UT WORLDWIDE INDIA P.LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 1454/MUM/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4860 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 23-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KARISHMA R PHATARPHEKAR; HARSH SHAH AR S
• Keywords: Transfer pricing; International transaction; Rule of consistency; Additional evidence; Revised return; TDS
• Section: 271(1)(c); 43B; 143(3); 143(1); 37

Judgement Text

ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI G.S.PANNU , VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO . 1454/MUM/2014 (ASSESSMENT YEAR : 2009 - 10 ) UT WORLDWIDE INDIA PRIVATE LTD. 2 ND /3 RD FLOOR, SOLITAIRE VI, SOLITAIRE CORPORATE PARK, 167, GURU HARGOVINDJI MARG, ANDHERI GHATKOPAR ROAD, ANDHERI (EAST),MUMBAI - 400 093. VS. DEPUTY COMMISSIONER OF INCOME TAX RANGE - 8(3), 2 ND FLOOR, ROOM NO. 204, AAYAKAR BHAVAN,MUMBAI - 400020 PAN AAACU5306L ( APPELLANT ) (RESPONDENT) ITA NO . 1686/MUM/2014 (ASSESSMENT YEAR : 2009 - 10 ) DEPUTY COMMISSIONER OF INCOME TAX RANGE - 8(3), 2 ND FLOOR, ROOM NO. 204, AAYAKAR BHAVAN, MUMBAI - 400 020 VS. UT WORLDWIDE INDIA PRIVATE LTD. 2 ND /3 RD FLOOR, SOLITAIRE VI, SOLITAIRE CORPORATE PARK, 167, GURU HARGOVINDJI MARG, ANDHERI GHATKOPAR ROAD, ANDHERI (EAST), MUMBAI - 400 093 ( APPELLANT ) (RESPONDENT) APPELLANT BY: MS. KARISHMA R. PHATARPHEKAR & SHRI HARSH SHAH, A.RS RESPONDENT BY: MS. NILU JAGGI , D.R DATE OF HEARING: 14 .11 .2018 DATE OF PRONOUNCEMENT: 08 .0 2 .2019 ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 2 O R D E R PER RAVISH SOOD, JM THE PRESENT CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 15.01.2014. AS THE AFOREMENTIONED APPEALS ARE INEXTR ICABLY INTERWOVEN AND INTERLINKED, THEREFORE, THE SAME ARE BEING TAKEN UP AND DISPOSED OFF BY WAY OF A CONSOLIDATED ORDER. WE SHALL FIRST ADVERT TO THE APPEAL FILED BY THE ASSESSEE. THE ASSESSEE ASSAILING THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S . 144C(13) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL: THE APPELLANT OBJECTS TO THE ORDER UNDER SECTION 143(3) R.W.S 144C (5) OF THE INCOME TAX ACT, 1961 ('THE ACT') DATED 15 JANUARY 2014 (RECEIVED ON 23 JANUARY 2014) PASSED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX ('AO') INCORPORATING THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL ('DRP') FOR THE AFORESAID ASSESSMENT YEAR ON THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LD. AO PASSED UNDER SECTION 143(3) R EAD WITH SECTION 1 4 4C(13) MAKING AN UPWARD ADJUSTMENT OF RS.8,94,34,417/ - TO THE INCOME OF THE APPELLANT IS ERRONEOUS AND BAD IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. AO / TRANSFER PRICING OFFICER ('TPO ') ERRED IN MAKING, AND THE HON BLE DRP ERRED IN CONFIRMING, THE DISALLOWANCE IN RESPECT OF THE ADMINISTRATIVE EXPENSES AMOUNTING TO RS. 7,49,11,250/ - AND CONCLUDING ITS ARM'S LENGTH PRICE ('ALP') AT NIL WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCE OF THE CASE. 3. THE LD. AO ERRED IN NOT CONSIDERING THE RELIEFS PROVIDED BY THE HON BLE DRP, IN FAVO U R OF THE APPELLANT, IN RESPECT OF THE FOLLOWING ADDITIONS PROPOSED TO BE MADE TO THE ARM S LENGTH PRICE BY THE LD. TPO SR. NO. DESCRIPTION OF THE EXPENDITURE AMOUNT (IN RS.) 1 FREIGHT LIABILITY AND INSURANCE EXPENSES ETC. 65,88,039 2 INFONET COMMUNICATION COST 5,17,328 3 ABN AMRO L/C CHARGES 28,79,323 4 STOCK COMPENSATION COST 16,65,641 5 RSU COST 21,76,283 7 LEGAL EXPENSES 6,81,146 TOTAL RELIEF PROVIDED 1,45,07,760 ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 3 4. THE LD. AO ERRED IN DISALLOWING AND THE LD. DRP ERRED IN CONFIRMING THE DISALLOWANCE OF RS.15,407/ - ON ACCOUNT OF EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND AND EMPLOYEES' STATE INSURANCE SCHEME, NOTWITHSTANDING THE FACT THAT THE SAME WERE DEPOSITED ON OR BEFORE THE DUE DATE OF FILING RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. 5. THE LD. AO ERRED IN GRANTING CREDIT FOR TAX DEDUCTED AT SOURCE ('TDS') AMOUNTING TO RS.10,48,24,081 / - AS AGAINST CREDIT AMOUNTING TO RS.6,55,69,102/ - CLAIMED BY THE APPELLANT IN THE INCOME TAX RETURN FOR THE YEAR UNDER CONSIDERATION, THUS RESULTING INTO A SHORT CREDIT OF TDS AMOUNTING TO RS. 3,92,54,979/ - . 6. THE LD. AO ERRED IN INITIATING PENALTY PROCE EDING U /S 271(1)(C) OF THE INCOME TAX ACT, 1961. THE APPELLANT SUBMITS THAT EACH GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, AMEND, SUBSTITUTE AND / OR MODIFY IN ANY MANNER WHATSOEVER ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF LOGISTICS RELATING TO FREIGHT FORWARDING BY AIR AND OCEAN, CUSTOM CLEARANCE AND CONTRACT LOGISTICS ETC. HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 30.09.2009, DECLARING TOTAL INCOME AT RS.10,21,12,976/ - . SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 19.03.2011, DECLARING INCOME AT RS.10,34,72,6 19/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. BEFORE ADVERTING TO THE FACTS OF THE CASE IT WOULD BE RELEVANT AND PERTINENT TO BRIEFLY CULL OUT THE BUSINESS MODEL OF THE ASSESSEE. THE ASSESSEE IS A PART OF UT WORLDWIDE GROUP WHICH IS A WORLD LEADER IN INTERNATIONAL FREIGHT FORWARDING BUSINESS. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT DATED 29.06.2004 W ITH ITS ASSOCIATE ENTERPRISE (FOR SHORT AE) VIZ. UTI NETWORKS INC., U.K FOR FORWARDING OF GENERAL COMMODITIES BY AIR OR SEA. BY VIRTUE OF THE AFORESAID ARRANGEMENT THE ASSESSEE HAD THE BENEFIT OF USING THE OVERALL UTI NETWORK OUTSIDE INDIA. ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 4 APART THEREFR OM, THE GROUP COMPANIES WERE BOUND TO USE THE ASSESSES SERVICES FOR THEIR OPERATIONS IN INDIA. AS PER THE AFORESAID ARRANGEMENT, IF SOME FREIGHT WAS REQUIRED TO BE TRANSPORTED BY A CUSTOMER FROM OVERSEAS TO INDIA THEN SUCH TRANSACTION WAS TO BE REFERRED TO AS AN IMPORT TRANSACTION AND IF IT WAS TO BE TRANSPORTED BY A CUSTOMER FROM INDIA TO OVERSEAS THEN THE SAME WAS TO BE REFERRED TO AS AN EXPORT TRANSACTION. THE FEE THAT WAS EARNED FROM A CUSTOMER WAS REDUCED BY THE COST OF TRANSPORTATION AND THE BALAN CE AMOUNT (HEREINAFTER REFERRED TO AS SPREAD) WAS SHARED BY THE EXPORTING AND THE IMPORTING ENTITY, AS UNDER: ORIGINATION PLACE UT INDIA UTI GROUP ENTITY INDIA 67% 33% OVERSEAS 33% 67% 4. DURING THE COURSE OF THE ASSESSMENT PROCEED INGS THE A.O MADE A REFERENCE UNDER SEC. 92CA(1) OF THE I.T ACT TO THE ADDL. CIT, TRANSFER PRICING OFFICE - (II) (5), MUMBAI (FOR SHORT TPO) FOR DETERMINING THE ARMS LENGTH PRICE (FOR SHORT ALP) OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE Y EAR UNDER CONSIDERATION. 5. THE TPO IN THE COURSE OF THE PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD ENTERED INTO THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS AES DURING THE YEAR UNDER CONSIDERATION: SR. NO. TRANSACTION AMOUNT RS. METHOD ADOPTED TPOS REMARKS 1 FREIGHT FORWARDING PAID/PAYABLE 54,81,99,458 CUP ACCEPTED TO BE AT ALP 2 FREIGHT FORWARDING RECEIVED/RECEIVABLE 80,84,07,553 CUP ACCEPTED TO BE AT ALP 3 INTEREST FREE LOAN TAKEN 3,85,72,500 CUP ACCEPTED TO BE AT ALP 4 PURCHASE OF FIXED ASSETS 1,45,813 CUP ACCEPTED TO BE AT ALP ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 5 5 REIMBURSEMENT OF EXPENSES (PAID/PAYABLE) 8,94,19,012 AT COST ALP DETERMINED AS NIL INSOFAR, THE REIMBURSEMENT OF EXPENSES OF RS. 8,94,19,010/ - BY THE ASSESSEE TO ITS AES VIZ. (I). UT - NETWORK INC. ; AND (II). UTI - USA WAS CONCERNED, IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAME WAS RELATING TO PAYMENTS FOR EXPENSES RELATED TO COMMUNICATION COSTS, FREIGHT INSURANCE COSTS ETC. THAT WERE INCURRED BY THE AFOREMENTIONED AES ON BEHALF OF THE ASSESSEE FOR ADMINISTRATI VE CONVENIENCE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAID EXPENSES WERE RECOVERED BY THE AES FROM THE ASSESSEE ON COST TO COST BASIS WITHOUT ANY MARK - UP. APART THEREFROM, IT WAS CLARIFIED BY THE ASSESSEE THAT THE RECOVERY OF THE AFORESAID AMOUNTS BY T HE AES FROM THE ASSESSEE DID NOT INVOLVE AVAILING OF ANY SERVICES. THE ASSESSEE FURNISHED ITEM - WISE DETAILS OF THE EXPENSES THAT WERE REIMBURSED BY IT TO THE AES, AS UNDER: SR. NO. DESCRIPTION OF THE EXPENDITURE NAME OF THE AE AMOUNT (IN RS.) 1 FREIGHT LIABILITY AND INSURANCE EXPENSES ETC. UT - NETWORK INC. 65,88,039 2 INFONET COMMUNICATION COST UT - NETWORK INC. 5,17,328 3. ABN AMRO L/C CHARGES UT - NETWORK INC. 28,79,323 4. STOCK COMPENSATION COST UT - NETWORK INC. 16,65,641 5. RSU COST UT - NETWORK INC. 21,76,283 TOTAL REIMBURSEMENT MADE TO UTI NETWORK INC. 1,38,26,614 6. ADMINISTRATIVE EXPENSES UTI - USA 7,49,11,250 7. LEGAL EXPENSES UTI - USA 6,81,146 TOTAL REIMBURSEMENT MADE TO USA 7,55,92,396 TOTAL REIMBURSEMENT MADE TO ITS AES 8,94,19,010 AS OBSERVED BY THE TPO, THE ASSESSEE IN THE COURSE OF THE PROCEEDINGS IN ORDER TO SUPPORT SOME OF THE ITEMS OF EXPENDITURE VIZ. (I). INFONET COMMUNICATION COST; (II). ABN AMRO L/C CHARGES; (III). STOCK COMPENSATION COST; AND (IV). RSU COST, HAD PLACED ON R ECORD COPIES OF ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 6 THE INVOICES THAT WERE RAISED BY THE AE VIZ. UTI NETWORK INC. HOWEVER, IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE HAD NEITHER SUPPORTED THE ABOVE ITEMS OF EXPENDITURE WITH SPECIFIC INVOICES/DEBIT NOTES FROM THE AES POINTING OUT THE COMPLE TE DETAILS WITH DATES, QUANTITY ETC., NOR HAD FURNISHED ANY JUSTIFICATION FOR THE EXPENSES THAT WERE CLAIMED TO HAVE BEEN INCURRED BY THE AES ON ITS BEHALF. APART THEREFROM, THE TPO OBSERVED THAT AS WAS DISCERNIBLE FROM THE RECORDS, THE ASSESSEE REGULARLY ON A MONTH TO MONTH BASIS WAS WITHOUT ANY JUSTIFICATION/REASON PAYING AT A UNIFORM RATE CERTAIN AMOUNTS TO UTI - NETWORK INC. IT WAS FURTHER OBSERVED BY THE TPO THAT THE ASSESSEE HAD ALSO FAILED TO PROVE THAT THE PAYMENTS MADE TO ITS AE VIZ. UTI - NETWORK INC. WERE TOWARDS REIMBURSEMENT OF EXPENSES WHICH HAD ACTUALLY BEEN INCURRED BY THE A.E ON BEHALF OF THE ASSESSEE. ON THE BASIS OF HIS AFORESAID OBSERVATIONS IT WAS CONCLUDED BY THE TPO THAT IN THE ABSENCE OF A COST SHARING AGREEMENT AND CONCRETE EVIDENCES THE MONTHLY REMITTANCES BY THE ASSESSEE TO ITS A.E VIZ. UTI - NETWORK INC. COULD NOT BE HELD TO BE AT ALP. INSOFAR, PAYMENTS MADE BY THE ASSESSEE TO ITS OTHER A.E VIZ. UTI - USA WERE CONCERNED, IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE WAS CONSISTENTLY MAKING A MONTHLY PAYMENT IN THE RANGE OF RS. 53.49 LAC TO RS. 64.04 LAC FROM APRIL, 2008 TO MARCH, 2009 TO THE SAID AE. IT WAS OBSERVED BY THE TPO THAT THE AFORESAID PAYMENTS MADE BY THE ASSESSEE TO ITS AE VIZ. UTI - USA WERE MORE IN THE NATURE OF A MONTHLY FEE RAT HER THAN REIMBURSEMENT OF ANY ACTUAL COST THAT WAS INCURRED BY THE A.E ON BEHALF OF THE ASSESSEE. THE TPO OBSERVED THAT THE ASSESSEE HAD NEITHER JUSTIFIED WITH CONCRETE EVIDENCE THE BENEFIT/SERVICES RECEIVED FROM THE AE NOR HAD PLACED ON RECORD ANY AGREEME NT BETWEEN THE ASSESSEE AND THE UTI - USA IN EVIDENCE OF ITS CONTRACTUAL LIABILITY TO PAY SUCH MANAGEMENT FEES FOR THE SERVICES RECEIVED FROM THE SAID AE. FURTHER, IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE HAD ALSO NOT ESTABLISHED THAT THE PAYMENTS MADE T O THE A.E ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 7 VIZ. UTI - USA WERE AT ACTUAL COST. IN SUM AND SUBSTANCE, IT WAS OBSERVED BY THE TPO THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM OF HAVING REIMBURSED THE EXPENSES INCURRED BY THE A.ES ON ITS BEHALF ON VARIOUS COUNTS VIZ. (I). THE ASSESSE E HAD FAILED TO PROVE THE EVIDENCE OF ACTUAL LIABILITY THAT HAD ACCRUED IN ITS HANDS; (II). THE EVIDENCE OF ACTUAL COST INCURRED BY THE A.ES ON BEHALF OF THE ASSESSEE WAS NOT BROUGHT ON RECORD; (III). THE EVIDENCE OF THE ACTUAL SERVICES RENDERED BY THE A.E S WAS NOT SUBSTANTIATED BY THE ASSESSEE; AND (IV). THE JUSTIFICATION OF THE MONTHLY REMITTANCES TO THE A.ES WAS NOT BEEN GIVEN BY THE ASSESSEE. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE TPO CONCLUDED THAT AS THE ASSESSEE HAD FAILED TO JUSTIFY THE REI MBURSEMENTS MADE TO THE AES WITH EVIDENCE OF RECEIPT OF ANY GOODS OR SERVICES/BENEFITS - TANGIBLE OR INTANGIBLE, HENCE THE SAID PAYMENTS WERE TO BE CONSIDERED TO BE UNFOUNDED AND EXCESSIVE TO THE EXTENT THE SAME WERE OVER AND ABOVE THE PROFIT SHARING DONE DU RING THE YEAR. RATHER, THE TPO WAS OF THE VIEW THAT AS THE ASSESSEE BY MAKING THE SAID PAYMENTS TO ITS AES HAD SHIFTED ITS PROFIT TO THE OVERSEAS A.ES BY ARTIFICIAL ROUTES, HENCE THE SAME WAS TO BE HELD AS NOT BEING AT ARMS LENGTH. IN THE BACKDROP OF HIS A FORESAID OBSERVATIONS THE TPO TOOK THE ALP OF THE AFORESAID INTERNATIONAL TRANSACTION OF REIMBURSEMENT OF EXPENSES OF RS. 8,49,19,010/ - BY THE ASSESSEE TO ITS A.ES AT NIL. 6. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE TPO UNDER SEC. 92CA(3), DATED 29 .11.2012, THEREIN VIDE HIS DRAFT ORDER PASSED UNDER SEC. 143(3), DATED 01.03.2013 MADE AN UPWARD ADJUSTMENT OF RS. 8,94,19,010/ - TO THE ALP IN RELATION TO THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY WITH ITS AES DURING THE YEAR UN DER CONSIDERATION. 7. AGGRIEVED, THE ASSESSEE FILED ITS OBJECTIONS WITH THE DISPUTE RESOLUTION PANEL - III, MUMBAI (HEREINAFTER REFERRED TO AS DRP). THE DRP ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 8 IN THE COURSE OF THE PROCEEDINGS DELIBERATED UPON THE EXPENSES WHICH THE ASSESSEE HAD CLAIMED TO HA VE REIMBURSED TO ITS AES DURING THE YEAR UNDER CONSIDERATION. THE DRP WAS OF THE VIEW THAT CERTAIN EXPENSES VIZ. (I) FREIGHT TRANSPORT INSURANCE COST (RS.65,88,039/ - ); (II) INFONET COMMUNICATION COST (RS.5,17,328/ - ); (III) ABN AMRO BANK L/C CHARGES(RS.28,7 9,323/ - ); (IV) STOCK COMPENSATION COST (RS. 16,65,641/ - ) ; RSU COST (RS.21,76,281/ - ); AND (V) LEGAL EXPENSES (RS.6,81,146/ - ) WERE CLEARLY IN THE NATURE OF REIMBURSEMENT OF THE COST OF EXPENSES WHICH WERE INCURRED BY THE AES ON BEHALF OF THE ASSESSEE. HOWEV ER, THE DRP WAS NOT PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE THAT IT HAD REIMBURSED ADMINISTRATIVE EXPENSES OF RS. 7,49,11,250/ - TO ITS AE VIZ. UTI - USA. THE DRP WHILE CONCLUDING AS HEREINABOVE, HELD A CONVICTION THAT NOW WHEN AS PER THE BUSINESS MODEL OF THE ASSESSEE THERE WAS A REVENUE SHARING AT THE GROSS RECEIPT LEVEL HAVING REGARD TO THE FUNCTIONS THAT THE RESPECTIVE GROUP ENTITIES WOULD UNDERTAKE, THUS THERE WAS HARDLY ANY JUSTIFICATION FOR ANY FURTHER REIMBURSEMENT OF COST TOWARD ADMINISTRA TIVE EXPENSES OR MANAGEMENT FEE OR ANYTHING OF THAT KIND. FURTHER, THE DRP OBSERVED THAT THE ASSESSEE WAS ALSO NOT ABLE TO ESTABLISH THAT BECAUSE OF PAYMENT OF ADMINISTRATIVE EXPENSES/MANAGEMENT FEES IT HAD SAVED UPON THE CORRESPONDING COST OF THE MANAGEME NT LOCALLY. APART THEREFROM, THE DRP WAS ALSO OF THE VIEW THAT THE ALLOCATION OF THE EXPENSES WAS NOT ON THE BASIS OF THE FIGURE OF SERVICES UTILIZED AND THEIR COMMENSURATE COST. IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS THE DRP UPHELD THE TP ADJUSTMEN T OF RS. 7,49,11,250/ - IN RESPECT OF THE ADMINISTRATIVE EXPENSES/MANAGEMENT FEES THAT WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN REIMBURSED TO ITS AE VIZ. UTI - USA. 8. THE A.O AFTER RECEIVING THE ORDER PASSED BY THE DRP UNDER SEC.144C(5) OF THE I.T. ACT, DATE D 19.12.2013, THEREIN MADE A TP ADJUSTMENT OF RS. 8,94,19,010/ - IN RESPECT OF THE INTERNATIONAL ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 9 TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND ASSESSED THE INCOME OF THE ASSESSEE AT RS.19,29,07,040/ - . 9. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S. 144C(5) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL SUBMITTED THAT THOUGH IT HAD ASSA ILED THE ORDER OF THE A.O ALSO ON THE GROUND THAT THE LATTER HAD ERRED IN NOT ALLOWING THE RELIEF THAT WAS GRANTED BY THE DRP, BUT AS THE SAID MISTAKE HAD THEREAFTER BEEN RECTIFIED BY THE A.O BY HIS ORDER PASSED UNDER SEC. 154, DATED 07.02.2014, HENCE THE SAID GRIEVANCE DOES NOT SURVIVE ANYMORE. ON THE BASIS OF THE AFORESAID CONCESSION OF THE LD. A.R THE GROUND OF APPEAL NO. 3 IS DISMISSED AS NOT PRESSED. 10. THE LD. AUTHORIZED REPRESENTATIVE TAKING US THROUGH THE FACTS OF THE CASE TO THE EXTENT RELEVANT FOR THE PRESENT APPEAL, SUBMITTED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH ITS AE VIZ. UTI - NETWORKS INC. FOR PROVISION OF VARIOUS SERVICES VIZ. (I) GLOBAL LEADERSHIP; (II) FINANCE LEADERSHIP AND TRANSFORMATION; (III) GLOBAL OPERATIONS SERVICES; (IV) GROUP AUDIT SERVICES;(V) SALES AND MARKETING SERVICES; (VI) INFORMATION TECHNOLOGIES SERVICES; (VII) GLOBAL PROCESS SERVICES; AND (VIII) GLOBAL COUNSEL S ERVICES. THE LD. A.R SUBMITTED THAT AS PER THE AGREEMENT WITH ITS AE THE SPREAD (I.E. FEES AFTER BEING REDUCED BY THE COST OF TRANSPORTATION) WAS TO BE SHARED BETWEEN THE ENTITIES, AS UNDER: ORIGINATION PLACE UT INDIA UTI GROUP ENTITY INDIA 67% 33% OVERSEAS 33% 67% IT WAS AVERRED BY THE LD. A.R THAT THOUGH THE ASSESSEE HAD IN THE COURSE OF THE PROCEEDINGS BEFORE THE TPO FURNISHED AN EXPLANATION REGARDING DESCRIPTION OF SERVICES, TYPE OF SERVICES RECEIVED AND BENEFITS WHICH WERE DERIVED BY THE ASSES SEE BY AVAILING SUCH SERVICES, ALONGWITH THE DETAILS ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 10 OF THE COSTS INCURRED AND THE BASIS OF THE ALLOCATION OF SUCH COSTS WITH SUPPORTING DOCUMENTARY EVIDENCE, HOWEVER, HE HAD WRONGLY OBSERVED THAT THE ASSESSEE HAD FAILED TO JUSTIFY WITH PROPER JUSTIFICATIO N AND CONCRETE EVIDENCE THE BENEFITS/SERVICES THAT WERE RECEIVED BY THE ASSESSEE FROM THE AE VIZ. UTI - USA AND HAD TAKEN THE ALP OF THE AFORESAID EXPENSES OF RS. 7,49,11,250/ - AT NIL. APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO HAD GRAVEL Y ERRED IN LAW BY NOT ADOPTING ONE OF THE MANDATORILY PRESCRIBED METHODS FOR DETERMINING THE ALP OF THE ADMINISTRATIVE EXPENSES THAT WERE REIMBURSED BY THE ASSESSEE TO ITS AE I.E. UTI - USA. THE LD. A.R SUBMITTED THAT AS PER THE SETTLED POSITION OF LAW TRANS FER PRICING ADJUSTMENT MADE BY THE TPO WITHOUT FOLLOWING ONE OF THE PRESCRIBED METHODS OUGHT TO BE DELETED. IT WAS FURTHER SUBMITTED BY THE LD. A.R THAT THE TPO IN THE PRESENT CASE HAD NOT EVEN MENTIONED ANY METHOD, LEAVE ASIDE USING ONE FOR DETERMINING TH E ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE DURING THE YEAR. IN SUPPORT OF HER AFORESAID CONTENTION THAT IT IS OBLIGATORY ON THE PART OF THE TPO TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTIONS BY ADOPTING ONE OF THE MANDATORILY PRESCRIBE D METHODS ENVISAGED IN CHAPTER X OF THE I.T ACT R.W RULE 10A TO 10E OF THE INCOME TAX RULES,1963 THE LD. A.R RELIE D ON THE JUDGMENTS OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF (I). CIT VS. MERCK LIMITED (2016) 389 ITR 70 (BOM); (II). CIT VS. LEVER IND IA EXPORTS LTD. (2017) 78 TAXMAN.COM 88 (BOM); AND (III). CIT VS. JOHNSON & JOHNSON LTD. (2017) 80 TAXMAN.COM 337 (BOM). APART THEREFROM, IT WAS SUBMITTED BY THE LD. A.R THAT THE TPO/DRP HAD FAILED TO APPRECIATE THAT AS THE SERVICE AGREEMENT OF THE ASSES SEE WITH ITS AE VIZ. UTI - USA. WAS AKIN TO A RETAINER AGREEMENT AS PER WHICH THE ASSESSEE WAS VESTED WITH A RIGHT TO RECEIVE SERVICES AS AND WHEN REQUIRED, HENCE IT WAS NOT OBLIGATORY ON ITS PART TO DEMONSTRATE THAT EACH AND EVERY SERVICE MENTIONED IN THE A GREEMENT WAS AVAILED DURING THE YEAR. IN SUPPORT OF ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 11 HER AFORESAID CONTENTION T HE LD. A.R RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. MERCK LIMITED. (2016) 389 ITR 70 (BOM). IN SUM AND SUBSTANCE, IT WAS THE CONTENTION O F THE LD. A.R THAT IT WAS MANDATORY ON THE PART OF THE TPO TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTIONS AS PER THE PRESCRIBED METHODS, FAILING WHICH THE ENTIRE TRANSFER PRICING ADJUSTMENT SO MADE BY HIM WOULD BE UNSUSTAINABLE IN LAW. ALTERNATIVEL Y, ON MERITS IT WAS SUBMITTED BY THE LD. A.R THAT AS THE ASSESSEE HAD EVEN OTHERWISE DULY SUBSTANTIATED BEFORE THE LOWER AUTHORITIES THAT IT HAD DURING THE YEAR UNDER CONSIDERATION AVAILED ALL THE 8 SERVICES MENTIONED IN THE SERVICE AGREEMENT WITH ITS AE VIZ. UTI - USA AND HAD THUS SATISFIED THE BENEFIT TEST, THEREFORE, ON THE SAID COUNT TOO NO ADVERSE INFERENCES IN RESPECT OF THE REIMBURSEMENT OF THE ADMINISTRATIVE EXPENSES AT COST BY THE ASSESSEE TO THE SAID AE WAS LIABLE TO BE DRAWN. IT WAS FURTHER SUB MITTED BY THE LD. A.R THAT THE TPO/DRP HAD DRAWN ADVERSE INFERENCES ON THE BASIS OF MISCONCEIVED AND ERRONEOUS FACTS. THE LD. A.R REBUTTED THE OBSERVATION OF THE TPO/DRP THAT NOW WHEN AS PER THE BUSINESS MODEL OF THE ASSESSEE THERE WAS REVENUE SHARING HAVI NG REGARD TO THE FUNCTIONS THAT THE RESPECTIVE GROUP ENTITIES WOULD UNDERTAKE, HENCE THERE WAS NO JUSTIFICATION FOR ANY FURTHER REIMBURSEMENT OF COST TOWARDS ADMINISTRATIVE EXPENSES OR MANAGEMENT FEE OR ANYTHING OF THAT KIND BY THE ASSESSEE TO ITS AE. IT W AS SUBMITTED BY THE LD. A.R THAT THE LOWER AUTHORITIES HAD FAILED TO APPRECIATE THAT THE ASSESSEE WAS NOT SHARING GROSS RECEIPTS BUT ONLY SPREAD I.E. THE GROSS RECEIPTS MINUS COST OF TRANSPORTATION. APART THEREFROM, IT WAS SUBMITTED BY HER THAT THE ENTIT IES WITH WHOM THE SPREAD WAS SHARED WERE NOT THE ONE TO WHOM PAYMENT FOR INTRA - GROUP SERVICES WAS BEING MADE. RATHER, AS SUBMITTED BY THE LD. A.R THE LOWER AUTHORITIES HAD FAILED TO APPRECIATE THAT THE ENTITY WITH WHOM THE REVENUE WAS BEING SHARED AND TH E ENTITY RENDERING THE CENTRALIZED GROUP SERVICES WERE DIFFERENT. INSOFAR, THE ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 12 OBSERVATIONS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE BENEFIT/SERVICES WHICH WERE RECEIVED FROM THE AE WAS CONCERNED, IT WAS SU BMITTED BY THE LD. A .R THAT AS HELD BY THE HONBLE HIGH COURT BOMBAY IN THE CASE OF CIT VS. MERCK LIMITED (2016) 389 ITR 70 (BOM) WHERE AN ASSESSEE HAD ENTERED INTO AN AGREEMENT WHICH IS AKIN TO A RETAINER AGREEMENT WITH ITS AE, THE FACT AS TO WHETHER SERVICES MENTIONED IN THE SAID AGREEMENT WERE UTILIZED BY THE ASSESSEE WOULD BE OF NO RELEVANCE. IT WAS SUBMITTED BY THE LD. A.R THAT IN THE BACKDROP OF THE SERVICE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH ITS AE WHICH WAS SIMILAR TO A RETAINER AGREEMENT, IT WAS THOUGH NOT OBLIGATORY ON THE PART OF THE ASSESSEE TO DEMONSTRATE AND THEREIN PROVE THAT IT HAD AVAILED THE SERVICES FROM ITS AE, HOWEVER, EVEN OTHERWISE THE COMPLETE DETAILS OF SUCH SERVICES FOR WHICH THE AE VIZ. UTI - USA WAS REIMBURSED WERE FURNISHED WITH THE LOWER AUTHORITIES. FURTHER, THE LD. A.R REFUTING THE OBSERVATION OF THE TPO THAT THE ASSESSEE HAD NOT PLACED ON RECORD THE COPY OF THE AGREEMENT BETWEEN THE ASSESSEE AND ITS AE I.E UTI - USA SUBMITTED THAT THE SAME WAS DULY PLACED ON HIS RECORD VIDE THE ASSESSES S UBMISSION DATED 27.08.2012. ON THE BASIS OF THE AFORESAID CONTENTIONS IT WAS SUBMITTED BY THE LD. A.R THAT THE ADHOC TRANSFER PRICING ADJUSTMENT MADE BY THE TPO COULD NOT BE SUSTAINED AS PER THE SETTLED POSITION OF LAW AND WAS LIABLE TO BE VACATED. APART T HEREFROM, IT WAS FURTHER AVERRED BY THE LD. A.R THAT THE A.O HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 15,407/ - ON ACCOUNT OF DELAY INVOLVED ON THE PART OF THE ASSESSEE IN DEPOSITING THE AMOUNT OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND AND EMPL OYEES STATE INSURANCE SCHEME 11. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD FAILED TO SUBSTANTIATE WITH PROPER JUSTIFICATION AND CONCRETE EVIDENCE THE BENEFITS/SERVICES THAT WERE ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 13 RECEIVED FROM THE AE, HENCE THE TPO/DRP HAD RIGHTLY DISALLOWED THE CLAIM OF ADMINISTRATIVE EXPENSES OF RS. 7,49,11,250/ - WHICH WAS CLAIMED BY THE ASSESSEE TO HAVE BEEN REIMBURSED TO ITS AE I.E. UTI - USA. 12 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD ON 01.01.2008 ENTERED INTO A SERVICE AGREEMENT WITH ITS AE I.E UTI - USA FOR CERTAIN INT RA - GROUP SERVICES TO IMPROVE THE OPERATIONAL EFFICIENCY OF ITS BUSINESS OPERATIONS IN INDIA. AS PER THE AGREEMENT THE ASSES SE S SHARE OF ALLOCATED COSTS AND EXPENSES (COLLECTIVELY REFERRED TO AS SERVICE FEES) WHICH DURING THE SUBSISTENCE OF THE AGREEMENT WERE TO BE WORKED OUT BY THE AE I.E UTI - USA ON THE BASIS OF A PREDETERMINED A LLOCATION KEY WERE TO BE REIMBURSE D BY THE ASSESSEE EVERY MONTH TO THE SAID AE . IN SUM AND SUBSTANCE, THE ASSESSEE IN TERMS OF THE A GREEMENT REMAINED UNDER A CONTRACTUAL OBLIGATION TO REIMBURSE THE AE I.E UTI - USA ON A MONTHLY BASIS ITS SHARE OF COSTS AND EXPENSES THAT WOULD BE WORKED OUT AS PER THE FIXED ALLOCATION KEYS. ON A PERUSAL OF THE ORDER OF THE TPO WE FIND THAT HE HAD FAILED TO APPRECIATE THAT THE MONTHLY PAYMENTS MADE BY THE ASSESSEE WERE BACKED BY ITS CONTRACTUAL LIABILITY TOWARDS ITS AE I.E UTI - USA. RATHER, THE TPO IN COMPLETE DISREGARD OF THE AGREEMENT HAD OBSERVED THAT THERE WAS NO EVIDENCE OF THE LIABILITY ACCRUING IN HANDS OF THE ASSESSEE. IT WAS ALSO OBSERVED BY HIM THAT THE ASSESSEE HAD FAILED TO JUSTIFY THE BENEFITS/SERVICES THAT WERE RECEIVED FROM THE AFORESAID AE ALONGWITH THE ACTUAL COST THAT WAS INCURRED BY THE AE ON ITS BEHALF . IN THE BACKDROP OF THE AFORESAID OBSERVATIONS THE ALP OF THE ADMINISTRATIVE EXPENSES REIMBURSED BY THE ASSESSEE TO ITS AE I.E UTI - USA WAS TAKEN BY THE TPO AT NIL. WE FURTHER FIND THAT T HE DRP WHILE UPHOLDING THE VIEW OF THE TPO OBSERVED THAT THOUGH THE ADMINISTRATIVE EXPENSES H AD BEEN ALLOCATED BASED ON THE REVENUE/SALES, BUT THE ASSESSEE HAD FAILED ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 14 TO PLACE ON RECORD THE FIGURE OF THE SERVICES UTILIZED AND THEIR COMMENSURATE COST. WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE AFORESAID OBSERVATIONS OF THE LOWER AUTHOR ITIES AS THE DRP HAS SPECIFICALLY IN PARA 2 OF HIS ORDER ACCEPTED THE NATURE OF SERVICES RENDERED. WE FIND THAT BOTH THE LOWER AUTHORITIES IN COMPLETE DISREGARD OF THE CONTRACTUAL LIABILITY OF THE ASSESSEE AS WAS DISCERNIBLE FROM THE AFORESAID AGREEMENT , DATED 01.01.2008 BETWEEN THE ASSESSEE AND ITS AE I.E UTI - USA, HAD TOTALLY FOCUSSED ON CERTAIN ASPECTS VIZ. SATISFACTION OF THE BENEFIT TEST; QUANTITY OF THE SERVICES UTILIZED AND THEIR COMMENSURATE COST ETC., WHICH IN THE BACKDROP OF THE CONTRACTUAL OBLI GATION OF THE ASSESSEE TOWARDS ITS AE PURSUANT TO THE AFORESAID AGREEMENT IN OUR CONSIDERED VIEW WERE NOT AT ALL RELEVANT FOR THE DETERMINATION OF THE ALP OF THE ADMINISTRATIVE EXPENSES REIMBURSED BY THE ASSESSEE TO ITS AE I.E UTI - USA. 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND AFTER NECESSARY DELIBERATIONS ARE OF THE CONSIDERED VIEW THAT THE AGREEMENT, DATED 01.01.2008 BETWEEN THE ASSESSEE AND ITS AE I.E UTI - USA WHICH CLEARLY REVEALED THE CONTRACTUAL OBLIGATION O F THE ASSESSEE TO REIMBURSE ON A MONTHLY BASIS ITS SHARE OF COSTS AND EXPENSES THAT WERE TO BE WORKED OUT AS PER THE FIXED COST ALLOCATION KEYS , CAN SAFELY BE HELD TO BE A RETAINER AGREEMENT BETWEEN THEM. WE FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN T HE CASE OF COMMISSIONER OF INCOME - TAX - 8 VS. MERCK LTD. (2016) 389 ITR 70 (BOM) HAD APPROVED THE OBSERVATIONS OF THE TRIBUNAL THAT IN A CASE OF A RETAINER AGREEMENT ENTERED INTO BY AN ASSESSEE WITH ITS AE FOR A CERTAIN SET OF SERVICES THE ALP OF SOME OF THE SERVICES NOT AVAILED BY THE ASSESSEE DURING THE YEAR CANNOT BE TAKEN AT NIL. THE ASSESSEE IN THE AFOREMENTIONED CASE HAD ENTERED INTO A RETAINER AGREEMENT WITH ITS AE TO PROVIDE TECHNICAL KNOWHOW/CONSULTANCY IN 12 FIELDS FOR A CONSIDERATION OF RS. 1.5 7 CRORES. DURING THE YEAR AS THE ASSESSEE HAD AVAILED SERVICES OF ITS AE IN ONLY THREE OUT OF THE TWELVE ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 15 FIELDS LISTED IN THE AGREEMENT, THEREFORE, THE TPO ATTRIBUTED THE ENTIRE CONSIDERATION OF RS. 1.57 CRORES TO THE THREE SERVICES WHICH THE ASSESSEE HAD AVAILED AND CONCLUDED THAT NO CONSIDERATION WAS PAYABLE IN RESPECT OF THE REMAINING N I NE SERVICES PROVIDED IN THE AGREEMENT . ON THE BASIS OF HIS AFORESAID OBSERVATIONS THE TPO DETERMINED THE ALP OF THE THREE SERVICES ON AN ADHOC BASIS AT RS. 40 LAC AND AFT ER TAKING THE ALP OF T H E REMAINING NINE SERVICES AT NIL MADE AN ADJUSTMENT OF THE BALANCE AMOUNT OF R S . 1.17 CRORES , WHICH RESULTED TO AN ADDITION OF THE SAID AMOUNT TO THE TAXABLE INCOME OF THE ASSESSEE. ON APPEAL, IT WAS OBSERVED BY THE TRIBUNAL THAT AS PER THE AGREEMENT THOUGH THE AE WAS UNDER AN OBLIGATION TO PROVIDE TECHNICAL ASSISTANCE TO THE ASSESSEE IN THE 12 AREAS LISTED IN THE AGREEMENT WHICH THE ASSESSEE COULD AVAIL AT ANY TIME DURING THE YEAR AS AND WHEN THE NEED AROSE , BUT THERE WAS NO OBLIGATION CAST UPON THE ASSESSEE TO OBTAIN TECHNICAL ASSISTANCE IN ALL THE SAID 12 AREAS. IT WAS OBSERVED BY THE TRIBUNAL THAT AS IT WAS FOR THE AVAILABILITY OF THE ASSISTANCE IN ALL THE TWELVE AREAS THAT THE CONSIDERATION WAS PAID, HENCE THE DETERMINING OF THE ALP OF THE NINE SERVICES NOT AVAILED BY THE ASSESSEE COULD NOT BE TAKEN AT NIL. WE FIND THAT THE HONBLE HIGH COURT AFTER DELIBERATING ON THE AFORESAID OBSERVATIONS OF THE TRIBUNAL HAD APPROVED THE SAME AND HAD CONCLUDED THAT THE SAME WERE NOT FOUND TO BE PERVERSE. WE FIND THAT THE FACTS INVOLVED IN THE CASE OF THE ASSESSEE BEFORE US ARE GOVERNED BY THE SPIRIT OF THE JUDGMENT OF THE HONBLE HIGH COURT IN THE AFORESAID CASE OF MERCK LTD. (SUPRA). AS OBSERVED BY US AT LENGTH HEREINABOVE, THE ASSESSEE B EFORE US , IN PURSUANCE OF ITS AGREEMENT WITH ITS AE I.E UTI - USA REMAINED UNDER A CONTRACTUAL OBLIGATION TO REIMBURSE THE SAID AE ON A MONTHLY BASIS ITS SHARE OF COSTS AND EXPENSES WHICH WERE TO BE DETERMINED ON THE BASIS OF A PREDETERMINED FIXED ALLOCAT ION KEYS. WE THUS ARE OF THE CONSIDERED VIEW THAT AS THE CONTRACTUAL LIABILITY OF THE ASSESSEE TO REIMBURSE ITS SHARE OF COST AND EXPENSES FOR THE INTRA - GROUP ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 16 SERVICES TO ITS AE I.E UTI - USA WAS NOT DEPENDANT MERELY ON THE AVAILING OF THE SERVICES OF THE AE , THEREFORE, THE DETERMINATION OF THE ALP OF THE ADMINISTRATIVE EXPENSES REIMBURSED TO THE SAID AE AT NIL BY THE TPO/DRP FOR THE REASON THAT THE ASSESSEE HAD FAILED TO SATISFY THE BENEFIT TEST AS WELL AS FAILED TO JUSTIFY THE QUANTITY OF THE SERVICES UTILI ZED AND THEIR COMMENSURATE COST ETC. CANNOT BE SUSTAINED AND ON THE SAID COUNT ITSELF IS LIABLE TO BE VACATED. 14. ALTERNATIVELY, WE ARE ALSO NOT IMPRESSED WITH THE OBSERVATIONS OF THE LOWER AUTHORITIES THAT AS THE ASSESSEE HAD FAILED TO SATISFY THE BENE FIT TEST IN THE COURSE OF THE TRANSFER PRICING PROCEEDINGS, HENCE THE ALP OF THE ADMINISTRATIVE EXPENSES REIMBURSED BY THE ASSESSEE TO ITS AE I.E UTI - USA WAS TO BE TAKEN AT NIL. IN SO FAR THE FACT THAT AS TO WHETHER THE ASSESSEE WAS BENEFITED BY AVAILING THE SERVICES OF THE AE IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT THE SAID ASPECT DOES NOT FALL WITH THE REALM OF THE TPO. IN OUR CONSIDERED VIEW AS PER CHAPTER X OF THE IT ACT R.W RULE 10A TO 10E OF THE INCOME - TAX RULES, THE JURISDICTIO N OF THE TPO IS SPECIFIC AND LIMITED I.E TO DETERMINE THE ALP OF AN INTERNATIONAL TRANSACTION. IT IS NOT FOR THE TPO TO CONSIDER WHETHER OR NOT THE EXPENDITURE INCURRED BY THE ASSESSEE PASSED THE TEST OF SEC. 37 OF THE IT ACT AND/OR THE GENUINENESS OF THE EXPENDITURE. THIS EXERCISE HAS TO BE DONE, IF AT ALL, BY THE A.O IN EXERCISE OF HIS JURISDICTION TO DETERMINE THE INCOME OF THE ASSESSE E IN ACCORDANCE WITH THE IT ACT. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN T H E CASE OF COMMISSIONER OF INCOME - TAX - 1, MUMBAI VS. LEVER INDIA EXPORTS LTD. (2017) 78 TAXMANN.COM 88 (BOM). WE THUS ARE OF THE CONSIDERED VIEW THAT THE ADOPTION OF THE ALP OF THE ADMINISTRATIVE EXPENSES REIMBURSED BY THE ASSESSEE TO ITS AE I.E UTI - USA AT NIL BY THE TPO FOR THE REASON THAT THE ASSESSEE HAD FAILED TO SATISFY THE BENEFIT TEST ALSO FAILS ON TH E SAID GROUND. ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 17 15. WE MAY FURTHER OBSERVE THAT AS AV ERRED BY THE LD. A.R THE TPO IN THE ASSESSES OWN CASE FOR THE IMMEDIATELY SUCCEEDING YEAR I.E. A.Y. 2010 - 11 HAD ACCEPTED THAT THE REIMBURSEMENT OF THE ADMINISTRATIVE EXPENSES BY THE ASSESSEE TO ITS AE WAS AT ALP. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTION ADVANCED BY THE LD . A.R THAT NOW WHEN THERE IS NO SHIFT IN THE FACTS OF THE CASE, THUS IT WAS NOT PERMISSIBLE FOR THE TPO TO HAVE ADOPTED AN INCONSISTENT APPROACH AND TAKEN THE ALP OF THE ADMINISTRATIVE EXPENSES FOR THE YEAR UNDER CONSIDERATION AT NIL. OUR AFORESAID VIEW TH AT THE PRINCIPLE OF CONSISTENCY OUGHT TO BE FOLLOWED BY THE DEPARTMENT IS FORTIFIED BY THE JUDGMENTS OF HONBLE SUPREME COURT IN THE CASE OF (I) RADHASOAMI SATSANG VS. CIT(1992) 193 ITR 321 (SC); AND (II) CIT VS. EXCEL INDUSTRIES LTD. (2013) 219 TAXMAN 379 (SC) . FURTHER, A SIMILAR VIEW HAD ALSO BEEN TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF PR. CIT VS. QUEST INVESTMENTS ADVISORS PVT. LTD.(ITA NO. 280 OF 2010) . IN TERMS OF OUR AFORESAID OBSERVATIONS WE ARE ALSO NOT PERSUADED TO SUBSCRIBE TO TH E INCONSISTENT APPROACH ADOPTED BY THE TPO DURING THE YEAR UNDER CONSIDERATION. 1 6 . WE SHALL NOW ADVERT TO THE CONTENTION OF THE LD. A.R THAT THE A.O HAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 15,407/ - ON ACCOUNT OF DELAY INVOLVED ON THE PART OF THE ASSESSEE IN DEPOSITING THE AMOUNT OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND AND THE EMPLOYEES STATE INSURANCE SCHEME. IT IS SUBMITTED BY THE LD. A.R THAT AS THE EMPLOYEES CONTRIBUTIONS IN THE SAID RESPECTIVE FUNDS WAS DEPOSITED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF ITS RETURN OF INCOME, HENCE NO DISALLOWANCE OF THE SAME WAS CALLED FOR IN ITS HANDS. WE HAVE DELIBERATED ON THE ISSUE BEFORE US AND ARE OF THE CONSIDERED VIEW THAT AS HELD BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF COMMISSIONER OF INCOME - TAX (CENTRAL), PUNE VS. GHATGE PATIL TRANSPORTS LTD. (2015) 368 IT R 749 (BOM) BOTH THE EMPLOYERS AND THE ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 18 EMPLOYEES CON TRIBUTIONS TO THE VARIOUS EMPLOYEES WELFARE FUNDS ARE COVERED UNDER SECTION 43B OF THE I.T ACT. IN OUR CONSIDERED VIEW, AS THE EMPLOYEES CONTRIBUTION TOWARDS THE PROVIDENT FUND AND EMPLOYEES STATE INSURAN CE OF RS. 15,407/ - WAS DEPOSITED BY THE ASSESSEE PRIOR TO THE DUE DATE OF FILING OF ITS RETURN OF INCOME, HENCE THE SAME WAS NOT LIABLE TO BE DISALLOWED. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS VACATE THE DISALLOWANCE OF RS. 15,407/ - MADE BY THE A .O. THE GROUND OF APPEAL NO. 4 IS ALLOWED. 1 7 . IN SO FAR THE CONTENTION OF THE LD. A.R THAT THE A.O HAD ERRED IN GRANTING SHORT CREDIT OF TDS OF RS. 3,92,54,979/ - IS CONCERNED , WE DIRECT THE A.O TO CONSIDER THE SAID CLAIM OF THE ASSESSEE. THE GROUND OF AP PEAL NO. 5 IS ALLOWED FOR STATISTICAL PURPOSES. 18 . THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ITA NO. 1680/MUM/2014 A.Y. 2009 - 10 19 . WE SHALL NOW ADVERT TO THE APPEAL OF THE REVENUE FOR AY. 2009 - 10. THE REVENU E ASSAILING THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) R.W.S. 144C(5) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT) HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL BEFORE US: (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP ERRED IN ADMITTING ADDITIONAL EVIDENCE WITHOUT GIVING AN OPPORTUNITY TO THE TPO TO EXAMINE THE SAME AND OFFER HIS COMME NTS ON THE ADDITIONAL EVIDENCE. (II) WHETHER ON THE FACT S AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRIP ERRED IN HOLDING THAT REIMBURSEMENT OF EXPENSES ON ACCOUNT OF FREIGHT LIABILITY AND INSURANCE EXPENSES (RS.65,88,039), INFONET COMMUNICATION COST - RS.5,17,328/ - , ABN AMRO LC CHARGES - RS.28,79,3 23/ - , LEGAL EXPENDITURE, STOCK COMPENSATION - (RS.38,41,924/ - ) BY THE ASSESSEE TO ITS AE ARE ARM'S LENGTH BY ADMITTING ADDITIONAL EVIDENCE AND WITHOUT GIVING AN OPPORTUNITY TO TPO TO EXAMINE THE SAME?'. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE DRP ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 19 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2 0 . THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT THE DRP HAD ERRED IN HOLDING THE REIMBURSEMENT OF EXPENSES ON ACCOUNT OF (I). FREIGHT LIABILITY AND INSURANCE EXPENSES (RS.65,88,039/ - ); (II). INFONET COMMUNICATIONS COST (RS.5,17,328/ - ) ; (III). ABN AMRO L/C CHARGES (RS.28,79,323/ - ); AND (IV) LEGAL EXPENSES, STOCK COMPENSATION (RS.38,41,924/ - ) BY THE ASSESSEE TO ITS AE VIZ. UTI - NETWORK INC. A ND UTI - USA AS BEING AT ARMS LENGTH ON THE BASIS OF ADDITIONAL EVIDENCE, WITHOUT GIVING AN OPPORT UNITY TO THE TPO TO EXAMINE THE SAME. 2 1 . WE FIND THAT THE SOLE GRIEVANCE OF THE REVENUE IN THE PRESENT APPEAL IS THAT THE DRP HA S HELD THE AFOREMENTIONED REIMBURSEMENT OF EXPENSES BY THE ASSESSEE TO ITS AE VIZ. UTI - NETWORK INC. AS BEING AT ALP ON THE BASI S OF ADDITIONAL EVIDENCE THAT WAS ADMITTED WITHOUT AFFORDING AN OPPORTUNITY TO THE TPO TO EXAMINE THE SAME. 2 2 . WE FIND THAT IT WAS OBSERVED BY THE DRP THAT THOUGH THE ASSESSEE HAD DURING THE COURSE OF THE PROCEEDINGS BEFORE THE TPO HAD SUBMITTED DETAILS AND DOCUMENTS WHICH EVIDENCED THE NATURE OF THE SERVICES RENDERED BY THE AES VIZ. (I). UTI NETWORK INC., U.K ; AND (II). UTI - USA, BUT HAD FAILED TO PLACE ON RECORD THE DETAILS OR DOCUMENTS RELATING TO THE QUANTUM OF SERVICES BY THE ASSESSEE AND THEIR PRICE IN THE OPEN MARKET. IT WAS FURTHER OBSERVED BY THE DRP THAT THE ASSESSEE HAD ALSO NOT FILED THE SAID DETAILS DURING THE COURSE OF THE PROCEEDINGS BEFORE IT. IT WAS THUS IN THE BACKDROP OF THE SAID FACTS THAT THE DRP ON ITS OWN HAD DIRECTED THE AUTHOR ISED REPRESENTATIVE FOR THE ASSESSEE TO GIVE AND DEMONSTRATE B ENEFIT TEST IN RESPECT OF THE TOTAL PAYMENT OF RS. 8,94,19,010/ - . IN COMPLIANCE TO THE DIRECTIONS OF THE DRP THE ASSESSEE HAD VIDE ITS SUBMISSION DATED 16.12.2012 PLACED ON RECORD CERTAIN DOCU MENTS IN SUPPORT OF CERTAIN COSTS INCURRED BY THE AE ON ITS BEHALF ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 20 VIZ. NATURE OF COST INCURRED UNDER VARIOUS HEADS SUCH AS FREIGHT LIABILITY, INSURANCE, INFONET COMMUNICATION COST, LETTER OF CREDIT CHARGES, STOCK COMPENSATION COST AND RESTRICTED SHARE UNI T COST AND ADMINISTRATIVE SUPPORT SERVICE. IN SUM AND SUBSTANCE, IT WAS AT THE BEHEST AND AS PER THE DIRECTIONS OF THE DRP THAT THE AFOREMENTIONED DETAILS AS CALLED FOR BY THE PANEL WERE PLACED ON RECORD BY THE ASSESSEE. WE FIND THAT AS PER RULE 9 OF THE INCOME - TAX (DISPUTE RESOLUTION PANEL) RULES, 2009, WHERE THE PANEL DEEMS IT NECESSARY, IT MAY CALL UPON OR, AS THE CASE MAY BE, PERMIT THE ELIGIBLE ASSESSEE TO PRODUCE ANY DOCUMENT OR EXAMINE ANY WITNESS OR FILE ANY AFFIDAVIT TO ENABLE IT TO ISSUE PROPER D IRECTIONS. INSOFAR, PERMITTING THE ELIGIBLE ASSESSEE TO PRODUCE ANY DOCUMENT OR EXAMINE ANY WITNESS OR FILE ANY AFFIDAVIT IS CONCERNED, THE SAME COMES WITH A RIDER IN THE FORM OF A PROVISO TO THE AFORESAID RULE AND OBLIGATES THE PANEL TO RECORD ITS REASON FOR SUCH PERMISSION. HOWEVER, THE POWER OF THE DRP TO SUO MOTTO CALL UPON THE ELIGIBLE ASSESSEE TO PRODUCE ANY DOCUMENT OR EXAMINE ANY WITNESS OR FILE ANY AFFIDAVIT IS NEITHER QUALIFIED BY ANY RESTRICTION NOR ANY OBLIGATION IS CAST UPON THE PANEL TO AFFORD ANY OPPORTUNITY TO THE TPO TO EXAMINE THE SAME. WE THUS ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID POWER S VESTED WITH THE DRP TO CALL UPON THE ELIGIBLE ASSESSEE TO PRODUCE ANY DOCUMENT OR EXAMINE ANY WITNESS OR FILE ANY AFFIDAVIT TO ENABLE IT TO ISSUE PROPER DIRECTIONS, NO INFIRMITY ARISES FROM THE ORDER OF THE DRP IN THE CASE BEFORE US, WHO WE FIND HAD ON ITS OWN CALLED FOR AND CONSIDERED CERTAIN DOCUMENTS IN THE COURSE OF THE PROCEEDINGS IN ORDER TO ENABLE IT TO ISSUE PROPER DIRECTI ONS. IN OUR CONSIDERED VIEW AS THE ADMISSION OF THE DOCUMENTS BY THE DRP IS WELL IN CONFORMITY WITH THE POWERS VESTED WITH THE PANEL, HENCE THE APPEAL OF THE REVENUE DOES NOT MERIT ACCEPTANCE AND IS DISMISSED. THE GROUNDS OF APPEAL NO. 1(I) & (II) RAISED B Y THE REVENUE ARE DISMISSED. ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 21 2 3 . THE GROUNDS OF APPEAL NO. 2 & 3 BEING GENERAL ARE DISMISSED AS NOT PRESSED. 2 4 . THE APPEAL OF THE REVENUE IS DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. 2 5 . THE APPEAL OF THE ASSESSEE I.E ITA NO. 1454/MUM/2014 IS ALLOWED AND THE APPEAL OF THE REVENUE I.E ITA NO. 1686/MUM/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 .02.2019 SD/ - SD/ - ( G.S PANNU) (RAVISH SOOD) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; 08 . 02.2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NOS. 1454 & 1686/MUM/2014 A.Y 2009 - 10 UT WORLDWIDE INDIA PVT. LTD. VS. DY. COMMISSIONER OF INCOME - TAX, RANGE 8(3) 22