DCIT, Circle - 11(2), Kolkata , Kolkata V. M/s. Wacker Metroark Chemicals Private Limited , Kolkata

ITA 1087/KOL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1360 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-11-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 22-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PAUL
• Assessee Lawyers: R N DUTT; SUTAPA ROY CHO
• Keywords: Transfer pricing; International transaction
• Section: 92C; 143(3); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) ITA NO. 1087/KOL/2018 ASSESSMENT YEAR: 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, WARD-11(2), KOLKATA....................APPELLANT VS. M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED.........................................RESPONDENT BLOCK-BN, PLOT-7 SECTOR-V KOLKATA 700 091 [PAN : AAACW 2192 G] APPEARANCES BY: SHRI SANJAY PAUL, ADDL. CIT D/R, APPEARING ON BEHALF OF THE REVENUE. SHRI R.N. DUTT, ADVOCATE & MS. SUTAPA ROY CHOUDHURY, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : NOVEMBER 25 TH , 2019 DATE OF PRONOUNCING THE ORDER : DECEMBER 11 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 22, KOLKATA, (HEREINAFTER THE LD.CIT(A)), PASSED U/S. 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 26/02/2018, FOR THE ASSESSMENT YEAR 2013-14. 2. AT THE OUTSET WE FIND THAT THERE IS A DELAY OF 1 (ONE) DAY IN FILING OF THIS APPEAL BY THE REVENUE. AFTER PERUSING THE PETITION FOR CONDONATION, WE ARE CONVINCED THAT THE DEPARTMENT WAS PREVENTED BY SUFFICIENT CAUSE FROM FILING THE APPEAL ON TIME. HENCE THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED. 3. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FERTILIZERS, CHEMICALS AND PAINTS. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 29/11/2013 AND LATER REVISED THE SAME ON 24/03/2014, DISCLOSING TOTAL INCOME OF RS.67,30,75,140/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 144C(3) OF THE ACT ON 30/01/2017, DETERMINING THE TOTAL INCOME AT RS.70,69,32,190/- INTERALIA MAKING ADJUSTMENT AS PER TRANSFER PRICING (TP) PROVISIONS U/S 92CA(3) OF THE ACT OF RS.3,38,57,052/-. 3.1. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY, DELETED THE SAME. 4. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE C ASE IN CONCLUDING THAT THE INTRA UNDER THE HEAD OF SAP IMPLEMENTATION SERVICES ARE NOT IN THE NATURE OF STEWARDSHIP ACTIVITIES, IGNORING THE DETAILS OF SAP IMPLEMENTATION SERVICES PROVIDED BY THE AE, WHICH CLEARLY INDICATE THAT THE SERVICES WERE MEANT FOR EXERCISING OVERALL CONTROL AND SUPERVISION OVER THE ASSESSEE COMPANY AND IN THE NATURE OF STEWARDSHIP ACTIVITIES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN CONCLUDING THAT THE PAYMENT FOR INTRA ARM'S LENGTH WITHOUT EXAMINING THE COST OF SUCH SERVICES IF THE SAME WAS PROCURED FROM ANY INDEPENDENT SERVICES PROVIDER AND WITHOUT EXAMINING MARK INCORPORATED IN THE QUAN TUM OF SERVICE FEE CHARGED BY THE AE. 3. THE LD. CIT(A) HAS ERRED IN NOT DIFFERENTIATING THAT THE ASSESSEE AND ITS AE ARE TWO SEPARATE ENTITY IN VIEW OF ASSESSMENT PROCEEDING AND THE ALP ADJUSTMENTS ARE BASED ON THE FACTS AND THE CIRCUMSTANCES ASSOCIATED 4. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR HEARING OF THIS APPEAL. 5. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE LD. FIRST APPELLATE AUTHORITY AT PAGE 25 PARA 6 OF THE ORDER HELD AS FOLLOWS: 06 FINDINGS DECISION: 1. I HAVE CONSIDERED THE ENTIRE FACTS .AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS FILED BY THE LD. ARS ON BEHALF OF THE APPELLANT WITH ME AGAINST THE ACTION OF THE LD. TPO / LD. AO IN DIR PRICE ADJUSTMENT OF RS. 3,38,57,052/ APPELLANT AS WELL AS THE CONTENTION OF THE LD. TPO / LD. AO. 2. I HAVE EXAMINED THE NATURE OF INFORMATION TECHNOLOGY SERVICES RECEIVED APPELLANT AS SUBMITTED TO THE LD. TPO AND SUBSEQUENTLY TO ME DURING THE COURSE OF APPEAL. I HAVE ALSO PERUSED THE CONTENT OF THE DOCUMENTARY EVIDENCES OF RECEIPT OF SERVICES SUBMITTED TO T.IE LD. TPO AND SUBSEQUENTLY TO ME DURING THE COURSE OF APPE AL. IN MY CONSIDERED OPINION, IN MODERN ERA, IT IS NOT FEASIBLE TO CONDUCT BUSINESS EFFICIENTLY AND EFFECTIVELY WITHOUT MAINTAINING A SOUND INFORMATION TECHNOLOGY INFRASTRUCTURE. IN THE INSTANT CASE, THE SAP MODULES PROVIDE THE APPELLANT WITH THE' BASIC IN THE APPELLANT RECORDS ALL THE BUSINESS INFORMATION AND UPDATES THE SAME ON REGULAR BASIS. THUS THE SAP MODULES PROVIDE APPELLANT WITH ECONOMIC AND COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION. AN IN IN COMPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY IF PERFORMED FOR IT BY AN INDEPENDENT ENTERPRISE OR WOULD HAVE PERFORMED THE ACTIVITY IN- HOUSE FOR ITSELF. 3. I HAVE NOTED THAT THE LD. TPO DID NOT CONTRADICT MADE BY THE APPELLANT IN RESPECT OF THE SAID INTERNATIONAL TRANSACTION UNDER THE 2 M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW ASE IN CONCLUDING THAT THE INTRA - GROUP SERVICES PROVIDED BY THE AE UNDER THE HEAD OF SAP IMPLEMENTATION SERVICES ARE NOT IN THE NATURE OF STEWARDSHIP ACTIVITIES, IGNORING THE DETAILS OF SAP IMPLEMENTATION SERVICES PROVIDED BY THE AE, WHICH THAT THE SERVICES WERE MEANT FOR EXERCISING OVERALL CONTROL AND SUPERVISION OVER THE ASSESSEE COMPANY AND IN THE NATURE OF STEWARDSHIP ACTIVITIES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW THE CASE IN CONCLUDING THAT THE PAYMENT FOR INTRA - GROUP SERVICES WAS AT ARM'S LENGTH WITHOUT EXAMINING THE COST OF SUCH SERVICES IF THE SAME WAS PROCURED FROM ANY INDEPENDENT SERVICES PROVIDER AND WITHOUT EXAMINING MARK - UP ELEMENT TUM OF SERVICE FEE CHARGED BY THE AE. 3. THE LD. CIT(A) HAS ERRED IN NOT DIFFERENTIATING THAT THE ASSESSEE AND ITS AE ARE TWO SEPARATE ENTITY IN VIEW OF ASSESSMENT PROCEEDING AND THE ALP ADJUSTMENTS ARE BASED ON THE FACTS AND THE CIRCUMSTANCES ASSOCIATED WITH THE CASE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, MODIFY OR RESCIND THE GROUNDS HEREINABOVE BEFORE OR HEARING OF THIS APPEAL. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE LD. FIRST APPELLATE AUTHORITY AT PARA 6 OF THE ORDER HELD AS FOLLOWS: - 06 FINDINGS DECISION: 1. I HAVE CONSIDERED THE ENTIRE FACTS .AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS FILED BY THE LD. ARS ON BEHALF OF THE APPELLANT WITH ME AGAINST THE ACTION OF THE LD. TPO / LD. AO IN DIR ECTING / MAKING THE IMPUGNED ARM'S LENGTH PRICE ADJUSTMENT OF RS. 3,38,57,052/ - . I HAVE CONSIDERED THE CONTENTION OF THE APPELLANT AS WELL AS THE CONTENTION OF THE LD. TPO / LD. AO. 2. I HAVE EXAMINED THE NATURE OF INFORMATION TECHNOLOGY SERVICES RECEIVED APPELLANT AS SUBMITTED TO THE LD. TPO AND SUBSEQUENTLY TO ME DURING THE COURSE OF APPEAL. I HAVE ALSO PERUSED THE CONTENT OF THE DOCUMENTARY EVIDENCES OF RECEIPT OF SERVICES SUBMITTED TO T.IE LD. TPO AND SUBSEQUENTLY TO ME DURING THE COURSE OF AL. IN MY CONSIDERED OPINION, IN MODERN ERA, IT IS NOT FEASIBLE TO CONDUCT BUSINESS EFFICIENTLY AND EFFECTIVELY WITHOUT MAINTAINING A SOUND INFORMATION TECHNOLOGY INFRASTRUCTURE. IN THE INSTANT CASE, THE SAP MODULES PROVIDE THE APPELLANT WITH THE' BASIC IN FORMATION TECHNOLOGY INFRASTRUCTURE BASED ON WHICH THE APPELLANT RECORDS ALL THE BUSINESS INFORMATION AND UPDATES THE SAME ON REGULAR BASIS. THUS THE SAP MODULES PROVIDE APPELLANT WITH ECONOMIC AND COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION. AN IN DEPENDENT ENTERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY IF PERFORMED FOR IT BY AN INDEPENDENT ENTERPRISE OR WOULD HAVE PERFORMED THE HOUSE FOR ITSELF. I HAVE NOTED THAT THE LD. TPO DID NOT CONTRADICT THE ARMS LENGTH ANALYSIS MADE BY THE APPELLANT IN RESPECT OF THE SAID INTERNATIONAL TRANSACTION UNDER THE ITA NO. 1087/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW GROUP SERVICES PROVIDED BY THE AE UNDER THE HEAD OF SAP IMPLEMENTATION SERVICES ARE NOT IN THE NATURE OF STEWARDSHIP ACTIVITIES, IGNORING THE DETAILS OF SAP IMPLEMENTATION SERVICES PROVIDED BY THE AE, WHICH THAT THE SERVICES WERE MEANT FOR EXERCISING OVERALL CONTROL AND SUPERVISION OVER THE ASSESSEE COMPANY AND IN THE NATURE OF STEWARDSHIP ACTIVITIES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW GROUP SERVICES WAS AT ARM'S LENGTH WITHOUT EXAMINING THE COST OF SUCH SERVICES IF THE SAME WAS PROCURED FROM UP ELEMENT 3. THE LD. CIT(A) HAS ERRED IN NOT DIFFERENTIATING THAT THE ASSESSEE AND ITS AE ARE TWO SEPARATE ENTITY IN VIEW OF ASSESSMENT PROCEEDING AND THE ALP ADJUSTMENTS ARE BASED ON 4. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR ALTER, AMEND, MODIFY OR RESCIND THE AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE LD. FIRST APPELLATE AUTHORITY AT 1. I HAVE CONSIDERED THE ENTIRE FACTS .AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS FILED BY THE LD. ARS ON BEHALF OF THE APPELLANT WITH ME AGAINST THE ECTING / MAKING THE IMPUGNED ARM'S LENGTH . I HAVE CONSIDERED THE CONTENTION OF THE 2. I HAVE EXAMINED THE NATURE OF INFORMATION TECHNOLOGY SERVICES RECEIVED BY THE APPELLANT AS SUBMITTED TO THE LD. TPO AND SUBSEQUENTLY TO ME DURING THE COURSE OF APPEAL. I HAVE ALSO PERUSED THE CONTENT OF THE DOCUMENTARY EVIDENCES OF RECEIPT OF SERVICES SUBMITTED TO T.IE LD. TPO AND SUBSEQUENTLY TO ME DURING THE COURSE OF AL. IN MY CONSIDERED OPINION, IN MODERN ERA, IT IS NOT FEASIBLE TO CONDUCT BUSINESS EFFICIENTLY AND EFFECTIVELY WITHOUT MAINTAINING A SOUND INFORMATION TECHNOLOGY INFRASTRUCTURE. IN THE INSTANT CASE, THE SAP MODULES PROVIDE THE FORMATION TECHNOLOGY INFRASTRUCTURE BASED ON WHICH THE APPELLANT RECORDS ALL THE BUSINESS INFORMATION AND UPDATES THE SAME ON REGULAR BASIS. THUS THE SAP MODULES PROVIDE APPELLANT WITH ECONOMIC AND DEPENDENT ENTERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY IF PERFORMED FOR IT BY AN INDEPENDENT ENTERPRISE OR WOULD HAVE PERFORMED THE THE ARMS LENGTH ANALYSIS MADE BY THE APPELLANT IN RESPECT OF THE SAID INTERNATIONAL TRANSACTION UNDER THE 'TRANSACTIONAL NET MARGIN METHOD'. THE LD. TPO ALSO DID NOT CONTRADICT THE ARM'S LENGTH ANALYSIS MADE BY THE' APPELLANT IN RESPECT OF THE SAID INTERN TRANSACTION THE COMPARABLE UNCONTROLLED PRICE METHOD. HOWEVER, THE LD. TPO CONDUCTED BENEFIT TEST IN RESPECT OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION FROM HIS OWN PERSPECTIVE PRIMARILY BASED ON FOREIGN STATUTE, THE DECISIONS OF THE FORE IGN COURT AND THE OECD REPORTS WHICH ARE NOT BINDING ON THE INDIAN COURTS. IT IS NOTED THAT THE LD. TPO ERRONEOUSLY APPLIED THE PRINCIPLE ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE MATTER OF DIT (INTERNATIONAL TAX) VS. MORGAN STANLEY AND CO. INC. (AND (SC). I HAVE ALSO NOTED THAT THE LD. TPO DETERMINED THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION AT NIL VALUE WITHOUT APPLYING ANY OF THE METHODS PRESCRIBED UNDER SUB INCOME- TAX ACT, 1961. IT IS NOTED THAT THE LD. TPO PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE 'OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION WITHOUT DEMONSTRATING ANY OF THE CONDITIONS PRESCRIBED UNDER CLAUSE (A) TO (D) SECTION (3) OF SECTION 92C OF THE INCOME DECISIONS OF THE HON'BLE HIGH COURTS AND HON'BLE TRIBUNALS ON WHICH RELIANCE IS PLACED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. IN MY CONSIDERED VIEW, THE AFORESAI D ACTION OF THE LD. TPO IS NOT PERMITTED BY THE RELEVANT PROVISIONS OF CHAPTER X OF THE INCOME 4. IN VIEW OF MY ABOVE OBSERVATIONS, I FIND THAT THE ACTION OF THE LD. TPO IS UNSUSTAINABLE FROM THE PERSPECTIVE OF INDIAN TRANSFER PRICING LAWS. DIRECT THE LD. AO TO DELETE THE ARM'S LENGTH PRICE ADJUSTMENT OF RS. 3,38,57,052/- AS A RESULT, THE GROUND OF APPEAL NO: (1) OF APPEAL STANDS ALLOWED. 6. THE LD. D/R SUBMITS THAT THE ALLOCATION KEYS HAVE NOT BEEN DISCLOSED BY THE ASSESSEE AND THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH CONSIDERATION, IF THE TRIBUNAL IS OF THE VIEW THAT THE TPO HAS ERRONEOUSLY APPLIED THE PRINCIPLES LAID DOWN IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF (INTERNATIONAL TAX) VS. MORGAN STANLEY AND CO. INC. (AND VICE VERSA) REPORTED IN [2007] 292 ITR 416 (SC). 6.1. IN OUR VIEW, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). SAP IMPLEMENTATION EXPENSES CANNOT BE CONSIDERED HAS HAVING ARMS LENGTH PRICE THE GROUND THAT THIS IS STEWARDSHIP ACTIVITY. INFORMATION TECHNOLOGY RELATED PROGRAM ARE A NECESSITY FOR SUCH ORGANISATION AND THEY HAVE A COST. THE TPO HAD ALSO NOT FOLLOWED THE PROVISIONS OF SECTION 9 DETERMINING THE ALP OF SAP IMPLEMENTATION EXPENSES. THE TPO HAS NOT STATED AS TO WHICH METHOD WAS FOLLOWED BY HIM IN COMING TO THE CONCLUSION THAT, THE ALP IS WHEN N METHOD PRESCRIBED UNDER THE ACT WAS FOLLOWED BY THE TPO, THE AD CANNOT BE SUSTAINED. THE REQUEST OF THE LD. D/R TO GIVEN ONE MORE OPPORTUNITY TO THE 3 M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED 'TRANSACTIONAL NET MARGIN METHOD'. THE LD. TPO ALSO DID NOT CONTRADICT THE ARM'S LENGTH ANALYSIS MADE BY THE' APPELLANT IN RESPECT OF THE SAID INTERN TRANSACTION THE COMPARABLE UNCONTROLLED PRICE METHOD. HOWEVER, THE LD. TPO CONDUCTED BENEFIT TEST IN RESPECT OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION FROM HIS OWN PERSPECTIVE PRIMARILY BASED ON FOREIGN STATUTE, THE