M/s Bright Point India Pvt Ltd., New Delhi V. ACIT, New Delhi

ITA 123/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3069 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 20-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Business expenditure; Opportunity of being heard; International transaction; Initiation of penalty proceedings; Wholly owned subsidiary; Commercial expediency
• Section: 143(3); 37(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.123/DEL/2017 ASSESSMENT YEAR : 2012-13 BRIGHT POINT INDIA PVT. LTD., G-9, BLOCK B-1, MOHAN CO-OPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI. VS. ACIT, CENTRAL CIRCLE- 20, NEW DELHI. PAN : AAACB6414G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARUN GULATI, ADV. DEPARTMENT BY : SHRI H. K. CHOUDHARY, CIT-DR DATE OF HEARING : 06-09-2017 DATE OF PRONOUNCEMENT : 04-12-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 09.12.2016 PASSED BY THE ACIT, CENTRAL CIRCLE- 20, NEW DELHI U/S 143(3) R.W.S. 144C(1) OF THE I.T. ACT FOR THE ASSESSMENT YEAR 201 2-13. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY INCORPORATED UNDER THE INDIAN COMPANIES ACT, 1956 AND IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF MOBILE HANDSET AND ACCESSORIES. IT IS A SUBSIDIARY OF M/S BRIGHTPOINT NETHERLANDS WHICH, IN TURN, IS A WHOLLY OWNED SUBSIDIARY OF M/S BRIGHTPOINT INC.. M/S BRIGHTPOINT NETHERLANDS HELD 85% OF THE PAID UP SHARE CAPITAL OF M/S BRIGHTPOINT INDIA AND BALANCE 15% HE LD BY M/S PERSEQUOR 2 ITA NO.123/DEL/2017 LIMITED. M/S BRIGHTPOINT INDIA COMMENCED ITS OPERA TIONS FROM JUNE 2003 AND IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF MOBIL E HANDSETS AND ACCESSORIES AND ALSO PROVIDES AFTER SALES SERVICES TO ITS CUSTO MERS BY UNDERTAKING WARRANTY AND NON-WARRANTY CLAIM PROCESSING FOR VARIOUS BRAND S. BRIGHTPOINT GROUP IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF WIRELESS VOICE AND DATA PRODUCTS AND A SUPPLIER OF OUTSOURCED SERVICES WORLDWIDE. THE ASS ESSEE FILED ITS RETURN OF INCOME ON 29.11.2012 SHOWING TOTAL INCOME OF RS.3,5 1,38,534/-. THE ASSESSING OFFICER REFERRED THE MATTER TO THE TPO TO DETERMINE THE ARMS LENGTH PRICE U/S 92CA(3) IN RESPECT OF THE INTERNATIONAL T RANSACTIONS ENTERED INTO BY THE ASSESSEE. 2.1 THE TPO, DURING THE COURSE OF TP ASSESSMENT PRO CEEDINGS, OBSERVED THAT THE ASSESSEE HAS REPORTED THE FOLLOWING INTERNATION AL TRANSACTIONS :- NATURE OF THE TRANSACTION METHOD VALUE (RS.) SALE OF MOBILE HANDSETS TNMM USING OPERATING PROFIT AS A PLI OPERATING COST 105,33,54,438 RECEIPT OF IT & SOFTWARE MAINTENANCE SERVICES 5,32, 21,360 RECEIPT OF MANAGEMENT SUPPORT SERVICES 4,49,25,556 PURCHASE OF HARDWARE 30,91,862 PROVISION OF SERVICES 30,77,244 PAYMENT OF INTEREST ON EXTERNAL COMMERCIAL BORROWING CUP 40,22,969 REIMBURSEMENT OF EXPENSES TO AES 1,39,81,268 REIMBURSEMENT RECEIVED FROM AES 41,55,207 3. THE TPO ISSUED A SHOW-CAUSE NOTICE ASKING THE AS SESSEE TO FURNISH VARIOUS DETAILS IN RESPONSE TO WHICH, THE ASSESSEE FILED THE REQUISITE DETAILS. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE TPO OBSERVED THAT THE ASSESSEE HAS BENCHMARKED THE TRANSACTIONS RELATING TO INTRA GROUP SERVICES (IGS) AVAILED FROM ITS AE USING COMBINED TRANSACTIO N APPROACH CONSIDERING 3 ITA NO.123/DEL/2017 TNMM AS THE MOST APPROPRIATE METHOD. HOWEVER, THE TPO REJECTED THE TNMM QUA IGS AND INSTEAD APPLIED THE CUP METHOD. H OWEVER, WHILE APPLYING THE CUP METHOD, NO COMPARABLE WAS PUT ON R ECORD AND ARMS LENGTH PRICE WAS TAKEN AS NIL AND ACCORDINGLY THE TPO MADE AN UPWARD ADJUSTMENT OF RS.4,49,25,556/-. THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER. THE ASSESSEE APPROACHED THE DRP, WHO UPHELD THE ADJUSTM ENT MADE BY THE TPO. ACCORDINGLY, THE ASSESSING OFFICER COMPLETED THE AS SESSMENT BY ENHANCING THE INCOME OF THE ASSESSEE BY RS.4,49,25,556/- AND DETE RMINED THE TOTAL INCOME OF RS.8,00,64,090/-. 4. AGGRIEVED WITH SUCH ORDER OF THE ASSESSING OFFIC ER/TPO, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOW ING GROUNDS :- APPEAL UNDER SECTION 253(1) OF THE INCOME TAX ACT, 1961 ('ACT') AGAINST THE ORDER DATED 09 DECEMBER 2016 (RECEIVED ON 16 DECEMBER 201 6) PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT ('IMPUGNED ORDER'), BY THE LD. ASSISTANT COMMISSIONER OF INCOME CENTRAL CIRCLE - 20, NEW DEL HI ('AO'). FOLLOWING GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER: GROUNDS OF APPEAL 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ASSESSING OFFICER ('LD. AO') ERRED IN ASSESSING THE INCOME OF THE APPELLANT AT INR. 8,00,64,090/- AS AGAINST THE RETURNED INCOME OF INR. 3,51,38,534/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE FINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 ('THE ACT') BY THE LD. AO IS BAD IN LAW AS THE SAME DO NOT CONSIDER COMPLETE AND RELEVANT FACTS, ARE NOT IN ACCORDANCE WITH PROV ISIONS OF LAW AND PRINCIPLES OF LAW AS LAID DOWN BY HON'BLE COURTS. TRANSFER PRICING GROUNDS 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. TPO/ LD. AO / HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAVE ERRED IN NOT ACCEPTING ECONOMIC ANALYSIS OF THE APPELLANT, FOR DETERMINATION OF THE ARM'S LENGTH PRICE (ALP') IN CONNECTION WITH THE IMPUGNED INTERNATIONAL TRANSACT ION PERTAINING TO PAYMENT OF MANAGEMENT SUPPORT SERVICES. 4 ITA NO.123/DEL/2017 4. THE LD. TPO/ HON'BLE DRP HAVE GROSSLY ERRED IN REJE CTING THE COMBINED TRANSACTION APPROACH OF BENCHMARKING ADOPTED BY THE APPELLANT I N ITS TRANSFER PRICING DOCUMENTATION ANALYSIS, AND BY REJECTING TRANSACTIO NAL NET MARGIN METHOD ('TNMM') AS THE MOST APPROPRIATE METHOD ('MAM') FOR DETERMINING THE ARMS' LENGTH PRICE (ALP') OF PAYMENT FOR BUSINESS SERVICE CHARG ES PAID TO ITS ASSOCIATED ENTERPRISES ('AES') IN ACCORDANCE WITH THE ACT, INC OME TAX RULES, 1962 ('RULES') AND THE GENERALLY ACCEPTED OECD GUIDELINES. 5. THE LD. TPO/ HON'BLE DRP ERRED IN NOT APPRECIATING THAT THE RECEIPT OF VARIOUS BUSINESS SERVICES ARE CLOSELY LINKED TO THE OVERALL BUSINESS ACTIVITIES OF THE APPELLANT AND ERRED IN ANALYZING THE TRANSACTION SEPARATELY F OR THE DETERMINATION OF ALP. 6. THAT THE LD. TPO/ HON'BLE DRP ERRED IN NOT CONDUCTI NG THE ANALYSIS OF SELECTING THE MAM AS PRESCRIBED UNDER RULE 10C OF THE RULES AND A CCORDINGLY NOT DOCUMENTED THE SAME AS PRESCRIBED UNDER RULE 10D OF THE RULES. 7. THE LD. TPO/ HON'BLE DRP ERRED IN LAW BY DETERMININ G THE ALP OF THE INTERNATIONAL TRANSACTION USING COMPARABLE UNCONTROLLED PRICE ('C UP') METHOD WITHOUT FOLLOWING THE MANNER OF APPLYING THE CUP METHOD PRESCRIBED UN DER RULE 10B(1)(A) OF THE RULES. 8. THE LD. TPO/ HON'BLE DRP HAS FAILED TO CONSIDER THE OBJECTIONS MADE ON THE APPLICABILITY AND SUITABILITY OF COMPARABLE UNCONTR OLLED PRICE METHOD TO THE FACTS OF THE CASE AND CASE LAWS CITED INCLUDING THOSE OF JURISDICTIONAL HIGH COURT AND RENDERED FINDINGS WITHOUT A REASONED ORDER ON SUCH OBJECTIONS. 9. THE LD. TPO/ HON'BLE DRP HAVE ERRED IN UPHOLDING TH E ADOPTION OF CUP METHOD AS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ARM 'S LENGTH PRICE IN RESPECT OF THE IMPUGNED INTERNATIONAL TRANSACTION WITHOUT IDENTIFY ING ANY COMPARABLE UNCONTROLLED TRANSACTION(S) FOR THE COMPUTATION OF THE ALP AS PR ESCRIBED IN SECTION 92F(II) OF THE ACT. 10. THAT THE BASIS TO DISALLOW THE PAYMENTS MADE FOR MA NAGEMENT SERVICES BY CONSIDERING CUP AS NIL IS BASED PURELY ON SURMISES AND CONJECTU RES AND HAS NO BASIS IN FACTS AND IN LAW. 11. THE LD. TPO/ HON'BLE DRP ERRED IN PASSING AN ORDER THAT IS PERVERSE IN LAW BY IGNORING THE RELEVANT SUBMISSIONS, INFORMATION AND DOCUMENTS PROVIDED BY THE APPELLANT INCLUDING BUT NOT LIMITED TO EMAIL EXCHAN GES, COST ALLOCATION DOCUMENTS, SERVICE AGREEMENT, INVOICES ETC. TO SUBSTANTIATE TH E RECEIPT OF BUSINESS SERVICES, AND BASED ON A PREOCCUPIED MIND REACHED AT AN INAPPROPR IATE CONCLUSION THAT THE ARM'S LENGTH VALUE OF THE IMPUGNED TRANSACTIONS SHOULD BE NIL. 12.THE LD. TPO/ HON'BLE DRP ERRED ERRED IN ARRIVING AT VARIOUS UNWARRANTED AND ERRONEOUS CONCLUSIONS UNSUPPORTED BY ANY MATERIAL A ND HAVE ALSO FAILED TO CONSIDER, SPECIFICALLY REBUT THE VARIOUS MATERIAL AND EVIDENC ES ADDUCED AND THE SUBMISSION MADE BY APPELLANT TO SUBSTANTIATE THE ARM'S LENGTH NATURE O F TRANSACTION RELATING TO PAYMENT OF MANAGEMENT SUPPORT CHARGES. 13. THE LD. TPO/ HON'BLE DRP HAS ERRONEOUSLY RELIED ON THE BASE EROSION AND PROFIT SHIFTING ('BEPS') REPORT RELEASED IN 2015 TO REJECT THE OBJECTIONS OF THE APPELLANT WITHOUT CONSIDERING THE REPORTS IN THEIR ENTIRETY A ND IN IGNORING THE BINDING PROTECTION AND APPLICABLE PROVISIONS OF THE ACT AND THE RULES. 14. THE LD. TPO/ HON'BLE DRP ERRED IN QUESTIONING THE C OMMERCIAL RATIONALE OF THE 5 ITA NO.123/DEL/2017 LEGITIMATE BUSINESS EXPENSES INCURRED BY THE TAXPAY ER AND NOT RESTRICTING THE SCOPE OF ASSESSMENT UNDER SECTION 92CA TO DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION BY ADOPTING ONE OF THE PR ESCRIBED METHODS ONLY. 15. THE FINDING OF THE HON'BLE DRP THAT THE PAYMENT MAY BE ALTERNATIVELY DISALLOWED UNDER SECTION 37(1) IS ERRONEOUS AND CONTRARY TO TH E FINDING THAT THE COMMERCIAL EXPEDIENCY HAS NOT BEEN DOUBTED BY LD. TPO & AO. 16. THE LD. TPO/ HON'BLE DRP ERRED IN DISREGARDING THE DOCUMENTARY EVIDENCE SUBMITTED BY THE APPELLANT AND QUESTIONING THE NEED AND ACTUAL RECEIPT OF SERVICES BY THE APPELLANT. 17.THE LD. TPO/ HON'BLE DRP ERRED IN DISREGARDING T HE DOCUMENTARY EVIDENCE SUBMITTED BY THE APPELLANT AND CONCLUDING THAT NO B ENEFIT HAS BEEN RECEIVED BY THE APPELLANT BY RECEIPT OF IMPUGNED SERVICES WITHOUT A PPRECIATING THAT THE SAME IS IRRELEVANT FOR THE COMPUTATION OF ARM'S LENGTH PRIC E. 18. THE LD. TPO/ HON'BLE DRP ERRED IN FACTS AND IN LAW BY CONCLUDING THE FOLLOWING, WITHOUT PROVIDING ANY MATERIAL ON RECORD TO SUBSTAN TIATE THE BASIS OF CONCLUDING THAT - I. SERVICES RENDERED BY THE AES ARE DUPLICATIVE IN NAT URE FOR WHICH NO SEPARATE PAYMENT NEEDS TO BE MADE; II. SERVICES RENDERED BY THE AES ARE INCIDENTAL SERVICE S OR SHAREHOLDER ACTIVITY FOR THE BENEFIT OF THE GROUP; III. SUPPORTING DOCUMENTS PROVIDED BY THE ASSESSEE BEFOR E LD. TPO/ HON'BLE DRP ARE GENERIC IN NATURE IV. NO INDEPENDENT ENTERPRISE WOULD HAVE MADE SUCH PAYM ENTS FOR SIMILAR SERVICES RENDERED BY ANOTHER ENTERPRISE; V. NO DETAILS PROVIDED IN CONNECTION TO THE COSTS INCU RRED AND COST ALLOCATION MECHANISM IMPLEMENTED TO ALLOCATE THE COSTS TO THE APPELLANT BY ITS AE INITIATION OF PENALTY PROCEEDINGS 19. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 20. THE APPELLANT CRAVES TO LEAVE TO ADD, WITHDRAW, ALT ER, MODIFY, AMEND OR VARY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HE ARING. 21. THE APPELLANT HAS PREFERRED A RECTIFICATION APPLICA TION U/S 154 IN CONNECTION TO THE INADVERTENT MISTAKES BY THE LD. AO. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEN D THE ABOVE GROUNDS OF APPEAL AS AND WHEN ADVISED. 6 ITA NO.123/DEL/2017 5. GROUNDS OF APPEAL NO.1 AND 2 BEING GENERAL IN NA TURE WERE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE FOR WHICH LD. DR H AS NO OBJECTION. ACCORDINGLY, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 6. SO FAR AS GROUNDS NO.3 AND 4 ARE CONCERNED, IT I S GRIEVANCE OF THE ASSESSEE THAT THE BENCHMARKING OF TRANSACTION THROUGH THE CO MBINED TRANSACTION APPROACH BY APPLYING OF TNMM WAS WRONGLY REJECTED. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TPO DISREGARDED THE COMBINED TRANSACTION APPROACH ON THE GROUND THAT TH E TRANSACTION ARE SEPARATE IN NATURE AS ACCORDING TO HIM EXPORT COMMISSION, ROYAL TY AND MODEL FEE ARE SEPARATE IN NATURE. HE SUBMITTED THAT THERE IS NO SPECIFIC FINDINGS BY THE DRP ON THIS ISSUE. HE SUBMITTED THAT THE COMBINED TRAN SACTION APPROACH IS WELL ACCEPTED AS PER THE PROVISIONS OF SECTION 92C(1) OF THE I.T. ACT WHICH SPEAKS ABOUT NATURE OF TRANSACTION OR CLASS OF TRANSACTIO N. FURTHER, THE TERM TRANSACTION ITSELF IS DEFINED IN RULE 10A(D) OF T HE I.T. RULES, 1962 TO INCLUDE A NUMBER OF CLOSELY LINKED TRANSACTIONS. THE OECD TRANSFER PRICING GUIDELINES AT PARA 3.9 AND 3.11 RECOGNIZE THAT IF CERTAIN TRAN SACTIONS ARE CLOSELY LINKED THEN THEY CAN BE BENCHMARKED TOGETHER. HE SUBMITTED THA T THE BASIS OF SEPARATE ANALYSIS FOR EXPORT COMMISSION, ROYALTY AND MODEL F EE IS COMPLETELY PERVERSE AND DOES NOT RELATE TO THE FACTS OF THIS CASE. THE RE IS NO EXPORT COMMISSION, ROYALTY AND MODEL FEE PAID IN THE PRESENT CASE. IN ABSENCE OF SUCH TRANSACTION THE VERY BASIS OF REJECTION OF TNMM IS ILLUSORY AND THE SAME SHOULD HAVE BEEN ACCEPTED. HE SUBMITTED THAT THE TNMM HAS BEEN ADOP TED FOR FIVE TRANSACTION 7 ITA NO.123/DEL/2017 USING THE COMBINED TRANSACTION APPROACH AS THESE AC TIVITIES ARE CLOSELY LINKED TO THE MAIN ACTIVITY I.E. SALE AND DISTRIBUTION OF HAN DSETS IN A HIGHLY COMPETITIVE MARKET AND AFTER SALES SERVICES, WHICH ARE OF TECHN ICAL NATURE. FURTHER, THE BASIS ADOPTED IN THE TP REPORT FOR ADOPTING TNMM HAS NOT BEEN REBUTTED. THE TPO HAS FAILED TO INDICATE ANY REASONS FOR REJECTION OF TNMM AS THE MOST APPROPRIATE METHOD. REFERRING TO THE DECISION OF T HE TRIBUNAL IN THE CASE OF AVERY DENISON VS. ACIT REPORTED IN (2016) 65 TAXMAN N.COM 188, HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THA T A SINGLE TRANSACTION CANNOT BE ISOLATED FOR APPLYING CUP METHOD. HE SUBMITTED THA T THE ABOVE DECISION OF THE TRIBUNAL HAS BEEN UPHELD BY THE HONBLE DELHI HIGH COURT. HE ACCORDINGLY SUBMITTED THAT SINCE THE ORDER OF THE ASSESSING OFF ICER/TPO IS COMPLETELY PERVERSE THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 8. SO FAR AS GROUNDS NO.6 TO 10 ARE CONCERNED, THE SAME RELATE TO APPLICATION OF CUP METHOD AS THE MOST APPROPRIATE METHOD FOR DE TERMINATION OF ARMS LENGTH PRICE FOR THE TRANSACTION BETWEEN THE ASSESS EE AND ITS AE. 9. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS P ER THE TPO, IGS RENDERED ARE NOT AT ARMS LENGTH PRICE. ACCORDING TO HIM, N O UNCONTROLLED ENTERPRISE WOULD HAVE PAID ANY AMOUNT FOR SERVICES NOT AMOUNTI NG TO IGS AND WITHOUT ANY BENEFITS. THEREFORE, ARMS LENGTH PRICE WAS CALCUL ATED BY HIM BY APPLYING CUP METHOD AS NIL, WHICH HAS BEEN UPHELD BY THE DRP. H E SUBMITTED THAT THE TPO/DRP HAVE INCORRECTLY APPLIED THE CUP METHOD WIT HOUT BRINGING OUT ANY COMPARABLE ON RECORD AND, THEREFORE, APPROACH OF TH E TPO/DRP IS CONTRARY TO 8 ITA NO.123/DEL/2017 RULE 10B(2) OF THE I.T. RULES, 1962 AND THE JUDICIA L PRECEDENTS. FOR THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS : - A. AWB INDIA P. LTD. VS. DCIT, (2014) 50 TAXMANN.C OM 323. B. FRIGOGOLAS INDIA (P.) LTD. VS. DCIT, (2016) 68 TAXMANN.COM 370. C. MITSUI PRIME ADVANCED COMPOSITE INDIA (P.) LTD. VS. DCIT, (2016) 70 TAXMANN.COM 123. D. KNORR BREMSE VS. ACIT, (2017) 77 TAXMANN.COM 10 1. 10. HE ACCORDINGLY SUBMITTED THAT THE ABOVE GROUNDS SHOULD BE ALLOWED. 11. SO FAR AS GROUNDS NO.5, 16 AND 17 ARE CONCERNED , THE SAME RELATE TO THE FAILURE OF THE TPO/DRP TO APPRECIATE THAT BENEFIT H AS BEEN RECEIVED BY THE ASSESSEE. 12. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE A BOVE GROUNDS SUBMITTED THAT AS PER THE TPO, NO DOCUMENTARY EVIDENCES WERE PRODU CED TO ESTABLISH THAT THE INTRA GROUP SERVICES WERE NEEDED BY THE ASSESSEE AN D THE SERVICES ARE MERELY DUPLICATIVE IN NATURE AND THEY DO NOT AMOUNT TO IGS . THE DRP HELD THAT THE ASSESSEE FAILED TO DEMONSTRATE THAT SERVICES WERE A CTUALLY NEEDED. ACCORDING TO THEM, THE ASSESSEE HAS FAILED TO PROVE THAT SERVICE S ARE NOT DUPLICATIVE AND PAYMENT WAS MADE AT ARMS LENGTH PRICE. ACCORDING TO THE DRP, THE EVIDENCE FILED BY THE ASSESSEE DOES NOT SATISFY THE NEED TES T AND FAIL TO DEMONSTRATE THAT SERVICES WERE ACTUALLY RECEIVED. HE SUBMITTED THAT THE TPO HAS RENDERED CONTRADICTORY FINDINGS I.E. ON ONE HAND HE HAS DISP UTED THE RECEIPT OF SERVICES AND ON THE OTHER HAND HE HAS STATED THAT SERVICES R ECEIVED ARE INCIDENTAL AND 9 ITA NO.123/DEL/2017 DUPLICATIVE. HE SUBMITTED THAT SINCE THE ASSESSEE HAS MADE TDS ON PAYMENTS TO ITS AES, THE SAME INDICATES THAT SERVICES WERE ACTU ALLY RECEIVED FOR WHICH PAYMENT WAS MADE. FURTHER, THE ASSESSEE HAD FILED VOLUMINOUS DOCUMENTS TO SUBSTANTIATE THAT THE SERVICES HAVE IN-FACT BEEN RE NDERED. REFERRING TO PAGE 301 OF THE PAPER BOOK (VOLUME I) HE SUBMITTED THAT IN DEPENDENT AUDITORS CERTIFICATE GIVEN TO BP AUSTRALIA PROVES THAT SERVI CES HAVE BEEN RENDERED BY THE AE AND RECEIVED BY THE ASSESSEE. REFERRING TO PAGE 212 TO 235 OF THE PAPER BOOK (VOLUME I), HE SUBMITTED THAT THE INVOICES S HOW THAT EMPLOYEE COST HAS BEEN SHARED AND TAXES HAVE BEEN DEDUCTED BY THE ASS ESSEE. REFERRING TO PAGE 240 TO 300 OF THE PAPER BOOK (VOLUME I), HE DREW THE ATTENTION OF THE BENCH TO THE SAMPLE EMAIL CORRESPONDENCE. REFERRING TO P AGE 685 OF THE PAPER BOOK (VOLUME I), HE DREW THE ATTENTION OF THE BENCH TO THE REASONS FOR AVAILING SERVICES AS INDICATED IN THE MANAGEMENT CROSS CHARG E REPORT. HE SUBMITTED THAT BIPL HAS NO TEAM FOR INTERNAL AUDIT AND THESE SERVICES ARE PERFORMED BY THE AE. REFERRING TO PAGE 563 TO 682 OF THE PAPER BOOK (VOLUME II), HE DREW THE ATTENTION OF THE BENCH TO THE DETAILED SUBMISSION B EFORE THE DRP INCLUDING EVIDENCE FOR PROVISION OF SERVICES. HE SUBMITTED T HAT THE SERVICES ARE NOT DUPLICATIVE IN NATURE AND THE ASSESSING OFFICER HAS INCORRECTLY GONE ON COST BENEFIT. RELYING ON THE FOLLOWING DECISIONS, HE SU BMITTED THAT BENEFIT FROM A TRANSACTION NEED NOT BE PROVED :- A. KNORR BREMSE VS. ACIT, 380 ITR 307. B. E.I. DUPONT INDIA (P.) LTD. VS. DCIT, (2016) 72 TAXMANN.COM 215. 10 ITA NO.123/DEL/2017 C. SONY ERICSON MOBILE COMMUNICATIONS INDIA (P.) LT D. VS. CIT, 374 ITR 118. D. CIT VS. CUSHMAN AND WAKEFIELD INDIA (P.) LTD., 367 ITR 730. E. DRESSER RAND INDIA (P) LTD. VS. ADDL.CIT, (2011) 13 TAXMANN.COM 82. 13. REFERRING TO THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MAX INDIA REPORTED IN (2016) 75 TAXMANN.COM 268, HE SUBMITTED THAT THE RECEIPT OF SERVICE IS ESTABLISHE D ON BALANCE OF PROBABILITIES AND THE AGREEMENT FOR SERVICES MAY BE ORAL OR WRITT EN. HE ACCORDINGLY SUBMITTED THAT THE ABOVE GROUNDS RAISED BY THE ASSE SSEE SHOULD BE ALLOWED. 14. SO FAR AS GROUNDS NO.14 AND 15 ARE CONCERNED, T HE SAME RELATE TO ACTION OF THE TPO/DRP IN QUESTIONING THE COMMERCIAL EXPEDIENC Y OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. 15. LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE D ECISION IN THE CASE OF EKL APPLIANCES REPORTED IN (2012) 24 TAXMANN.COM 199 SU BMITTED THAT IT IS WELL- ESTABLISHED PRINCIPLE THAT THE DEPARTMENT CANNOT QU ESTION THE COMMERCIAL EXPEDIENCY OF A TRANSACTION. 16. SO FAR AS GROUND NO.13 IS CONCERNED, THE SAME R ELATES TO THE ORDER OF THE DRP/TPO IN RELYING ON THE BEPS REPORT WITHOUT CONSI DERING THE REPORTS IN THEIR ENTIRETY AND BY IGNORING BINDING PROVISIONS OF THE ACT AND DECISIONS OF THE TRIBUNAL. 17. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BEPS REPORT, IF READ IN ENTIRETY, CLEARLY PROVIDES THAT CENTRALIZED SERVICE S, SERVICES ON CALL AS IGS OUGHT 11 ITA NO.123/DEL/2017 TO BE CONSIDERED FOR DETERMINING THE ARMS LENGTH P RICE AND CANNOT BE REJECTED AS MERELY SHAREHOLDER SERVICES. BEPS REPORT IN-FAC T SUPPORTS THE CASE OF THE ASSESSEE FOR DETERMINING ARMS LENGTH PRICE USING T NMM. HE ACCORDINGLY SUBMITTED THAT THE GROUNDS RAISED BY THE ASSESSEE S HOULD BE ALLOWED. 17.1 THE REMAINING OTHER GROUNDS WERE NOT PRESSED B Y THE LD. COUNSEL FOR THE ASSESSEE BEING GENERAL/ARGUMENTATIVE/SUPPORTIVE IN NATURE FOR WHICH LD. DR HAS NO OBJECTION. ACCORDINGLY, THESE GROUNDS ARE DISMI SSED AS NOT PRESSED. 18. LD. DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER/TPO/DRP AND SUBMITTED THAT THE REVENUE AUTH ORITIES HAVE CORRECTLY APPRECIATED THE FACTS AND PASSED THE ORDER BY MAKIN G AN UPWARD ADJUSTMENT OF RS.4,49,25,556/- AND, THEREFORE, THE SAME SHOULD BE UPHELD. IN HIS ALTERNATE CONTENTION, HE SUBMITTED THAT HE HAS NO OBJECTION I F THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER/TPO FOR ADJUDICATION OF THE ISSUES AFRESH IN THE LIGHT OF THE VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. 19. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THE ASSESSEE IN THE INSTANT CASE IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF MOBILE HANDSET AND ACCESSORIES. IT ALSO PROVIDES AFTER SALES SERVICES TO ITS CUSTOMERS THROUGH ITS SERVICES CENTRES. THE ASSESSEE HAS AVAILED CERTAIN INTRA GROUP SERVICES FROM ITS AE AND IN ORDER TO ASCERTAIN THE ARMS LENGTH PRICE OF THESE TRANSACTIONS, THE ASSESSEE BENCHMARKED THESE TRANSACTIONS USING THE C OMBINED TRANSACTION APPROACH CONSIDERING TNMM AS THE MOST APPROPRIATE M ETHOD. WE FIND THE 12 ITA NO.123/DEL/2017 ASSESSING OFFICER/TPO REJECTED THE TNMM FOR THE IGS AND INSTEAD APPLIED CUP METHOD WHICH HAS BEEN UPHELD BY THE DRP. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE COMBINED TRANSACT ION APPROACH IS WELL ACCEPTED AS PER THE PROVISIONS OF SECTION 92C(1) WHICH SPEAK S ABOUT NATURE OF TRANSACTION OR CLASS OF TRANSACTION. IT IS ALSO H IS SUBMISSION THAT THE TERM TRANSACTION ITSELF IS DEFINED IN RULE 10A(D) OF T HE I.T. RULES, 1962 TO INCLUDE A NUMBER OF CLOSELY LINKED TRANSACTIONS. IT IS ALS O HIS ARGUMENT THAT THE FINDING OF THE ASSESSING OFFICER/TPO THAT THE BASIS OF SEPA RATE ANALYSIS IS EXPORT COMMISSION, ROYALTY AND MODEL FEE IS COMPLETELY PE RVERSE SINCE THE ASSESSEE HAS NOT RECEIVED ANY EXPORT COMMISSION, ROYALTY OR MODEL FEE. IT IS ALSO HIS ARGUMENT THAT THE TNMM HAS BEEN ADOPTED FOR FIVE TR ANSACTIONS USING THE COMBINED TRANSACTION APPROACH AS THESE ACTIVITIES A RE CLOSELY LINKED TO THE MAIN BUSINESS ACTIVITY I.E. SALE AND DISTRIBUTION OF HAN DSETS. IT IS ALSO HIS SUBMISSION THAT THE ASSESSING OFFICER/TPO HAS NOT REBUTTED THE BASIS ADOPTED IN THE TP REPORT FOR ADOPTING TNMM AND THEY FAILED TO INDICAT E THE REASONS FOR REJECTING THE TNMM AS THE MOST APPROPRIATE METHOD. FURTHER, THEY HAVE BEEN INCORRECTLY APPLIED THE CUP METHOD WITHOUT BRINGING OUT ANY COM PARABLE ON RECORD. IT IS CONTRARY TO RULE 10B(2) OF THE I.T. RULES, 1962. S IMILARLY, IT IS ALSO HIS ARGUMENTS THAT THE ASSESSEE HAD FILED VOLUMINOUS DO CUMENTS TO ESTABLISH THAT THE IGS WERE NEEDED BY THE ASSESSEE AND ARE NOT DUP LICATIVE IN NATURE. ALL THOSE DETAILS FILED BEFORE THE TPO/DRP WERE COMPLETELY IG NORED. IT IS ALSO HIS ARGUMENT THAT THE DEPARTMENT CANNOT QUESTION THE CO MMERCIAL EXPEDIENCY OF 13 ITA NO.123/DEL/2017 THE TRANSACTIONS. IN OUR OPINION AND CONSIDERING T HE TOTALITY OF THE FACTS OF THE CASE, THE MATTER REQUIRES A FRESH ADJUDICATION AT T HE LEVEL OF THE ASSESSING OFFICER/TPO IN THE LIGHT OF THE VARIOUS EVIDENCES P RODUCED BEFORE THEM AND IN THE LIGHT OF THE DECISIONS RELIED ON BY THE LD. COU NSEL FOR THE ASSESSEE BEFORE US. WE, THEREFORE, RESTORE THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER/TPO WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCO RDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECTLY ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 TH DAY OF DECEMBER, 2017. SD/- SD/- (KULDIP SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04-12-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE DRP-I, NEW DELHI 4) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI