JAS Forwarding Worldwide Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 2162/DEL/2015

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4146 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Transfer pricing; Business expenditure; Opportunity of being heard; Principle of natural justice; International transaction; Corroborative evidences; Commercial expediency
• Section: 143(3); 37(1); 144C; 13; 92

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI I-1 B ENCH, NEW DELHI (THROUGH VIDEO CONFERENCING] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI LALIET KUMAR, JUDICIAL M EMBER SA NO. 144/DEL/2021 [A.Y 2010-11] ITA NO. 2162/DEL/2015 JAS FORWARDING WORLDWIDE PVT. LTD VS. THE D.C.I.T. 1 ST FLOOR, A - WING CIRCLE -13(1) COMMERCIAL COMPLEX NEW DELHI RADISSON HOTEL, NEW DELHI PAN: AABCJ 5546 A [APPELLANT] [RESPONDENT] DATE OF HEARING : 30.09.2021 DATE OF PRONOUNCEMENT : 30.09.2021 ASSESSEE BY : SHRI SALIL KAPOOR SHRI SUMIT LALCHANDANI SHRI VANSH PANDYA, ADV REVENUE BY : SHRI SURENDERPAL, CIT- DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST OR DER DATED 13.02.2015 FRAMED U/S 143(3) R.W.S 144C(13) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. 2 2. THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: THE ADDITION AMOUNTING TO RS. 39,596,975 UNDERTAKE N BY THE LEARNED DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1 3(1), NEW DELHI ('THE LD. AO') [CONFIRMING ADDITIONS BY THE L EARNED ADDITIONAL COMMISSIONER OF INCOME-TAX, TRANSFER PRI CING OFFICER-1 (3) ('THE LD. TPO')] VIDE FINAL ASSESSMENT ORDER DA TED FEBRUARY 13, 2015 PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE INCOME TAX ACT, 1961 ('THE ACT') IS NOT IN ACCORDAN CE WITH THE LAW AND THEREFORE NOT SUSTAINABLE. THAT THE HON'BLE DISPUTE RESOLUTION PANEL, NEW DELH I ('THE DRP') HAS ERRED BOTH IN LAW AND ON FACTS BY SUMMARILY REJ ECTING THE APPELLANT'S OBJECTIONS TO THE DRAFT ORDER PASSED BY THE LD. AO UNDER SECTION 143(3) READ WITH SECTION 144C(1) OF T HE ACT ('THE DRAFT ASSESSMENT ORDER'). THE HON'BLE DRP WHILE ISSUING DIRECTIONS UNDER SECT ION 144C(5) OF THE ACT DID NOT CONSIDER THE FACTS AND MERITS OF AP PELLANT'S OBJECTIONS TO THE PROPOSED ADJUSTMENTS, AND MERELY RELIED ON THE REASONING GIVEN BY THE ERSTWHILE HON'BLE DRP VIDE D IRECTIONS ISSUED UNDER SECTION 144C(5) OF THE ACT FOR AY 2009-10, RE ASONING GIVEN BY THE LD. TPO IN HIS ORDER PASSED UNDER SECTION 92 CA(3) OF THE ACT. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. TPO AND THE LD. AO HAVE ERRED IN PROPOSING AND HON'BLE DRP HAS FURTHER ERRED IN CONFIRMING THE ADJUSTMENT OF RS. 39,596,97 5 AS TRANSFER PRICING ADJUSTMENT WITHOUT DUE APPLICATION OF MIND AND WITHOUT AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD I N THE MATTER. TRANSFER PRICING ADJUSTMENTS - RS. 39,596,975 1. THE LD. TPO ERRED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW BY MAKING MODIFICATION TO THE SET O F COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT FOR ITS FREIG HT FORWARDING SERVICES BASED ON HIS OWN CONJECTURES AND SURMISES. SPECIFICALLY, THE LD. TPO ERRED BY USING AN APPROAC H THAT HAD AN INHERENT UPWARD BIAS AND EMPLOYED ERRONEOUS FILTERS , THAT WERE DESIGNED TO SELECT ONLY HIGH MARGIN COMPARABLE COMP ANIES. THE LD. TPO ALSO OVERLOOKED THE FACT THAT THE RESULTS WERE FALLING WITHIN PERMISSIBLE LIMITS IN ACCORDANCE WITH PROVISO TO SE CTION 92C(2) OF THE ACT. 1.1 THE LD. TPO MISCONSTRUED THE FUNCTIONAL PROFI LE OF THE APPELLANT. IN THIS CONNECTION, THE LD. TPO GROSSLY ERRED, IN FOLLOWING INCONSISTENT APPROACH WHILE ACCEPTING/ RE JECTING COMPANIES COMPARABLE TO THE BUSINESS PROFILE OF THE APPELLANT. 1.2 THE HON'BLE DRP HAS NOT ADJUDICATED ON THE ISSUE PERTAINING TO ERRONEOUS APPROACH FOLLOWED BY THE LD. TPO BY CO NSIDERING FUNCTIONALLY DISSIMILAR COMPANIES AS COMPARABLE TO THE APPELLANT. 4 AS THE LD. TPO ERRED ON FACTS BY COMPARING DISSIMIL AR COMPANIES AS COMPARABLE TO THE APPELLANT, THE RELEVANT GROUND RELATING TO THIS ISSUE HAD BEEN DISCUSSED BEFORE THE DRP IN OUR HEAR ING ON NOVEMBER 14,/20L4 THROUGH DRP OBJECTION DATED APRIL 25, 2014 (PARA 1.2.11.7). THE DRP ERRED IN NOT DEALING WITH OBJECTIONS FILED BY THE APPELLANT. IN THIS REGARD, DRP BLINDLY RELIED UPON THE DIRECTIONS ISSUED FOR AY 2009-10 WITHOUT CONSIDERING THE FACTS AND ARGUMENTS OF THE YEAR UNDER CONSIDERATION. 1.3 THE LD. TPO ERRED BY RELYING UPON DATA OF T HE COMPARABLES FOR FINANCIAL YEAR 2009-10 ONLY FOR DETERMINATION O F THE ARM'S LENGTH PRICE, DISREGARDING THE MULTIPLE YEAR DATA A PPROACH FOLLOWED BY THE APPELLANT. THE LD. TPO ALSO ERRED BY RELYING UPON UPDATED DATA OF THE COMPARABLES WHICH WAS NOT AVAILABLE TO THE APPELLAN T AT THE TIME OF MAINTENANCE OF TRANSFER PRICING DOCUMENTATION WI THIN THE TIME- FRAME MENTIONED IN RULE 10D(4) OF THE RULES. 2. THE LD. TPO HAS ERRED IN LAW AND ON FACTS BY SUM MARILY DISREGARDING THE APPROACH FOLLOWED BY THE APPELLANT FOR BENCHMARKING INTERNATIONAL TRANSACTION PERTAINING T O RECEIPT OF MANAGEMENT SERVICES WITHOUT ASSIGNING ANY COGENT RE ASONS. 5 IN THIS REGARD, THE LD. TPO HAS ARTIFICIALLY CREATE D SEPARATE BUSINESS SEGMENTS ON FALLACIOUS ASSUMPTIONS, CONTRA RY TO THE FACT THAT MANAGEMENT SERVICES ARE RECEIVED IN THE COURSE OF ROUTINE BUSINESS ACTIVITY AND ARE INTEGRAL PART /INEXTRICAB LY LINKED TO THE BUSINESS MODEL OF THE APPELLANT (VIZ. FREIGHT FORWA RDING SERVICES). 3. THE LD. TPO HAS ERRED IN LAW AND ON FACTS BY ASS IGNING NIL VALUE TO THE VALUE OF INTERNATIONAL TRANSACTION IN RELATION TO RECEIPT OF MANAGEMENT SERVICES. FURTHER, THE LD. TPO HAS FA ILED TO PROVIDE THE DETAILED METHODOLOGY/ REASONING OR CUP DATA FOR ASSIGNING NIL VALUE TO THE UNDERLYING TRANSACTION. FURTHER THE DRP, BASED ON ITS CONJECTURES, ERRONEOU SLY STATED THAT CUP METHOD WAS USED BY THE APPELLANT IN AY 2009-10 AND ALSO THAT NO COST ALLOCATION METHODOLOGY WAS PROVIDED. 4. THE LD. TPO HAS ERRED IN LAW BY SUMMARILY DISREG ARDING THE APPELLANT'S SUBMISSION DATED JANUARY 21, 2014 IN RE SPONSE TO THE QUERIES RAISED VIDE SHOW-CAUSE NOTICE DATED JANUARY 4, 2014 FILED IN RELATION TO INTRA GROUP SERVICES AND BY NOT ADDR ESSING APPELLANT'S SUBMISSION DATED JANUARY 29, 2014 IN RE LATION TO SELECTION OF COMPARABLES FOR FREIGHT FORWARDING SER VICES. 5. THE LD. TPO HAS ERRED IN LAW BY VIOLATING THE PR INCIPAL OF NATURAL JUSTICE BY ISSUING REVISED SHOW CAUSE NOTIC E (RSCN) DATED JANUARY 23, 2014 WHICH WAS RECEIVED BY THE APPELLAN T ON JANUARY 29, 2014 WHEN THE APPELLANT WAS REQUIRED TO FILE IT S WRITTEN RESPONSE TO RSCN BY JANUARY 28, 2014. 6 3. GROUND NO. 1, WITH ALL ITS SUB-GROUNDS, RELATES TO THE TP ADJUSTMENT OF RS. 3,95,96,975/. 4. BUSINESS PROFILE OF THE APPELLANT COMPANY . JAS INDIA'S BUSINESS INVOLVES PROVISION OF FREIGHT FORWARDING SERVICES FOR DELIVERY OF CARGO OUTSIDE INDIA (EXPORT BUSINES S) AND INTO INDIA (IMPORT BUSINESS). IN THIS REGARD THE COMPANY HAS E NTERED INTO AN AGREEMENT WITH JAS WORD WIDE GROUP OF COMPANIES. IN RELATION TO ALL THE TRANSACTIONS OF EXPORT, AND IMPORT, A PART OF T HE SERVICES IS PROVIDED BY JAS INDIA IN THE INDIAN TERRITORY AND P ART OF THE SERVICES IS PROVIDED BY JAS COUNTERPART OF THE RESPECTIVE CO UNTRIES. FOR EACH TRANSACTION THERE IS A PROFIT SHARING OF APPROXIMAT ELY 50% OF THE FREIGHT WITH THE COUNTERPART OF JAS I.E JAS INDIA. FOR EACH OF THE ABOVE SHARING THE BILLS ARE RAISED AND/ OR RECEIVED BY JAS FOR SHARING OF THE PROFIT. IF THE COUNTERPART OF JAS IS NOT IN EXISTENCE IN ANY PART OF THE COUNTRY, THEN THE BILLING IS DONE WITH THE O UTSIDE AGENCY. THE BILL WILL BE RAISED BASED ON THE TERMS OF SHIPPING MATERIAL. 7 5. INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION ARE AS UNDER: S.NO. NATURE OF INTERNATIONAL TRANSACTION AMOUNT (IN RS) MOST APPROPRIATE 1 FREIGHT & FORWARDING SERVICES RENDERED TO THE ASSOCIATED ENTERPRISES 334,827,87 3 TNMM 2 FREIGHT & FORWARDING SERVICES RECEIVED FROM ASSOCIATED ENTERPRISES 266,695,16 4 TNMM 3 MANAGEMENT FEE 13,655,302 TNMM 4 REIMBURSEMENT OF MICROSOFT LICENSE FEE 1,393,125 TNMM 5 REIMBURSEMENT OF SERVER MAINTENANCE CHARGES 640,861 TNMM 6 REIMBURSEMENT OF CORPORATE GUARANTEE CHARGES 307,414 TNMM 7 EDI CHARGES 120,024 TNMM 8 REIMBURSEMENT OF SOFT MART CHARGES. 71,942 TNMM 9 PREFERENCE DIVIDEND 2,436,000 TNMM 10 RECOVERY OF EXPENSES 1,991,380 TNMM 11 RECOVERY OF TRAVEL EXPENSES 63,595 TNMM 12 INSURANCE CHARGES 524,369 TNMM 6. THE ASSESSEE HAS SELECTED TNMM AS THE MOST APPRO PRIATE METHOD, WHICH WAS ACCEPTED BY THE TPO. HOWEVER, THE TPO WAS OF THE OPINION THAT PLI SHOULD BE OP/OC FOR BENCHMARKING O F INTERNATIONAL TRANSACTION RELATING TO FREIGHT FORWARDING BUSINESS . 8 7. COMPARABLES SELECTED BY THE ASSESSEE ARE AS UNDE R: SI. NAME OF THE COMPARABLE MARGIN 1 . AQUA LOGISTICS 9.72% 2. ARSHIYA INTERNATIONAL LTD. 7.90% 3. EITA 2.08% 4. HINDUSTAN CARGO LTD. 2.92% 5. NYK LOGISTICS (INDIA) LTD. - 10.67% 6. P L SHIPPING & LOGISTICS LTD. 3.27% 7. REDIFF FREIGHT & LOGISTICS PVT. LTD. 4.49% 8. THE TPO ACCEPTED ONLY TWO COMPARABLES, NAMELY, A QUA LOGISTICS AND ARSHIYA INTERNATIONAL LTD. THE TPO, AFTER ACCEP TING THE TWO COMPARABLES OF THE ASSESSEE, PROCEEDED BY DOING FRE SH SEARCH AND FINALLY SELECTED THE FOLLOWING COMPARABLES: 9 1. AQUA LOGISTICS 2 ARSHIYA INTERNATIONAL LTD. 3 ! A B G KANDLA CONTAINER TERMINAL LTD. 4 ASSOCIATED ROAD CARRIERS LTD. 5 CG U LOGISTIC LTD. 6 CHARTERED LOGISTICS LTD. 7 COASTAL ROADWAYS LTD. 8 DHL LEMUIR LOGISTICS PVT. LTD. 9 DAHEJHARBOUR& INFRASTRUCTURE LTD. 10 INDO ARYA CENTRAL TRANSPORT LTD. 11 KAKINADA SEAPORTS LTD. 12 ON - DOT COURIERS & CARGO LTD. 13 PRIME AIR GLOBAL LTD. 14 RIPLEY & CO. LTD. 15 SEAMEC LTD. 16 SPEEDY MULTIMODES LTD. 17 SPENCERS TRAVEL SERVICES LTD. 18 T K M GLOBAL LOGISTICS LTD. 19 TOLANI SHIPPING CO. LTD. 20 TRANSPORT CORPORATION OF INDIA LTD. 21 V R L LOGISTICS LTD. 9. THE ASSESSEE STRONGLY RAISED OBJECTIONS FOR THE PROPOSED COMPARABLES STATING THAT THE COMPARABLES SELECTED A RE FUNCTIONALLY DIFFERENT. 10. OBJECTIONS OF THE ASSESSEE DID NOT FIND ANY FAV OUR WITH THE TPO WHO PROCEEDED BY COMPUTING THE UPWARD ADJUSTMENT AN D MADE ADDITION OF RS. 8,31,85, 477/. 10 11. THE ASSESSEE RAISED OBJECTIONS BEFORE THE DRP A ND REITERATED THAT THE TPO HAS SELECTED COMPARABLES WHICH ARE FUN CTIONALLY DIFFERENT. 12. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, TH E DRP WAS OF THE VIEW THAT SINCE THE FACTS OF THE CASE IN HAND ARE S IMILAR TO THE FACTS FOR ASSESSMENT YEAR 2009 10, ACCORDINGLY FOLLOWED ITS OWN ORDER FOR ASSESSMENT YEAR 2009 10. 13. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMNTLY STATED THAT THE COMPARABLES SELECTED BY THE TPO/DRP ARE FU NCTIONALLY DIFFERENT. IT IS THE SAY OF THE LEARNED COUNSEL THA T THAT THE ASSESSEE DOES NOT OWN SIGNIFICANT VEHICLES AND, THEREFORE, C OMPARABLE COMPANIES WHICH HAVE SIGNIFICANT OWNERSHIP OF VEHIC LES SHOULD NOT BE USED. THE LEARNED COUNSEL PRAYED FOR REMOVAL OF THE TWO COMPARABLES AND INCLUSION OF THREE COMPARABLES. 14. IN THE ALTERNATIVE, THE LEARNED COUNSEL PLEADED FOR RESTORATION OF THE APPEAL TO THE FILE OF THE TPO FOR FRESH SEARCH IN PARITY WITH BUSINESS PROFILE OF THE ASSESSEE, STRONGLY STATING THAT THE COMPARABLES WHO ARE OWNING VEHICLES SHOULD NOT BE SELECTED. 11 15. PER CONTRA THE LD DR STATED THAT UNDER THE TNMM , VERTICALS HAVE TO BE CONSIDERED AND SOME SIMILARITY IN FUNCTIONAL PROFILE SHOULD BE SUFFICIENT TO MAKE THE COMPARABLE VALID FOR COMPARI SON. 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. IT IS TRUE THAT THE DRP HAS FOLLOWED ITS DIRECTIONS ISSUED IN ASSES SMENT YEAR 2009 10. WE HAVE THE BENEFIT OF THE ORDER OF THIS TRIBUNAL F OR ASSESSMENT YEAR 200910 AND 201112 IN ITA NO. 2484/DEL/2014 AND 16 87/DEL/2016. SINCE THE BUSINESS PROFILE OF THE ASSESSEE HAS NOT CHANGED AND SINCE THE COMPARABLE SELECTED IN ASSESSMENT YEAR 200910 HAVE BEEN ACCEPTED, WE ARE OF THE OPINION THAT THOSE COMPARAB LES MUST HAVE BEEN ACCEPTED FINDING THE BUSINESS PROFILE SIMILAR TO THAT OF THE ASSESSEE. 17. A PERUSAL OF THIS ORDER OF THE TRIBUNAL SHOWS T HAT IN ASSESSMENT YEAR 2009 10, THE ONLY OBJECTION WAS IN RESPECT TO SELECTION OF THE COMPARABLES WHERE THE ASSESSEE WAS SEEKING EXCLUSIO N OF OM LOGISTICS ARCADIA SHIPPING LTD, GOOD EARTH MARITIME LTD AND S UN MAR SHIPPING LIMITED. THE TRIBUNAL HAS DIRECTED THE EXCLUSION OF ALL THESE COMPANIES FROM THE COMPARABILITY ANALYSIS FINDING T HAT THE AFORESAID STATED COMPARABLE COMPANIES OWNED DEDICATED FLEET O F VEHICLES FOR 12 LOCAL DESTINATIONS IN ADDITION TO THE LOGISTICS MIX OF RAIL AND ROAD, WHEREAS THE ASSESSEE COMPANY IS NOT HAVING FLEET OF TRUCKS, ETC. FOR TRANSPORTATION. 18. WE ARE OF THE CONSIDERED VIEW THAT ONCE THIS VI EW HAS BEEN ACCEPTED BY THE TRIBUNAL WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS GIVEN IN ASSESSMENT YEARS 200910 AND 201112 BY THIS TRIBUNAL. WE, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE TPO. THE TPO IS DIRECTED TO DO HIS FRESH SEARCH IN LINE OF F INDINGS GIVEN BY THIS TRIBUNAL IN ASSESSMENT YEARS 200910 AND 201112 [SUPRA]IN RESPECT OF BUSINESS PROFILE OF THE ASSESSEE. THE ASSESSEE W OULD BE AT LIBERTY TO RAISE SUITABLE OBJECTIONS AND THE TPO IS AT LIBERTY OF BRINGING FRESH COMPARABLES IN LINE WITH THE BUSINESS PROFILE OF TH E ASSESSEE. 19. NEEDLESS TO MENTION THE TPO SHALL GIVE REASONAB LE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 1 WITH ALL ITS SUB-GROUNDS IS TREATED AS ALLOWED FOR STATISTICAL P URPOSES. 20. GROUND NOS. 2 AND 3 RELATE TO BENCHMARKING OF I NTERNATIONAL TRANSACTIONS PERTAINING TO RECEIPT OF MANAGEMENT SE RVICES. WE FIND THAT THIS TRIBUNAL HAD CONSIDERED A SIMILAR QUARREL IN ASSESSMENT YEARS 13 200910 AND 201112 IN ITA NOS. 2484/DEL/2014 AND 1 687/DEL/2016. THE RELEVANT FINDINGS OF THE TRIBUNAL READ AS UNDER : WITH RESPECT TO THE ADJUSTMENT MADE BY THE LEARNED TRANSFER PRICING OFFICER WITH RESPECT TO THE INTRAGROUP SERV ICES WE FIND THAT THE ISSUE SQUARELY COVERED BY THE DECISION OF THE C OORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 0 9 [ ITA NO 5410/DEL/2015 [AY 2008-09] DATED 14/10/2019 WHEREIN THE COORDINATE BENCH DEALT WITH THIS ISSUE AS UNDER:- 37. SECOND GRIEVANCE RELATES TO THE ADJUSTMENT ON ACCOUNT OF IGS. 38. AS MENTIONED ELSEWHERE, THE TPO HAS TAKEN ARM'S LE NGTH PRICE OF IGS AT NIL AND MADE AN ADJUSTMENT OF 35.89 LAKHS. THE REIMBURSEMENT RECEIVED BY THE ASSESSEE HAS ALREADY BEEN EXHIBITED ELSEWHERE. A PERUSAL OF THE ORDER OF THE TPO SHOWS THAT THE TPO HAS CONSTANTLY HIT UPON THE FACT THAT THE A SSESSEE HAS FAILED TO DEMONSTRATE THE NEED AND BENEFITS DERIVED FROM SUCH SERVICES. 39. THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF EKL APPLIANCES LTD IN ITA NO. 1068 & 1070/DEL/201 1 AFT ER CONSIDERING THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF SASSOON J. DAVID PVT LTD, 1 18 ITR 261 REFERRED TO THE LEGISLATIVE HISTORY AND NOTED THAT: 14 'WHEN THE INCOME TAX BILL OF 1961 WAS INTRODUCED, S ECTION 37(1) REQUIRED THAT THE EXPENDITURE SHOULD HAVE BEEN INCU RRED 'WHOLLY, NECESSARILY AND EXCLUSIVELY' FOR THE PURPOSES OF BU SINESS IN ORDER TO MERIT DEDUCTION. PURSUANT TO PUBLIC PROTEST, THE WORD 'NECESSARILY' WAS OMITTED FROM THE SECTION. 21. THE POSITION EMERGING FROM THE ABOVE DECISIONS IS T HAT IT IS NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY LEGITIM ATE EXPENDITURE INCURRED BY HIM WAS ALSO INCURRED OUT O F NECESSITY. IT IS ALSO NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF BUSI NESS CARRIED ON BY HIM HAS ACTUALLY RESULTED IN PROFIT OR INCOME EI THER IN THE SAME YEAR OR IN ANY OF THE SUBSEQUENT YEARS. THE ONLY CO NDITION IS THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED 'WHOLLY A ND EXCLUSIVELY' FOR THE PURPOSE OF BUSINESS AND NOTHING MORE. IT IS THIS PRINCIPLE THAT INTER ALIA FINDS EXPRESSION IN THE OECD GUIDEL INES, IN THE PARAGRAPHS WHICH WE HAVE QUOTED ABOVE. 22. EVEN RULE 10B(L)(A) DOES NOT AUTHORISE DISALLOW ANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HAVE INCURRED THE SAME OR THAT IN T HE VIEW OF THE REVENUE THE EXPENDITURE WAS UNREMUNERATIVE OR THAT IN VIEW OF THE CONTINUED LOSSES SUFFERED BY THE ASSESSEE IN HIS BU SINESS, HE COULD HAVE FARED BETTER HAD HE NOT INCURRED SUCH EXPENDIT URE. THESE ARE IRRELEVANT CONSIDERATIONS FOR THE PURPOSE OF RULE 1 0B. WHETHER OR NOT TO ENTER INTO THE TRANSACTION IS FOR THE ASSESS EE TO DECIDE. THE 15 QUANTUM OF EXPENDITURE CAN NO DOUBT BE EXAMINED BY THE TPO AS PER LAW BUT IN JUDGING THE ALLOWABILITY THEREOF AS BUSINESS EXPENDITURE, HE HAS NO AUTHORITY TO DISALLOW THE EN TIRE EXPENDITURE OR A PART THEREOF ON THE GROUND THAT THE ASSESSEE H AS SUFFERED CONTINUOUS LOSSES. THE FINANCIAL HEALTH OF ASSESSEE CAN NEVER BE A CRITERION TO JUDGE ALLOWABILITY OF AN EXPENSE; THER E IS CERTAINLY NO AUTHORITY FOR THAT. WHAT THE TPO HAS DONE IN THE PR ESENT CASE IS TO HOLD THAT THE ASSESSEE OUGHT NOT TO HAVE ENTERED INTO THE AGREEMENT TO PAY ROYALTY/ BRAND FEE, BECAUSE IT HAS BEEN SUFFERING LOSSES CONTINUOUSLY. SO LONG AS THE EXPENDITURE OR PAYMENT HAS BEEN DEMONSTRATED TO HAVE BEEN INCURRED OR LAID OUT FOR THE PURPOSES OF BUSINESS, IT IS NO CONCERN OF THE TPO T O DISALLOW THE SAME ON ANY EXTRANEOUS REASONING. AS PROVIDED IN TH E OECD GUIDELINES, HE IS EXPECTED TO EXAMINE THE INTERNATI ONAL TRANSACTION AS HE ACTUALLY FINDS THE SAME AND THEN MAKE SUITABL E ADJUSTMENT BUT A WHOLESALE DISALLOWANCE OF THE EXPENDITURE, PA RTICULARLY ON THE GROUNDS WHICH HAVE BEEN GIVEN BY THE TPO IS NOT CON TEMPLATED OR AUTHORISED.' 22. EVEN RULE 10B(L)(A) DOES NOT AUTHORISE DISALLOW ANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HAVE INCURRED THE SAME OR THAT IN T HE VIEW OF THE REVENUE THE EXPENDITURE WAS UNREMUNERATIVE OR THAT IN VIEW OF THE CONTINUED LOSSES SUFFERED BY THE ASSESSEE IN HIS BU SINESS, HE COULD HAVE FARED BETTER HAD HE NOT INCURRED SUCH EXPENDIT URE. THESE ARE IRRELEVANT CONSIDERATIONS FOR THE PURPOSE OF RULE 1 0B. WHETHER OR NOT TO ENTER INTO THE TRANSACTION IS FOR THE ASSESS EE TO DECIDE. THE 16 QUANTUM OF EXPENDITURE CAN NO DOUBT BE EXAMINED BY THE TPO AS PER LAW BUT IN JUDGING THE ALLOWABILITY THEREOF AS BUSINESS EXPENDITURE, HE HAS NO AUTHORITY TO DISALLOW THE EN TIRE EXPENDITURE OR A PART THEREOF ON THE GROUND THAT THE ASSESSEE H AS SUFFERED CONTINUOUS LOSSES. THE FINANCIAL HEALTH OF ASSESSEE CAN NEVER BE A CRITERION TO JUDGE ALLOWABILITY OF AN EXPENSE; THER E IS CERTAINLY NO AUTHORITY FOR THAT. WHAT THE TPO HAS DONE IN THE PR ESENT CASE IS TO HOLD THAT THE ASSESSEE OUGHT NOT TO HAVE ENTERED INTO THE AGREEMENT TO PAY ROYALTY/ BRAND FEE, BECAUSE IT HAS BEEN SUFFERING LOSSES CONTINUOUSLY. SO LONG AS THE EXPENDITURE OR PAYMENT HAS BEEN DEMO NSTRATED TO HAVE BEEN INCURRED OR LAID OUT FOR THE PURPOSES OF BUSINESS, IT IS NO CONCERN OF THE TPO TO DISALLOW THE SAME ON ANY EXTR ANEOUS REASONING. AS PROVIDED IN THE OECD GUIDELINES, HE I S EXPECTED TO EXAMINE THE INTERNATIONAL TRANSACTION AS HE ACTUALL Y FINDS THE SAME AND THEN MAKE SUITABLE ADJUSTMENT BUT A WHOLESALE D ISALLOWANCE OF THE EXPENDITURE, PARTICULARLY ON THE GROUNDS WHICH HAVE BEEN GIVEN BY THE TPO IS NOT CONTEMPLATED OR AUTHORISED.' SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE HIGH COU RT OF DELHI IN THE CASE OF BAUSCH & LOMB EYECARE [INDIA] PVT LTD I N ITA NO. 643/2014 & ORS OF 2014. RELEVANT FINDING OF THE HON 'BLE HIGH COURT READS AS UNDER: 17 6. ON THE ISSUE OF THE INTRA GROUP SERVICES, THE AS SESSEE IS JUSTIFIED IN CONTENDING THAT THE RE-CHARACTERIZATIO N OF ITS TRANSACTION INVOLVING ITS AE FOR THE TWO YEARS WHIC H HAVE BEEN FULLY DISCLOSED IN THE TP STUDY ON THE BASIS OF IT NOT BE ING FOR COMMERCIAL EXPEDIENCY OF THE ASSESSEE IS CLEARLY BE YOND THE POWERS OF THE TPO AND CONTRARY TO THE LEGAL POSITIO N EXPLAINED IN EKL APPLIANCES (SUPRA).' 41. IN THE LIGHT OF THE AFOREMENTIONED DECISIONS OF THE HON'BLE HIGH COURT OF DELHI, WE AFE OF THE CONSIDERED VIEW THAT THE ONLY THING THAT A TPO CAN EXAMINE/IS THE RENDITION OF SE RVICES AND SUPPORTING EVIDENCES. WE, ACCORDINGLY, RESTORE THIS ISSUE TO THE FILE OF THE TPO. THE TPO IS DIRECTED TO EXAMINE THE RENDITION OF SERVICES WITH SUPPORTING EVIDENCES AND THE ASSESSEE IS/DIRECTED TO FILE THE DETAILS FOR THE SAME. THIS GROUND IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF TH E COORDINATE BENCH IN -'ASSESSEES OWN CASE FOR EARLIER YEAR WE ALSO SET-ASIDE THE WHOLE ISSUE OF DETERMINATION OF THE ARMS-LENGT H PRICE OF THE INTRAGROUP SERVICES BACK TO THE FILE OF THE LEARNED TRANSFER PRICING OFFICER WITH SIMILAR DIRECTION TO THE ASSESSEE AND THE LEARNED TRANSFER PRICING OFFICER. ACCORDINGLY GROUND NUMBER 3 - 4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECT IONS FOR STATISTICAL PURPOSES. 18 21. A PERUSAL OF THE ORDER OF THE DRP SHOWS THAT TH E DRP HAS FOLLOWED ITS OWN ORDERS FOR ASSESSMENT YEAR 2009 1 0. THE RELEVANT FINDINGS OF THE DRP READ AS UNDER: SINCE THE FACTS AND SUBMISSIONS OF THE PRESENT CAS E ARE QUITE SIMILAR TO THE ASSESSEE'S OWN CASE IN AY 2009-10; T HEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE'S CASE IS SQUARELY COVERED BY THE DRP'S ORDER IN THE ASSESSEE'S CASE F OR AY 2009- L(VACCORDINGLY, FOLLOWING THE FINDING AND REASONING GIVEN BY THE DRP IN ITS ORDER IN THE ASSESSEE'S CASE FOR AY 2009 -10, IN VIEW OF FINDING IN PARA 9.1 OF THE DRP'S ORDER IN THE ASSES SEE'S CASE FOR AY 2009-10, IT IS HEREBY HELD THAT THERE IS MERIT IN T HE ASSESSEE'S OBJECTION NO. 1.1 AND THEREFORE, THE AO/TPO IS DIRE CTED TO COMPUTE THE ADJUSTMENT ON PROPORTIONATE BASIS, TAKI NG INTO CONSIDERATION THE PROPOSITION OF THE GOODS PURCHASE D FROM THE AE TO THE TOTAL COST. 22. AS MENTIONED ELSEWHERE, THIS TRIBUNAL HAS RESTO RED THIS ISSUE TO THE FILE OF THE TPO WITH SIMILAR DIRECTIONS GIVEN B Y THIS TRIBUNAL (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL (SUPRA), WE DIRECT ACCORDINGLY. 19 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 2162/DEL/2015 IS ALLOWED FOR STATISTICAL PURPOSES. SA NO. 144/DEL/2021 BECOMES INFRUCTUOUS. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.09 .2021. SD/- SD/- [LALIET KUMAR] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH SEPTEMBER, 2021 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 20 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE DATE ON WHICH THE APPROVED DRAFT COMES TO THE DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DATE ON WHICH THE FAIR ORDER COMES BACK TO THE DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT DATE OF DISPATCH OF THE ORDER