IGN COURT AND THE OECD REPORTS WHICH ARE NOT BINDING ON THE INDIAN COURTS. IT IS NOTED THAT THE LD. TPO ERRONEOUSLY APPLIED THE PRINCIPLE ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE MATTER OF DIT (INTERNATIONAL TAX) VS. MORGAN STANLEY AND CO. INC. (AND VICE VERSA) REPORTED IN [2007] 292 ITR 416 (SC). I HAVE ALSO NOTED THAT THE LD. TPO DETERMINED THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION AT NIL VALUE WITHOUT APPLYING ANY OF THE METHODS PRESCRIBED UNDER SUB -SECTION (1) AND (2) OF SECTION 92C OF THE TAX ACT, 1961. IT IS NOTED THAT THE LD. TPO PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE 'OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION WITHOUT DEMONSTRATING ANY OF THE CONDITIONS PRESCRIBED UNDER CLAUSE (A) TO (D) SECTION (3) OF SECTION 92C OF THE INCOME - TAX ACT, 1961. I HAVE CONSIDERED THE DECISIONS OF THE HON'BLE HIGH COURTS AND HON'BLE TRIBUNALS ON WHICH RELIANCE IS PLACED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. IN MY CONSIDERED VIEW, THE D ACTION OF THE LD. TPO IS NOT PERMITTED BY THE RELEVANT PROVISIONS OF CHAPTER X OF THE INCOME -TAX ACT, 1961. 4. IN VIEW OF MY ABOVE OBSERVATIONS, I FIND THAT THE ACTION OF THE LD. TPO IS UNSUSTAINABLE FROM THE PERSPECTIVE OF INDIAN TRANSFER PRICING LAWS. DIRECT THE LD. AO TO DELETE THE ARM'S LENGTH PRICE ADJUSTMENT OF RS. 3,38,57,052/- AS A RESULT, THE GROUND OF APPEAL NO: (1) OF APPEAL STANDS ALLOWED. THE LD. D/R SUBMITS THAT THE ALLOCATION KEYS HAVE NOT BEEN DISCLOSED BY THE THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH CONSIDERATION, IF THE TRIBUNAL IS OF THE VIEW THAT THE TPO HAS ERRONEOUSLY APPLIED THE PRINCIPLES LAID DOWN IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF (INTERNATIONAL TAX) VS. MORGAN STANLEY AND CO. INC. (AND VICE VERSA) REPORTED IN [2007] 292 IN OUR VIEW, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). SAP IMPLEMENTATION EXPENSES CANNOT BE CONSIDERED HAS HAVING ARMS LENGTH PRICE THE GROUND THAT THIS IS STEWARDSHIP ACTIVITY. AS HELD BY THE LD. CIT(A), COMPUTER AND INFORMATION TECHNOLOGY RELATED PROGRAM ARE A NECESSITY FOR SUCH ORGANISATION AND THEY THE TPO HAD ALSO NOT FOLLOWED THE PROVISIONS OF SECTION 9 DETERMINING THE ALP OF SAP IMPLEMENTATION EXPENSES. THE TPO HAS NOT STATED AS TO WHICH METHOD WAS FOLLOWED BY HIM IN COMING TO THE CONCLUSION THAT, THE ALP IS WHEN N METHOD PRESCRIBED UNDER THE ACT WAS FOLLOWED BY THE TPO, THE AD CANNOT BE SUSTAINED. THE REQUEST OF THE LD. D/R TO GIVEN ONE MORE OPPORTUNITY TO THE ITA NO. 1087/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED 'TRANSACTIONAL NET MARGIN METHOD'. THE LD. TPO ALSO DID NOT CONTRADICT THE ARM'S LENGTH ANALYSIS MADE BY THE' APPELLANT IN RESPECT OF THE SAID INTERN ATIONAL TRANSACTION THE COMPARABLE UNCONTROLLED PRICE METHOD. HOWEVER, THE LD. TPO CONDUCTED BENEFIT TEST IN RESPECT OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION FROM HIS OWN PERSPECTIVE PRIMARILY BASED ON FOREIGN STATUTE, THE IGN COURT AND THE OECD REPORTS WHICH ARE NOT BINDING ON THE INDIAN COURTS. IT IS NOTED THAT THE LD. TPO ERRONEOUSLY APPLIED THE PRINCIPLE ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE MATTER OF DIT (INTERNATIONAL TAX) VICE VERSA) REPORTED IN [2007] 292 ITR 416 (SC). I HAVE ALSO NOTED THAT THE LD. TPO DETERMINED THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION AT NIL VALUE WITHOUT APPLYING ANY (2) OF SECTION 92C OF THE TAX ACT, 1961. IT IS NOTED THAT THE LD. TPO PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE 'OF THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION WITHOUT DEMONSTRATING ANY OF THE CONDITIONS PRESCRIBED UNDER CLAUSE (A) TO (D) OF SUB- TAX ACT, 1961. I HAVE CONSIDERED THE DECISIONS OF THE HON'BLE HIGH COURTS AND HON'BLE TRIBUNALS ON WHICH RELIANCE IS PLACED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. IN MY CONSIDERED VIEW, THE D ACTION OF THE LD. TPO IS NOT PERMITTED BY THE RELEVANT PROVISIONS OF 4. IN VIEW OF MY ABOVE OBSERVATIONS, I FIND THAT THE ACTION OF THE LD. TPO IS I THEREFORE DIRECT THE LD. AO TO DELETE THE ARM'S LENGTH PRICE ADJUSTMENT OF RS. 3,38,57,052/- THE LD. D/R SUBMITS THAT THE ALLOCATION KEYS HAVE NOT BEEN DISCLOSED BY THE THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH CONSIDERATION, IF THE TRIBUNAL IS OF THE VIEW THAT THE TPO HAS ERRONEOUSLY APPLIED THE PRINCIPLES LAID DOWN IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DIT (INTERNATIONAL TAX) VS. MORGAN STANLEY AND CO. INC. (AND VICE VERSA) REPORTED IN [2007] 292 IN OUR VIEW, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). SAP IMPLEMENTATION EXPENSES CANNOT BE CONSIDERED HAS HAVING ARMS LENGTH PRICE OF NIL, ON AS HELD BY THE LD. CIT(A), COMPUTER AND INFORMATION TECHNOLOGY RELATED PROGRAM ARE A NECESSITY FOR SUCH ORGANISATION AND THEY THE TPO HAD ALSO NOT FOLLOWED THE PROVISIONS OF SECTION 9 2C(3) OF THE ACT IN DETERMINING THE ALP OF SAP IMPLEMENTATION EXPENSES. THE TPO HAS NOT STATED AS TO WHICH METHOD WAS FOLLOWED BY HIM IN COMING TO THE CONCLUSION THAT, THE ALP IS NIL. WHEN N METHOD PRESCRIBED UNDER THE ACT WAS FOLLOWED BY THE TPO, THE AD JUSTMENT CANNOT BE SUSTAINED. THE REQUEST OF THE LD. D/R TO GIVEN ONE MORE OPPORTUNITY TO THE TPO TO EXAMINE THE ALLOCATION OF EXPENSES KEYS, IS REJECTED AS IT IS DEVOID OF MERIT. WE UPHOLD THE FINDING OF THE LD. CIT(A) AND DISMISS THIS APPEAL OF THE 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. KOLKATA, THE SD/- [S.S. GODARA] JUDICIAL MEMBER DATED : 11.12.2019 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED BLOCK-BN, PLOT-7 SECTOR-V KOLKATA 700 091 2. DEPUTY COMMISSIONER OF INCOME TAX, WARD 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 4 M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED TPO TO EXAMINE THE ALLOCATION OF EXPENSES KEYS, IS REJECTED AS IT IS DEVOID OF MERIT. WE UPHOLD THE FINDING OF THE LD. CIT(A) AND DISMISS THIS APPEAL OF THE REVENUE. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. KOLKATA, THE 11 TH DAY OF DECEMBER, 2019. [ J. SUDHAKAR REDDY ACCOUNTANT MEMBER M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED DEPUTY COMMISSIONER OF INCOME TAX, WARD -11(2), KOLKATA 3. CIT(A)- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES ITA NO. 1087/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. WACKER METROARK CHEMICALS PRIVATE LIMITED TPO TO EXAMINE THE ALLOCATION OF EXPENSES KEYS, IS REJECTED AS IT IS DEVOID OF MERIT. THUS, REVENUE. SD/- J. SUDHAKAR REDDY ] ACCOUNTANT MEMBER TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES