TH BOSTON CONSULTING GROUP (INDIA) P. LTD, MUMBAI V. DCIT CIR 3(3)(2), MUMBAI

ITA 1401/MUM/2016

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2549 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: K
• Next Hearing Date: 24-04-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 13-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Question of law; TDS
• Section: 92C; 143(3); 244A; 234B; 10B; 191; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “K”, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON'BLE JUDICIAL MEMBER AND SHRI SUNIL KUMAR SINGH, HON'BLE JUDICIAL MEMBER ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited 14 th Floor, Nariman Bhavan 227, Nariman Point Mumbai - 400021 PAN: AABCB3524G v. DCIT – Circle - 3(3)(2) Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee Represented by : Shri J.D. Mistri, Shri Pratik Shah & Ms. Riddhi Maru Department Represented by : Shri Udoal Raj singh Date o Conclusion of Hearing : 25.04.2024 Date of Pronouncement : 03.05.2024 O R D E R PER NARENDRA KUMAR BILLAIYA (AM) 1. This appeal by the assessee is preferred against the order dated 18.01.2016 framed under section 143(3) r.w.s. 144C(13) of Income-tax Act, 1961 (in short “Act”) pertaining to A.Y. 2011-12. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 2 2. Assessee has raised following grounds in its appeal: - “1. On the facts and in the circumstances of the case and in law, the learned Deputy Commissioner of Income-tax 3(3)(2) (the learned AO'/ the learned Additional Commissioner of Income-tax Transfer Pricing 4(2) ('the learned TPO'), under the directions of the Hon'ble Dispute Resolution Panel - 2 ('the Hon'ble DRP'), erred in determining the arm's length price of the Appellant's international transaction of provision of management consultancy services at Rs. 30,91,74,079 instead of Rs. 23,79,44,777 as determined by the Appellant and thereby making an adjustment of Rs. 7,12,29,302. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 2. On the facts and in the circumstances of the case and in law, the learned AO/TPO, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Appellant's international transaction of payment of license fees for time and billing software at Nil instead of Rs. 2,70,67,280 as determined by the Appellant and thereby making an adjustment of Rs. 2,70,67,280. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 3. On the facts and in the circumstances of the case and in law, the learned AO / TPO, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Appellant's international transaction of provision of regional co- ordination services at Rs. 6,08,28,453 instead of Rs. 5,78,31,951 as determined by the Appellant and thereby making an adjustment of Rs. 29,96,502. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 4. On the facts and in the circumstances of the case and in law, the learned AO / TPO, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Appellant's international transaction of payment of information technology cost allocation at Nil instead of Rs. 4,77,19,067 as determined by the Appellant and thereby making an adjustment of Rs. 4,77,19,067. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 3 The Appellant, therefore, prays that the aforesaid adjustment be deleted. 5. On the facts and in the circumstances of the case and in law, the learned AO / TPO, under the directions of the Hon'ble DRP, erred in determining the arm's length price of the Appellant's international transaction of reimbursements paid at Nil instead of Rs. 4,96,13,505 as determined by the Appellant and thereby making an adjustment of Rs. 4,96,13,505. The Appellant, therefore, prays that the aforesaid adjustment be deleted. 6. On the facts and in the circumstances of the case and in law, the learned AO erred in short-granting TDS credit by Rs. 4,27,18,295. The Appellant, therefore, prays that the learned AO be directed to grant TDS credit of Rs. 4,27,18,295. 7. On the facts and in the circumstances of the case and in law, the learned AO erred in charging interest under section 234B of the Act of Rs. 1,27,67,076. The Appellant, therefore, prays that the learned AO be directed to delete interest charged under section 234B of the Act. 8. On the facts and in the circumstances of the case and in law, the learned A erred in charging interest under section 234D of the Act of Rs. 96,17,689. The Appellant, therefore, prays that the learned AO be directed to recalculate interest charged under section 234D of the Act. 9. On the facts and in the circumstances of the case and in law, the learned AO erred in short-granting interest under section 244A of the Act. The Appellant, therefore, prays that the learned AO be directed to recalculate interest under section 244A of the Act. 10. On the facts and in the circumstances of the case and in law, the learned AO erred in initiating penalty proceeding under section 271(1)c) of the Act. The Appellant, therefore, prays that the learned AO be directed to drop the initiation of the aforesaid penalty proceeding. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.” ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 4 3. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidences brought on record in the form of Paper Books duly considered in the light of Rule 18(6) of ITAT Rules. Judicial decisions wherever relied upon duly considered. 4. Briefly stated the facts of the case are that the, assessee is a global management consulting firm and the world's leading advisor on business strategy. Assessee is a part of BCG group, which is an international strategy consulting firm with a strong global presence. It has a presence in major countries of the world. It provides insights to clients on the factors that drive value creation and add competitive advantage in their businesses and the economy as a whole and converts such insights into strategies, whose implementation would have a probable positive impact on performance. SI. No. Particulars of Transactions Amount (Rs.) Method Used 1. Receipt of Management Consultancy Fees (Receipt) 237944777 CUP 2. Payment for Time & Billing Software License (Paid/ Pay able) 27067280 CUP 3. Regional coordination 57831951 TNMM 4. Regional cost allocation (training, administration and coordination) 48576753 CUP 5. Information technology cost allocation 47719067 CUP ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 5 SI. No. Particulars of Transactions Amount (Rs.) Method Used 6. Worldwide Training cost allocation (training and conferences) 9228385 CUP 7. Global finance cost allocation 2983409 CUP 8. Reimbursement of expenses paid 49613505 CUP (at cost) 9. Reimbursement of expenses received 31730593 CUP (at cost) 5. The first adjustment is in respect of Receipt of Management Consultancy Fees. The underlying facts in this issue are that, during the year under consideration the assessee provided management consultancy services both, to its affiliates worldwide and to unrelated parties. The aggregate fees received by the assessee in respect of such services rendered to BCG Affiliates are ₹.23,79,44,777/-. Assessee charges its affiliates at standard hourly rate based on time spent for each assignment. The standard hourly rates are as under: - Designation Hourly rates actually charged lo affiliates in INR Maximum Hourly rates actually charged to third par lies in INR Officer 17500 17500 Manager 12000 12000 Project leader 10000 10000 Consultant 6500 6500 Associates 6500 6500 Knowledge Group 1601 1601 6. In its transfer pricing study report, assessee applied CUP comparing hourly rate charged to AE and Non-AE, to justify Internal CUP. It was explained that the assessee does not avail of management ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 6 consultancy services or third parities other than its associated enterprises and the assessee has rendered similar services to unrelated parties in India and outside India. Based on this internal comparables were available vis-à-vis BCG India. The assessee has determined Arm’s Length Price and explained that it has rendered similar services to unrelated parties in India and outside India on standard hourly rates. It was explained that the assessee has also rendered services to unrelated parties in India for which it will be charging fees on a lumpsum basis. The standard hourly rates charged by BCG India to unrelated parties are as under: - Designation Standard Hourly rates (In INR) Officer 17500 Manager 12000 Project leader 10000 Consultant 6500 Associates 6500 Knowledge Group 1601 7. During the transfer pricing assessment proceedings, the Transfer Pricing Officer observed that the assessee has not submitted copy of agreement entered with the AE for providing specific services and on analyzing copies of agreement related to non-AE in respect of Godrej & Boyce Mfg Co. Ltd., IndusInd Bank and Mphasis Corp, the Transfer ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 7 Pricing Officer observed that the assessee has erased most of the part, to which the assessee explained that due to confidential reasons it is unable to provide the entire document. The Transfer Pricing Officer was of the opinion that the assessee has not submitted the kind of work mentioned in these documents. It is not clear that what kind of services the assessee is supposed to provide. Therefore, it is not possible to comment whether similar serves were provided for AE. On further analyses the Transfer Pricing Officer found that there is no mention of hourly charges. The amount decided is a lumpsum amount including out of pocket expenses. The Transfer Pricing Officer formed a belief that the assessee has failed to substantiate applicability of CUP and rejected the same and applied TNMM as the most appropriate method. The reasons for rejecting CUP given by the Transfer Pricing Officer are: - a. No AE documents are on fixed payment basis. b. No hourly rate mentioned in the Non-AE documents. c. No personnel mentioned in NON-AE. d. Rates mentioned in AE documents do not match with the TPSR rates. e. CUP needs stringent comparability. 8. Applying TNMM as the most appropriate method, Transfer Pricing Officer selected following comparables, a) ICRA management Consulting ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 8 Services Ltd., b) eClerx Services Ltd., and c) TCE Consulting Engineers Ltd., and determined the mean margin as under: - Particulars OP/OC (%) ICRA management Consulting Services Ltd., 15.32 eClerx Services Ltd., 69.70 TCE Consulting Engineers Ltd., 26.60 Mean 37.21 9. Transfer Pricing Officer made the adjustment as under: - (OP/OC) of assessee 5.61 value of international transaction 237944777 OP/OC of comparable 37.21 Arm's length profit=37.21%*total expenditure 811965736.4 Arm's length revenue= Arm's length profit+Cost 2994082738 Difference between actual revenue and arm's length revenue 689538254 % of AE income on total income 10.33 Proportionate adjustment=10.33%*689538254 71229302 5% of international transaction 11897239 Adjustment proposed 71229302 10. We have given a thoughtful consideration to the findings of the Transfer Pricing Officer. It is true that Non-AE documents are on fixed payment basis. We find force in the contention of the counsel when he stated that Non-AE client do lot of negotiation and the final billing is done after negotiations though the assessee compute the final figure on the basis of hours spent by its professional. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 9 11. It would be pertinent to understand the setup of a large consultant global firm like that of the assessee, the consultants are not only qualified but many of them are super qualified specialists and super specialists having different years of experiences. For Example, the consultant can be a simple MBA, MBA + IIT Graduate, MBA + CA, though they may be placed in the same category like project leader, or manager but due to their qualification and super specialty their hourly rates may be differ. Therefore, it would be incorrect to say that there is a discrimination in charging of hourly rates. Considering the facts of the case in totality, we are of the considered view that the action of the Transfer Pricing Officer is not only erroneous but also against the facts of the case in hand. 12. Assuming that the Transfer Pricing Officer application of TNMM is the most appropriate method, we find that while applying the TNMM, the Transfer Pricing Officer has computed the profitability of BCG India at a company level and subsequently computed a proportionate profitability to impute the adjustment with respect to the international transaction of provision of management consultancy services. If the assessee’s segmental profit and loss account is considered wherein the revenue and expenses are allocated between AE and Non-AE on an ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 10 appropriate basis. Then the profitability arising of the AE segment is 44.02% whereas in case of Non-AE it is 3.77%. On a perusal of the internal TNMM analysis, we find that the assessee has earned significantly higher margins in the AE Segment vis-à-vis Non-AE Segment. 13. Rule 10B also provides that “the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base”. In our considered opinion the word “comparable” may encompass internal comparable or external comparable. It is because the delegated legislature has firstly referred to the net profit margin realized by the enterprise (internal) from a comparable uncontrolled transaction and, thereafter, it points towards net profit margin realized by an unrelated enterprise (external) from a comparable uncontrolled transaction. 14. In the light of the above, in our humble opinion wherever Internal TNMM is available the same should be given preference over external TNMM analysis. Even on this point the assessee is in a better footing, However, as mentioned elsewhere, we are of the considered view that ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 11 the CUP applied by the assessee does not have any flaw or error and the same should be accepted. We accordingly direct the Assessing Officer to delete the TP Adjustment in relation to proviso for management consultancy services. Ground No. 1 is allowed. 15. Ground No. 2 is in respect of T.P Adjustment in relation to payment of licence fees for time and billing software. We find that the identical issue was considered by the Coordinate Bench in assessee’s own case in A.Ys. 2008-09, 2009-10 and 2010-11. In ITA No. 1760/MUM/2015 for the A.Y. 2010-11, the Coordinate Bench has considered this issue at Para No. 13 of its order wherein it upheld the decision given in A.Y. 2008-09 in ITA No. 7600/MUM/2012 and A.Y.2009-10 in ITA No. 1870/MUM/2017 and concluded as under: - “17. Considered the rival submissions and material placed on record, we observe from the record that similar issue was considered by the coordinate bench in the case of assessee’s own case in the AY 2008-09 held as under: “7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. An examination of the order of the TPO made u/s 92CA(3) dated 20.10.2011 clearly indicates that while making the adjustment of Rs.1,62,74,359/- (payment for time and billing software license), Rs.3,73,07,488/- (regional and worldwide training) and Rs.2,10,06,610/- (payment for information technology cost allocation), he has not adopted any of the prescribed method. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 12 In the case of M/s Lever India Exports Ltd. (supra), the Hon’ble Bombay High Court has held that the jurisdiction of the TPO is specific and limited i.e. to determine the ALP of an international transaction in terms of Chapter X of the Act r.w. Rule 10A to 10E of the Income Tax Rules. It further held that the ad-hoc determination of ALP by the TPO dehors section 92C of the Act cannot be sustained. In M/s Merck Ltd. (supra), the respondent-assessee had entered into an agreement with its AE to provide technical knowhow/consultancy in 12 fields as indicated therein for a consideration of Rs.1.57 crores. The respondentassessee availed services of its AE during the subject year (AY 2003-04) only in 3 out of 12 fields listed in the agreement. The TPO, therefore, proceeded to hold that the entire consideration of Rs.1.57 crore is attributable to the 3 technical services which the respondent- assessee availed of and held that no consideration was payable in respect of 9 services provided for in the agreement. Thus the entire payment of Rs.1.57 crore was attributable only to the 3 services availed out of the 12 listed out in the agreement. It further held that only Rs.40 lacs could be considered as ALP attributable to 3 services and made adjustment of Rs.1.17 crore resulting in its addition to the taxable income. In appeal, the CIT(A) upheld addition of Rs.1.17 crores made and taxable income consequent to the adjustment made on account of technical knowhow/consultancy agreement. On further appeal, the Tribunal upheld the submissions of the respondent-assessee and recorded further the fact that no transfer pricing exercise was done by the AO/TPO to determine the value of the services received by the respondent-assessee in respect of the 3 services which it had availed from its AE before holding that the ALP in this case is Rs.40 lacs. The Tribunal further held that “consideration payable for the services availed of by the respondent-assessee to determine the ALP was not carried out”. On appeal by the Revenue, the Hon’ble Bombay High Court held that : “Consequently, the finding of the Assessing Officer attributing nil value to nine of the services listed in the agreement which were not availed of by the Respondent Assessee in the present facts was not justified. Moreover, not adopting one of the mandatorily prescribed methods to determine the ALP in respect of fees of technical services payable by the Respondent-Assessee to its AE, make the entire Transfer pricing Agreement unsustainable in law.” ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 13 In M/s Johnson & Johnson Ltd. (supra), the Tribunal allowed the respondent-assessee’s appeal before it by deleting the addition of Rs.200.82 lacs being the transfer pricing adjustment on account of sales promotion and publicity expenses being payable by the respondent-assessee’s parent M/s Johnson & Johnson, USA. This on the ground that the TPO has, while holding that the parent company should share this expenditure on publicity and sales promotion as it benefits therefrom, as higher sales result in higher royalty, has not determined the ALP by following any of the methods prescribed u/s 92C(1) of the Act r.w. Rule 10B. On appeal by the revenue, the Hon’ble Bombay High Court held that : (ii) The TPO is obliged under the law to determine the ALP by following any one of the prescribed methods of determining the ALP as detailed in Section 92C(1) of the Act. In this case, there is nothing on record to indicate that the TPO had applied any one of the prescribed methods in Section 92C(1) of the Act to determine the ALP before disallowing the payment of Rs.200.82 lakhs incurred by the Respondent on account of publicity and sales management as being excessive and/or payable by its parent, M/s. Johnson & Johnson, USA. (iii) The impugned order holds that transfer pricing adjustment done by disallowing the payment, on the basis of an assumption that it is excessive, is an action completely dehors the provisions of transfer pricing adjustment found in chapter X of the Act. The determination of the ALP has to be done only by following one of the methods prescribed under the Act. (iv) In view of the above, as the Revenue has not acted in accordance with the clear mandate of law, the questions as proposed does not give rise to any substantial question of law. Thus, not entertained.” In M/s Kodak India Pvt. Ltd. (supra), the above position of law is reiterated by the Hon’ble Bombay High Court. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 14 As mentioned earlier, we notice that the TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co-ordination cost allocation and (iii) payment of information technology cost allocation. In view of the above factual scenario, we are of the considered view that the ratio laid down by the Hon’ble Bombay High Court in Lever India Exports Ltd.; Merck Ltd.; Johnson & Johnson Ltd. and Kodak India Pvt .Ltd. mentioned hereinabove is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal.” 18. Respectfully, following the above decision, we observe that the facts in the present case are exactly similar and hence, we are inclined to allow the grounds Nos. 1 and 3 raised by the assessee.” 16. Respectfully following the findings of the Coordinate Bench (supra), we direct the Assessing Officer / Transfer Pricing Officer to delete the TP Adjustment in relation to payment of licence fees for time and billing software. 17. Ground No. 3 relates to the TP adjustment on provision of regional coordination services, underlying facts shows that the functions performed by the assessee in this regard are as under: -  Assistance with maintaining and developing client relationships at a regional level • Providing co-ordination and support on matters such as regional training and conferences ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 15 • Providing co-ordination and support on recruitment and compensation related matters within the region • Providing co-ordination and support on executive and operational matters concerning the Asia Pacific Region • Assistance on other support and co-ordination matters pertaining to Asia Pacific Region 18. The assessee considered TNMM as most appropriate method to substantiate the Arm’s Length nature of this transaction. The assessee has earned the OP/TC of 7.5% with respect to provision of regional coordination services as against 5.49% of comparables companies. The financial results of comparables are as under: - Sr.No. Company Name PLI (OP/TC) 1. Lancor Maintenance & Services Ltd. 19.89 2. Office Care Services Ltd 4.44 3. Vatika Marketing ltd -14.47 4. Geo Connect Ltd 14.89 5. Tata Services Ltd.(Support Services) -15.75 6. SDB Cisco I Ltd Annual report not available 7. EQMS India Ltd Annual report not available 8. Horizone Environmental Services ltd Annual report not available Mean 1.89% 19. While considering the TPSR of the assessee, the Transfer Pricing Officer was of the opinion that Vatika Marketing Limited is not a good comparable for the reason that it is in the business of building maintenance which activity is not at all functionally comparable to the activity of the assessee. The Transfer Pricing Officer was of the firm belief that the FAR is not comparable. Transfer Pricing Officer further ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 16 rejected TATA Services Limited who is providing Services to Group Companies on No Profit No Loss basis and further rejected SDB Cisco I Ltd., , EQMS India Ltd., Horizone Environmental Services Ltd., for want of annual report. The final set of comparables and the determination of Arm’s Length Price was done as under: - Sr.No Company Name PLI(OP/TC) 1 Lancor Maintenance & Services Ltd. 19.89 2 Office Care Services Ltd 4.44 3 Geo Connect Ltd 14.89 Mean 13.07 9.2.5 since the PLI of the assessee is less than that of the Comparables the transaction is not at Arm’s Length. Therefore, the Arm's Length value is calculated as under: Operating Expenses as per Assessee's TPSR A 53797164 Operating Revenue as per Assessee's TPSR page B 57831951 Operating rating Profit as per TPSR page 55 C 4034787 OP/'OC as per TPSR page 55 D 7.4999994 OP/OC of Comparables E 13.07% Arms length Operating Profit F=E*A 7031289.3 Arms Length revenue G=A+F 60828453 Difference in Actual and Arms Length Revenue H=G-B 2996502.3 5% of Actual Revenue I=5%*B 2891597.6 Adjustment J=H 2996502.3 20. Before us, it has been argued that the Transfer Pricing Officer has grossly erred in excluding Vatika Marketing Limited, it has been emphatically pointed out that Lancor Maintenance & Services Ltd., included in the final determination of Arm’s Length Price has similar ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 17 services and therefore, either Vatika Marketing Limited should be included or Lancor Maintenance & Services Ltd. should also be excluded. 21. The reasons given by the Transfer Pricing Officer for excluding Vatika Marketing Limited are mentioned elsewhere. Let us now see the business of Lancor Maintenance & Services Ltd.,. The income shown by this company is “income from Maintenance operations” and in its segment information “the company is engaged in the business of maintenance and management of properties and there is no separately identifiable business or geographical segments”. In the light of the above, we are of the considered view that the Transfer Pricing Officer has erred in excluding Vatika Marketing Limited which is also engaged in the similar business as that of the Lancor Maintenance & Services Ltd.,. We accordingly direct the Transfer Pricing Officer / Assessing Officer to include Vatika Marketing Limited for the determination of Arm’s Length Price of the impugned transaction. Ground No. 3 is Accordingly, allowed. 22. Ground No. 4 relates to the TP Adjustment on payment of information technology cost allocation. An identical issue was considered by the Coordinate Bench in A.Y. 2008-09 in ITA No. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 18 7600/MUM/2012, A.Y. 2009-10 in ITA No. 1870/MUM/2014 and A.Y.2010-11 in ITA No. 1760/MUM/2015. It would be suffice if we refer to the decision of the Coordinate Bench in A.Y. 2008-09 in ITA No.7600/MUM/2012. The relevant findings read as under: - “7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. An examination of the order of the TPO made u/s 92CA(3) dated 20.10.2011 clearly indicates that while making the adjustment of The Boston Consulting Group. 8 Rs.1,62,74,359/- (payment for time and billing software license), Rs.3,73,07,488/- (regional and worldwide training) and Rs.2,10,06,610/- (payment for information technology cost allocation), he has not adopted any of the prescribed method. In the case of M/s Lever India Exports Ltd. (supra), the Hon'ble Bombay High Court has held that the jurisdiction of the TPO is specific and limited i.e. to determine the ALP of an international transaction in terms of Chapter X of the Act r.w. Rule 10A to 10E of the Income Tax Rules. It further held that the ad-hoc determination of ALP by the TPO dehors section 92C of the Act cannot be sustained. In M/s Merck Ltd. (supra), the respondent-assessee had entered into an agreement with its AE to provide technical knowhow/consultancy in 12 fields as indicated therein for a consideration of Rs.1.57 crores. The respondent- assessee availed services of its AE during the subject year (AY 2003-04) only in 3 out of 12 fields listed in the agreement. The TPO, therefore, proceeded to hold that the entire consideration of Rs.1.57 crore is attributable to the 3 technical services which the respondent-assessee availed of and held that no consideration was payable in respect of 9 services provided for in the agreement. Thus the entire payment of Rs.1.57 crore was attributable only to the 3 services availed out of the 12 listed out in the agreement. It further held that only Rs.40 lacs could be considered as ALP attributable to 3 services and made adjustment of Rs.1.17 crore resulting in its addition to the taxable income. In appeal, the CIT(A) upheld addition of Rs.1.17 crores made and taxable income consequent to the adjustment made on account of technical knowhow/consultancy agreement. On further appeal, the Tribunal upheld the submissions of the respondent-assessee and ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 19 recorded further the fact that no transfer pricing exercise was done by the AO/TPO to determine the value of the services received by the respondent-assessee in respect of the 3 services which it had availed from its AE before holding that the ALP in this case is Rs.40 lacs. The Tribunal further held that "consideration payable for the services availed of by the respondent-assessee to determine the ALP was not carried out". On appeal by the Revenue, the Hon'ble Bombay High Court held that : "Consequently, the finding of the Assessing Officer attributing nil value to nine of the services listed in the agreement which were not availed of by the Respondent- Assessee in the present facts was not justified. Moreover, not adopting one of the mandatorily prescribed methods to determine the ALP in respect of fees of technical services payable by the Respondent-Assessee to its AE, make the entire Transfer pricing Agreement unsustainable in law." In M/s Johnson & Johnson Ltd. (supra), the Tribunal allowed the respondent-assessee's appeal before it by deleting the addition of Rs.200.82 lacs being the transfer pricing adjustment on account of sales promotion and publicity expenses being payable by the respondent-assessee's parent M/s Johnson & Johnson, USA. This on the ground that the TPO has, while holding that the parent company should share this expenditure on publicity and sales promotion as it benefits therefrom, as higher sales result in higher royalty, has not determined the ALP by following any of the methods prescribed u/s 92C(1) of the Act r.w. Rule 10B. On appeal by the revenue, the Hon'ble Bombay High Court held that : (ii) The TPO is obliged under the law to determine the ALP by following any one of the prescribed methods of determining the ALP as detailed in Section 92C(1) of The Boston Consulting Group. 10 the Act. In this case, there is nothing on record to indicate that the TPO had applied any one of the prescribed methods in Section 92C(1) of the Act to determine the ALP before disallowing the payment of Rs.200.82 lakhs incurred by the Respondent on account of publicity and sales management as being excessive and/or payable by its parent, M/s. Johnson & Johnson, USA. (iii) The impugned order holds that transfer pricing adjustment done by disallowing the payment, on the basis of an assumption that it is excessive, is an action completely dehors the provisions of transfer pricing adjustment found in chapter ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 20 X of the Act. The determination of the ALP has to be done only by following one of the methods prescribed under the Act. (iv) In view of the above, as the Revenue has not acted in accordance with the clear mandate of law, the questions as proposed does not give rise to any substantial question of law. Thus, not entertained." In M/s Kodak India Pvt. Ltd. (supra), the above position of law is reiterated by the Hon'ble Bombay High Court. As mentioned earlier, we notice that the TPO/AO has arrived at the ALP by not adopting any of the methods prescribed u/s 92C of the Act in respect of (i) payment of license fees for time and billing software, (ii) payment of regional administration and regional co- ordination cost allocation and (iii) payment of information technology cost allocation. In view of the above factual scenario, we are of the considered view that the ratio laid down by the Hon'ble Bombay High Court in Lever India Exports Ltd.; Merck Ltd.; Johnson & Johnson Ltd. and Kodak India Pvt .Ltd. mentioned hereinabove is squarely applicable to the facts of the case. Therefore, following the same, we allow the 1st, 2nd and 3rd ground of appeal.” 23. Respectfully following the findings of the Coordinate Bench (supra), we hold accordingly. 24. Ground No. 5 is in respect of transfer pricing adjustment in relation to reimbursement paid. We find that the underlying facts and the reasoning given in this adjustment are identical to the reasoning given for the issues raised in Ground No. 2 and 4 above. We have followed the decision of the Coordinate Bench in A.Y. 2008-09 while disposing Ground No. 4 for identical reason the same decision is also followed for this ground also. We hold accordingly. ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 21 25. Ground No. 6 is not pressed and the same is dismissed as not pressed. 26. Ground Nos. 7 and 8 are in respect of charging of interest which are consequential. 27. Ground No. 9 related to short granting interest under section 244A of the Act. The similar issue was considered by the Coordinate Bench in A.Y. 2010-11 in ITA No. 1760/MUM/2015, the relevant findings read as under: - “27. With regard to Ground No. 5 which is in respect of short granting interest under section 244A of the Act, Ld. AR of the assessee brought to our notice that identical issue in appeal has been considered by the Co-ordinate Bench of this tribunal in the case of M/s. Small Industries v. DCIT in ITA No. 3707/MUM/2012 dated 15.09.2017 and prayed that similar direction may be given. 28 On the other hand, Ld. DR relied on the order of the lower authorities. 29. Considered the submissions and material placed on record, we observe from the record that identical issue has been considered by the coordinate bench of this Tribunal in the case of M/s. Small Industries v. DCIT (supra) and decided the issue in favour of the assessee, observing as under: - “7. We have carefully considered the rival submissions. Notably, the only issue in dispute is the period for which assessee is entitled to interest u/s 244A of the Act. According to the assessee, the CIT(A) erred in granting interest upto the date of issuance of refund ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 22 voucher, i.e. 29.3.2010 whereas as per the assessee, it is entitled to interest upto April, 2010 (i.e. upto the date of receipt of refund voucher on 6.4.2010). In this context, we find that the Hon'ble Bombay High Court in the case of Pfizer Limited, 191 ITR 626 (Bom) has held that assessee is entitled to interest upto the date of receipt of the refund order. Similarly, our coordinate bench in the case of M/s. Novartis India Limited, ITA No. 1249/Mum/2010 dated 18.3.2011 has decided a similar issue in favour of the assessee by referring to an unreported judgement of the Hon'ble Bombay High Court in the case of Citi Bank vs. CIT in ITA No. 6 of 2001 dated 17.7.2003, wherein the claim of the assessee for interest was upheld upto the date when the Pay Order is “actually received by the assessee pursuant to the order sanctioning the refund”. Therefore, following the aforesaid precedents, in our view, the assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 6.4.2010. Thus, on this aspect, assessee succeeds.” 30. Respectfully following the above decision, the issue raised by the assessee is allowed with the direction that the Assessing Officer may consider extending the benefit to the assessee upto the date of actual receipt of refund. Accordingly, Ground No. 5 raised by the assessee is allowed.” 28. Respectfully following the findings of the Coordinate Bench (supra) we direct accordingly. 29. In the result, appeal filed by the assessee is partly allowed. 30. Before closing, the assessee has also raised the additional ground challenging the validity of the impugned assessment order as barred by limitation. The root cause for this challenge is the decision of the ITA NO.1401/MUM/2016 (A.Y. 2011-12) The Boston Consulting Group (India) Private Limited Page No. 23 Hon’ble Madras High Court in the case of Roca Bathroom Products Private Limited (WA No. 1609 and 1610 of 2021). The outcome of the challenge before the Hon’ble Supreme Court is not known. Therefore, this ground is left open without adjudication. Order pronounced in the open court on 03 rd May, 2024. Sd/- Sd/- (SUNIL KUMAR SINGH) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 03.05.2024 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum