L.K. India Pvt. Ltd. ( Currently Known as Schneider Electric India Pvt. Ltd.), Baroda V. The Dy.CIT, Circle-1(2), Baroda

ITA 209/AHD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5804 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 29-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAYUR SWADIA TH E RAKESH JHA
• Keywords: Transfer pricing; International transaction; Commercial expediency
• Section: 143(3)

Judgement Text

ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 209 / AHD / 2 0 1 5 ASSESSMENT YEAR: 20 09 - 10 SCHNEIDER ELECTRIC INDIA PRIVATE LIMITED ........................... APPELLANT (FORMER LY KNOWN AS L K INDIA PVT LTD) 328/23, RASULABAD ROAD, VILL JAROD, TALU WAGHODIA DISTRICT: VADODARA 391 510 [PAAN: AAACL3263C] VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1 ( 2) , VADODARA .. . ..... RESPONDENT APPEARANCES BY: MAYUR SWADIA FOR TH E APPELLANT RAKESH JHA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MAY 29 , 201 7 DATE OF PRONOUNCING THE ORDER : MAY 31 , 2017 O R D E R PER PRAMOD KUMAR AM: 1 . BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORD ER DATED 8 TH OCTOBER 2014 , PASSED BY THE LEARNED CIT (A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 20 09 - 10 . 2. GRIEVANCES RAISED BY THE ASSESSEE APPELLANT IS AS FOLLOWS: THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HAS ERRED IN FACTS AND IN LAW IN UPHOLDING THE UPWARD ADJUSTMENT OF RS 1,51,83,140 3. AS LEARNED REPRESENTATIVES FAIRLY AGREE, SHORT GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED COMMISSIONER (APPEALS) ERRED IN UPHOLDING THE AR M S LENGTH PRICE ADJUSTMENT OF RS 1,51,83,140 , IN RESPECT OF MANAGEMENT FEES PAID BY THE ASSESSEE, UNDER A COST CONTRIBUTION ARRANGEMENT, TO ITS ASSOCIATED ENTERPRISES SCHNEIDER ELECTRIC INDUSTRIES SAS , FRANCE (SEI - F) . ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 2 OF 16 4. BRIEFLY, THE RELEVANT MATERIAL F ACTS ARE AS FOLLOWS. THE ASSESSEE BEFORE US IS A PART OF SCHNEIDER ELECTRIC GROUP, STATED TO BE A SPECIALIST IN ELECTRICAL DISTRIBUTION PRODUCTS, WITH HEADQUARTERS IN FRANCE AND WORLDWIDE PRESENCE IN AROUND 150 COUNTRIES ACROSS THE GLOBE. THE ASSESSEE IS E NGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SWITCHES, OUTLETS AND OTHER ELECTRICAL PRODUCTS , AND W HILE ITS DTA UNIT IS MANUFACTURING PRODU CTS FOR THE DOMESTIC MARKET, ITS EOU UNIT IS EXCLUSIVELY MANUFACTURING GOODS, ON CONTRACT BASIS, FOR ITS AES ABROAD. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD PAID RS 1,51,83,140, UNDER A COST SHARING ARRANGEMENT, TO ITS PARENT COMPANY SEI - F. IN THE ANNEXURE TO FORM 3CEB, IN ADDITION, THE ASSESSEE JUSTIFIED ARM S LENGTH PRICE OF THE SERVICES BY ADDI NG THAT THE ASSESSEE HAS AVAILED MANAGEMENT SERVICES FROM SCHNEIDER ELECTRIC INDUSTRIES SAS FRANCE. A COPY OF THE SAID AGREEMENT IS ENCLOSED. AS PER THE GROUP POLICY, THE COSTS INCURRED BY THE SAID COMPANY, FOR SERVICES RENDERED, IS A LLOCATED TO THE GROU P ENTITI ES . THE CENTRAL COST ALLOCATION AGREEMENT, WHICH, INTER ALIA, SET OUT THE DETAILS OF THESE SERVICES AS ALSO THE ALLOCATION KEYS, WAS DULY FILED BY THE ASSESSEE. THE ASSESSEE HAD APPLIED TNMM AT THE ENTITY LEVEL AND THE SAME WAS NOT DISTURBED BY T HE TPO. HOWEVER, WHEN THE ARM S LENGTH PRICING OF THESE SERVICES CAME UP FOR SCRUTINY BEFORE THE TRANSFER PRICING OFFICER, HE OBSERVED THAT IT WAS NOTICED THAT IN RESPECT OF SOME OF THE INTERNATIONAL TRANSACTIONS REPRESENTING PAYMENT OF MANAGERIAL FEES, T HE CONCLUSION ARRIVED AT BY THE ASSESSEE, IN RESPECT OF THE ARM S LENGTH NATURE OF TRANSACTION WAS NOT FOUND TO BE ACCEPTABLE, AND, ACCORDINGLY .IT WAS PROPOSED TO BENCHMARK THE INTERNATIONAL TRANSACTION REPRESENTING THE PAYMENT OF MANAGEMENT FEES, AT NIL SINCE THE ASSESSEE WAS UNABLE TO JUSTIFY THE PAYMENT BY FAILING THE RECEIPT AND BENEFIT TEST . THE SUBMISSIONS MADE BY THE ASSESSEE, IN RESPONSE TO THIS SHOW CAUSE NOTICE, WERE TAKEN TO RECORD, BUT, BEFORE DEALING WITH THE SAME ON MERITS, THE TRANSFER PR ICING OFFICER PROCEEDED TO SUMMARIZE THE PRINCIPLES, WHICH, ACCORDING TO HIM, SHOULD BE BORNE IN MIND WHILE DETERMINING THE ARM S LENGTH PRICE FOR COST ALLOCATION . HE WAS OF THE VIEW THAT, INTER ALIA, THAT AN ARM S LENGTH ENTITY WOULD BE WILLI NG TO PAY FOR AN ACTIVITY ONLY TO THE EXTENT THAT THE ACTIVITIES CONFER ON IT A BENEFIT OF ECONOMIC OR COMMERCIAL VALUE AND THAT THE EXPECTED BENEFIT MUST BE SUFFICIENTLY DIRECT AND SUBSTANTIAL SO THAT AN INDEPENDENT RECIPIENT (OF SIMILAR SERVICE) IN SIMILAR CIRCU MSTANCES WOULD BE PREPARED TO PAY FOR IT . HE ALSO OBSERVED THAT IT IS FOR THE ASSESSEE TO PROVE THE RENDITION O F SERVICES, THAT WHERE IT WOULD NOT HAVE BEEN REASONABLE TO EXPECT TO EXPECT THE ENTITY TO EITHER PAY AN ARM S LENGTH ENTITY FOR ACTIVITY OR TO PERFORM IT ITSELF, IT IS UNLIKELY THAT ANY CHARGES FOR THE ACTIVITY WOULD BE JUSTIFIED AND THAT JUST BY DESCRIBING VARIOUS SERVICES, IT WILL NOT SUFFICE TO JUSTIFY THE PRICE CHARGED IN INTRA GROUP SERVICES; THE ASSESSEE HAS TO PROVE, WITH PROPER DOCUMEN TATION AND EVIDENCE, THAT THE SERVICES ARE ACTUALLY RENDERED AND THE PAYMENT IS COMMENSURATE WITH THE BENEFIT DERIVED THEREFROM . HE THEN OBSERVED THAT WHEN EXPENDITURE IS INCURRED FOR THE BENEFIT OF THE GROUP AS A WHOLE, NO CHARGING OF SUCH AN EXPENDITUR E IS REQUIRED AS SUCH EXPENDITURE IS NOT INCURRED IN CONNECTION WITH ANY INDIVIDUAL MEMBER OF THE GROUP AND THE BENEFIT OF SUCH EXPENDITURE WOULD ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 3 OF 16 BE AVAILABLE TO ALL THE MEMBERS OF THE GROUP; SIMILARLY, IF NO BENEFIT IS RECEIVED OR THE BENEFIT IS REMOTE O R FOR THE BENEFIT OF THE ENTIRE GROUP, THE SAME NEED NOT BE CHARGED . THE TPO ALSO ADDED THAT IF THE SERVICES ARE IN THE NATURE OF STEWARDSHIP ACTIVITIES OR SHAREHOLDER ACTIVITIES, THE SAME NEED NOT BE CHARGED BY THE AES OF THE ASSESSEE AND THAT THE A E MIGHT BE IN A POSITION TO PROVIDE A NUMBER OF SERVICES BUT IT HAS TO BE SHOWN THAT SUCH SERVICES WERE ACTUALLY REQUIRED BY THE ASSESSEE FOR ITS BUSINESS DURING THE ASSESSMENT YEAR 2007 - 08 . ARMED WITH THIS ANALYSIS AND UNDERSTANDING OF THE LEGAL POSITION , THE TPO PROCEEDED TO DEAL WITH THE FACTS OF THE CASE BEFORE HIM AND OBSERVED THAT THE ASSESSEE IS NOT CORRECT IN BENCHMARKING ENTIRE TRANSACTIONS, AT ENTITY LEVEL, ON THE BASIS OF TRANSACTIONAL NET MARGIN METHOD (TNMM). HE WAS OF THE VIEW THAT NO SEPARAT E BENCHMARKING HAS BEEN DONE FOR THE RENDITION OF MANAGEMENT SERVICES AVAILED UNDER THE COST SHARING ARRANGEMENT, AND THE ASSESSEE HAS SIMPLY FOLLOWED TNMM AT THE ENTITY LEVEL. IT WAS IN THIS BACKDROP THAT THE TPO PROCEEDED TO CONCLUDE THAT THE ARM S LENGT H PRICE OF THESE MANAGEMENT SERVICES IS NIL, AND, WHILE DOING SO, HE JUSTIFIED THE SAID CONCLUSION AS FOLLOWS: 6.3.6 . THIS INTERNATIONAL TRANSACTION WAS REQUIRED TO BE BENCHMARKED SEPARATELY. THE ASSESSEE DID NOT SEPARATELY BENCHMARK THIS TRANSACTIO N, HOWEVER IN ORDER TO EXAMINE SUCH PAYMENTS, THE DETAILS WERE CALLED FROM THE ASSESSEE VIDE LETTER DATED 04,8.2011. IN THE LETTER, THE DOCUMENTARY EVIDENCE IN RESPECT OF SUCH MANAGEMENT FEES BEING ACTUALLY REQUIRED BY THE ASSESSEE AND SUCH SERVICES BEING ACTUALLY RENDERED BY THE AE TO THE ASSESSEE WERE CALLED FOR. THE COST BENEFIT ANALYSIS CARRIED OUT BY THE ASSESSEE IN RESPECT OF PAYMENT OF SUCH FEES WAS ALSO CALLED AND ASSESSEE WAS ASKED TO SEPARATE OUT THE SERVICES RENDERED WHICH WERE IN NATURE OF SHA RE HOLDING ACTIVITIES. NO SUCH DETAILS WERE SUBMITTED EXCEPT MAKING GENERAL STATEMENTS AND CONTENTIONS WHICH HAS ALREADY MENTIONED IN PARA 5.A.1 ABOVE. VIDE LETTER DATED 10.01.2013, THE ASSESSEE CONTENDED THAT THE BENEFITS AND DIE RECEIPT OF SERVICES H AVE BEEN SUBSTANTIATED BY IT. HOWEVER, IT IS SEEN THAT NO DOCUMENTARY EVIDENCE WAS EVER SUBMITTED BY THE ASSESSEE AND NO RECEIPT OF BENEFIT WAS QUANTIFIED EXCEPT MAKING STATEMENTS THAT THE ASSESSEE, IF IT HAD NOT AVAILED SUCH SERVICES, IT WOULD HAVE INC URRED COSTS WHICH ARE MORE THAN THE PAYMENT MADE TO THE AE. THUS THE ASSESSEE FAILED IN SUBSTANTIATING THAT THE SERVICES WERE ACTUALLY RENDERED. AS ALREADY MENTIONED ABOVE, THE MAINTENANCE AND SUBSTANTIATION OF ALP IS REQUIRED TO BE DONE BY TH E ASSESSEE, WHICH HAS NOT BEEN DONE IN INSTANT CASE. ON THIS GROUND ONLY, THE ALP FOR THE PAYMENT OF MANAGEMENT FEES NEED TO BE TAKEN AS NIL. 6.3.7 FROM THE PERUSAL OF THE FAR ANALYSIS SUBMITTED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE IS RESPONSIBL E FOR THE ENTIRE PRODUCTION PROCESS STARTING FROM DEVELOPING THE SOURCE OF RAW MATERIAL PURCHASE TO MANAGING THE FINANCIAL NEEDS OF SUCH MANUFACTURING FUNCTIONS, WHILE THE ASSOCIATE ENTERPRISE ARE RESPONSIBLE FOR ALL OTHER FUNCTIONS INCLUDING MARKETING, IM AGE MAKEOVER, DEVELOPMENT OF PATENTS, OWNING THE TRADEMARKS. THE ASSESSEE FURTHER STATED THAT IT ONLY BEARS THE RISK RELATED TO MANUFACTURING AND IS RESPONSIBLE ONLY FOR THE MANUFACTURING FUNCTIONS. THUS, THE ASSESSEE CATEGORIZED ITSELF AS A CONTRACT MANU FACTURER. THE PAYMENT OF MANAGEMENT FEES BY THE ASSESSEE IS REQUIRED TO BE SEEN IN THE LIGHT OF THIS FAR ANALYSIS. ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 4 OF 16 6.3.8 THE ASSESSEE CLAIMED THAT THE .FINANCE DEPARTMENT IS RENDERING SERVICES RELATED TO GLOBAL CONTRACTS, SPECIAL LITIGATION, INTELLECTUAL PROPERTY, CASH POSITION OF THE ASSESSEE ETC. FROM THE FAR ANALYSIS ABOVE, IT IS SEEN THAT THESE FUNCTIONS ARE NOT AT ALL REQUIRED TO BE PERFORMED BY THE ASSESSEE. THEREFORE, THE PAYMENT FOR THESE FUNCTIONS NEED NOT BE MADE BY THE ASSESSEE. IN RESPECT TO CO MMUNICATION DEPARTMENT, IT IS SEEN THAT THE SERVICES ALLEGEDLY REFERRED INCLUDES ARTICULATION OF GENERAL POLICIES OF THE GROUP AND ACTIVITIES RELATED TO CREATING AND MAINTAINING THE IMAGE OF SCHNEIDER BRANDS. AGAIN SUCH FUNCTIONS ARE NOT REQUIRED TO BE PER FORMED BY THE ASSESSEE. SIMILARLY, THE SERVICES ALLEGEDLY RECEIVED FROM THE OTHER DEPARTMENTS ARE ALSO OF SUCH NATURE WHICH IS NOT 'REQUIRED TO BE PERFORMED BY THE ASSESSEE, IN RELATION TO THE FAR ANALYSIS, WHICH INCLUDES CUSTOMER SATISFACTION SERVICES, IM PLEMENTATION OF GENERAL DIRECTIVES, MANAGING WORLDWIDE PURCHASE FUNCTIONS, THEREFORE, THE REQUIREMENT OF RENDERING OF SUCH SERVICES BY THE AE TO THE ASSESSEE IS ALSO NOT FULFILLED. 6.3.9 THE ASSESSEE FURTHER SUBMITTED THAT SINCE AS PER GLOBAL TRANSFER P RICE POLICY OF THE GROUP, THE ASSESSEE IS BEING REIMBURSED COSTS WITH A MARKUP OF 4%, THE PAYMENT FOR SUCH FEES WOULD NOT MAKE ANY DIFFERENCE TO THE MARGIN OF THE ASSESSEE AS THE SAME IS RECEIVED THROUGH THE SALE PRICE RECEIVED FROM THE AE. IN THIS RESPECT IT IS SEEN THAT, THE ASSESSEE HAS BENCHMARKED ALL ITS TRANSACTION USING EXTERNAL TNMM WITH THE PLI AS OP/SALES. FROM THE ABOVE BENCHMARKING, IT IS NOT CLEAR AS TO HOW THE MANAGEMENT FEES IS INCLUDED IN THE COST BASE AND HOW THE ASSESSEE HAS RECEIVED THIS FEES BACK WITH A MARKUP OF 4% AS CLAIMED IN THE GLOBAL TP REPORT. THE ASSESSEE DID NOT SUBMIT ANY BIFURCATION OF THE EXPENSES INCURRED IN THE MANUFACTURING PROCESS AND THE CALCULATION OF THE SALE PRICE RECEIVED FROM THE AE ON COST PLUS MARKUP BASIS. THE IN TERNATIONAL TRANSACTION OF SALE IS BENCHMARKED USING ENTITY LEVEL EXTERNAL TNMM, AS MENTIONED ABOVE. FURTHER, IN THE CASE OF DOMESTIC TRANSACTIONS, SINCE NO SUCH MARKUP IS RECEIVED ON COSTS THE CONTENTION OF THE ASSESSEE REGARDING THE RECEIPT BACK OF PAYME NT OF MANAGEMENT FEES TO THE AE THROUGH SALE PRICE IS NOT ESTABLISHED. THEREFORE, THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. 6.3.10 THE ASSESSEE ALSO SUBMITTED THAT SINCE NO ADDITIONS WERE MADE FOR THE PAST ASSESSMENT YEAR ON THIS ISSUE, NO ADJUS TMENT SHOULD BE MADE ON THIS YEAR ALSO. THE FACT THAT THE TRANSACTION WAS ACCEPTED BY THE TRANSFER PRICING OFFICER FOR PROCEEDINGS IN EARLIER YEARS CANNOT ACT AS AN ESTOPPEL IN NOT BENCHMARKING THE SAME TRANSACTION IN SUBSEQUENT YEARS. ANY MISTAKE THAT MAY HAVE CREPT IN EARLIER YEARS NEED NOT CONTINUE FOREVER AND THE SAME NEEDS TO BE RECTIFIED. FURTHER, THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE INCOME TAX ACT AND SINCE EACH ASSESSMENT YEAR IS DIFFERENT, ACCEPTANCE IN EARLI ER YEAR CAN'T JUSTIFY NON CORRECTION OF THE SAME IN LATER YEARS. THEREFORE, THIS CONTENTION OF THE ASSESSEE ALSO DOES NOT HAVE ANY FORCE. 6.3.11 THE TAXPAYER HAS CONTENDED THAT IT WAS REQUIRED TO INCUR EXPENDITURE ON VARIOUS HEADS INCLUDED IN THE MANAGEM ENT FEES ON THE BASIS OF IT'S FAR ANALYSIS. AS ALREADY DISCUSSED ABOVE, THE EXPENDITURE ON THE HEADS, INCLUDED IN THE MANAGEMENT FEES, IS NOT REQUIRED TO BE INCURRED BY THE TAXPAYER ON DIE BASIS OF THE FAR ANALYSIS PROVIDED BY THE TAXPAYER. IF IT IS THE C ASE OF THE TAXPAYER THAT THE EXPENDITURE WAS INDEED REQUIRED TO BE INCURRED, THEN EITHER THE FAR ANALYSIS PROVIDED BY THE TAXPAYER IS INCORRECT OR IF IT IS CLAIMED TO BE CORRECT THAN THERE WAS NO NEED FOR INCURRING OF THE EXPENDITURE. APART FROM MAKING ASS ERTIONS REGARDING THE SUFFICIENCY OF THE AMOUNTS PAID BY IT AS MANAGEMENT FEES, MO DOCUMENTARY EVIDENCE IS SUBMITTED TO JUSTIFY WHETHER THE PAYMENT WAS COMMENSURATE TO SUCH TYPE OF PAYMENTS MADE BY INDEPENDENT ENTITIES. IN THE ABSENCE OF SUCH DOCUMENTARY E VIDENCE, THE ASSERTION ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 5 OF 16 CANNOT BE ACCEPTED ON FACE VALUE. THE HONOURABLE TRIBUNAL IN THE CASE OF KNORR BREMSE (SUPRA) HELD THAT THE TAXPAYER IS REQUIRED TO SUBSTANTIATE THE ASSERTION REGARDING THE ARM'S LENGTH NATURE OF THE MANAGEMENT FEES, BY REDUCING EVID ENCE US REQUIRED BY THE IT RULES. THE RELEVANT PORTION OF THE JUDGEMENT IS REPRODUCED BELOW FOR CONVENIENCE . THE I.T. RULES CONTAIN EXHAUSTIVE DETAIL REGARDING NATURE OF INFORMATION AND DOCUMENTS WHICH ARE REQUIRED TO BE MA INTAINED BY THE ASSESSES. RULE 10D(1) OF THE IT. RULES, 1962 ALSO MANDATES THE MAINTAINABILITY OF RECORD OF UNCONTROLLED TRANSACTIONS TO BE TAKEN INTO ACCOUNT IN ANALYZING THE COMPARABILITY OF THE INTERNATIONAL FUNCTIONS ENTERED INTO BY THE ASSESSEE. IT, THEREFORE, IS OBLIGATORY ON PART OF THE APPELLANT TO MAINTAIN SUCH RECORD AND PRODUCE THE SAME BEFORE THE TPO TO SHOW THAT IT HAS BENCHMARKED THE INTERNATIONAL TRANSACTION AT .ALP. THIS OBLIGATION, HOWEVER, HAS NOT BEEN DISCHARGED BY THE ASSESSEE. 9.3 THE APPELLANT IN THE PRESENT CASE IS ALSO NOT SHOWN TO BE WILLING TO PAY ANY AMOUNT FOR SUCH SERVICES, IF IT WERE, SO PROVIDED BY AN INDEPENDENT ENTERPRISE OR IF THE SAME WOULD HAVE BEEN PERFORMED IN HOUSE. THE DRP IS FOUND TO HAVE CONSIDERED THESE SERVICE S AS NON - BENEFICIAL FOR THE RECIPIENT AND DID NOT TAKE IT AS CHARGEABLE SERVICES. THE PERUSAL OF E - MAILS AND OTHER CONTEMPORANEOUS RECORD ONLY GOES TO REVEAL THAT INCIDENTAL AND PASSIVE ASSOCIATION BENEFIT HAS BEEN PROVIDED BY THE ASSOCIATE ENTERPRISE. I N THIS VIEW OF THE MATTER THERE COULD NEITHER BE ANY COST CONTRIBUTION OR COST REIMBURSEMENT NOR PAYMENT FOR SUCH SERVICES TO THE AE. THE TPO, THEREFORE, HAS RIGHTLY ADOPTED NIL VALUE FOR BENCHMARKING THE ARM'S LENGTH PRICE IN RESPECT OF BOTH THESE SERVIC ES. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE WELL REASONED CONCLUSION REACHED BY THE ASSESSING OFFICER ON THIS COUNT. THE GROUNDS RAISED IN APPEAL IN THIS RESPECT, THEREFORE, STAND REJECTED. 6.3.12 CONSEQUENTLY, MERELY MAKING THE AS SERTION THAT THE AMOUNTS PAID BY THE TAXPAYER WERE AT ARM'S - LENGTH VIS - A - VIS SUCH AMOUNTS REQUIRED TO BE PAID BY INDEPENDENT ENTERPRISES, THE ARMS - LENGTH NATURE OF THE TRANSACTION CANNOT BE JUSTIFIED. 7. ACCORDINGLY, IN VIEW OF THE FACTS OF THE CASE, THE ALP FOR THE PAYMENT FOR MANAGEMENT FEES IS TAKEN AT NIL. THUS, AN ADJUSTMENT OF RS.1,51,83,140/ - IS REQUIRED TO BE MADE TO THE TOTAL INCOME OF THE ASSESSEE IN ORDER THAT THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE COMPANY ARE AT ARM S LENGTH. 5 . ACCORDINGLY, AN ALP ADJUSTMENT OF RS 1,51,83,140 WAS MADE TO THE PAYMENT OF MANAGERIAL FEES PAID, UNDER COST CONTRIBUTION AGREEMENT, TO SIS - F. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A), I NTER ALIA, OBSERVED AS FOLLOWS: 4.8 SUBMISSION OF THE APPELLANT'S AR IS NOT FOUND TO BE TENABLE. SOME OF THE SPECIFIC POINTS AS RAISED BY THE TRANSFER PRICING OFFICER IN HIS ORDER U/S 92CA(3) OF THE ACT ARE NOT CLARIFIED BY THE APPELLANT WITH PROPER D OCUMENTARY EVIDENCES. THE FIRST ISSUE RAISED BY THE TRANSFER PRICING OFFICER IN HIS ORDER IS THAT WHETHER THE CHARGES PAID BY THE APPELLANT FOR INTRA GROUP SERVICES REFLECT THE SAME CHARGES FOR THE SERVICES THAT WOULD HAVE BEEN, OR WOULD REASONABLY BE EXPE CTED TO BE, LEVIED BETWEEN INDEPENDENT PARTIES DEALING AT ARM'S LENGTH PRICE FOR COMPARABLE SERVICES UNDER COMPARABLE CIRCUMSTANCES. THIS QUERY REMAINS TO BE REPLIED. THERE IS ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 6 OF 16 NOTHING ON RECORD TO SHOW THAT THE CHARGES PAID BY THE APPELLANT FOR INTRA GROUP SERVICES REFLECTS THE SAME CHARGES FOR THE SERVICES THAT WOULD HAVE BEEN, OR WOULD REASONABLY BE EXPECTED TO BE LEVIED BETWEEN INDEPENDENT PARTIES DEALING AT ARM'S LENGTH PRICE. SUCH COMPARABLE CASES UNDER THE COMPARABLE CIRCUMSTANCES HAVE NOT BEEN BROUGH T BY THE APPELLANT ON RECORD. IN THIS REGARD THE ARGUMENT OF THE AR IS THAT IT WAS NOT POSSIBLE TO OBTAIN A RECORD OF UNCONTROLLED TRANSACTIONS FOR THE PURPOSE OF ANALYZING THEIR COMPARABILITY WITH THE INTERNATIONAL TRANSACTION ENTERED INTO. IT IS SUBMITTE D BY THE AR THAT LK INDIA HAS SET UP EXCLUSIVE FACILITY TO CATER THE REQUIREMENT OF LK INDIA AND OTHER GROUP COMPANIES AND THERE ARE NO MANUFACTURER OF THE PRODUCTS EXPORTED BY LK INDIA IN INDIA AND FURTHER THE MAJOR COMPETITOR FOR THE SAID PRODUCT I.E. L EGRAND DOES NOT MANUFACTURE SAID PRODUCTS IN INDIA AND FURTHER THE INFORMATION PERTAINING TO THE SOURCING/MANUFACTURING OF THE SAID PRODUCT BY LEGRAND WOULD NOT BE AVAILABLE FROM THE MARKET/DATA BASE SINCE IT IS A PROPRIETARY INFORMATION OF LEGRAND GROUP. BUT THIS ARGUMENT OF THE AR OF THE APPELLANT IS NOT FOUND TO BE ACCEPTABLE. HERE IN THE CASE OF APPELLANT THE ISSUE REGARDING ARM'S LENGTH PRICE IS RELATED TO THE SERVICES WHICH ARE MANAGERIAL IN NATURE IN THE FIELD OF FINANCE, TAX AND LEGAL, HUMAN RESOURCE, CORPORATE COMMUNICATION, CORPORATE QUALITY INDUSTRIALIZATION AND GLOBALIZATION AND MARKETING. IN MY OPINION SUCH COMPARABLE CASES UNDER THE COMPARABLE CIRCUMSTANCES ARE AVAILABLE AS THE SERVICES OF ABOVE NATURE ARE RENDERED BY TH E PROFESSIONALS/EXPERTS TO CORPORATE IN INTERNATIONAL MARKET. IN ABSENCE OF SUCH DETAILS, IT CANNOT BE SAID THAT THE CHARGES PAID BY THE APPELLANT FOR INTRA GROUP SERVICES WAS JUSTIFIABLE IN VIEW OF THE SERVICES AS CLAIMED' TO HAVE BEEN RENDERED TO IT. T HE TPO IN HIS ORDER HAS MENTIONED THAT AN ARM'S LENGTH ENTITY WOULD BE WILLING TO PAY FOR AN ACTIVITY ONLY TO THE EXTENT THAT THE ACTIVITY CONFERS ON IT A BENEFIT OF ECONOMIC OR COMMERCIAL VALUE. AS PER THE TPO THUS, WHETHER AS A RESULT OF SUCH PAYMENT, THE RECIPIENT OF THE SERVICES, THE APPELLANT, GOT ANY ECONOMIC OR COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION. THE TPO IS OF THE VIEW THAT THE EXPECTED BENEFIT MUST BE SUFFICIENTLY DIRECT AND SUBSTANTIAL SO THAT AN INDEPENDENT RECIPIENT , IN SIMILAR CIRCUMSTANCES WOULD BE PREPARED TO PAY FOR IT. THIS A SPECT HAS NOT BEEN EXPLAINED BY THE APPELLAN T . 4.11 AS CAN BE SEEN FROM THE ABOVE THAT SERVICES ARE CLAIMED TO HAVE BEEN RENDERED BY SCHNEIDER ELECTRIC INDUSTRIES IN DIFFERENT AREAS , BUT IT IS NOT EXPLAINED AS TO WHO ARE THE EXPERTS/PROFESSIONALS WHO HAD RENDERED THEIR SPECIFIC SERVICES IN THE ABOVE AREAS. THE BREAKUP OF EXPENDITURE IN RESPECT OF SERVICES RENDERED IN EACH AREA ALONG WITH DOCUMENTARY EVIDENCES ARE NOT SUBMITTED BY THE AR. THE AR IN HIS SUBMISSION DATED 10/06/2014 HAS STATED THAT THE SERVICES AVAILED BY EACH COMPONENT OF THE COMPANY'S BUSINESS SUCH AS FINANCE, TREASURY, HUMAN RESOURCES, CORPORATE QUALITY, GLOBALIZATION AND INDUSTRIALIZATION HAVE BEEN FURNISHED IN TH E ATTACHED CENTRAL COST ALLOCATION AGREEMENT AS PER ANNEXURE - 5. THE AR HAS ATTACHED THIS ANNEXURE - 5 WITH HIS SUBMISSION DATED 10/06/2014 AND ON PERUSAL OF THE SAME IT IS FOUND THAT THIS IS MERELY A CENTRAL COST ALLOCATION AGREEMENT WHICH EXPLAIN THE NATURE OF SERVICES TO BE PERFORMED IN LEGAL DEPARTMENT, TAX & CUSTOM, TREASURY, COMMUNICATION CORPORATE, MOBILITY MANAGEMENT AND SUSTAINABLE DEVELOPMENT ETC. BY THE SCHNEIDER ELECTRIC INDUSTRIES. BUT MERELY FILING OF COPY OF THIS CENTRAL COST ALLOCATION AGREE MENT DOES NOT SERVE THE PURPOSE SO FAR AS FILING OF DETAILS OF SPECIFIC SERVICES RENDERED BY THE PROFESSIONALS/EXPERTS IN ABOVE SPECIFIC AREAS AND ALSO DOCUMENTARY EVIDENCES IN RESPECT OF SUCH SPECIFIC SERVICES ACTUALLY RENDERED ARE CONCERNED. THE AR HAS A LSO ATTACHED THE LIST OF THE PERSON WITH HIS SUBMISSION WHO HAD VISITED THE VADODARA PLANT ALONG WITH THE ATTENDANCE SHEET FOR MEETING/CONSULTING/TRAINING CONDUCTED AT VADODARA PLANT AS PER ANNEXURE - 6. HOWEVER, ON PERUSAL OF ANNEXURE - 6 IT IS FOUND THAT T HERE ARE 3 PERSONS NAMELY ALAI LAI, LIM AH HAWAI AND JOYCE CHUNG WHOSE NAMES ARE MENTIONED IN THE LIST AND ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 7 OF 16 PERIOD OF THEIR VISITS ARE SHOWN IN THE MONTH OF SEPTEMBER, JANUARY, JULY AND FEBRUARY 2008. FIRST OF ALL, NO ANY DOCUMENTARY EVIDENCES ARE FURNISHED AT ALL BY THE AR TO SHOW THAT THEY HAVE ACTUALLY VISITED VADODARA. THE SPECIFIC PERIODS OF THEIR VISITS ARE NOT MENTIONED. IT IS NOT MENTIONED IN THE LIST THAT IN WHAT CAPACITY THEY HAVE VISITED VADADARA ON BEHALF OF SCHNEIDER ELECTRIC INDUSTRIES. IT IS N OT EXPLAINED AS TO IN WHAT FIELDS OR IN WHAT AREAS THESE PERSONS WERE EXPERT AND IN WHAT MANNER THEY HAVE HELPED THE APPELLANT COMPANY IN THEIR MANUFACTURING ACTIVITIES. THE DESIGNATION AND QUALIFICATIONS OF THESE PERSONS ARE NOT EXPLAINED AT ALL. IT IS AL SO NOT EXPLAINED WHETHER THESE PERSONS WERE SPECIALISTS IN FINANCE TAX AND LEGAL, IN HUMAN RESOURCES, IN CORPORATE QUALITY OR IN INDUSTRIALIZATION, GIOBALIZATION AND IN MARKETING ETC. IT IS NOT KNOWN WHETHER THE ABOVE THREE PERSONS WERE THE EMPLOYEE OF THE SCHNEIDER ELECTRIC INDUSTRIES OR THEY WERE HIRED BY SCHNEIDER ELECTRIC INDUSTRIES FOR IMPARTING THE TRAINING TO THE EMPLOYEES OF THE COMPANY. THE IDENTITY AND DESIGNATION OF THESE PERSONS ARE NOT EXPLAINED. FURTHER, ON PERUSAL OF TRAINING RECORD BOOK, IT IS SEEN THAT NAME OF FEW PARTICIPANTS AND DEPARTMENTS OF SUCH PARTICIPANTS AND DETAILS OF TRAINING SUBJECT ARE MENTIONED IN SUCH TRAINING RECORD BOOK. BUT NO ORIGINAL TRAINING RECORD BOOK HAS BEEN FILED. PRINTED MATERIALS AND HAND - OUTS IN RESPECT OF TRAINI NG SUBJECT HAVE NOT BEEN FURNISHED. IN THE COPY OF TRAINING RECORD BOOK AS FILED BY THE AR, THE SIGNATURE OF THE TRAINERS AND ALSO SIGNATURE OF THE TRAINEES IN SOME CASES ARE VERY FADE AND NOT READABLE. NO CORRESPONDENCES BETWEEN THE APPELLANT AND THE SCHN EIDER ELECTRIC INDUSTRIES WITH REGARD TO IMPARTING OF TRAINING AND VISITS OF THE PROFESSIONAL ALONG WITH THE DETAILS OF SPECIFIC PERIOD OF TRAINING ARE FURNISHED BY THE APPELLANT. I AM ENCLOSING HEREWITH THE APPEAL ORDER THE LIST OF PERSONS WHO AS PER THE CLAIM OF THE APPELLANT HAVE VISITED VADODARA FOR IMPARTING TRAINING AND ALSO THE COPY OF TRAINING RECORD BOOKS (I.E. RUNNING FROM PAGE 1 TO PAGE 6 AND MARKED AS ANNEXURE - 6) FOR REFERENCE AND FROM THE SAME IT CAN BE SEEN THAT ONLY THRE E PERSONS ARE SHOWN TO HAVE VISITED INDIA AND ONLY 5 TO 6 TRAININGS AT A VERY SMALL SCALE ARE SHOWN TO HAVE BEEN HELD. EVEN IF IT IS CONSIDERED THAT 'THE THREE PERSONS I.E. ALAI LAI, LIM AH HAWAI AND JOYCEE CHUNG HAVE VISITED VADODARA AND IMPARTED TRAINI NGS TO THE EMPLOYEES OF THE APPELLANT ON 5 TO 6 OCCASIONS, THEN ALSO IT CANNOT BE SAID THAT SUCH HUGE AMOUNT OF RS.1,51,83,140 - WAS INCURRED ON SUCH TRAININGS WHICH WAS HELD AT A VERY SMALL SCALE. ORGANIZING OF FEW TRAININGS AT A SMALL SCALE CANNOT JUSTI FY CLAIM OF EXPENDITURE OF RS.1,51,83,140/ - . ANOTHER VITAL ASPECT OF THE CASE OF THE APPELLANT IS THAT IT HAS CLAIMED TO HAVE RECEIVED SERVICES OF PROFESSIONALS AND EXPERTS IN DIFFERENT AREAS LIKE FINANCE, TREASURY, HUMAN RESOURCES, CORPORATE QUALITY, G LOBALIZATION AND INDUSTRIALIZATION ETC. AND WHEREAS AS PER TRAINING RECORD BOOK VERY FEW TOPICS ARE SHOWN TO HAVE BEEN COVERED. IF SOMEONE GOES BY THE PARTICULARS OR DETAILS OF SERVICES RENDERED IN VARIOUS BUSINESS ASPECTS AS REPRODUCED IN EARLIER PARAGRAPHS, THEN IT CAN BE SEEN THAT A VERY FEW TOPICS ARE SHOWN TO HAVE BEEN COVERED AS PER TRAINING RECORD BOOKS AS COMPARED TO THE LIST OF SERVICES CLAIMED TO HAVE BEEN RECEIVED BY THE APPELLANT FROM THE PROFESSIONALS. IN MY OPINION THE TPO IS FULLY CORRECT IN HOLDING THAT THE APPELLANT HAS TO PROVE WITH PROPER DOCUMENTATION AND EVIDENCES THAT THE SERVICES WERE ACTUALLY RENDERED BY THE SPECIALISTS AND PAYMENT WAS IN COMMENSURATE WITH THE BENEFIT DERIVED THERE FROM. THIS VITAL ASPECT HAS TO BE REPLIED WITH SPECIFICALLY BY FILING DOCUMENTARY EVIDENCES. THE TPO IS CORRECT IN OPINING THAT THE EXPECTED BENEFIT MUST BE SUFFICIENTLY DIRECT AND SUBSTANTIAL SO THAT AN INDEPENDENT RECIPIENT, IN SIMILAR CIRCUMSTANCE, WOULD BE PREPARED TO P AY FOR IT. IT IS ALSO NOT EXPLAINED AS TO HOW THE CHARGES PAID FOR SERVICES CLAIMED TO HAVE BEEN RENDERED ARE DETERMINED. THE RELEVANT PART OF RECORD OF THE APPELLANT IN THIS REGARD IS ALSO NOT PRODUCED. THE TPO HAS CORRECTLY HELD THAT ONUS FOR MAINTAINING RELEVANT DOCUMENTATION AND CONSEQUENT DETERMINATION OF ALP IS CAST ON THE APPELLANT AND IN ABSENCE OF THE SAME, NO SUCH PAYMENT NEEDS TO BE ALLOWED. IN THIS REGARD THE TPO ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 8 OF 16 HAS CORRECTLY RELIED UPON DECISION OF HON'BLE ITAT BANGALOR E (SB) IN THE CASE OF AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD. VS. ACIT, 107 ITR 141. 4.12 IT IS CLAIMED BY THE AR IN HIS SUBMISSION THAT AS A PART OF CONSULTATIVE PROCESS, THE APPELLANT COMPANY EXECUTIVES RAISED A QUERY THROUGH INTERNAL ON - LINE SYSTEM A ND THE RESPECTIVE EXPERTS OF THE GROUP PROVIDE THE REAL TIME/ON - LINE SOLUTION TO THE QUERY RAISED. FEW EXAMPLE OF REGULAR INTERACTIONS/CORRESPONDENCES BETWEEN THE LOCAL TEAM AT VADODARA PLANT AND ADVISORY TEAM AT FRANCE IS ENCLOSED BY THE APPELLANT AS PER ANNEXURE - 7. I AM ENCLOSING HEREWITH THE APPEAL ORDER THE CORRESPONDENCES AS ENCLOSED BY THE AR AS PER ANNEXURE - 7 FOR REFERENCE. IN MY OPINION THE COPIES OF THESE FEW CORRESPONDENCES AS ENCLOSED AS PER ANNEXURE - 7 DO NOT SHOW THAT ANY ADVICE OR OPINION IN TH E AREAS OF FINANCE, TREASURY, HUMAN RESOURCES, CORPORATE QUALITY, GLOBALIZATION AND INDUSTRIALIZATION ETC. ARE GIVEN AS CLAIMED BY THE APPELLANT. THESE ARE MERE COPY OF CORRESPONDENCES BETWEEN THE APPELLANT AND THE OTHER PARTY AND DO NOT SHOW ANY SORT OF S ERVICES RENDERED BY THE GROUP COMPANY. THE APPELLANT HAS ENCLOSED THE COPIES OF INVOICE AND LEDGER ACCOUNTS AS PER ANNEXURE - 8. THE APPELLANT HAS ALSO ENCLOSED COMPUTATION OF COST OF MANAGEMENT FEES BASED ON THE COST INCURRED BY SCHNEIDER ELECTRIC, FRANCE A S PER ANNEXU'RE - 9. THE APPELLANT HAS ENCLOSED CERTIFICATE OF STATUTORY AUDITOR AS PER ANNEXURE - 10 WHICH VALIDATES THE TOTAL COST ALLOCATED AMONG THE GROUP ENTITIES BASED ON VARIOUS PARAMETERS. HOWEVER, SINCE IT HAS NOT BEEN ESTABLISHED THAT ACTUAL SERVICES WERE RENDERED BY THE GROUP COMPANY TO THE APPELLANT AS DISCUSSED IN DETAIL IN PRECEDING PARAGRAPHS AND THEREFORE THESE COPIES OF INVOICE ETC. AS ENCLOSED AS PER ANNEXURE - 8, 9 AND 10 CANNOT BE RELIED UPON. I AM ENCLOSING HEREWITH COPIES OF INVOICE AND LEDG ER ACCOUNTS AS PER ANNEXURE - 8, COMPUTATION OF COST OF MANAGEMENT FEES BASED ON THE COST INCURRED BY SCHNEIDER ELECTRIC, FRANCE AS PER ANNEXURE - 9 AND CERTIFICATE OF STATUTORY AUDITOR AS PER ANNEXURE - 10 FOR REFERENCE. 4.13 THE TPO HAS FURTHER MENTIONED IN H IS ORDER THAT THE APPELLANT PRODUCED THE TP REPORT IN WHICH ALL THE TRANSACTIONS WERE BENCH MARKED BY TAKING TNMM AS THE MOST APPROPRIATE METHOD ON AN ENTITY LEVEL. HOWEVER/ THE TPO HAS HELD THIS METHOD AS INCORRECT IN VIEW OF THE REASONS AS MENTIONED IN H IS ORDER U/S 92CA(3). THE TPO HAS MADE DETAILED DISCUSSIONS IN THIS REGARD IN HIS ORDER U/S 92CA(3). AS PER THE TPO THE INDIAN TRANSFER PRICING REGULATION AS WELL AS OECD GUIDELINES STATE THAT THE INTERNATIONAL PROFIT METHOD SHOULD IDEALLY BE APPLIED ON A TRANSACTION TO TRANSACTION BASIS, BUT IN APPROPRIATE SITUATION TRANSACTIONS MAY BE GROUPED OR AGGREGATED. THE TPO HAS REFERRED TO RULE 10A(D) AS PER WHICH 'TRANSACTION' INCLUDES A NUMBER OF CLOSELY LINKED TRANSACTIONS. AS PER THE TPO THE TRANSACTIONS CAN O NLY BE TAKEN TO BE CLOSELY INTERLINKED IF ITS SEPARATE EVALUATION/ PROFITABILITY IS NOT POSSIBLE. AS PER THE TPO IF THE APPROACH ADOPTED BY THE APPELLANT IS TO BE GIVEN ANY CREDENCE, THEN IN CASE OF ANY ENTERPRISES ALL ITS INTERNATIONAL TRANSACTIONS WOULD BE CLOSELY INTERLINKED BECAUSE AIL THE TRANSACTIONS OF AN ENTERPRISE IN ONE WAY OR THE OTHER ARE CONNECTED TO OVERALL OPERATION AND OBJECTIVES OF THE COMPANY AND THE VERY BASIS OF COMPARABILITY AND ANALYSIS ON A TRANSACTION TO TRANSACTION BASIS ENSHRINED I N THE ITPR AS WELL AS IN THE OCED GUIDELINES WOULD LOSE ITS MEANING. AS PER THE TPO, FAILURE ON THE PART OF THE APPELLANT TO BENCHMARK ITS INTERNATIONAL TRANSACTIONS SEPARATELY WOULD RENDER THE ANALYSIS CONDUCTED BY IT TO BE NOT AS PER THE WORDS AND INTENT OF THE LAW. THE TPO HAS REFERRED TO OECD GUIDELINES IN HIS ORDER U/S - 92CA(3) WHICH RECOMMENDS EVALUATION/BENCHMARKING ON TRANSACTION BY TRANSACTION BASIS AND ONLY IN CERTAIN SITUATION WHEN THEY CANNOT BE EVALUATED ON SEPARATE BASIS THAT COMBINED APPROACH HAS BEEN SUGGESTED. THE TPO HAS ALSO REFERRED TO DECISIONS OF VARIOUS HON'BLE COURTS IN HIS ORDER U/S 92CA(3) AND HAS - HELD THAT INTERNATIONAL TRANSACTION WAS REQUIRED TO BE BENCH MARKED IN THE CASE OF APPELLANT SEPARATELY. THE ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 9 OF 16 FINDINGS OF THE TPO IN THIS REGARD ARE FOUND TO BE CONVINCING. THE CASE LAWS RELIED UPON BY THE TPO HAS BEARING ON THE CASE OF THE APPELLANT. IN MY OPINION INTERNATIONAL TRANSACTION WAS REQUIRED TO BE BENCH MARKED SEPARATELY. AS PER THE TPO IN ORDER TO EXAMINE THE PAYMENT ON ACCOUNT OF MANAGEMENT FEES, THE DETAILS WERE CALLED FOR FROM THE APPELLANT. AS PER THE TPO IN THE SAID LETTER, THE DOCUMENTARY EVIDENCE IN RESPECT OF SUCH MANAGEMENT FEES BEING ACTUALLY REQUIRED BY THE APPELLANT AND SUCH SERVICES BEING ACTUALLY RENDERED BY THE AE TO IT WERE CALLED FOR. AS PER THE TPO THE COST BENEFIT ANALYSIS CARRIED OUT BY THE APPELLANT IN RESPECT OF PAYMENT OF SUCH FEES WAS ALSO CALLED AND THE APPELLANT WAS ASKED TO SEPARATE OUT THE SERVICES RENDERED WHICH WERE IN THE NATURE OF SHARE HOLDING ACTI VITIES. IT IS MENTIONED BY THE TPO IN THE ORDER THAT NO SUCH DETAILS WERE SUBMITTED BY THE APPELLANT EXCEPT MAKING GENERAL STATEMENT. 4.14 THE TPO ON PERUSAL OF F A R ANALYSIS HAS FURTHER OBSERVED THAT THE APPELLANT IS RESPONSIBLE FOR THE ENTIRE PRODUCTION PROCESS STARTING FROM DEVELOPING THE SOURCE OF RAW MATERIAL, PURCHASE TO MANAGING THE FINANCIAL NEEDS OF SUCH MANUFACTURING FUNCTIONS, WHILE THE ASSOCIATE ENTERPRISE ARE RESPONSIBLE FOR ALL THE FUNCTIONS INCLUDING MARKETING, IMAGE MAKEOVER, DEVELOPMENT OF PATENTS, OWNING THE TRADE MARKS. AS PER THE TPO THE APPELLANT HAS CATEGORIZED ITSELF AS A CONTRACT MANUFACTURER. AS PER THE TPO THE APPELLANT HAD CLAIMED THAT THE FINANCE DEPARTMENT IS RENDERING SERVICES RELATED TO GLOBAL CONTRACTS, SPECIAL LITIGATION, IN TELLECTUAL PROPERTY, CASH POSITION OF THE ASSESSEE ETC. AS PER THE TPO FROM THE FAR ANALYSIS, IT WAS SEEN THAT THESE FUNCTIONS WERE NOT AT ALL REQUIRED TO BE PERFORMED BY THE APPELLANT. AS PER THE TPO THEREFORE, THE PAYMENT FOR THESE FUNCTIONS WAS NOT TO BE MADE BY THE APPELLANT. IN RESPECT TO COMMUNICATION DEPARTMENT, IT IS SEEN THAT THE SERVICES LEGALLY ALLEGEDLY REFERRED INCLUDES ARTICULATION OF GENERAL POLICIES OF THE GROUP AND ACTIVITIES RELATED TO CREATING .AND MAINTAINING THE IMAGE OF SCHNEIDER BRA NDS. AGAIN SUCH FUNCTIONS ARE NOT REQUIRED TO BE PERFORMED BY THE APPELLANT. SIMILARLY, THE SERVICES ALLEGEDLY RECEIVED FROM THE OTHER DEPARTMENT ARE ALSO OF SUCH NATURE WHICH IS NOT REQUIRED TO BE PERFORMED BY THE ASSESSEE, IN RELATION TO THE FAR ANALYSIS , WHICH INCLUDES CUSTOMER SATISFACTION SERVICES, IMPLEMENTATION OF GENERAL DIRECTIVES, MANAGING WORLDWIDE PURCHASE FUNCTIONS. THEREFORE, THE REQUIREMENT OF RENDERING OF SUCH SERVICES BY THE AE TO THE APPELLANT IS ALSO NOT FULFILLED. THESE FINDINGS OF THE T PO ARE FOUND TO BE CONVINCING IN VIEW OF THE FACT THAT IF CLAIM OF ANY EXPENDITURE IS MADE BY THE APPELLANT, THEN IT IS REQUIRED TO PROVE THAT SUCH EXPENDITURE WAS NEEDED TO BE INCURRED FOR THE PURPOSE OF BUSINESS. THE APPELLANT IS REQUIRED TO PROVE THE BU SINESS EXPEDIENCY FOR THE PURPOSE OF CLAIMING THE EXPENDITURE. 4.15 IT WAS ALSO SUBMITTED BY THE APPELLANT BEFORE THE TPO THAT SINCE AS PER GLOBAL TRANSFER PRICE POLICY OF THE GROUP, IT WAS BEING REIMBURSED THE COSTS WITH THE MARKUP OF 4% AND THE PAYMENT FOR SUCH FEES WOULD NOT MAKE ANY DIFFERENCE TO ITS MARGIN AS THE SAME IS RECEIVED THROUGH THE SALE PRICE RECEIVED FROM THE ASSOCIATE ENTERPRISE. HOWEVER, AS PER THE TPO, THE APPELLANT HAD BENCHMARKED ALL ITS TRANSACTIONS USING EXTERNAL TNMM WITH THE PLI A S OP/SALES. AS PER THE TPO FROM THE BENCHMARKING, IT IS NOT CLEAR AS TO HOW THE MANAGEMENT FEES IS INCLUDED IN THE COST BASE AND HOW THE APPELLANT HAD RECEIVED THIS FEES BACK WITH A MARKUP OF 4% AS CLAIMED IN THE GLOBAL TP REPORT. IT IS MENTIONED BY THE TP O IN HIS ORDER THAT THE APPELLANT DID NOT SUBMIT ANY BIFURCATION OF THESE EXPENSES .INCURRED IN THE MANUFACTURING PROCESS AND THE CALCULATION OF THE SAME PRICE RECEIVED FROM THE AE ON COST PLUS MARKUP BASIS. AS PER THE TPO FURTHER IN THE CASE OF DOMESTIC T RANSACTIONS SINCE NO SUCH MARKUP IS RECEIVED ON COSTS, THE CONTENTION OF THE APPELLANT REGARDING THE RECEIPT BACK OF PAYMENT OF MANAGEMENT FEES TO THE AE THROUGH SALE PRICE IS NOT ESTABLISHED. THUS ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 10 OF 16 THE ABOVE CONTENTION OF THE APPELLANT HAS NOT BEEN ACCEPTE D BY THE TPO. IT IS NOT EXPLAINED AS TO HOW THE APPELLANT HAS RECEIVED THESE FEES BACK WITH A MARKUP OF 4% AS CLAIMED IN THE GLOBAL TP REPORT. LIKEWISE, IN THE CASE OF DOMESTIC TRANSACTIONS ALSO IT IS NOT ESTABLISHED THAT HOW SUCH MANAGEMENT FEES HAS BEEN RECEIVED BACK FROM THE AE THROUGH SALE. IN MY OPINION IN ABSENCE OF SPECIFIC DETAILS AS WELL AS EVIDENCES, IT CANNOT BE SAID THAT THE APPELLANT HAS RECEIVED BACK THE MANAGEMENT FEES WITH A MARKUP OF 4% AS CLAIMED IN THE GLOBAL TP REPORT. THUS, THE ABOVE VI EW OF THE TPO IS FOUND TO BE CORRECT AND CONVINCING. 4.16 I ALSO AGREE WITH THE VIEW OF THE TPO THAT THE EXPENDITURE ON THE HEADS INCLUDED IN THE MANAGEMENT FEES IS NOT REQUIRED TO BE INCURRED BY THE TAX PAYER ON THE BASIS OF FAR ANALYSIS PROVIDED BY THE TAX PAYER. AS PER THE TPO IF IT IS THE CASE OF THE TAX PAYER THAT THE EXPENDITURE WAS INDEED REQUIRED TO BE INCURRED, THEN EITHER' THE FAR ANALYSIS PROVIDED BY THE TAX PAYER IS INCORRECT OR IF IT IS CLAIMED TO BE CORRECT THEN THERE WAS NO NEED FOR INCURRI NG OF THE EXPENDITURE. ! FURTHER AGREE WITH THE VIEW OF THE TPO THAT NO DOCUMENTARY EVIDENCE IS SUBMITTED TO JUSTIFY WHETHER THE PAYMENT WAS COMMENSURATE TO SUCH TYPE OF PAYMENTS MADE BY THE INDEPENDENT ENTITIES AND IN ABSENCE OF SUCH DOCUMENTARY EVIDENCES THE ASSERTION OF THE APPELLANT CANNOT BE ACCEPTED ON FACE VALUE. THE TPO HAS RIGHTLY HELD THAT THE TAX PAYER IS REQUIRED TO SUBSTANTIATE THE ASSERTION REGARDING ARM'S - LENGTH NATURE OF MANAGEMENT FEES BY WAY OF ADDUCING EVIDENCES. 4.17 IN VIEW OF THE D ISCUSSIONS AS MADE IN PRECEDING PARAGRAPHS, IT IS HELD THAT THE ALP FOR THE PAYMENT FOR MANAGEMENT FEES AMOUNTING TO RS.1,51,83,140/ - HAS CORRECTLY BEEN TAKEN BY THE TPO AT NIL AND ADJUSTMENT OF RS.1,51,83,1407 - HAS CORRECTLY BEEN PROPOSED TO BE MADE TO TH E TOTAL INCOME OF THE APPELLANT. FURTHER, BASED ON ORDER U/S 92CA(3) OF THE ACT DATED 21/01/2013 OF THE TPO, THE ASSESSING OFFICER, I.E. DCIT CIRCLE - L(2), BARODA IN HIS ASSESSMENT ORDER U/S 143(3) OF THE ACT DATED 12/03/2013 HAS CORRECTLY ADJUSTED THE INCO ME OF THE APPELLANT BY AN AMOUNT OF RS.1,51,83,140/ - AND HAS CORRECTLY ADDED BACK THE SAME TO THE TOTAL INCOME. THUS, THIS ADJUSTMENT OF RS.1,51,83,140/ - AS MADE AND ACCORDINGLY ADDITION OF THIS AMOUNT TO THE TOTAL INCOME OF THE APPELLANT IS HEREBY CONFIRM ED. THUS THE FIRST GROUND OF APPEAL OF THE APPELLANT IS DISMISSED. 6 . THE ASSESSEE IS AGGRIEVED OF THE STAND SO TAKEN BY THE LEARNED CIT(A) AND IS IN FURTHER APPEAL BEFORE US. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DUL Y CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSIT ION. 8 . AS WE BEGIN TO DEAL WITH THIS ISSUE, WE FIND THAT IN A MATERIALLY IDENTICAL SITUATION IN THE CASE OF MERCK LIMITED VS DCIT [(2016) 139 DTR 1(MUM)], A COORDINATE BENCH, SPEAKIN G THROUGH ONE OF US I.E. THE ACCOUNTANT MEMBER, HAS OBSERVED, INTER ALIA, AS FOLLOWS: 9. WE FIND THAT THERE IS A CLEAR CONTRADICTION IN THE FINDINGS OF THE AUTHORITIES BELOW. ON ONE HAND, THE STAND OF THE AUTHORITIES BELOW IS THAT NO SERVICES ARE RENDERED, AND, ON THE OTHER HAND, THERE ARE CATEGORICAL FINDINGS THAT THE SERVICES RENDERED ARE SO GENERAL IN NATURE THAT EVEN AN EMPLOYEE OF THE ASSESSEE COULD HAVE RENDERED THE SAME. IN THE EVENT OF NO SERVICES ACTUALLY HAVING BEEN RENDERED, THERE CANNOT BE ANY O CCASION FOR THE SAME SERVICES ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 11 OF 16 BEING RENDERED BY A PERSON WITHOUT SPECIALIZED KNOWLEDGE. ON THE ONE HAND, IT IS HELD THAT ARM'S LENGTH PRICE OF THESE SERVICES IS ZERO VALUE, AND, IN THE SAME BREATH, IT IS HELD THAT 'THERE WOULD HARDLY BE ANY SUBSTANTIAL PAY MENT' FOR THESE SERVICES. CLEARLY, SERVICES ARE RENDERED ON THE FACTS OF THE PRESENT CASE. THERE IS SUFFICIENT MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE WAS, UNDER THE AGREEMENT, ENTITLED TO RECEIVE A PACKAGE OF SERVICES ON AS AND WHEN REQUIRED BASIS. T HE EMAILS AND OTHER DOCUMENTARY EVIDENCES SHOW THAT THE ASSESSEE WAS IN RECEIPT OF THESE SERVICES. JUST BECAUSE THESE SERVICES WERE TOO GENERAL, IN THE PERCEPTION OF THE AUTHORITIES BELOW, OR JUST BECAUSE THE ASSESSEE DID NOT NEED THESE SERVICES FROM THE O UTSIDE AGENCIES, CANNOT BE REASON ENOUGH TO HOLD THAT THE SERVICES WERE NOT RENDERED AT ALL. WE HAVE PERUSED THE MATERIAL BEFORE US, AND, IN OUR CONSIDERED VIEW, THE ASSESSEE HAS REASONABLY ESTABLISHED RENDITION OF SERVICES. THE ASSESSEE MAY NOT HAVE RECEI VED ALL THE SERVICES UNDER THE AGREEMENT BUT ESSENTIALLY THE ASSESSEE HAD RIGHT TO RECEIVE ALL THESE SERVICES, AS AND WHEN REQUIRED, UNDER THE AGREEMENT. THE PAYMENT IS MADE FOR THE RIGHTS ACCRUING TO THE ASSESSEE FOR THE BUNDLED SERVICES UNDER THE CONTRAC T AND NOT FOR EACH SERVICE ON ALA CARTE BASIS. THE REASON THAT THE ASSESSEE DID NOT USE A PARTICULAR SERVICE CANNOT JUSTIFY HOLDING THAT NO PAYMENT WAS WARRANTED FOR SUCH SERVICES. TO GIVE AN EXAMPLE FROM DAY TO DAY LIFE, IF AN ASSESSEE IS PAYING FOR HAVIN G RIGHT TO VIEW A BOUQUET OF TELEVISION CHANNELS, WHICH COME AS A PACKAGE, HE DOES NOT DECLINE TO PAY THE CONSIDERATION FOR THE BOUQUET OF TELEVISION CHANNELS BECAUSE HE DID NOT VIEW A PARTICULAR TELEVISION CHANNE L. THE EXAMPLE MAY SEEM TO BE A BIT TOO SIM PLISTIC BUT IT DOES HAMMER THE MASSAGE, AS WE WOULD LIKE TO, THAT NOT AVAILING A PARTICULAR SERVICE UNDER A CONTRACT DOES NOT MEAN THAT NO PAYMENTS ARE REQUIRED TO BE MADE FOR ALL THE SERVICES BUNDLED UNDER THE CONTRACT. THE OTHER THING IS THE BENEFIT TEST . WE DO NOT THINK BENEFIT TEST HAS TOO MUCH RELEVANCE IN THE ARM'S LENGTH PRICE ASCERTAINMENT. WHEN EVALUATING THE ALP OF A SERVICE, IT IS WHOLLY IRRELEVANT AS TO WHETHER THE ASSESSEE BENEFITS FROM IT OR NOT; THE REAL QUESTION WHICH IS TO BE DETERMINED IN SUCH CASES IS WHETHER THE PRICE OF THIS SERVICE IS WHAT AN INDEPENDENT ENTERPRISE WOULD HAVE PAID FOR THE SAME. IN CASE TPO CAN DEMONSTRATE THAT THE CONSIDERATION FOR SIMILAR SERVICES, UNDER THE CUP METHOD, IS NIL, HE CAN VERY WELL DO SO. THAT'S NOT, HOWEV ER, HIS CASE. HE ONLY STATES THAT THESE SERVICES ARE NOT WORTH THE AMOUNT PAID BY THE ASSESSEE. SUCH BAND STATEMENTS AND SWEEPING GENERALIZATIONS CANNOT HELP THE CASE OF THE REVENUE AUTHORITIES. THE ASSESSEE HAS BENCHMARKED THE TRANSACTION ON TNMM BASIS, A ND UNLESS THE REVENUE AUTHORITIES CAN DEMONSTRATE THAT SOME OTHER METHOD OF ASCERTAINING THE ARM'S LENGTH PRICE ON THE FACTS OF THIS CASE WILL BE MORE APPROPRIATE A METHOD OF ASCERTAINING THE ARM'S LENGTH PRICE, THE TNMM CANNOT BE DISCARDED. DEALING WITH A LMOST A SIMILAR SITUATION, AS WE ARE IN SEISIN OF, A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF AWB INDIA (P.) LTD V. DY. CIT [2015] 152 ITD 770 , HAS OBSERVED AS FOLLOWS: '11. IN GROUND NOS. 5 TO 9, WHICH WE WILL TAKE UP TOGETHER, THE ASSESSEE HAS R AISED THE FOLLOWING GRIEVANCES: 5. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP AND TPO/AO HAVE FAILED TO APPRECIATE THE BUSINESS MODEL AND ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 12 OF 16 BUSINESS REALITIES OF THE APPELLANT AND ROLE OF ITS AE, WHILE CONDUCTING THE ECONOMIC ANALYSIS, AND CON CLUDING THAT NO SERVICE IS RECEIVED OR NO BENEFIT, AND/OR SERVICES RECE IVED ARE DUPLICATIVE IN NATURE. 6. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP AND TPO/AO ERRED IN PRESUMPTIVELY HOLDING THAT THE REVENUE AUTHORITIES ARE EMPOWERED TO QUES TION THE COMMERCIAL DECISION OF THE APPELLANT AND IN NOT APPRECIATING THE JURISPRUDENCE THAT THE DRP AND THE AO/TPO CANNOT GO BEYOND THEIR POWERS TO QUESTION THE BU SINESS DECISION OF THE COMPANY. 7. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP HAS ERRED IN CONFIRMING THAT THE TPO HAS DISCHARGED HIS STATUTORY ONUS BY ESTABLISHING THE CONDITIONS SPECIFIED IN (A) TO (D) OF SECTION 92C(3) OF THE ACT HAVE BEEN SATISFIED BEFORE DISREGARDING THE ARM'S LENGTH PRICE DETERMINED BY THE APPELLANT AND PROCE EDING TO DECIDE THE ARM'S LENGTH PRICE HIMSELF. 8. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP AND TPO/AO HAVE ERRED IN CONDUCTING ECONOMIC ANALYSIS OF THE INTERNATIONAL TRANSACTIONS WITHOUT RELYING ON ANY COMPARABLE TRANSACTION/COMPAN IES USI NG INAPPROPRIATE METHOD. 9. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DRP AND TPO/AO HAVE ERRED IN DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS CONSISTING OF C OST AND PROFIT MARGIN AT 'NIL'. 12. SO FAR AS THESE GRIEVANCES OF THE ASSESSEE ARE CONCERNED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FOOD GRAINS. IT IS A PART OF AWB GROUP AUSTRALIA AND ITS 99.999% EQUITY IS HELD BY AWB AUSTRALIA LIMITED AND THE BALANCE. 001% EQ UITY IS HELD BY ANOTHER GROUP COMPANY, NAMELY AWB INVESTMENTS LIMITED. ONE OF THE INTERNATIONAL TRANSACTIONS THAT THE ASSESSEE ENTERED INTO WITH ITS AES WAS PAYMENT OF RS 58,20,571 TOWARDS 'MANAGEMENT SERVICES'. ON AN ANALYSIS OF THE DETAILS OF THE PAYMENT S MADE UNDER THIS HEAD, THE TPO WAS OF THE VIEW THAT THE BENEFIT OF SOME OF THE SERVICES AVAILED UNDER THE HEAD 'MANAGEMENT SERVICES' WAS NOT COMMENSURATE WITH THE PAYMENTS MADE FOR THE SAME. HE WAS ALSO OF THE VIEW THAT AS AGAINST THE USE OF TNMM BY THE A SSESSEE IN BENCHMARKING, THE RIGHT COURSE OF ACTION WILL BE TO FOLLOW CUP METHOD BECAUSE THE VALUE UNDER CUP METHOD WILL BE BEST INDICATOR OF THE VALUE OF THESE SERVICES. IT WAS IN THIS BACKGROUND THAT THE TPO MADE CERTAIN ADVERSE INFERENCES AGAINST THE AS SESSEE. THE TPO WAS OF THE VIEW THAT WHILE THE ASSESSEE HAS MADE A PAYMENT OF RS 20,35,907 TOWARDS FINANCIAL MANAGEMENT AND REPORTING SERVICES, 'BUT THE SERVICES RENDERED ARE NEGLIGIBLE COMPARED TO THE COST INCURRED'. THE TPO WAS ALSO OF THE VIEW THAT 'A M INOR CLARIFICATION OR SEEKING OF CERTAIN GUIDANCE ON VERIFY BASIC ISSUE DOES NOT CALL FOR A ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 13 OF 16 PAYMENT OF RS 20 LAKHS. THEREFORE, THE ALP OF THESE SERVICES WAS TAKEN AS 'NIL'. HE FURTHER NOTED THAT WHILE THE ASSESSEE HAS MADE A PAYMENT OF RS 1,23,476 TOWARDS HUMAN RESOURCES SERVICES, THE ASSESSEE HAS 'NOT FURNISHED ANY SPECIFIC INPUT ON TRAINING AND DEVELOPMENT OF HUMAN RESOURCES AND IT IS ALSO NOTICED THAT THESE SERVICES ARE OF ROUTINE NATURE AND DUPLICATE AT BEST'. ACCORDINGLY, THE TPO ALSO TREATED ALP OF TH ESE SERVICES AS 'NIL'. AS REGARDS THE PAYMENT OF RS 96,355 TOWARDS 'LEGAL SERVICES', THE TPO DID TAKE NOTE OF THE SERVICES THAT THE ASSESSEE WAS ENTITLED TO UNDER THESE ARRANGEMENTS BUT AS THERE IS NO EVIDENCE OF ANY SERVICES HAVING BEEN ACTUALLY RENDERED BY THE AE, THE TPO CONCLUDED THAT IT DOES NOT HAVE ANY VALUE IN AN ARM'S LENGTH SITUATION. THE VALUE OF THIS SERVICE WAS ALSO TAKEN AS NIL. THE SAME WAS THE CASE WITH RESPECT TO THE PAYMENTS FOR OTHER SERVICES. ACCORDINGLY, NO ARM'S LENGTH VALUE WAS ASSIGN ED TO THESE SERVICES ALSO. IN RESPECT OF THESE CASES TNMM WAS REJECTED AND CUP WAS APPLIED THOUGH, EVEN UNDER CUP METHOD, VALUE ASSIGNED WAS NIL AS, IN THE OPINION OF THE TPO, THESE SERVICES WERE WORTHLESS. 13. WHEN ASSESSING OFFICER PROPOSED TO MAKE DISA LLOWANCE IN RESPECT OF PAYMENTS FOR THE ABOVE SERVICES, ARM'S LENGTH VALUE OF WHICH WAS TAKEN AT 'ZERO', AGGREGATING TO RS 31,23,325, AS AGAINST TOTAL MANAGEMENT FEES OF RS 58,20,571 PAID BY THE ASSESSEE, ASSESSEE CARRIED THE MATTER BEFORE THE DRP BUT WITH OUT ANY SUCCESS. THE DRP CONFIRMED THE STAND SO TAKEN BY THE TPO, ACCORDINGLY, AN ALP ADJUSTMENT OF RS 31,23,325 WAS MADE BY THE ASSESSING OFFICER. THE ASSESSEE IS AGGRIE VED AND IS IN APPEAL BEFORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 15. ONE OF THE VERY BASIC PRE - CONDITION FOR USE OF CUP METHOD IS AVAILABILITY OF THE PRICE OF THE SAME PRODUCT AND SERVICE IN UNCONTROLLED CONDITIONS. IT IS ON THIS BASIS THAT ALP OF THE PRODUCT OR SERVICE CAN BE ASCERTAINED. IT CANNOT BE A HYPOTHETICAL OR IMAGINARY VALUE BUT A REAL VALUE ON WHICH SIMILAR TRANSACTIONS HAVE TAKEN PLACE. COMING TO THE FACTS OF THIS CASE, THE APPLICATION OF CUP IS DEPENDENT O N THE MARKET VALUE OF THE ARRANGEMENTS UNDER WHICH THE PRESENT PAYMENTS HAVE BEEN MADE. UNLESS THE TPO CAN IDENTIFY A COMPARABLE UNCONTROLLED CASE IN WHICH SUCH SERVICES, HOWSOEVER TOKEN OR IRRELEVANT SERVICES AS HE MAY CONSIDER THESE SERVICES TO BE, ARE R ENDERED AND FIND OUT CONSIDERATION FOR THE SAME, THE CUP METHOD CANNOT HAVE ANY APPLICATION. HIS PERCEPTION THAT THESE SERVICES ARE WORTHLESS IS OF NO RELEVANCE. IT IS NOT HIS JOB TO DECIDE WHETHER A BUSINESS ENTERPRISE SHOULD HAVE INCURRED A PARTICULAR EX PENSE OR NOT. A BUSINESS ENTERPRISE INCURS THE EXPENDITURE ON THE BASIS OF WHAT IS COMMERCIALLY EXPEDIENT AND WHAT IS NOT COMMERCIALLY EXPEDIENT. AS HELD BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. EKL APPLIANCES LIMITED (345 ITR 241), 'EVEN RULE 10B(1)(A) DOES NOT AUTHORISE DISALLOWANCE ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 14 OF 16 OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSES SEE TO HAVE INCURRED THE SAME'. 16. THE VERY FOUNDATION OF THE ACTION OF THE TPO IS THUS DEVOID OF LEGALLY SUSTAINABLE MERITS . THERE IS NO DISPUTE THAT THE IMPUGNED PAYMENTS ARE MADE UNDER AN ARRANGEMENT WITH THE AE TO PROVIDE CERTAIN SERVICES. IT IS NOT EVEN THE TPO'S CASE THAT THE PAYMENTS FOR THESE SERVICES WERE NOT MADE FOR SPECIFIC SERVICES UNDER THE CONTRACT BUT HE IS OF T HE VIEW THAT EITHER THE SERVICES WERE USELESS OR THERE WAS NO EVIDENCE OF ACTUAL SERVICES HAVING BEEN RENDERED. AS FOR THE SERVICES BEING USELESS, AS WE HAVE NOTED ABOVE, IT IS A CALL TAKEN BY THE ASSESSEE WHETHER THE SERVICES ARE COMMERCIALLY EXPEDIENT OR NOT AND ALL THAT THE TPO CAN SEE IS AT WHAT PRICE SIMILAR SERVICES, WHATEVER BE THE WORTH OF SUCH SERVICES, ARE ACTUALLY RENDERED IN THE UNCONTROLLED CONDITIONS. 17. AS FOR THE EVIDENCE FOR EACH OF THE SERVICE STATED IN THE AGREEMENT, IT IS NOT EVEN NECES SARY THAT EACH OF THE SERVICE, WHICH IS SPECIFICALLY STATED IN THE AGREEMENT, IS RENDERED IN EVERY FINANCIAL PERIOD. THE ACTUAL USE OF SERVICES DEPENDS ON WHETHER OR NOT USE OF SUCH SERVICES WAS WARRANTED BY THE BUSINESS SITUATIONS WHEREAS PAYMENTS UNDER C ONTRACTS ARE MADE FOR ALL SUCH SERVICES AS THE USER MAY REQUIRE DURING THE PERIOD COVERED. AS LONG AS AGREEMENT IS NOT FOUND TO BE A SHAM AGREEMENT, THE VALUE OF THE SERVICES COVERED UNDER THE AGREEMENT CANNOT BE TAKEN AS 'NIL' JUST BECAUSE THESE SERVICES WERE NOT ACTUALLY REQUIRED BY THE ASSESSEE. IN ANY CASE, HAVING PERUSED THE MATERIAL ON RECORD, WE ARE SATISFIED THAT THE SERVICES WERE ACTUALLY RENDERED UNDER THE AGREEMENT AND THESE SERVICES DID JUSTIFY THE IMPUGNED PAYMENTS. 18. WE ARE ALSO OF THE CONSI DERED VIEW THAT IN THE ABSENCE OF PREREQUISITES FOR APPLICATION OF CUP METHODS BEING ABSENT IN THE PRESENT CASE, IT WAS NOT OPEN TO THE TPO TO DISREGARD THE TNMM EMPLOYED BY THE ASSESSEE. NO DEFECTS HAVE BEEN POINTED OUT IN APPLICATION OR RELEVANCE OF TNMM IN THIS CASE. UNDER THESE CIRCUMSTANCES, THE TPO'S IMPUGNED ACTION CAN NOT MEET OUR JUDICIAL APPROVAL. 19. FOR THE DETAILED REASONS SET OUT ABOVE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE AO TO DELETE THE IMPUGNED ALP ADJUSTMENT OF RS. 31,23, 325. THE ASSESSE E GETS THE RELIEF ACCORDINGLY.' 25. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. 26. IN THE PRESENT CASE, THOUGH A FINDING IS GIVEN TO THE EFFECT THAT NO SERVICES ARE RENDERED, IN TH E LIGHT OF THE CONTRADICTIONS IN THIS FINDING AND THE OBSERVATIONS ABOVE, IT IS CLEAR THAT IN EFFECT COMMERCIAL EXPEDIENCY OF THIS PAYMENT IS QUESTIONED. THAT EXERCISE, IN OUR CONSIDERED VIEW PARTICULARLY IN THE LIGHT OF HON'BLE DELHI HIGH COURT'S JUDGMEN T IN THE CASE OF CIT V. EKL ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 15 OF 16 APPLI ANCES LTD. [2012] 345 ITR 241 , CANNOT BE CONDUCTED IN THE COURSE OF ASCERTAINING THE AR M'S LENGTH PRICE. 27. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CIRCUMSTANCE, IT IS CLEAR THAT THE IMPUG NED ALP ADJUSTMENT IS CONTRARY TO THE SCHEME OF THE ACT. THE AUTHORITIES BELOW HAVE BEEN SWAYED BY THE CONSIDERATIONS WHICH WERE NOT GERMANE TO THE ISSUE. WE, THEREFORE, UPHOLD THE GRIEVANCES OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE A LP ADJUSTMENTS IN RESPECT OF THE PAYMENT OF FEES FOR TECHNICAL SERVICES. THE ASSESSEE GETS THE RELIEF ACCORD 9 . WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH AND THE IMPUGNED ADDITION MUST STAND DELETED FOR THIS SHORT REASON ALONE. IN OUR CONSIDERED VIEW, THE FACTS OF THE CASE BEFORE US ARE MATERIALLY SIMILAR INASMUCH AS THE SERVICES ARE INDEED RENDERED BY THE SEI - F, AS EVIDENT FROM THE DOCUMENTARY EVIDENCES ON RECORD AND YET ITS ARM S LENGTH VALUE IS HELD TO BE NIL ONL Y BECAUSE, ACCORDING TO THE AUTHORITIES BELOW, THESE SERVICES WERE WORTHLESS, THESE SERVICES WERE NOT REQUIRED BY THE ASSESSEE, THE ASSESSEE COULD HAVE PERFORMED THESE SERVICES ON ITS OWN AND THE SERVICES WERE NOT RENDERED BY THE GROUP ENTITY. THE TPO HAS REJECTED THE DETERMINATION OF ARM S LENGTH PRICE ON THE BASIS OF TNMM, AT ENTITY LEVEL, BUT THEN HE HAS NOT ADOPTED ANY OTHER PERMISSIBLE METHOD FOR DETERMINATION OF ARM S LENGTH PRICE. SUCH A COURSE OF ACTION, AS NOTED ABOVE, IS NOT PERMISSIBLE IN LAW. J UST BECAUSE THESE SERVICES ARE WORTHLESS IN THE EYES OF THE REVENUE AUTHORITIES, THE ARM S LENGTH PRICE OF THESE SERVICES CANNOT BE HELD TO BE NIL. SIMILARLY, THE FINDINGS THAT NO SERVICES WERE RENDERED AND THAT THE ASSESSEE COULD HAVE PERFORMED THESE SER VICES ON ITS OWN ARE CONTRADICTORY. IF NO SERVICES WERE RENDERED, WHICH SERVICES THE AUTHORITIES BELOW HOLD THAT THE ASSESSEE COULD HAVE PERFORMED ON ITS OWN. THERE IS ALSO EVIDENCE FOR VISITS BY THE REPRESENTATIVES OF THE GROUP ENTITY, I.E SEI - F, F OR REND ITION OF THESE SERVICES. THE COST ALLOCATION AGREEMENT AND DETAILED DOCUMENTATION SUPPORT FOR THE SERVICES AVAILED UNDER THE COST CONTRIBUTION ARRANGEMENT WERE PLACED BEFORE US AT PAGES 106 TO 258, AND, UPON PERUSAL OF THE SAME, WE HAVE NO DOUBTS ABOUT THE ACTUAL RENDITION OF SERVICES AND BONAFIDES OF ARRANGEMENT. AS FOR THE TPO S OBSERVATION THAT IF THE SERVICES ARE IN THE NATURE OF STEWARDSHIP ACTIVITIES OR SHAREHOLDER ACTIVITIES, THE SAME NEED NOT BE CHAR GED BY THE AES OF THE ASSESSEE , OECD TRANSFER PRICING GUIDELINES INDEED STATE THAT STEWARDSHIP ACTIVITIES COVERED A RANGE OF ACTIVITIES BY A SHAREHOLDER THAT MAY INCLUDE PROVISION FOR SERVICES TO OTHER GROUP MEMBERS, FOR EXAMPLE SERVICES THAT WOULD BE PROV IDED BY A COORDINATING CENTRE , THAT THESE L ATTER TYPE OF NON - SHAREHOLDER ACTIVITIES COULD INCLUDE DETAILED PLANNING SERVICES FOR PARTICULAR OPERATIONS, MANAGEMENT OR TECHNICAL ADVICE (TROUBLE SHOOTING) OR IN SOME CASES ASSISTANCE IN DAY TO DAY MANAGEMENT BUT MAKE IT CLEAR THAT WHILE SHAREHOLDER ACTIVITIES, I.E. THE ACTIVITIES W HICH ARE PERFORMED SOLELY ON ACCOUNT OF OWNERSHIP INTERESTS, WOULD NOT JUSTIFY A CHARGE TO THE RECIPIENT ENTITIES . IN OTHER WORDS, CONSIDERATION IS NOT REQUIRED TO BE CHARGED FOR THE SHAREHOLDER ACTIVITIES, WHILE OTHER ST EWARDSHIP ACTIVITIES CAN, AND MUST, BE ITA NO. 209 /AHD/2015 ASSESSMENT YEAR: 2009 - 10 PAGE 16 OF 16 COMPENSATED. NOTHING, THEREFORE, TURNS IN FAVOUR OF THE REVENUE ON ACCOUNT OF THE SERVICES RENDERED BY THE S EI - F BEING IN THE NATURE OF STEWARDSHIP ACTIVITIES WHICH IS A TERM OF MUCH BROADER CONNOTATION THAN SHAREHOLD ER ACTIVITIES . NOT CHARGING FOR THE RENDITION OF SHAREHOLDER ACTIVITIES CAN BE JUSTIFIED BUT NOT FOR ALL THE STEWARDSHIP ACTIVITIES. COMING TO THE QUESTION OF BUSINESS EXPEDIENCY, WHICH HAS BEEN QUESTIONED BY THE AUTHORITIES BELOW, IN OUR CONSIDERED VIEW I T WAS ALSO NOT FOR THE TPO TO BOTHER ABOUT BUSINESS EXPEDIENCY OF THESE SERVICES; ALL HE WAS TO SEE WAS WHAT WOULD BE ARM S LENGTH SERVICES OF THESE SERVICES IN AN UNCONTROLLED SITUATION. THAT HAS TO BE DONE ON THE BASIS OF A PERMISSIBLE METHOD OF ASCERTAI NING THE ARM S LENGTH PRICE. IT CANNOT BE OPEN TO THE TPO TO REJECT A METHOD OF ASCERTAINING THE ARM S LENGTH PRICE WITHOUT FINING A LEGALLY PERMISSIBLE METHOD TO SUBSTITUTE FOR THE METHOD OF ASCERTAINING ALP AS ADOPTED BY THE ASSESSEE. TO HOLD THAT THE A RM S LENGTH PRICE OF THESE SERVICES WAS NIL UNDER THE CUP METHOD , THE TPO HAD TO NECESSARILY TO DEMONSTRATE THAT THE SAME SERVICES, WHATEVER BE ITS INTRINSIC WORTH, WERE AVAILABLE FOR NIL CONSIDERATION IN AN UNCONTROLLED SITUATION; THAT IS NOT, AND THAT CA NNOT BE, THE CASE. IT IS ALSO NOT THE CASE OF THE AUTHORITIES BELOW THAT THE ARM S LENGTH PRICE OF THESE SERVICES, UNDER ANY OTHER LEGALLY PERMISSIBLE METHOD IS, NIL. THERE IS THUS NO LEGALLY SUSTAINABLE FOUNDATION FOR THE IMPUGNED ALP ADJUSTMENT. 10. W E HAVE ALSO NOTED THAT THE MANAGERIAL SERVICES, AVAILED BY THE ASSESSEE UNDER THE SAME COST CONTRIBUTION ARRANGEMENT, HAVE BEEN ALLOWED ALL THESE YEARS AND HAVE BEEN ACCEPTED TO BE AT AN ARM S LENGTH TRANSACTION. WHILE THERE IS INDEED NO RES JUDICATA IN TA X PROCEEDINGS, ITS IMPORTANT TO BEAR IN MIND THE OBSERVATIONS OF HON BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT [(1992) 193 ITR 321 (SC)], TO THE EFFECT THAT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR . FOR THIS REASON ALSO, THE STAND OF THE AUTHORITIES BELOW IS UNSUSTAINABLE IN LAW. IN THE LIGHT OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE TH E IMPUGNED ALP ADJUSTMENT OF RS 1,51,83,140. TH E ASSESSEE GETS THE RELIEF ACCORDINGLY. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 31 ST DAY OF MAY, 2017. SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMA R (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 31 ST DAY OF MAY , 201 7