT IN FORCE DURING THE YEAR, THEREFORE, WE AGREE WITH THE LD. A.R THAT THE SAME COULD NOT HAVE BEEN CONSIDERED FOR THE PURPOSE OF BENCHMARKING THE PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. (III) AS THE AFORESAID AGREEMENT HAD BEEN ENTERED INTO BETWEEN THE PARTIES BASED IN USA, THEREFORE, ON ACCOUNT OF GEOGRAPHICAL DIFFERENCE BETWEEN THE AFORESAID AGREEMENTS THE SAME COULD NOT HAVE BEEN FEASIBLY ADOPTE D FOR THE PURPOSE OF COMPARABILITY. (IV) LASTLY, WE FIND THAT AS THE PRODUCTS LICENSE D UNDER THE AFORESAID AMENDMENT AGREEMENT ARE BIOLOGICAL GRANULAR MATRIX PEST CONTROL AS OPPOSED TO CHLORPYRIFOS IN THE CASE OF THE ASSESSEE, THEREFORE, ON ACCOUNT OF THE VARIANCE IN THE PRODUCTS ALSO THE AFORESAID AGREEMENT COULD NOT HAVE BEEN ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 24 SELECTED FOR THE PURPOSE OF COMPARABILITY. IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS, WE ARE OF THE CONSIDERED VIEW THAT THE BENCHMARKING OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE COULD NOT HAVE BEEN CARRIED OUT BY SELECTING THE AFORESAID ROYALTY AGREEMENT . ACCORDINGLY, WE VACATE THE ALTE RNATE BENCHMARKING THAT WAS SUGGESTED BY THE TPO IN THE COURSE OF THE REMAND PROCEEDINGS. 21 . ALTHOUGH WE HAVE HELD THAT AS THE ROYALTY PAID BY THE ASSESSEE TO ITS AE WAS APPROVED BY THE GOVERNMENT OF INDIA AND RBI, VIDE THEIR RESPECTIVE APPROVALS DATED 17 TH SEPTEMBER, 1996 AND 22 ND JANUARY, 1997, AND WAS ALSO IN CONFORMITY WITH THE RATES PRESCRIBED IN THE PRESS NOTE NO. 2 (2003 SERIES), DATED 24 TH JUNE, 2003, THEREFORE, NO INFIRMITY DID EMERGE FROM CONSIDERING OF THE SAME FOR BENCHMARKING THE ROYALTY PAID BY THE ASSESSEE TO ITS AE USING CUP METHOD , HOWEVER, FOR THE SAKE OF COMPLETENESS WE SHALL DEAL WITH THE SUSTAINABILITY OF THE SECONDARY ANALYSIS CARRIED OUT BY THE ASSESSEE FOLLOWING TNM METHOD. AS OBSERVED BY US HEREINABOVE , THE ASSESSEE HAD CARRIED OUT A SECONDARY ANALYSIS TO ASCERTAIN THE ARMS LENGTH PRICE OF THE ROYALTY PAID TO ITS AE BY APPLYING THE TNM METHOD . AS STATED BY THE ASSESSEE, SINCE THE ROYALTY TRANSACTION IS CLEARLY LINKED TO THE MANUFACTURING ACTIVITY, IT H AD, THEREFORE, ANALYZED THE SAME ALONGWITH THE MANUFACTURING TRANSACTION USING A COMBINED TRANSACTION APPROACH. AS THE MARGIN EARNED BY THE ASSESEE FROM THE MANUFACTURING ACTIVITY (AFTER CONSIDERING THE AMOUNT OF EXPENSE ON ROYALTY PAYMENT) WAS MUCH HIGHER ( 19.09%) THAN THE MARGINS EARNED BY THE OTHER COMPARABLES (10.30%), THE MARGIN EARNED FROM THE MANUFACTURING ACTIVITY WAS HELD TO HAVE MET THE ARMS LENGTH TEST. ACCORDINGLY, THE ASSESSEE HAD CONCLUDED THAT THE ROYALTY PAYMENT BEING THE OPERATING COST FOR THE MANUFACTURING SEGMENT WAS AT ARMS LENGTH. ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THEY HAD ACCEPTED THE BENCHMARKING ANALYSIS APPLYING THE TNM METHOD FOR ALL OTHER TRANSACTIONS. W E FIND THAT THE CUP METHOD CANNOT BE APPLIED AS THE TPO HAS NOT BEEN ABLE TO FIND A SIMILAR TRANSACTION WHICH COULD BE COMPARED WITH THE TRANSACTION OF THE ASSESSEE ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 25 COMPANY. AS REGARDS THE REMAINING METHODS , VIZ. RESALE PRICE METHOD (RPM), COST PLUS METHOD (CPM) AND PROFIT SPLIT METHOD (PSM), THE SAM E ARE NOT APPLICABLE TO THE AFORESAID TRANSACTION UNDER CONSIDERATION I.E PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. AS SUCH , WE ARE OF THE CONSIDERED VIEW THAT SINCE COMPARABLE TRANSACTIONS CANNOT BE FOUND UNDER THE CUP METHOD AND RPM, CPM & PSM ARE NO T APPLICABLE ON THE PREVALENT FACTS, THEREFORE, THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE HAD RIGHTLY BEEN BENCHMARKED BY THE ASSESSEE BY APPLYING THE TNM METHOD. OUR AFORESAID VIEW IS SUPPORTED BY THE FOLLOWING JUDICIAL PRONOUNCEMENT S , WHEREIN IT HAS BEEN HELD THE TRANSACTION OF PAYMENT OF ROYALTY BY AN ASSESSEE TO ITS AE CAN BE BENCHMARKED BY APPLYING TNM METHOD : - (I). GOOD YEAR INDIA LTD. VS. DCIT (2016) 70 TAXMANN.COM 67 (DELHI) (II). FRIGOGLASS INDIA P. LTD. VS. DCIT ( 2016) 68 TAXMANN. COM 370)(DELHI) (III) DCIT VS. AIR LIQUIDE ENGINEERING INDIA P. LTD. (2014) 43 TAXMANN.COM 299 (HYD). (IV). DAKSH BUSINESS PROCESS SERVICES P. LTD. VS. DCIT (2016) 72 TXAMANN.COM 44 (DELHI) IN THE BACKDROP OF OUR AFORESAID DELIBERATIONS, WE ARE OF THE CONSIDERED VIEW THAT AS THE NET MARGIN OF THE ASSESSEE COMPANY IS SHOWN TO BE HIGHER THAN THE MARGIN OF THE COMPARABLES, THEREFORE, THE ADJUSTMENT MADE BY TPO/DRP ON THE SAID COUNT ALSO COULD NOT HAVE BEEN SUSTAINED. 22 . ON THE BASIS OF OUR AFORESA ID OBSERVATIONS, WE HEREIN CONCLUDE THAT THE TRANSFER PRICING ADJUSTMENT MADE BY THE AO/TPO AS REGARDS THE ROYALTY PAID BY THE ASSESSEE COMPANY TO ITS AE VIZ. DOW AGROSCIENCES BV CANNOT BE SUSTAINED AND IS LIABLE TO BE VACATED. ACCORDINGLY, WE HEREIN DIREC T THE A . O TO DELETE THE TRANSFER PRICING ADJUSTMENT OF RS. 4,29,47,493/ - . THE GROUNDS OF APPEAL NOS. 1 TO 13 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. (B). TRANSFER PRICING ADJUSTMENT AS REGARDS THE INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE S : RS. 3,99,95,779/ - : 23 . WE SHALL NOW DEAL WITH THE GRIEVANCE OF THE ASSESSEE THAT THE LOWER ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 26 AUTHORITIES HAD ERRED IN MAKING A TRANSFER PRICING ADJUSTMENT OF RS.3,99,95,779/ - AS REGARDS THE INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES, VIZ. INFORMATION TECHNOLOGY SERVICES, FIN ANCIAL AND TREASURY SUPPORT SERVICES , FINANCIAL AND ACCOUNTING SUPPORT SERVICES AND LEGAL AND ADMINISTRATIVE SUPPORT SERVICES. AS OBSERVED BY US HEREINABO VE, THE ASSESSEE COMPANY HAD RECEIVED THE AFOREMENTIONED INTRA - GROUP SERVICES FOR WHICH ITS AES HAD RAISED A CHARGE UPON IT ON COST PLUS MARK UP BASIS. SINCE, THE ABOVE SERVICES RENDERED BY THE AES WERE USED BY ALL THE BUSINESS SEGMENTS OF THE ASSESSEE COM PANY , VIZ. MANUFACTURING SEGMENT, TRADING SEGMENT, INDENTING SEGMENT AND TECHNICAL SUPPORT SERVICES SEGMENT, THEREFORE , THE COST WAS ALLOCATED BY THE ASSESSEE TO ALL THE BUSINESS SEGMENT S O N A PRO RAT A BASIS CONSIDERING THE REVENUE OF EACH SEGMENT. AS THE AFORESAID TRANSACTION OF RECEIPT OF INTRA - GROUP SERVICES BY THE ASSESSEE FROM ITS AE S WAS CLOSELY CONNECTED WITH THE OTHER INTERNATIONAL TRANSACTIONS CARRIED OUT WITH THE AE S , THE ASSESSEE , THUS, HAD AGGREGATED THE SAME AND BENCHMARKED THE SAME BY APPLYING TNM METHOD FOR EACH SEGMENT. AS THE MARGIN OF THE ASSESSEE IN EACH SEGMENT WAS HIGHER THAN THOSE OF THE COMPARABLES, THEREFORE, THE TRANSACTIONS WERE TREATED BY THE ASSESSEE AS BEING AT ARMS LENGTH. 24. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR B OTH THE PARTIES IN CONTEXT OF THE AFORE SAID ISSUE OF BENCHMARKING THE I NTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD , AS WELL AS CONSIDERED THE JUDICIAL PRONOUNCEMENTS THAT HAVE BEEN PRESSED INTO SERVICE BY THEM TO DRIVE HOME THEIR RESPECTIVE CONTENTIONS. ON A PERUSAL OF THE RECORDS, WE FIND THAT THE TPO AT THE FAG END OF THE PROCEEDINGS ON 25 TH JANUARY, 2014 [I.E 5 DAYS BEFORE THE EXPIRY OF T HE TIME LIMIT FOR PASSING THE ORDER UNDER SEC. 92CA (3)] HAD CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF THE SERVICE S WHICH WERE RENDERED BY ITS AE S . AS THE ASSESSEE WAS ALLOWED INSUFFICIENT TIME , THEREFORE , IT HAD VIDE ITS LETTER DATED 29 TH JANUARY, 2014 SUBMITTED THE DETAILS AS REGARDS THE SERVICES RENDERED BY THE AES TO THE EXTENT THE SAME AT THE RELEVANT POINT OF TIME WERE ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 27 READILY AVAILABLE WITH IT . AFTER PERUSING THE DETAILS FURNISHED BY THE ASSESSEE, IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE SERVICES RENDERED BY ITS AE S ON THE BASIS OF SUPPORTING DOCUMENTS AND EVIDENCE WHICH WERE REQUIRE D TO BE MAINTAINED. ALSO, IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE RELATING TO DIRECT AND TANGIB LE BENEFITS THAT WAS RECEIVED BY IT FROM THE SERVICES RENDERED BY THE AES. BACKED BY HIS AFORESAID OBSERVATIONS, THE TPO DETERMINED THE A RM S LEN G TH PRICE OF THE AFORESAID SERVICES AT NIL. 25 . ON A PERUSAL OF THE ORDER OF THE DRP, WE FIND THAT THE ASSESSE E VIDE ITS LETTER DATED 19 TH SEPTEMBER, 2014 HAD IN ORDER TO SUBSTANTIATE THE AVAILING OF SERVICES FROM ITS AES ALONG WITH THE BENEFITS DERIVED FROM THE RENDERING OF THE SAME FILED ADDITIONAL EVIDENCE BEFORE THE PANEL . ON BEING CONFRONTED WITH THE AFORESAID DOCUMENTARY EVIDENCE, IT WAS SUBMITTED BY THE TPO IN HIS REMAND REPORT THAT THE EVIDENCE AND E - MAILS PRODUCED BY THE ASSESSEE WERE GENERAL IN NATURE AND WERE NOT COMMENSURATE TO THE AMOUNT OF EXPENDITURE THAT WAS C LAIMED IN TERMS OF THE COST BENEFIT ANALYSIS. APART FROM THAT, WE FIND, THAT IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE HAD NOT PROVIDED QUANTIFICATION OF THE SERVICES IN TERMS OF ACTUAL EXPENDITURE INCURRED AND THE BENEFITS DERIVED THERE FROM. IT WAS OB SERVED BY THE DRP THAT THE ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE IN THE FORM OF E - MAILS , TEMPLATES AND SCREEN SHOTS WERE GENERAL IN NATURE AND DID NOT PROVE THE AMOUNT OF CONTRIBUTION THE AES WOULD HAVE MADE BY RENDERING THE SERVICES TO THE ASSESS EE COMPANY . A LSO, IT WAS OBSERVED BY THE DRP THAT THE ASSESSEE HAD NOT SUBMITTED EVIDENCE RELATING TO THE COST THAT WAS INCURRED BY THE AES AND THE COMMENSURATE BENEFIT DERIVED THERE FROM ON THE BASIS OF WHICH IT COULD BE HELD THAT THE PAYMENT S MADE BY THE ASSESSEE WERE FOUND TO BE AT ARMS LENGTH. FURTHER, THE DRP REJECTED THE BENCHMARKING CARRIED OUT BY THE ASSESSEE BY APPLYING THE TNM METHOD AND UPHELD THE DETERMINATION OF THE ARMS LENGTH PRICE OF THE I NTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM I TS AES AT NIL BY THE TPO . 26 . ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES AND THE RECORDS BEFORE ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 28 US, WE FIND THAT IT IS A MATTER OF FACT BORNE FROM RECORD S THAT THE TPO BY CALLING UPON THE ASSESSEE ON 25 TH JANUARY, 2014 (5 DAYS BEFORE THE TIME LIMIT) TO FURNISH THE DETAILS AND EVIDENCE TO SUPPORT ITS CLAIM OF HAVING RECEIVED INTRA - GROUP SERVICES FROM THE AES, HAD AFFORDED INSUFFICIENT TIME FOR DOING THE NEEDFUL. I N THE BACKDROP OF THE AFORESAID FACT, THE AS SESSEE IN ORDER TO SUBSTANTIATE ITS CLAIM OF HAVING RECEIVED THE INTRA - GROUP SERVICES FROM ITS AES HAD VIDE ITS LETTER DATED 19 TH SEPTEMBER, 2014 FURNISHED ADDITIONAL EVIDENCE WITH THE DRP . ON A PERUSAL OF THE REMAND REPORT OF THE TPO DATED 13 TH NOVEMB ER, 2014, WE FIND THAT ALTHOUGH HE HAD ACCEPTED THAT SERVICES WERE RECEIVED BY THE ASSESSEE FROM ITS AES, HOWEVER, IT WAS OBSERVED BY HIM THAT THE BENEFIT WHICH WAS RECEIVED FROM AVAILING THE SAID SERVICES COULD NOT BE SHOWN BY THE ASSESSEE . DRP VIDE ITS O RDER DATED 26 TH NOVEMBER, 2014 THOUGH ACCEPTED THAT THE ASSESSEE COMPANY HAD RECEIVED SERVICES FROM ITS AES , BUT THEN, IT HELD THAT THE SERVICES SO RECEIVED WERE GENERAL IN NATURE. 27 . WE FIND THAT IN THE BACKDROP OF THE AFORESAID FACTS THE ASSESSEE IN ORDER TO FURTHER SUBSTANTIATE THE RECEIPT OF INTRA - GROUP SERVICES FROM ITS AES HAD VIDE ITS LETTER DATED 09 TH APRIL, 2015 SUBMITTED SUPPORTING DOCUMENTS AS ADDITIONAL EVIDENCE BEFORE US, VIZ. EMAILS, SCREENSHOT S , MANUALS, CPA CERTIFICATES ETC. IN OUR CONSIDERED VIEW, AS THE ASSESSEE WAS NOT AFFORDED SUFFICIENT OPPORTUNITY TO PRODUCE THE AFORESAID DOCUMENTARY EVIDENCE IN THE COURSE OF THE PROCEEDINGS BEFORE THE LOWER AUTHORITIES , AND THE S AME WOULD HAVE A BEARING ON THE ADJUDICATION OF THE ISSUE UNDER CONSIDERATION, THEREFORE, THE SAME IN ALL FAIRNESS MERITS TO BE ADMITTED. IT IS STATED BY THE LD. A.R BEFORE US THAT AFTER PERUSING SIMILAR EVIDENCE THAT WAS SUBMITTED BY THE ASSESSEE WITH THE TPO/DRP IN THE IMMEDIATELY SUCCEEDING YEARS I.E A.Y. 2011 - 12 AND A.Y. 2012 - 13 , THE SAID AUTHORITIES HAD CONCLUDED THAT SERVICES WERE RECEIVED BY THE ASSESSEE FROM THE AES. IT WAS FURTHER STATED BY THE LD. A.R THAT THE AES OF THE ASSESSEE COMPANY DURING TH E YEAR UNDER CONSIDERATION I.E A.Y 2010 - 11 HAD RENDERED SIMILAR SERVICES TO ITS OTHER GROUP COMPANIES IN INDIA , VIZ. DOW CHEMICAL INTERNATIONAL PVT. LTD AND R OHM & H AAS INDIA PVT. LTD. , AND HOLDING THE TRANSACTIONS AS ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 29 BEING AT ARMS LENGTH NO ADJUSTMENT WA S MADE BY THE DEPARTMENT IN THEIR HANDS. IN THE BACKDROP OF THE AFORESAID FACTS, IT WAS SUBMITTED BY THE LD. A.R THAT NOW WHEN THE DEPARTMENT HAD ACCEPTED THE RECEIPT OF THE SAME INTRA - GROUP SERVICES FROM THE SAME AES AS BEING AT ARMS LENGTH PRICE IN THE CASE OF THE OTHER GROUP COMPANIES IN INDIA , THEREFORE, IT COULD NOT BE ALLOWED TO TAKE A CONTRARY STAND WHILE FRAMING THE ASSESSMENT IN THE CASE OF THE ASSESSEE COMPANY. FURTHER, IT WAS SUBMITTED BY THE LD. A.R THAT SIMILAR SERVICES WERE RENDERED BY THE AES IN THE EARLIER ASSESSMENT YEARS, I.E A.Y 2006 - 07, A . Y 2007 - 08, A . Y 2008 - 09 AND A.Y 2009 - 10 , AND THE TPO IN HIS ORDERS PASSED FOR THE SAID RESPECTIVE YEARS UNDER SEC. 92 CA(3) OF THE ACT HOLDING THE SERVICES TO BE AT ARMS LENGTH HAD NOT MADE ANY ADJUSTMENT AS REGARDS THE SAME. I T WAS AVERRED BY THE LD. A.R THAT AS THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE AS IN COMPARISON TO THOSE OF THE PR ECEDING YEARS , THEREFORE, THE TPO WAS NOT ENTITLED TO ADOPT A CONTRARY VIEW AND DRAW ADVERSE INFERENCES DURING THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED BY THE LD. A.R THAT THE AES OF THE ASSESSEE COMPANY HAD FILED THEIR RETURNS OF INCOME AND HAD OFFE R ED THE AMOUNT RECEIVED FROM THE ASSESSEE COMPANY TO TAX , AND THE SAME HAD BEEN ACCEPTED BY THE DEPARTMENT. IN FACT, IT WAS SUBMITTED BY THE LD. A.R THAT IN CASE OF ONE OF THE AE , VIZ. DOW CHEMICAL SINGAP O RE PTE. LTD., THE ASSESSMENT AND TRANSFER PRICING O RDER WAS PASSED WITHOUT MAKING ANY ADJUS TMENT. ON THE BASIS OF THE AFORESAID FACTS, IT WAS THE CLAIM OF THE LD. A.R THAT ONCE THE DEPARTMENT HAD ACCEPTED THAT THE AMOUNTS RECEIVED BY THE AE S IS CHARGEABLE TO TAX AS FEES FOR SERVICES RENDERED AND HAD ASSES SED THE SAME AT THE RATE PROVIDED FOR IN THE RELEVANT ARTICLE IN THE TREATY DEALING WITH FEES FOR TECHNICAL SERVICES , THEN , IT WAS NOT OPEN TO THE DEPARTMENT TO TAKE A CONTRARY STAND AND CONTEND THAT NO SERVICES HAD BEEN RENDERED BY THE AES, SINCE THE IN COME RECEIVED BY THE AE S HAD ALREADY BEEN TAXED ON THE BASIS THAT THE SERVICES HAD BEEN RENDERED BY THEM. ADVERTING TO THE DETERMINING OF THE ARMS LENGTH PRICE OF THE I NTRA - GROUP S ERVICES, IT WAS STATED BY THE LD. A.R THAT THE LOWER AUTHORITIES HAD OBSERV ED THAT ON APPLICATION OF CUP METHOD THE ARMS LENGTH PRICE OF THE I NTRA - GROUP SERVICES WAS ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 30 DETERMINED BY THE TPO AT NIL. HOWEVER, IT WAS STATED BY THE LD. A.R THAT THE TPO WITHOUT BRINGING A SINGLE COMPARABLE ON RECORD , AND WITH OUT FOLLOWING ANY OF THE METHOD PROVIDED IN SEC. 92C OF THE ACT HAD DETERMINED THE ARMS LENGTH PRICE OF THE SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES AT N IL . REITERATING THE CONTENTION S THAT WERE ADVANCED WHILE ASSAILING THE DETERMINATION OF THE ALP OF ROYALTY PAID BY THE AS SESSEE TO ITS FOREIGN AE AT NIL BY THE TPO WITHOUT FOLLOWING ANY OF THE PRESCRIBED METHOD PROVIDED IN SEC. 92C, THE LD. A.R HAD ON THE SAME COUNT CHALLENGED THE VALIDITY OF THE JURISDICTION ASSUMED BY THE TPO FOR MAKING THE TRANSFER PRICING ADJUSTMENT REGA RDING THE INTRA - GROUP SERVICES RECEIVED FROM ITS AES . ON THE BASIS OF THE AFORESAID FACT S , IT WAS SUBMITTED BY THE LD. AR THAT THE TPO/DRP HAD NOT ONLY ERRED ON FACTS IN OBSERVING THAT NO SERVICES HAD BEEN RECEIVED BY THE ASSESSEE FROM ITS AES, BUT HAD ALS O WRONGLY ASSUMED JURISDICTION IN DETERMINING THE ARMS LENGTH PRICE OF THE I NTRA - GROUP S ERVICES AT N IL AS AGAINST THAT WORKED OUT BY THE ASSESSEE AT RS.3,99,95,779/ - . 28 . WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION AND FIND SUBSTANTIAL FORCE IN THE CONTENTION S ADVANCED BY THE COUNSEL FOR THE ASSESSEE. ON A PERUSAL OF T HE DOCUMENTARY EVIDENCE THAT HAS BEEN FILED BY THE ASSESSEE BEFORE US AS ADDITIONAL EVIDENCE , AS WELL THOSE THAT WERE FILED BEFORE THE LOWER AUTHORITIES, WE ARE OF THE CONSIDERED VIEW THAT SUBSTANTIAL EVIDENCE/ MATERIAL HAD BEEN PLACED ON RECORD BY THE ASSESSEE TO SUBSTANTIATE THE FACT THAT IT HAD DURING THE YEAR UNDER CONSIDERATION RECEIVED I NTRA - G ROUP S ERVICES FROM ITS AES. IN FACT, WE FIND THAT BOTH THE LOWER AUTHORITIES HAD ADMITTED THAT I NTRA - GROUP S ERVICES WERE RECEIVED BY THE ASSESSEE FROM ITS AES. ON A PERUSAL OF THE REMAND REPORT , DATED 13.11.2014, WE FIND THAT THE TPO HAD THOUGH ACCEPTED THAT SERVICES WERE RECEIVED BY THE ASSESSEE FROM ITS AES, BUT , HAD OBSERVED , THAT THE BENEFIT RECEIVED FROM AVAILING OF SUCH SERVICES HAD NOT BEEN SUBSTANTIATED BY THE ASSESSEE COMPANY. ADOPTING A SIMILAR VIEW, WE FIND THAT THE DRP IN ITS ORDER HAD HELD THAT THOUGH THE ASSESSEE HAD RECEIVED THE SERVICES FROM ITS AES, BUT THEN, THE SAME WERE GENERAL IN NATURE. IN THE BACKDROP OF THE AFORESAID FACTS, WE FIND THAT IT IS A MATTER OF AN ADMITTED FACT ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 31 BORNE FROM RECORDS THAT THE ASSESSEE HAD RECEIVED I NTRA - G ROUP S ERVICES FROM ITS AES DURING THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERED VIEW, NOW WHEN IT IS AN UNDISPUTE D FACT THAT SERVICES WERE RENDERED BY THE AE S TO THE ASSESSEE, IT WAS , THEN, OBLIGATORY ON THE PART OF THE TPO TO HAVE BENCHMARKED THE SAID SERVICES BY ADOPTIN G ANY OF THE METHOD PROVIDED IN SEC. 92C OF THE ACT. AS PER THE SETTLED POSITION OF LAW, WE ARE OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES HAD ERRED IN REJECTING THE BENCHMARKING ANALYSIS OF THE ASSESSEE ON THE GROUND THAT THE COST AND BENEFIT ANALY SIS WAS NOT DONE BY THE ASSESSEE , AND IT HAD NOT SHOWN AS TO WHAT BENEFIT WAS DERIVED BY IT FROM RENDITION OF THE AFORESAID SERVICES BY ITS AES. WE ARE AFRAID THAT THE AFORESAID OBSERVATIONS OF THE LOWER AUTHORITIES CANNOT BE SUSTAINED. I T IS NOT OBLIGATOR Y FOR THE ASSESSEE TO DEMONSTRATE AS TO WHETHER OR NOT THE INTERNATIONAL TRANSACTION HAD RESULTED INTO AN ECONOMIC BENEFIT OR NOT, FOR THE REASON, THAT THE SAME WOULD DEPEND ON VARIOUS FACTORS AND WOULD BE BEYOND THE CONTROL OF THE ASSESSEE. APART FROM THAT, WHETHER A BENEFIT IS OBTAINED IS A MATTER OF PERCEPTION FOR A BUSINESSMAN , AND IT IS NOT OPEN FOR THE REVENUE TO SIT IN JUDGMENT OVER THIS EXERCISE. ACCORDINGLY, WE ARE UNABLE TO SUBSCRIBE TO THE REJECTION OF THE BENCHMAR KING ANALYSIS BY THE TPO/DRP , FOR THE REASON , THAT THE ASSESSEE HAD FAILED TO DEMONSTRATE THE BENEFITS WHICH WERE DERIVED BY IT FROM RENDITION OF THE SERVICES BY ITS AES. OUR AFORESAID VIEW IS FORTIFIED BY THE FOLLOW ING JUDICIAL PRONOUNCEMENTS: ( A) CIT VS. LEVER INDIA EXPORTS (78 TAXMANN.COM 88) (BOM.) (B) PCIT VS. RAK CERAMICS (78 TAXMANN.COM 230) (AP) (C) AWB INDIA P . LTD. VS. DCIT (50 TAXMANN.COM 323) (D) EMERSON CLIMATE VS. DCIT (ITA NO. 2182/PUN/2013) (E) MERCK LTD. VS. DCIT (69 TAXMANN.COM 45) (F) SCHNEIDER ELECTRIC INDIA P. LTD. VS. DCIT (82 TAXMANN.COM 364) (G) SABIC INNOVATIVE PLASTICS INDIA P. LTD. VS. ACIT (88 TAXMANN.COM 810) ALSO, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE DETERMINATION OF THE ALP OF THE INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES AT NIL BY THE TPO WITHOUT FOLLOWING ANY OF THE METHOD PROVIDED IN SEC. 92C OF THE ACT. AS OBSERVED BY US AT LENGTH HEREINABOVE, THE TPO IS OBLIGATED TO ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 32 BENCHMARK THE ARMS LENGTH PRICE OF AN INTERNATIONAL TRANSACTION BY ADOPTING ANY OF THE PRESCRIBED METHOD CONTEMPLATED IN SEC. 92C OF THE ACT, FAILING WHICH THE ADJUSTMENTS MADE BY HIM CANNOT BE SUSTAINED IN THE EYES OF LAW. OUR AFORESAID VIEW IS FORTIFIED BY THE FOLLOWIN G JUDICIAL PRONOUNCEME NTS : (A) CIT VS. MERCK LTD. (74 TAXMANN.COM 23) (BOM) (B) CIT VS. LEVER INDIA EXPORTS (78 TAXMANN.COM 88) (BOM) (C) CIT VS. RAK CERMICS (78 TAXMANN.COM 230) (AP) (D) CIT VS. JOHNSON & JOHNSON (80 TAXMANN.COM 269) (BOM.) (E) FIRMENICH AROMATICS VS. DCIT (ITA NO. 2590/MUM/2017) ACCORDINGLY, IN THE BACKDROP OF OUR AFORESAID DELIBERATIONS, THE TRANSFER PRICING ADJUSTMENT CARRIED OUT BY THE TPO AS REGARDS THE I NTRA - G ROUP S ERVICES RECEIVED BY THE ASSESSEE FROM ITS AES CANNOT BE SUSTAINED AND IS LIABL E TO BE STRUCK DOWN. 29 . ALTHOUGH, WE HAVE STRUCK DOWN THE TRANSFER PRICING ADJUSTMENT IN RESPECT OF THE I NTRA - G ROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AE, HOWEVER, FOR THE SAKE OF COMPLETENESS WE SHALL DEAL WITH THE CLAIM OF THE ASSESSEE THAT NO SUCH ADJUSTMENT WAS EVEN OTHERWISE CALLED FOR ON THE MERITS OF THE CASE. I T IS THE CLAIM OF THE ASSESSEE THAT NOW WHEN THE I NTRA - G ROUP SERVICES RECEIVED BY ITS GROUP COMPANIES IN INDIA FROM THE AFOREMENTIONED AE S HAD BEEN HELD TO BE AT ARMS LENGTH PRICE, THEREFORE, A CONTRARY STAND IN THE CASE OF THE ASSESSEE COULD NOT HAVE BEEN DRAWN. ALTHOUGH, WE ARE PRINCIPALLY IN AGREEMENT WITH THE AFORESAID CLAIM OF THE ASSESSEE, HOWEVER, IN THE ABSENCE OF THE RELEVANT DETAILS WHICH WOULD REVEAL RENDITION OF SIMILAR S ERVICES BY THE AES TO THE OTHER GROUP COMPANIES IN INDIA AND THE TREATMENT OF THE SAME AS BEING AT ARMS LENGTH BY THE DEPARTMENT IN THE CASE OF THE SAID LATTER GROUP CONCERN S , WE ARE UNABLE TO SUMMARILY ACCEPTED THE SAID CONTENTION ON THE VERY FACE OF IT. 30 . FURTHER, WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THAT AS ITS AES HAD FILED THEIR RETURNS OF INCOME AND OFFER ED THE AMOUNT RECEIVED FROM THE ASSESSEE TO TAX , WHICH THEREAFTER HAD BEEN ACCEPTED BY THE DEPARTMENT, THEREFORE, ONCE THE SAID RECEIPTS ARE BROUGHT TO TAX IN THE HANDS OF THE AES AS FEES FOR SERVICES RENDERED AS PER THE RATES PROVIDED FOR IN THE RELEVANT ARTICLE IN THE TAX TREATY ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 33 DEALING WITH FEES FOR TECHNICAL SUPPORT SERVICES, THEN, IT WOULD NOT BE OPEN FOR THE DEPARTMENT TO TAKE A CONT RARY STAND IN THE CASE OF THE ASSESSEE , AND CONTEND , THAT NO SERVICE S HAD BEEN RENDERED BY THE AES, FOR THE REASON, THAT THE SAID INCOME RECEIVED BY THE AE S HAD BEEN TAXED ON THE BASIS THAT THE SERVICES WERE RENDERED BY THEM. AGAIN, WE THOUGH ARE PRINCIPAL LY IN AGREEMENT WITH THE AFORESAID CLAIM OF THE ASSESSEE, HOWEVER, WE FIND THAT THOUGH THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS IN RECEIPT OF I NTRA - G ROUP S ERVICES FROM ITS VARIOUS AES BUT DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM THAT RETURN S OF INCOME HAD BEEN FILED BY THE AE S AND THE AMOUNTS RECEIVED FROM THE ASSESSEE HAD BEEN BROUGHT TO TAX IN THEIR HANDS IS AVAILABLE BEFORE US ONLY IN RESPECT OF ONE SUCH AE , VIZ. DOW CHEMICAL PACIFIC SINGAPORE PTE. LTD. , AND NO SUCH DETAILS IN RESPECT OF T HE REMAINING AES HAD BEEN BROUGHT TO OUR NOTICE. ACCORDINGLY, IN THE BACKDROP OF THE FACT THAT COMPLETE DETAILS IN RESPECT OF THE REMAINING AES SUPPORTING THE AFORESAID CLAIM OF THE ASSESSEE ARE NOT THERE BEFORE US, WE , THEREFORE, REFRAIN FROM ADJUDICATING THE SAID CLAIM OF THE ASSESSEE. 31 . WE SHALL NOW DEAL WITH THE CONTENTION OF THE ASSESSEE THAT THE TNM METHOD IN THE BACKDROP OF THE PECULIAR FACTS OF THE CASE WAS RIGHTLY ADOPTED BY IT TO BENCHMARK THE TRANSACTION OF RECEIPT OF INTRA - GROUP S ERVICES. AS OBSERVED BY US HEREINABOVE, THE TPO/DRP HAD REJECTED THE APPLICATION OF TNM METHOD , FOR THE REASON , THAT AS IT WAS A SEPARATE AND DISTINCT TRANSACTION, THEREFORE, THE SAME COULD NOT HAVE BEEN AGGREGATED AND BENCHMARKED BY APPLYING THE AFORESAID METHOD. AFT ER REJECTING THE TNM METHOD APPLIED BY THE ASSESSEE, THE TPO/DRP HAD PURPORTED TO APPLY THE CUP METHOD WITHOUT PLACING ON RECORD ANY COMPARABLE TRANSACTION TO BENCHMARK THE SAID TRANSACTION. IN OUR CONSIDERED VIEW, THERE IS SUBSTANTIAL FORCE IN THE CLAIM O F THE ASSESSEE THAT AS ON THE ONE HAND , IN THE ABSENCE OF ANY COMPAR ABLE TRANSACTION THE CUP METHOD COULD NOT HAVE BEEN APPLIED , WHILE FOR ON THE OTHER HAND THE OTHER METHODS I.E RESALE PRICE METHOD (RPM) COST PLUS METHOD, (CPM) AND PROFIT SPLIT METHOD (PSM) ARE NOT APPLICABLE TO THE TRANSACTION UNDER CONSIDERATION, ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 34 THEREFORE, TNM WAS THE ONLY METHOD THAT COULD HAVE BEEN APPLIED TO BENCHMARK THE AFORESAID TRANSACTION. OUR AFORESAI D VIEW THAT IN CASE THE TPO IS NOT ABLE TO BRING COMPARABLES ON RECORD BY APPLYING CUP METHOD, THEN, THE TNM METHOD APPLIED BY THE ASSESSEE IS TO BE ACCEPTED IS SUPPORTED BY THE FOLLOW ING JUDICIAL PRONOUNCEMENTS: (A) KNORR BREMSE VS. ACIT (77 TAXMANN.C OM 101) (DELHI) (B) AWB INDIA P. LTD. VS. DCIT (50 TAXMANN.COM 323) (C) EMERSON CLIMATE VS. DCIT (ITA NO 2182/PUN/2013) (D) MERCK LTD. VS. DCIT (69 TAXMANN.COM 45) (E) TNS INDIA VS. ACIT (48 TAXMANN.COM 128) (F) SCHNEIDER ELECTRIC INDIA P. LTD. VS. D CIT (82 TAXMANN.COM 364) (G) SABIC INNOVATIVE PLASTIC INDIA P. LTD. VS. ACIT (88 TAXMANN.COM 810) APART FROM THA T, WE ARE ALSO IN AGREEMENT WITH THE CLAIM OF THE ASSESSEE THAT NOW WHEN THE TPO/DRP HAD ACCEPTED THE BENCHMARKING CARRIED OUT BY THE ASSESSEE BY APPLYING TNM METHOD INSOFAR OTHER TRANSACTION S ARE CONCERNED, THEREFORE, IT WAS NOT OPEN FOR THEM TO SUBJECT THE ROYALTY TRANSACTION TO A SEPARATE ANALYSIS. IN SUPPORT OF OUR AFORESAID OBSERVATION THAT ONCE TNM METHOD IS ACCEPTED FOR BENCHMARKING , THEN , THE TPO CANNOT PLUCK OUT ONE TRANSACTION AND SUBJECT IT TO S EPARATE ANALYSIS, RELIANCE IS PLACED ON THE FOLLOWI NG JUDICIAL PRONOUNCEMENTS : (A) MAGNETI MARELLI POWERTRAIN INDIA P. LTD. (75 TAXMANN.COM 213) (DEL.) (B) WOODWARD INDIA PVT. LTD (ITA NO. 916/DEL/2015) (PARA 5.3 - 5.5 PG. 1633 - 1635 OF COMPILATION) . ACCORDINGLY, IN THE BACKDROP OF OUR AFORESAID DELIBERATIONS , WE ARE OF THE CONSIDERED VIEW THAT IN LIGHT OF THE AFORESAID PECULIAR FACTS OF THE CASE, THE BENCHMARKING OF THE I NTRA - G ROUP S ERVICES RE CEIVED BY THE ASSESSEE FROM ITS AE S BY APPLYING TNM METHOD COULD NOT HAVE BEEN FAULTED WITH BY THE LOWER AUTHORITIES. 32 . WE MAY HEREIN OBSERVE THAT THE LD. D.R HAD STATED THAT MAJORITY OF THE PAYMENT S WERE MADE BY THE ASSESSEE TO A CHINESE AE, WHICH PRIMARILY COMPRISED OF A PAYMENT STATED TO HAVE BEEN MADE IN RESPECT OF SERVICES OF A PERSON, VIZ. MR. JEORGE LA ROZA WHO IS STATED TO BE RESPONSIBLE FOR OVERALL ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 35 COMMERCIAL PERFORMANCE OF THE REGION. IT WAS SUBM ITTED BY THE LD. D.R THAT THE ASSESSEE EXCEPT FOR FILING THE COPIES OF THE E - MAILS WHICH ONLY RE VEALED THE INVOLVEMENT OF THE AFORESAID PERSON IN MANAGERIAL SUPPORT SURVIVES, HAD HOWEVER, FAILED TO DEMONSTRATE THE BASIS O F THE COST TO THE AE. LD. A.R IN HI S REJOINDER SUBMITTED THAT MR. JEORGE LA ROZA WAS THE MANAGING DIRECTOR OF THE COMPANY AND NO PAYMENT WAS MADE TO HIM EXCEPT FOR THE COST ALLOCATED TO THE ASSESSEE BY ITS AE FOR THE SERVICES RENDERED. LD. A.R TOOK US THROUGH A LETTER DATED 1 ST OCOBER, 2014 FILED WITH THE TPO WHEREIN AT SR. NO 3 OF THE REPLY THE SAID FACT WAS BROUGHT TO HIS NOTICE. AS REGARDS THE NATURE OF SERVICES RENDERED BY THE AFORESAID PERSON ALONGWITH DOCUMENTS SUPPORTING THE FACTUM OF RECEIPT OF SERVICES, THE LD. A.R TOOK US THROUGH C ERTAIN E - MAIL CORRESPONDENCES BETWEEN MR. JEORGE LA ROZA AND SHR. SURESH RAMCHANDRAN, COUNTRY MA NAGER OF THE ASSESSEE COMPANY, PAGE 661 TO 679 OF APB. ALSO, OUR ATTENTION WAS DRAWN TO THE ADDITIONAL EVIDENCE THAT WAS FILED BY THE AS SESSEE WITH THE DRP, W HEREIN AT PAGE 469 - 470 THE DETAILS AS REGARDS THE PAYMENT MADE TO MR. JEORGE LA ROZA WERE STATED. 33. WE HAVE PERUSED THE DOCUMENTS TO WHICH OUR ATTENTION WAS DRAWN BY THE LD. A.R, AND FIND , THAT THE DETAILS AS REGARDS THE SERVICES RENDERED BY MR. JEORGE LA ROZA TO THE ASSESSEE, AS WELL AS THE BASIS OF THE CHARGE SO RAISED FORMED PART OF THE ADDITIONAL EVIDENCE THAT WAS FILED BY THE ASSESSEE WITH THE DRP. IN FACT, NO ADVERSE INFERENCE AS REGARDS THE AFORESAID PAYMENT MADE BY THE ASSESSEE COMPANY F INDS ANY MENTION IN THE ORDER OF THE DRP. IN OUR CONSIDERED VIEW, AS THERE IS NO JUSTIFIABLE REASON FOR DRAWING OF ANY ADVERSE INFERENCES AS REGARDS THE PAYMENTS THAT WERE MADE BY THE ASSESSEE TO THE AFORESAID PERSON, WE , THUS, NOT BEING ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE CLAIM OF THE LD. D.R THAT THERE WAS NO MATERIAL AVAILABLE ON RECORD WHICH WOULD JUSTIFY THE BASIS OF THE COSTS TO THE AE , REJECT THE SAME. 3 4 . IN THE BACKDROP OF OUR AFORESAID DELIBERATIONS , WE HEREIN VACATE THE TRANSFER PRICING ADJUSTMENT OF RS.3,99,95,779/ - MADE BY THE AO/TPO AS REGARDS THE I NTRA - G ROUP S ERVICES RECEIVED BY THE ASSESSEE FROM ITS AFORESAID ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 36 AES. THE GROUNDS OF APPEAL NO(S).14 TO 20 ARE PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 3 5 . AS REGARDS THE GROUND OF APPEAL NO. 22 PERTAINING TO ALLOWING OF SHORT CREDIT OF TDS BY THE A.O , IT WAS SUBMITTED BY THE LD. A.R THAT AS THE A.O HAD NOW GRANTED THE CREDIT FOR THE DEFICIT AMOUNT OF TDS, THEREFORE, THE SAID GROUND HAD BE EN RENDERED AS INFRUCT U OUS. IN THE BACKDROP OF THE AFORESAID CONCESSION OF THE LD. A.R THE GROUND OF APPEAL NO . 22 IS DISMISSED AS HAVING BEEN RENDERED AS INFRUCTOUS. 3 6 . AS REGARDS THE GROUND OF APPEAL NO. 21 AND GROUNDS OF APPEAL NOS. 23 TO 25 , WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THAT THE A.O HAD ERRED IN COMPUTING ITS TAX LIABILITY AND ALSO ALLOWED SHORT CREDIT OF ADVANCE TAX DEPOSITED . IT IS STATED BY THE ASSESSEE THAT A RECTIFICATION APPLICATION DATED 01.03.2016 HAD THEREAFTER BEEN F ILED WITH THE A.O SEEKING RECTIFICATION OF THE AFORE SAID MISTAKE S , WHICH , HOWEVER , IS PENDING AS ON DATE. IT IS STATED BY THE ASSESSEE THAT THE A.O MAY BE DIRECTED TO RECTIFY THE ERRORS IN LIGHT OF THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE. WE HA VE GIVEN A THOUGHTFUL CONSIDERATION AND IN THE BACKDROP OF THE AFORESAID CLAIM OF THE ASSESSEE, WE DIRECT THE A.O TO CONSIDER ITS AFORESAID GRIEVANCE S WHILE GIVING APPELLATE EFFECT TO OUR ORDER. THE GROUND OF APPEAL NO. 21 AND G ROUND S OF APPEAL NO ( S ) . 23 T O 25 ARE ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 3 7 . THE APPEAL OF THE ASSESSEE ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. IT(TP)A. NO.203/MUM/2016 (ASSESSMENT YEAR: 2011 - 12) 3 8 . WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y 2011 - 12 . THE ASSESSEE HAD ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL RAISED BEFORE US : ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 37 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, DOW AGROSCIENCES INDIA PRIVATE LIMITED (HEREINAFTER REFERRED TO AS THE APPELLANT') RESPECTFULLY CRAVES TO PREFER AN APPEAL AGAINST THE ORDER ISSUED BY THE DEPUTY COMMISSIONER OF INCOME - TAX, RANGE 14(1 )(1), MUMBAI [HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER'] UNDER SECTION 143(3) READ W ITH SECTION 144C(1 3) OF THE INCOME - TAX ACT, 1961 (THE ACT') IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE HON'BLE DISPUTE RESOLUTION PANEL - I, (H EREINAFTER REFERRED TO AS THE HON BLE DRP) ON THE FOLLOWING GROUNDS, EACH OF WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO/ ADDITIONA L COMMISSIONER OF INCOME - TAX (TRANSFER PRICING) - 1(2) ('TPO') ON FACT AND IN LAW HAS: GENERAL 1. ERRED IN ASSESSING THE TOTAL INCOME AT RS.83,85,77,731 AS AGAINST RETURNED INCOME OF RS.73,38,86, 264 COMPUTED BY THE APPELLANT. TRANSFER PRICING ADJUSTMENTS I. REFERENCE TO THE TPO 2. ERRED IN MAKING REFERENCE OF THE APPELLANT'S CASE TO THE TPO, WITHOUT APPLYING ITS MIND AND WITHOUT RECORDING ITS SATISFACTION, MERELY M AKING THE ENTIRE PROCESS OF REFERRING THE MATTER TO THE TPO AS INVALID. II. PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISE ('AE') GENERAL 3. ERRE D IN MAKING AN ADJUSTMENT OF RS. 5,90,82,363 TO THE TOTAL INCOME OF THE APPELLANT UNDER SECTION 92CA(3) OF THE ACT ON ACCOUNT OF DOWNWARD ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY. REJECTION OF ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT ERRED IN NOT CONSIDERING APPROVALS RECEIVED FROM SECRETARIAT OF INDUSTRIAL ASSISTANC E (SIA'), MINISTRY OF INDUSTRY AND RESERVE BANK OF INDIA (RBI') AS VALID CUP AND REJECTING THE CUP ANALYSIS UNDERTAKEN BY THE ASSESSEE AS A PRIMARY ANALYSIS. 4. ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT INCLUDING THE ANALYSIS USING THE COMBINED TRANSACTIONAL NET MARGIN METHOD ('TNMM'), IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME - TAX RULES, 1962 (THE RULES'), FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYA LTY. DISREGARDING THE COMMERCIAL BENEFITS RECEIVED FROM THE AE 5. ERRED IN NOT APPRECIATING THAT THE TECHNICAL KNOWHOW LICENSED BY THE AE TO THE ASSESSEE WAS AN INVALUABLE AND UNIQUE INTANGIBLE WHICH YIELDED COMMERCIAL BENEFITS TO THE APPELLANT. 6. ERRED IN NOT APPRECIATING THE COMMERCIAL RATIONALE OF THE ASSESSEE FOR EXTENDING THE TECHNOLOGY AGREEMENT AS WELL AS MAKING ROYALTY PAYMENT TO THE AE AND THEREBY ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 38 APPLYING BENEFIT TEST' TO HOLD NO BENEFIT IS RECEIVED BY THE APPELLANT. INAPPROPRIATELY CONSIDERED SUPPLEME NTARY AGREEMENT AS CUP 7. ERRED IN CONSIDERING THE SUPPLEMENTARY AGREEMENT BETWEEN HERO PRODUCTS AND COT CORPORATION AS COMPARABLE WITHOUT GIVING COGNIZANCE TO THE VALIDITY OF THE AGREEMENT AS WELL AS THE FACT THAT THE COMPLETE INFORMATION (I.E. THE MASTER AG REEMENT) IS NOT AVAILABLE. 8. WITHOUT PREJUDICE TO THE ABOVE , FAILED TO APPRECIATE THAT THE SUPPLEMENTARY AGREEMENT MENTIONS 2 DIFFERENT RATES (I.E. 2 PERCENT OF THE GROSS VALUE AND 5 PERCENT OF GROSS VALUE ON SALES BASED ON CUSTOMER) AND CONVENIENTLY CONSIDE RING THE LOWER ROYALTY RATE FOR MAKING TRANSFER PRICING ADJUSTMENT (I.E. 2 PERCENT). 9. WITHOUT PREJUDICE TO THE ABOVE , ERRED IN NOT CONSIDERING THE FACT THAT ROYALTY RATES AS MENTIONED IN THE AGREEMENT IS ON GROSS SALES VALUE AND THE RATES AT WHICH APPELLANT IS PAYING IS BASED ON NET SALES VALUE. INAPPROPRIATELY CONSIDERING CONTROLLED TRANSACTION AS CUP 10. ERRED IN COMPARING (ON WITHOUT PREJUDICE BASIS) THE RATE OF ROYALTY PAID BY THE APPELLANT TO ITS AE [DOW AGROSCIENCES B.V (DOW NETHERLANDS)], WITH A CONTROLLE D TRANSACTION I.E. THE ROYALTY RATE PAID BY DOW UK, ANOTHER AE OF THE APPELLANT, TO DOW NETHERLANDS. 12. ERRED IN NOT CONSIDERING THE DIFFERENCE IN DEFINITION OF NET SALES AS PER AGREEMENT BETWEEN APPELLANT AND DOW NETHERLANDS AND AS PER AGREEMENT BETWEEN DOW UK AND DOW NETHERLANDS 13. WITHOUT PREJUDICE TO THE ABOVE , ERRED IN IGNORING THE FACT THAT PRICES OF THE PRODUCTS IN UK IS M UCH HIGHER AS COMPARED TO INDIA, SINCE UK IS A DEVELOPED COUNTRY AND THEREBY THE ROYALTY PAID BY DOW UK CANNOT BE COMPARED WITH THE ROY ALTY PAID BY THE APPELLANT. 14. WITHOUT PREJUDICE TO THE ABOVE , ERRED IN IGNORING THE FACT THAT THERE EXISTS TECHNOLOGICAL DIFFERENCES BETWEEN THE TECHNOLOGY AVAILED BY THE APPELLANT AND DOW UK (WHERE THE TECHNOLOGY WAS OLD) AND HENCE THE SAME CANNOT BE TAKEN AS COMPARABLE. 15. WITHOUT PREJUDICE TO THE ABOVE , EVEN IF CONTROLLED RATE OF ROYALTY PAID BY DOW UK TO DOW NETHERLANDS IS TAKEN AS CUP, APPROPRIATE ADJUSTMENT SHOULD BE PROVIDED ON THE SAME TO ELIMINATE THE DIFFERENCES. VARIATION OF 5% FROM THE ARITHMETIC MEA N 16. THE BENEFIT OF PROVISO TO SECTION 92C (2) OF THE ACT SHOULD BE GRANTED TO THE APPELLANT, IF THE TRANSACTION PAYMENT OF ROYALTY IS WITHIN SUCH RANGE. II. PAYMENT TO AE S FOR AVAILING OF SERVICES GENERAL 17. ERRE D IN MAKING AN ADJUSTMENT OF RS.4,56,09, 104 TO TH E TOTAL INCOME OF THE APPELLANT UNDER SECTION 92CA(3) OF THE ACT ON ACCOUNT OF DOWNWARD ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION PERTAINING TO AVAILING OF SERVICES. REJECTION OF THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT 18. ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT INCLUDING THE ANALYSIS USING COMBINED TNMM, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 39 THE RULES, FOR THE DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRAN SACTION OF PAYMENT FOR AVAILING OF SERVICES. INAPPROPRIATE APPLICATION OF CUP METHOD TO BENCHMARK THE INTERNATIONAL TRANSACTION 19. ERRED IN NOT USING ANY OF THE FIVE METH OD PRESCRIBED UNDER SECTION 92C TO BENCHMARK THE INTERNATIONAL TRANSACTION OF PAYMENT FOR AVAILING OF SERVICES AND COMPUTING THE ARMS LENGTH PRICE BY APPLYING SOME AD - HOC MAN HOUR RATE TO SOME AD - HOC NUMBER OF MAN HOURS (SO CALLED CUP) WHICH IS NOT IN ACCORDANCE WITH THE TRANSFER PRICING REGULATIONS PRESCRIBED IN INDIA. BENEFIT TEST/ COMMERCIA L EXPEDIENCY FOR AVAILING SERVICES 20. FAILED TO APPRECIATE THE BUSINESS MODEL AND BUSINESS REALITIES OF THE APPELLANT AND THE ROLE OF ITS AE5 AND CONCLUDING THAT THERE IS NO SIGNIFICANT BENEFIT RECEIVED BY THE APPELLANT FROM THE SERVICES BEING RENDERED BY THE AES. NOT APPRECIATING THE EVIDENCES SUBMITTED FOR SERVICE AVAILED AND BENEFITS DERIVED 21. ERRED IN BRUSHING ASIDE THE ADDITIONAL EVIDENCES AS WELL AS SUBMISSION FILED DURING THE COURSE OF TRANSFER PRICING ASSESSMENT PROCEEDINGS TO PROVE EXISTENCE/ BENEFIT RECEIVED BY THE APPELLANT. 22. ERRED IN NOT CONSIDERING THE DETAILED COST ALLOCATION SHEET SUBMITTE D BY THE APPELLANT WHICH DEMONSTRATES THAT COST HAS BEEN ALLOCATED USING APPROPRIATE ALLOCATION KEYS AND THAT THE TRANSACTION IS AT ARMS LENGTH. NON - GRANTING OF CREDIT OF TAXES DEDUCTED AT SOURCE ('TDS' ) 23. ERRED IN NOT GRANTING CREDIT FOR TDS OF RS. 83 , 34 , 009 AS CLAIMED BY THE APPELLANT. LEVY OF INTEREST UNDER SECTION 234B OF THE ACT 24. ERRED IN LEVYING OF INTEREST UNDER SECTION 234B OF THE ACT OF RS. 2,19,76122. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT 25. ERRED IN LEVYIN G OF INTEREST UNDER SECTION 234C OF THE ACT OF RS. 37,787. 26. ERRED IN NOT APPRECIATING THAT INTEREST UNDER SECTION 234B WOULD BE APPLICABLE ONLY ON THE RETURNED INCOME AS AGAINST ON ASSESSED INCOME LEVIED BY THE LEARNED AO. LEVY OF IN TEREST UNDER SECTION 234D OF THE ACT 27. ERRED IN LEVYING O F INTEREST UNDER SECTION 234D OF THE ACT OF RS. 10,93 , 282. INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT 28. ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECT ION 274 READ WITH SECTION 271(1 )(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR WITHDRAW ANY OR ALL OF THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL SO AS TO ENABLE THE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING TO LAW. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 40 37 . BRIEFLY STATED, THE ASSESSEE COMPANY HAD FILE D ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 28.11.2011, DECLARING ITS TOTAL INCOME AT RS.73,38,86,264/ - . THE RETURN OF INCOME WAS INITIALLY PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT UNDER SEC. 143(2) OF THE ACT. 3 9 . OBSERVING THAT THE ASSESSEE COMPANY HAD DURING THE YEAR ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES (FOR SHORT AES), THE A.O MADE A REFERENCE UNDER SEC. 92CA(1) OF THE ACT TO THE ADDL. C IT, TRANSFER PRICING OFFICER - 1( 2 ), MUMBAI (HEREINAFTER REFERRED TO AS TPO) FOR DETERMINING THE ARMS LENGTH PRICE OF THE SAID TRANSACTIONS. THE TPO VIDE HIS ORDER PASSED UNDER SEC. 92CA(3), DATED 22.01.2015 MADE AN ADJUSTMENT OF RS. 10,46,91,467/ - TO THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE, AS UNDER: SR. NO. PARTICULARS AMOUNT 1. (A). ADJUSTMENT TO THE ALP OF ROYALTY PAID BY THE A SSESSEE TO ITS AE VIZ. DOW AGROS CIENCES BV BY COMPUTING THE SAME AT RS.NIL AS AGAINST THE ALP OF RS. 5,90,82,363/ - DETERMINED BY THE ASSESSEE. (B). ALTERNATIVELY, THE TPO BY APPLYING CUP METHOD HAD SUGGESTED ADJUSTMENT OF RS. 2,15,25,030/ - / - THAT WAS TO BE INVOKED ONLY IF THE PRIMARY ADJUSTMENT OF TAKING THE ALP OF THE ROYALTY TRANSACTION AT NIL WAS VACATED BY THE LOWER AUTHORITIES. (C). FURTHER, THE TPO ON THE BASIS OF THE REMAND PROCEEDINGS FOR A.Y 2010 - 11 HAD CARRIED OUT AN ALTERNATE BENCHMARKING BY SELECTING AN AGREEMENT BETWEEN TWO PARTIES, VIZ. AARC CORPORATION AND CCT CORPORATION (HERC AG REEMENT AS REFERRED BY THE TPO) FROM THE ROYALTYSTAT DATABASE AND HAD SUGGESTED A TRANSFER PRICING ADJUSTMENT AS REGARDS THE ROYALTY TRANSACTION @ 2% OF THE EXPORT SALES , THAT WAS TO BE INVOKED ONLY IF BOTH OF THE AFORESAID ADJUSTMENTS I.E THE PRIMARY ADJUSTMENT OF TAKING THE ALP OF THE ROYALTY TRANSACTION AT NIL AND ALTERNATIVE ADJUSTMENT OF TAKING THE ALP AT RS. 2,15,25,030/ - WERE VACATED BY THE LOWER AUTHORITIES . RS. 5,90,82,363/ - - - 2. ADJUSTMENT TO THE ALP ON ACCOUNT OF INTRA - GROUP SERVICES RS 4,56,09,104/ - TOTAL RS. 10,46,91,467/ - 40 . THE A.O AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 41 92CA(3), DATED 22.01.2015 PASSED A DRAFT ASSESSMENT ORDER UNDER SEC. 143(3) R.W.S 144C(1), DATED 11.02.2015 AND PROPOSED TO ASSESS THE INCOME OF THE ASSESSEE COMPANY AT RS. 83,85,77,730/ - . 4 1 . OBJECTING TO THE ADDITIONS PROPOSED BY THE A.O THE ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE RESOLUTION PANEL - 1, MUMBAI (FOR SHORT DRP). AS REGARDS THE TRANSFER PRIC ING ADJUSTMENT OF RS. 5,90,82,363/ - MADE BY THE TPO IN RESPECT OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE, VIZ. DOW AGROSCIENCES BV, NETHERLAND, IT WAS OBSERVED BY THE DRP THAT THE BENCHMARKING OF THE ROYALTY TRANSACTION WAS A RECU RRING ISSUE OVER THE YEARS. AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE, THE DRP WAS OF THE VIEW THAT NO INFIRMITY COULD BE RELATED TO THE DETERMINING OF THE ALP OF ROYALTY AT NIL BY THE TPO. FURTHER, IT WAS OBSERVED BY THE DRP THAT THE ISSUE OF BENCHMARKING OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE HAD EARLIER CAME UP BEFORE THE PANEL IN THE ASSESSEES CASE FOR THE PRECEDING YEAR S I.E A.Y. 2009 - 10 AND A.Y 2010 - 11 AND THE TRANSFER PRICING ADJUSTMENT MADE BY THE TP O WAS CONFIRMED. ALSO, IT WAS NOTICED BY THE DRP THAT INVOLVING IDENTICAL FACTS THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2003 - 04 IN ITA NO. 630/MUM/2011, DATED 30.01.2014 HAD PRINCIPALLY UPHELD THE APPLICATION OF THE APPROACH THAT WAS ADOPTED BY TH E LOWER AUTHORITIES FOR BENCHMARKING THE TRANSACTION OF PAYMENT OF ROYALTY. ACCORDINGLY, THE DRP UPHELD THE DETERMINING OF THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION BY THE TPO AT NIL. ADVERTING TO THE ALTERNATIVE VIEW OF THE TPO WHEREIN USING THE C UP METHOD HE HAD CONSIDERED THE ROYALTY PAID BY AN ANOTHER AE OF THE ASSESSEE, VIZ. DOW U.K TO DOW NETHERLANDS AS A COMPARABLE TRANSACTION , AND HAD DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT 5% OF THE NET EXPORT SALE S, AND SUGGESTED AN ALTERNATE ADJUSTMENT OF RS. 2,15,2 5 ,030/ - THAT WAS TO BE SUBSTITUTED IN CASE THE PRIMARY ADJUSTMENT OF TAKING THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION AT NIL WAS VACATED BY THE APPELLATE AUTHORITIES, THE DRP WAS OF THE VIEW THAT AS THE SAID OBSERVATION OF THE TPO WAS IN CONFORMITY WITH THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y 2003 - 04, ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 42 THEREFORE, NO INFIRMITY COULD BE RELATED TO THE SAME. FURTHER, THE TPO ON THE BASIS OF THE REMAND PROCEEDINGS FOR A.Y 2 010 - 11 HAD CARRIED OUT AN ALTERNATE BENCHMARKING BY SELECTING AN AGREEMENT BETWEEN TWO PARTIES, VIZ. AARC CORPORATION AND CCT CORPORATION (HERC AGREEMENT AS REFERRED BY THE TPO) FROM THE ROYALTYSTAT DATABASE AND HAD SUGGESTED A TRANSFER PRICING ADJUSTMEN T AS REGARDS THE ROYALTY TRANSACTION @ 2% OF THE EXPORT SALES. DRP RELYING ON THE ORDER PASSED BY THE PANEL IN THE IMMEDIATELY PRECEDING YEAR I.E A.Y 2010 - 11 ALSO APPROVED THE AFORESAID ALTERNATIVE TRANSFER PRICING ADJUSTMENT WHICH WAS TO BE INVOKED ONLY I F THE DETERMINATION OF THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION AT NIL AND RS. 2,15,25,030/ - (ALTERNATIVE ADJUSTMENT) WAS VACATED BY THE APPELLATE AUTHORITIES. ACCORDINGLY, ON THE BASIS OF HIS AFORESAID OBSERVATIONS , THE DRP UPHELD BOTH THE PRIMAR Y AND ALTERNATE TRANSFER PRICING ADJUSTMENTS MADE BY THE TPO PERTAINING TO THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. AS REGARDS THE OBJECTION REGARDING THE TRANSFER PRICING ADJUSTMENT OF RS. 4,56,09,104/ - MADE BY THE A.O REGARDING TH E INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES, IT WAS OBSERVED BY THE DRP THAT THE TPO HAD OBSERVED THAT THE SERVICES RECEIVED BY THE ASSESSEE WOULD BE 950 HOURS AND THE COST OF THE AE IN PROVIDING THE SERVICES WAS TO BE ESTIMATED @ RS. 3,00 0/ - PER HOUR. IT WAS OBSERVED BY THE DRP THAT THE TOTAL COST OF SERVICES BY APPLYING CUP METHOD WAS DETERMINED BY THE TPO AT RS. 28,50,000/ - . ACCORDINGLY, IT WAS NOTICED BY THE DRP THAT THE TPO HAD ALLOWED A DEDUCTION OF RS. 28,50,000/ - AND DISALLOWED THE BALANCE AMOUNT OF RS. 4,56,09,104/ - . AFTER EXHAUSTIVE DELIBERATIONS, THOUGH IT WAS OBSERVED BY TH E DRP THAT THE NUMBER OF HOURS OF SERVICE AND THE PER HOUR RATE OF THE SERVICES ESTIMATED BY THE TPO WERE TOO LOW CONSIDERING THE FACTS OF THE CASE, BUT, DESPI TE SO OBSERVING , IT UPHELD THE TRANSFER PRICING ADJUSTMENT MADE BY THE TPO AS REGARDS THE INTRA - G ROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES. 4 2 . AFTER RECEIVING THE ORDER PASSED BY THE DRP UNDER SEC. 144C(5), DATED 26.11.2015 , THE A.O FRAMED THE ASSESSMENT VIDE HIS ORDER PASSED UNDER SEC. 143(3) R.W.S 144C(13), DATED 08.12.2015 AND DETERMINED THE TOTAL INCOME OF ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 43 THE ASSESSEE COMPANY AT RS. 83,85,77,730/ - . 4 3 . AGGRIEVED, THE ASSESSEE HAS ASSAILED THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13), DATED 08.12.2015 IN APPEAL BEFORE US. 4 4 . AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE TPO/DR P HAD ERRED IN BENCHMARKING THE TRANSACTION OF ROYALTY PAID BY THE ASSESSEE TO ITS AE VIZ. DOW AGROSCIENCES BV, NETHERLAND, W E FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE CASE BEFORE US FOR THE AFOREMENTIONED YEAR I.E A.Y. 2011 - 12 , REMAINS THE SAME , AS WERE THERE IN THE CASE OF THE ASESEE FOR A.Y. 2010 - 11, THEREFORE, OUR ORDER THEREIN PASSED SHALL APPLY MUTATIS MUTANDIS FOR THE PURPOSE OF DISPOSAL OF THE SAID ISSUE. THE GROUNDS OF APPEAL NOS. 1 TO 16 ARE DISPOSSED OFF IN TERMS OF OUR AFORESAID OBSER VATIONS. 4 5 . WE SHALL NOW ADVERT TO THE CLAIM OF THE ASSESSEE THAT THE TPO/DRP HAD ERRED IN MAKING AN ADJUSTMENT OF RS. 4,56,09,104/ - AS REGARDS THE ARMS LEGNTH PRICE OF THE I NTRA - G ROUP S ERVICES THAT WERE RECEIVED BY THE ASSESSEE FROM ITS AES. ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE TPO VIDE HIS ORDER PASSED UNDER SEC. 92CA(3) HAD ACCEPTED THAT I NTRA - G ROUP SERVICES WERE RECEIVED BY THE ASSESSEE COMPANY FROM ITS AES. HOWEVER, FOR DETERMINING THE ARMS LENGTH PRICE OF THE AFORESAID TRANSACTION HE HAD ADOPTED AN AD HOC METHOD AND HELD THAT 950 HOURS WOULD HAVE BEEN SPENT BY THE AES FOR RENDERING THE AFORESAID SERVICES TO THE ASSESSEE COMPANY, AND THEREIN , TAKING A RATE OF RS.3000/ - PER HOUR HAD ESTIMATED THE ARMS LENGTH PRI CE OF THE AFORESAID INTRA GROUP SERVICES AT RS. 28,50,000/ - . 4 6 . ON OBJECTION S FILED BY THE ASSESSEE, THE DRP OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED SERVICES FROM ITS AES. ALTHOUGH, IT WAS OBSERVED BY THE DRP THAT CONSIDERING THE FACTS OF THE CA SE THE NUMBER OF HOURS AND THE RATE ESTIMATED BY THE TPO WERE TOO LOW, BUT THEN , DESPITE SO OBSERVING THE DRP MECHANICALLY CONFIRMED THE ADJUSTMENT MADE BY THE TPO IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 44 4 7 . WE FIND THAT EXCEPT FOR THE FAC T THAT THE TPO DURING THE YEAR UNDER CONSIDERATION HAD IN THE COURSE OF THE PROCEEDINGS BEFORE HIM ACCEPTED THAT THE ASSESSEE HAD RECEIVED I NTRA - G ROUP S ERVICES FROM ITS AES, AND THEREIN , ADOPTING AN AD HOC METHOD HAD WORKED OUT THE ARMS LENGTH PRICE OF THE AFORESAID TRANSACTION , THE OTHER FACTS INVOLVED IN CONTEXT OF THE SAID ISSUE PERTAINING TO DETERMINING OF THE ARMS LENGTH PRICE OF THE I NTRA - G ROUP S ERVICES DURING THE YEAR UNDER CONSIDERATION , REMAINS THE SAME , AS WERE THERE BEFORE US IN THE CASE OF THE ASSESSEE FOR A.Y. 2010 - 11. ACCORDINGLY, OUR ORDER THEREIN PASSED IN CONTEXT OF THE ISSUE PERTAINING TO DETERMINING OF THE ARMS LENGTH PRICE OF THE I NTRA - G ROUP S ERVICES IN THE CASE OF THE ASSESSEE FOR A.Y. 2010 - 11 SHALL APPLY MUTATIS MUTANDIS FOR THE PURPOSE OF DISPOSAL OF THE AFORE SAID ISSUE IN THE PRESENT APPEAL OF THE ASSESSEE FOR A.Y. 2011 - 12 . T HE GROUNDS OF APPEAL NOS. 17 TO 22 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 4 8 . AS REGARDS THE ASSESSEES CLAIM OF ALLOWING OF A SHORT CREDIT OF TDS OF RS.8,34,809/ - BY THE A.O, IT WAS STATED BY THE LD. A.R THAT AS THE CREDIT FOR THE DEFICIT AMOUNT OF TAX DEDUCTED AT SOURCE HAD BEEN ALLOWED TO THE ASSESSEE, THEREFORE, THE GROUND OF APPEAL NO. 23 IS RENDERED AS INFRUCTOUS . ACCORDINGLY, IN THE BACKDROP OF THE CONCESSION OF THE LD. A.R THE GROUND OF APPEAL NO. 23 IS DISMISSED AS HAVING BEEN REND ER ED AS INFRUCTUO U S. 4 9 . AS STATED BY THE LD. A.R, THE A.O HAD ERRED IN COMPUTING THE ASSESSEES TAX LIABILITY FOR THE YEAR UNDER CONSIDERATION. IT IS STATED BY THE ASSESSEE THAT FOR RECTIFYING THE AFORESAID MISTAKE AN APPLICATION UNDER SEC. 154, DATED 28.01.2016 WAS FILED WITH THE A.O , WHICH , HOWEVER , HAD NOT BEEN DISPOSED BY HIM TILL DATE . IT WAS SUBMITTED BY THE LD. A.R THAT THE A.O BE DIRECTED TO RECTIFY THE AFORESAID MISTAKE . WE HAVE GIVEN A THOUGHTFUL CONSIDERATION AND IN THE BACKDROP OF THE AFORESAID CLAIM OF THE ASSESSEE, WE DIRECT THE A.O TO CONSIDER ITS AFORESAID GRIEVANCE WHILE GIVING APPELLATE EFFECT TO OUR ORDE R . THE GROUNDS OF APPEAL NO ( S ) . 26 TO 28 ARE DISPOSED OFF IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 45 50 . THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. IT(TP)A. NO.1528/MUM/2017 (ASSESSMENT YEAR: 2012 - 13) 5 1 . WE SHALL NOW TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2012 - 13 . THE ASSESSEE HAD ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, DOW AGROSCIENCES INDIA PRIVATE LIMITED (HEREINAFTER REFERRED TO AS 'THE APPELLANT') RESPECTFULLY CRAVES TO PREFER AN APPEAL AGAINST THE ORDER ISSUED BY THE INCOME TAX OFFICER, RANGE 14(1)(3), MUMBAI [HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER'] UNDER SECTION 143(3) READ WITH SECTION 1440(13) OF THE INCOME - TAX ACT, 1961 ('THE ACT') IN PURSUANCE OF THE DIRECTIONS ISSUED BY THE HON'BLE DISPUTE RESOLUTION PANEL - I, (HEREINAFTER REFERRED TO AS THE HON'BLE DRP') ON THE FOLLOWING GROUNDS, EACH OF WHICH ARE WITHOUT PREJUDICE TO ONE ANOTHER. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO/ ADDITIONAL COMMISSIONER OF INCOME - TAX (TRANSFER PRICING) - 1(2) ('TPO') ON FACT AND IN LAW HAS: GENERAL 1. ERRED IN ASSESSING THE TOTAL INCOME AT RS.72,85,47,300 AS AGAINST RETURNED INCOME OF RS.60,98,52.220 COMPUTED BY THE APPELLANT. TRANSFER PRICING ADJUSTMENTS I. PAYMENT OF R OYALTY TO ASSOCIATED ENTERPRISE ('AE' ) GENERAL 2. ER RED IN MAKING AN ADJUSTMENT OF R S . 2,51,41,162 TO THE TOTAL INCOME OF THE APPELLANT UNDER SECTION 92CA(3) OF THE ACT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY. REJECTION OF ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT 3. ERRED IN NOT CONSIDERING APPROVALS RECEIVED FROM SECRETARIAT OF INDUSTRIAL ASSISTANCE ('SIA'), MINISTRY OF INDUSTRY AND RESERVE BANK OF INDIA ('RBI') AS VALID CUP AND REJECTING THE CUP ANALYSIS UNDERTAKEN BY THE ASSESSEE AS A PRIMARY ANALYSIS. 4. ERRED IN NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT US ING TRANSACTIONAL NET MARGIN METHOD ('TNMM'), IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME - TAX RULES, 1962 (THE RULES'), FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 46 DISREGARDING THE COMMERCIAL BENEFITS RECEIVED FROM THE AE 5. ERRED IN NOT APPRECIATING THAT THE TECHNICAL KNOWHOW LICENSED BY THE AE TO THE ASSESSEE WAS AN INVALUABLE AND UNIQUE INTANGIBLE 'WHICH YIELDED COMMERCIAL BENEFITS TO THE APPELLANT. 6. ERRED IN NOT APPR ECIATING THE COMMERCIAL RATIONALE OF THE ASSESSEE FOR EXTENDING THE TECHNOLOGY AGREEMENT AS WELL AS MAKING ROYALTY PAYMENT TO THE AE AND APPLYING 'BENEFIT TEST' TO HOLD NO BENEFIT IS RECEIVED BY THE APPELLANT. INAPPROPRIATELY CONSIDERED SUPPLEMENTARY AGREE MENT AS CUP 7. ERRED IN CONSIDERING THE SUPPLEMENTARY AGREEM ENT BETWEEN HERC PRODUCTS AND CC T CORPORATION AS COMPARABLE WITHOUT GIVING COGNIZANCE TO THE VALIDITY OF THE AGREEMENT AS WELL AS THE FACT THAT THE COMPLETE INFORMATION (I.E. THE MASTER AGREEMENT) IS NOT AVAILABLE. 8. WITHOUT PREJUDICE TO THE ABOVE, FAILED TO APPRECIATE THAT THE SUPPLEMENTARY AGREEMENT MENTIONS 2 DIFFERENT RATES (I.E. 2 PERCENT OF THE GROSS VALUE AND 5 PERCENT OF GROSS VALUE ON SALES, BASED ON CUSTOMER) AND CONVENIENTLY CONSIDERING THE LOWER ROYALTY RATE FOR MAKING TRANSFER PRICING ADJUSTMENT (I.E. 2 PERCENT). 9. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN NOT CONSIDERING THE FACT THAT ROYALTY RATES AS MENTIONED IN THE AGREEME NT IS ON GROSS SALES VALUE AND THE RATES AT WHICH APPELLANT IS PAYING IS BASED ON NET SALES VALUE. INAPPROPRIATELY CONSIDERING CONTROLLED TRANSACTION AS CUP 10. ERRED IN COMPARING THE RATE OF ROYALTY PAID BY THE APPELLANT TO ITS AE [DOW AGROSCIENCES B.V (DOW N ETHERLANDS)], WITH A CONTROLLED TRANSACTION I.E. THE ROYALTY RATE PAID BY DOW UK, ANOTHER AE OF THE APPELLANT, TO DOW NETHERLANDS. 11. ERRED IN NOT CONSIDERING THE DIFFERENCE IN DEFINITION OF 'NET SALES' AS PER AGREEMENT BETWEEN APPELLANT AND DOW NETHERLANDS A ND AS PER AGREEMENT BETWEEN DOW UK AND DOW NETHERLANDS 12. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN IGNORING THE FACT THAT PRICES OF THE PRODUCTS IN UK IS SIGNIFICANTLY DIFFERENT AS COMPARED TO INDIA, SINCE UK IS A DEVELOPED COUNTRY AND THEREBY THE ROYALTY PAI D BY DOW UK CANNOT BE COMPARED WITH THE ROYALTY PAID BY THE APPELLANT. 13. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN IGNORING THE FACT THAT THERE EXISTS TECHNOLOGICAL DIFFERENCES BETWEEN THE TECHNOLOGY AVAILED BY THE APPELLANT AND DOW UK (WHERE THE TECHNOLOGY W AS OLD) AND HENCE THE SAME CANNOT BE TAKEN AS COMPARABLE. 14. WITHOUT PREJUDICE TO THE ABOVE, EVEN IF CONTROLLED RATE OF ROYALTY PAID BY DOW UK TO DOW NETHERLANDS IS TAKEN AS CUP, APPROPRIATE ADJUSTMENT SHOULD BE PROVIDED ON THE SAME TO ELIMINATE THE DIFFERENC ES. 15. VIOLATION OF PRINCIPLES OF JUDICIAL DISCIPLINE ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 47 15. ERRED IN VIOLATING THE PRINCIPLES OF JUDICIAL DISCIPLINE IN NOT FOLLOWING THE ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF SGS INDIA PRIVATE LIMITED ITA NO 1807 OF 2013 WHEREIN IT HAS BEEN HELD THAT FIPB APPROVAL IS A VALID CUP FOR BENCHMARKING PURPOSES. II. PAYMENT TO AE'S FOR AVAILING OF SERVICES GENERAL 16. ERRED IN MAKING AN ADJUSTMENT OF AS 935.53,919 TO THE TOTAL INCOME OF THE APPELLANT UNDER SECTION 92CA(3) OF THE ACT ON ACCOUNT OF ADJUSTMENT IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF AVAILING OF SERVICES. REJ ECTION OF ECONOMIC ANALYSIS UNDERTAKEN BY THE ASSESSEE 17. ERRED IN REJECTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE ASSESSEE USING TNMM, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES AND INSTEAD USING HYPOTHETICAL CUP AS THE MOST APPROPRIATE METHOD, FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PAYMENT FOR AVAILING OF SERVICES FROM AES, WITHOUT PROVIDING ANY COGENT REASONS F OR THE SAME. 18. ERRED IN NOT APPRECIATING THAT SINCE COSTS IN RELATION TO THE SERVICES AVAILED BY THE ASSESSEE WERE ALLOCATED TO THE MANUFACTURING, TRADING AND INDENTING SEGMENT WHICH WERE AT ARM'S LENGTH (BASED ON NET LEVEL MARGIN ANALYSIS USING TN MM), THE T RANSACTION OF AVAILING SERVICES BY THE ASSESSEE FROM ITS AES ALSO MEETS THE ARM'S LENGTH TEST. INAPPROPRIATE APPLICATION OF CUP METHOD TO BENCHMARK INTERNATIONAL TRANSACTION 19. ERRED IN NOT USING ANY OF THE SIX METHODS PRESCRIBED UNDER SECTION 92C TO BENCHMAR K THE INTERNATIONAL TRANSACTION OF PAYMENT FOR AVAILING OF SERVICES. 20. WITHOUT PREJUDICE TO THE ABOVE, ERRED IN COMPUTING THE ARM'S LENGTH PRICE BY APPLYING SOME AD - HOC MAN HOUR RATE TO SOME AD - HOC NUMBER OF MAN HOURS (SO CALLED CUP) WHICH IS NOT IN ACCORDAN CE WITH THE TRANSFER PRICING REGULATIONS PRESCRIBED IN INDIA. 21. ERRED IN NOT APPRECIATING THE FACT THAT ONE OF THE BASIC CONDITIONS FOR APPLYING CUP IS AVAILABILITY OF THE PRICE OF THE SAME SERVICE IN UNCONTROLLED CONDITION AND IT CANNOT BE HYPOTHETICAL OR IMAGINARY VALUE BUT REAL VALUE ON WHICH SIMILAR TRANSACTIONS HAVE TAKEN PLACE. BENEFIT TEST/ COMMERCIAL EXPEDIENCY FOR AVAILING SERVICES 22. FAILED TO APPRECIATE THE BUSINESS MODEL AND BUSINESS REALITIES OF THE ASSESSEE AND THE ROLE OF ITS AES AND THEREBY STAT ING THAT NO SERVICE IS RECEIVED OR BENEFITS HAVE BEEN AVAILED BY THE ASSESSEE. IGNORED EVIDENCES SUBMITTED FOR SERVICE AVAILED AND BENEFITS DERIVED 23. ERRED IN STATING THAT THE SERVICES AVAILED BY THE ASSESSEE ARE IN THE NATURE OF SHAREHOLDER ACTIVITIES/ ROUTINE SERVICES WITHOUT APPRECIATING THE NATURE OF SERVICES AVAILED FROM AES AND BENEFITS DERIVED BY THE ASSESSEE THEREFROM. 24. ERRED IN NOT APPRECIATING THE EVIDENCES SUBMITTED TO SUBSTANTIATE SERVICES RECEIVED/ BENEFITS DERIVED/ BASIS OF ALLOCATION OF COST S AND DISREGARDED THE SAME WITHOUT GIVING ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 48 ANY COGENT REASONS. LEVY OF INTEREST UNDER SECTION 234B OF THE ACT 25. ERRED IN LEVYING OF INTEREST OF AS. 2,1844,093 UNDER SECTION 234B OF THE ACT. LEVY OF INTEREST UNDER SECTION 234C OF THE ACT 26. ERRED IN LEVYING OF INTEREST OF AS. 19,43,855 UNDER SECTION 234C OF THE ACT. INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT 27. ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER SECTION 274 READ WITH SECTION 271 (1)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR WITHDRAW ANY OR ALL OF THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL SO AS TO ENABLE THE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THE APPEAL ACCORDING TO LAW. 5 2 . BRIEFLY STATED, THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR A.Y. 201 2 - 1 3 ON 29.11.2012 , DECLARING ITS TOTAL INCOME AT RS. 61,00,92,220/ - . THE RETURN OF INCOME WAS THEREAFTER REVISED BY THE ASSESSEE ON 10.02.2014, AT AN INCOME OF RS. 60,98,52,220/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 5 3 . OBSERVING THAT THE ASSESSEE COMPANY HAD DURING THE YEAR ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES (FOR SHORT AES), THE A.O MADE A REFERENCE UNDER SEC. 92CA(1 ) OF THE ACT TO THE ADDL. CIT, TRANSFER PRICING OFFICER - 1( 2 ), MUMBAI (HEREINAFTER REFERRED TO AS TPO) FOR DETERMINING THE ARMS LENGTH PRICE OF THE SAID TRANSACTIONS. THE TPO VIDE HIS ORDER PASSED UNDER SEC. 92CA(3), DATED 11.01.2016 MADE AN ADJUSTMENT OF RS. 11,86,95,081/ - TO THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE, AS UNDER: SR. NO. PARTICULARS AMOUNT 1. (A). ADJUSTMENT TO THE ALP OF ROYALTY PAID BY THE A SSESSEE TO ITS AE VIZ. DOW AGROS CIENCES BV BY COMPUTING THE SAME AT RS.NIL AS AGAINST THE ALP OF RS. 2,51,41,162/ - DETERMINED BY THE ASSESSEE. (B). ALTERNATIVELY, THE TPO BY APPLYING CUP METHOD HAD SUGGESTED ADJUSTMENT OF RS. 89,91,752/ - THAT WAS TO BE INVOKED ONLY IF THE PRIMARY ADJUSTMEN T OF TAKING THE ALP OF THE ROYALTY TRANSACTION AT NIL WAS VACATED BY THE LOWER AUTHORITIES. RS. 2,51,41,162/ - ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 49 (C). FURTHER, THE TPO ON THE BASIS OF THE VIEW TAKEN BY HIS PREDECESSOR IN THE CASE OF THE ASSESSEE FOR A.Y 2011 - 12 HAD ON THE BASIS OF AN ALTERNATE BENCHMARKING BY SELECTING AN AGREEMENT BETWEEN TWO PARTIES, VIZ. AARC CORPORATION AND CCT CORPORATION (HERC AGREEMENT AS REFERRED BY THE TPO) FROM THE ROYALTYSTAT DATABASE AND SUGGESTED A TRANSFER PRICING ADJUSTMENT AS REGARDS THE ROYALTY TRANSACTION @ 2% OF THE EXP ORT SALES , THAT WAS TO BE INVOKED ONLY IF BOTH OF THE AFORESAID ADJUSTMENTS I.E THE PRIMARY ADJUSTMENT OF TAKING THE ALP OF THE ROYALTY TRANSACTION AT NIL AND ALTERNATIVE ADJUSTMENT OF TAKING THE ALP AT RS. 2,15,25,030/ - WERE VACATED BY THE LOWER AUTHORITI ES . 2. ADJUSTMENT TO THE ALP ON ACCOUNT OF INTRA - GROUP SERVICES RS 9,35,53,919/ - TOTAL RS. 11,86,95,081/ - 5 4 . THE A.O AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 11.01.2016 PASSED A DRAFT ASSESSMENT ORDER UNDER SEC. 143(3) R.W.S 144C(1), DATED 14.03.2016 AND PROPOSED TO ASSESS THE INCOME OF THE ASSESSEE COMPANY AT RS. 72,85,47,300/ - . 5 5 . OBJECTING TO THE ADDITIONS PROPOSED BY THE A.O THE ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE RESOLUTION PANEL - 1 (WZ) , MUMBAI (FOR SHORT DRP). AS REGARDS THE TRANSFER PRICING ADJUSTMENT OF RS. 2,51,41,162/ - MADE BY THE TPO IN RESPECT OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE, VIZ. DOW AGROSCIENCES BV, NETHERLAND, IT WAS OBSERVED BY THE DRP THAT THE BENCHMARKING OF THE ROYALTY TRANSACTION WAS A RECURRING ISSUE OVER THE YEARS. AFTER DELIBERATING ON THE CONTENTIONS ADVANCED BY THE ASSESSEE, THE DRP WAS OF THE VIEW THAT NO INFIRMITY COULD BE RELATED TO THE DETERMINING OF THE ALP OF ROYALTY AT NIL BY THE TPO. FURTHER, IT WAS OBSERVED BY THE DRP THAT THE ISSUE OF BENCHMARKING OF THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE HAD EARLIER CAME UP BEFORE THE PANEL IN THE ASSESSEES CASE FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y. 2011 - 12 AND THE TRANSFER PRICING ADJUSTMENT MADE BY THE TPO WAS CONFIRMED. ALTHOUGH IT WAS OBSERVED BY THE DRP THAT THE ISSUE AS REGARDS DETERMINATION OF ARMS LENGTH PRICE OF ROYALTY PAID BY THE ASSESSEE TO ITS AE WAS COVERED BY TH E ORDER OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF SGS INDIA. P. LTD. (SUPRA), HOWEVER, AS THE DEPARTMENT ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 50 PROPOSED TO FILE A SLP, AND ALSO, AS NO RIGHT OF APPEAL AS AGAINST THE DIRECTIONS OF THE DRP WAS VESTED WITH THE DEPARTMENT, THEREFORE, IN ORD ER TO KEEP THE MATTER ALIVE AND SAFEGUARD THE INTEREST OF THE REVENUE THE ADJUSTMENT MADE BY THE TPO WAS TO BE UPHELD. ALSO, THE ALTERNATIVE VIEW OF THE TPO WHEREIN USING THE CUP METHOD HE HAD CONSIDERED THE ROYALTY PAID BY AN ANOTHER AE OF THE ASSESSEE, V IZ. DOW U.K TO DOW NETHERLANDS AS A COMPARABLE TRANSACTION AND DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY PAID BY THE ASSESSEE TO ITS AE AT THE RATE OF 5% OF THE NET EXPORT SALES , AND HAD SUGGESTED AN ALTERNATE TRANSFER PRICING ADJUSTMENT OF THE ROYA LTY PAID BY THE ASSESSEE TO ITS AE AT RS. 1,61,49,411/ - THAT WAS TO BE SUBSTITUTED IN CASE THE PRIMARY ADJUSTMENT OF TAKING THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION AT NIL WAS VACATED BY THE APPELLATE AUTHORITIES, THE DRP ALSO DID NOT DISLODGE THE SAID OBSERVATION OF THE TPO. FURTHER, THE TPO RELYING ON THE ORDER PASSED BY HIS PREDECESSOR FOR A.Y 2011 - 12 HAD CARRIED OUT AN ALTERNATE BENCHMARKING BY SELECTING AN AGREEMENT BETWEEN TWO PARTIES, VIZ. AARC CORPORATION AND CCT CORPORATION (HERC AGREEMEN T AS REFERRED BY THE TPO) FROM THE ROYALTYSTAT DATABASE AND HAD SUGGESTED A TRANSFER PRICING ADJUSTMENT AS REGARDS THE ROYALTY TRANSACTION @ 2% OF THE EXPORT SALES. DRP RELYING ON THE ORDER PASSED BY THE PANEL IN THE IMMEDIATELY PRECEDING YEAR I.E A.Y 2011 - 12 ALSO APPROVED THE AFORESAID ALTERNATIVE TRANSFER PRICING ADJUSTMENT WHICH WAS TO BE INVOKED ONLY IF THE DETERMINATION OF ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION AT NIL AND RS. 1,61,49,411/ - (ALTERNATIVE ADJUSTMENT) WAS VACATED BY THE APPELLATE AU THORITIES. ACCORDINGLY, ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE DRP UPHELD BOTH THE PRIMARY AND ALTERNATE TRANSFER PRICING ADJUSTMENTS MADE BY THE TPO PERTAINING TO THE TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS AE. AS REGARDS THE OBJE CTION REGARDING THE TRANSFER PRICING ADJUSTMENT OF RS. 9,35,53,919/ - MADE BY THE A.O REGARDING THE INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES, IT WAS OBSERVED BY THE DRP THAT THE ISSUE WAS SQUARELY COVERED BY THE ORDER OF THE PANEL IN THE A SSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR I.E A.Y 2011 - 12 . IT WAS OBSERVED BY THE DRP THAT THE TOTAL COST OF SERVICES BY APPLYING CUP WAS DETERMINED BY THE TPO AT RS. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 51 28,50,000/ - . ACCORDINGLY, IT WAS NOTICED BY THE DRP THAT THE TPO HAD ALLOWED A DEDUCTION OF RS. 28,50,000/ - AND DISALLOWED THE BALANCE AMOUNT OF RS . 9,35,53,919/ - . RELYING ON THE ORDER OF THE PANEL FOR A.Y 2011 - 12, THE DRP UPHELD THE TRANSFER PRICING ADJUSTMENT MADE BY THE TPO AS REGARDS THE I NTRA - G ROUP SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES. 5 6 . AFTER RECEIVING THE ORDER PASSED BY THE DRP UNDER SEC. 144C(5), DATED 13.12.2016 , THE A.O FRAMED THE ASSESSMENT UNDER SEC. 143(3) R.W.S 144C(13), DATED 24.01.2017 AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE COMPANY AT RS. 72,85,47,300/ - . 5 7 . AGGRIEVED, THE ASSESSEE HAS ASSAILED THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13), DATED 24.01.2017 IN APPEAL BEFORE US. 5 8 . AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE TPO/DR HAD ERRED IN BENCHMARKING THE TRANSACTION OF ROYALTY PAID BY THE ASSESSEE TO ITS AE VIZ. DOW AGROSCIENCES BV, NETHERLAND, WE FIND THAT AS THE FACTS AND THE ISSUE INVOLVED IN THE CASE BEFORE US FOR THE AFOREMENTIONED YEAR I.E A.Y. 201 2 - 13 REMAINS THE SAME A S WERE THERE IN THE CASE OF THE ASSESSEE FOR A.Y. 2010 - 11, THEREFORE, OUR ORDER THEREIN PASSED SHALL APPLY MUTATIS MUTANDIS FOR THE PURPOSE OF DISPOSAL OF THE SAID ISSUE. THE GROUNDS OF APPEAL NOS. 1 TO 1 5 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS . 5 9 . WE SHALL NOW ADVERT TO THE CLAIM OF THE ASSESSEE THAT THE TPO/DRP HAD ERRED IN MAKING AN ADJUSTMENT OF RS. 9,35,53,919/ - AS REGARDS THE ARMS LEGNTH PRICE OF THE I NTRA - G ROUP S ERVICES THAT WERE RECEIVED BY THE ASSESSEE FROM ITS AES. ON A PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE TPO VIDE HIS ORDER UNDER SEC. 92CA(3) HAD ACCEPTED THAT I NTRA - GROUP S ERVICES WERE RECEIVED BY THE ASSESSEE COMPANY FROM ITS AES. HOWEVER , FOR DETERMINING THE ARMS LENGTH PRICE OF THE AFORESAID TRANSACTION HE HAD ADOPTED AN AD HOC METHOD AND HELD THAT 950 HOURS WOULD HAVE BEEN SPENT BY THE AES FOR ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 52 RENDERING THE AFORESAID SERVICES TO THE ASSESSEE COMPANY, AND THEREIN, TAKING A RATE OF RS.30 00/ - PER HOUR HAD ESTIMATED THE ARMS LENGTH PRICE OF THE AFORESAID I NTRA - G ROUP S ERVICES AT RS. 28,50,000/ - . 60 . ON OBJECTION FILED BY THE ASSESSEE, THE DRP RELIED ON THE VIEW TAKEN BY THE PANEL IN THE CASE O F THE ASSESSEE FOR A.Y 2011 - 12 AND THUS, IMPLIEDLY OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED SERVICES FROM ITS AES. ALTHOUGH, IT WAS OBSERVED BY THE DRP THAT CONSIDERING THE FACTS OF THE CASE THE NUMBER OF HOURS AND THE RATE ESTIMATED BY THE TPO WERE TOO LOW, BUT THEN, DESPITE SO OBSERVING THE DRP MECHANICALLY RELYING ON THE VIEW TAKEN BY THE PREDECESSOR PANEL IN A.Y 2011 - 12 CONFIRMED THE ADJUSTMENT MADE BY THE TPO IN CONTEXT OF THE AFORESAID ISSUE UNDER CONSIDERATION. 6 1 . WE FIND THAT EXCEPT FOR THE FACT THAT THE TPO DURING THE YEAR UNDER CONSIDERATION HAD IN THE COURSE OF THE PROCEEDINGS BEFORE HIM ACCEPTED THAT THE ASSESSEE HAD RECEIVED I NTRA - G ROUP S ERVICES FROM ITS AES, AND THEREIN, ADOPTING AN AD HOC METHOD HAD WORKED OUT THE ARMS LENGTH PRICE OF THE AFORESAID TRANSACTION, T HE OTHER FACTS INVOLVED IN CONTEXT OF THE SAID ISSUE PERTAINING TO DETERMINING OF THE ARMS LENGTH PRICE OF THE I NTRA - G ROUP S ERVICES DURING THE YEAR UNDER CONSIDERATION REMAINS THE SAME AS WERE THERE BEFORE US IN THE CASE OF THE ASSESSEE FOR A.Y. 2010 - 11. ACCORDINGLY, OUR ORDER THEREIN PASSED IN CONTEXT OF THE ISSUE PERTAINING TO DETERMINING OF THE ARMS LENGTH PRICE OF THE I NTRA - G ROUP S ERVICES IN THE CASE OF THE ASSESSEE FOR A.Y. 2010 - 11 SHALL APPLY MUTATIS MUTANDIS FOR THE PURPOSE OF DISPOSAL OF THE SAID ISSUE IN THE PRESENT APPEAL OF THE ASSESSEE FOR A.Y. 2012 - 13 . THE GROUNDS OF APPEAL NOS. 1 6 TO 2 4 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 6 2 . THE ASSESSEE HAD ASSAILED THE LEVY OF INTEREST UNDER SEC. 23 4B UNDER SEC. 234C VIDE GROUNDS OF APPEAL N O ( S ) . 25 & 26. WE HEREIN DIRECT THE A.O TO CONSIDER THE AFORESAID GRIEVANCE OF THE ASSESEE WHILE GIVING APPELLATE EFFECT TO OUR ORDER. THE GROUND S OF APPEAL NOS. 25 AND 26 ARE DISPOSED OFF IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NOS.1051/MUM/2015, ITA NO.203/MUM/2016 & ITA NO.1528/MUM/2017 A.YS 2010 - 11 TO 2012 - 13 DOW AGROSCIENCES INDIA PVT. LTD. VS. ACIT, RANGE - 14(1)(2) 53 6 3 . THE ASSESSEE HAS ASSAILED THE INITIATION OF THE PENALTY PROCEEDINGS UNDER SEC. 274 R.W.S 271(1)(C) OF THE ACT. IN OUR CONSIDERED VIEW AS THE AFORESAID GRIEVANCE OF THE ASSESSEE IS PREMATURE, THEREFORE, THE SAME IS DISMISSED. THE GROUND OF APPEAL NO. 27 IS DISMISSED. 6 4 . T HE APPEAL THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 6 5 . RESULTANTLY, T HE APPEALS OF THE ASSESSEE I.E ITA NO. 1051/MUM/2015 FOR A.Y 2010 - 11 , ITA NO.203/MUM/2016 FOR A.Y 2011 - 12 AND ITA NO. 1528/MUM/2017 FOR A.Y 2012 - 13 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRO NOUNCED IN THE OPEN COURT ON 11 . 01.2021 SD/ - SD/ - PRAMOD KUMAR RAVISH SOOD ( VICE PRESIDENT ) ( JUDICIAL MEMBER) MUMBAI, DATE: 11 . 01 .202 1 PS: ROHIT COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR G BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI