DDIT, Dehradun V. BG Exploration & Production India Ltd., Mumbai

ITA 2227/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3337 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 28-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N C SWAIN
• Keywords: Capital asset; Transfer pricing; Business expenditure; Opportunity of being heard; International transaction; Additional evidence; Initiation of penalty proceedings; Tangible material; Revised return; Capital expenditure
• Section: 92C; 143(3); 92B; 92F; 234B; 144; 92

Judgement Text

DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I ( 2 ) NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2227/DEL/2014 (ASSESSMENT YEAR: 2009 - 10) DY. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, DEHRADUN VS. BG EXPLORATION & PRODUCTION INDIA LTD, BG HOUSE, LAKE BOULEVARD ROAD, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI PAN: AAACE4569K (APPELLANT) (RESPONDENT) CO NO. 13 /DEL/2015 (IN ITA NO. 2227/DEL/2014) (ASSESSMENT YEAR: 2009 - 10) BG EXPLORATION & PRODUCTION INDIA LTD, BG HOUSE, LAKE BOULEVARD ROAD, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI PAN: AAACE4569K VS. DY. DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, DEHRADUN (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AJAY VOHRA, SR. ADV REVENUE BY: SH. NC SWAIN, CIT DR DATE OF HEARING 02/03/2017 DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 2 DATE OF PRONOUNCEMENT 26 /04/2017 1. APPEAL IN ITA NO 2227/ DEL/2014 IS FILED BY THE LEARNED DY. DIRECTOR OF INCOME TAX , ( INTERNATIONAL TAXATION), DEHRADUN AGAINST DIRECTION DATED 27/12/2103 OF THE LD DISPUTE RESOLUTION PANEL [ HEREINAFTER REFERRED TO AS THE LD DRP] U/S 144C (5) OF THE ACT ON OBJECTIONS FILED BY THE ASSESSEE AGAINST DRAFT ASSESSMENT ORDER PASSED U/S 143(3) RWS 144C OF THE ACT BY THE LD AO ON 28/03/2013 INCORPORATING THEREIN ADJUSTMENTS IN TERMS OF ORDER PASSED U/S 92 CA (3) OF THE ACT ON 30/1/2013 BY THE LEARNED TRANSFER PRICING OFFICER [ HEREINAFTER REFERRED TO AS THE LD TPO] FOR THE ASSESSMENT YEAR 2009 - 10 , RAISING FOLLOWING GROUNDS OF APPEAL. AY 2009 - 10 ITA NO. 2227 /DEL/2014 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAS ERRED IN HOLDING THAT THE ASSESSING OFFICER/TRANSFER PRICING OFFICER ('AO/TP0') WAS WRONG IN REJECTING THE ECONOMIC ANALYSIS CONDUCTED BY THE ASSESSEE FOR THE DETERMINATION OF THE ARM'S LENGTH PRICE ( 'ALP') IN CONNECTI ON WITH THE TRANSACTIONS PERTAINING TO MANAGEMENT SERVICE AND UNIT CHARGES ( `MSU CHARGES') AND GENERAL & ADMINISTRATIVE EXPENSES ('G& A'). 1.1 THE HON'BLE DRP HAS ERRED IN HOLDING THAT THE TRANSACTIONAL NET MARGIN METHOD('TNMM) AND OPERATING PROFIT MARGI N BASED ON THE SALES AS THE PROFIT LEVEL INDICATOR (PLI) AS USED BY THE ASSESSEE IS THE MOST APPROPRIATE METHOD IN THE FACTS OF THE CASE SOLELY ON THE GROUND OF DIFFICULTY IN AVAILABILITY OF RELIABLE DATA OF COMPARABLES, NOT APPRECIATING THE FACT THAT TH E SELECTION OF THE MOST APPROPRIATE DATA IS A FUNCTION OF SEVERAL FACTORS. DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 3 1.2 THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FINDING OF THE AO/TPO THAT THE COMPARABLE UNCONTROLLED PRICE ('CUP') METHOD WAS THE MOST APPROPRIATE METHOD IN THIS CASE AND T HAT THE ALP AS DETERMINED BY THE ECONOMIC ANALYSIS CONDUCTED BY THE ASSESSEE WAS INAPPROPRIATE AS: I) THE ASSESSEE HAS NOT BEEN ABLE TO SHOW AS HOW THESE TRANSACTIONS ARE INTRINSICALLY LINKED WITH THE OTHER INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSE SSEE (E.G. PAYMENT ON INTEREST ON LOAN, SALE OF GAS, UNSECURED LOANS TAKEN OR REIMBURSEMENTS MADE) AND THERE IS NO LINK WITH THE TRANSACTIONS UNDER CONSIDERATION AND THE OTHER INTERNATIONAL TRANSACTIONS II) IT IS ONLY WHEN THE INTERNATIONAL TRANSACTIONS AR E SO CLOSELY LINKED THAT THEY CANNOT BE BENCHMARKED THAT A COMBINED APPROACH CAN BE ADOPTED AS PER RULE 10A(D) OF THE INCOME TAX RULES III) GIVEN THE NATURE OF THE TRANSACTIONS IN THIS CASE, EACH TRANSACTION HAS TO BE BENCHMARKED SEPARATELY AND NOT UNDER TNMM. V) THE ASSESSEE HAS ADOPTED A COMBINED APPROACH WITH REGARD TO ITS BUSINESS TRANSACTIONS AS A WHOLE WHICH IS CONTRARY TO THE PROVISIONS OF LAW. V) THE APPROACH FOLLOWED BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE OECD GUIDELINES WITH REGARD TO THE INTRA - GROUP SERVICES IN TERMS OF WHICH COST OF INTRA - GROUP SERVICES SHOULD BE BENCHMARKED USING EITHER CUP OR COST PLUS METHOD. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN DIRECTING THE AO/TPO TO DROP THE PRO POSED ADJUSTMENT OF RS. 9,88,84,046/ - ON ACCOUNT OF DISALLOWANCE OF G&A EXPENSES PAID BY THE ASSESSEE TO M/S B.G. INTERNATIONAL LTD ( 'BGIL') 2.1 THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FINDINGS OF THE AO/TPO THAT DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 4 A) THE ASSESSEE HAS NOT BEEN A BLE TO ESTABLISH THAT IT HAS ACTUALLY RECEIVED ANY INTRA - GROUP G & A SERVICES. B) BEYOND A DESCRIPTION OF THE SERVICES, NO EVIDENCE, MUCH LESS CONCRETE EVIDENCE, ESTABLISHING THE ACTUAL RENDERING OF SERVICES HAS BEEN PROVIDED. C) THE BULK OF THE SO - CALLE D 'EVIDENCE' FURNISHED DURING THE PROCEEDINGS BEFORE THE TPO AS WELL THE DRP CONSISTS OF THE DEBIT NOTES, MANUALS, POLICY DOCUMENTS, MENTION OF BUDGET AMOUNTS, INTERNAL CORRESPONDENCE, WHICH BY THEMSELVES DO NOT ESTABLISH THAT SUCH SERVICES HAVE ACTUALLY B EEN RECEIVED BY THE ASSESSEE D) THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE ECONOMIC AND COMMERCIAL BENEFITS DERIVED BY IT ON ACCOUNT OF SUCH SERVICES E) WITHOUT PREJUDICE TO THE ABOVE, THE COST ALLOCATION AMONGST THE DIFFERENT UNITS OR ASSOCIATE ENT ERPRISES, PURPORTEDLY ON THE BASIS OF THE REPORTS OF EXTERNAL CONSULTANTS, ARE COMPLETELY ARBITRARY AS THEY ARE BASED ON AD - HOC FACTORS LIKE HEAD - COUNTS & HOURLY RATES ETC. AND PREPARED BY THE EXTERNAL CONSULTANTS ON THE BASIS OF THE INPUTS ON SUCH AD - HOC FACTORS GIVEN BY THE AES THEMSELVES F) NO COMPARABLE INDEPENDENT ENTERPRISE WOULD COMPARABLE CIRCUMSTANCES HAVE PAID FOR THE SERVICES IN G) WITHOUT PREJUDICE TO THE FINDINGS REGARDING THE ACTUAL RENDERING OF SERVICES AND THE NON - EXISTENCE OF THE ECONOMIC OR COMMERCIAL BENEFIT DERIVED BY THE ASSESSEE, THE SERVICES ARE ESSENTIALLY IN THE NATURE OF SHARE - HOLDERS/STEWARDSHIP SERVICES WHICH ARE FOR THE BENEFIT OF THE PARENT COMPANY AND HENCE TO THAT EXTENT THE ALP IS LIABLE TO BE TREATED AS NIL. DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 5 2.2 THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FACT THAT IN TERMS OF THE JOINT OPERATING AGREEMENT (`JOA'), ALL COSTS ARE SHARED AMONG THE JOINT VENTURE PARTNERS IN RATIO OF THEIR PARTICIPATING INTEREST AND THAT THE TWO OTHER PARTIES TO THE JOA (M/S ONGC AND RELIANCE INDUSTRIES LTD) , WHICH ARE UNRELATED PARTIES, WOULD NOT PAY THE COST OF THE SERVICES OF ASSOCIATE ENTERPRISES WHICH WOULD HAVE BEEN IN EXCESS OF THE ALP. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN DIRECTING THE AO/TPO TO DROP THE PROPOSED ADJUSTMENT OF RS. 1,52,09,65,985/ - ON ACCOUNT OF DISALLOWANCE OF MANAGEMENT SERVICE AND UNIT CHARGES [CONSISTING OF FEDERAL GREEN RECHARGES OF 14,85,73,458/ - , MANAGEMENT & UNIT RECHARGES OF RS. 1,22,95,73,659/ - AND TECHNOLOGY RECHARGES OF RS. 14,28,18,869/ - ) PAID BY THE ASSESSEE TO M/S B.G. INTERNATIONAL LTD ( 'BGIL') 3.1 THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FINDINGS OF THE AO/TPO THAT A) THE ASSESSEE HAS NOT BEEN ABLE TO ESTABL ISH THAT IT HAS ACTUALLY RECEIVED ANY SERVICES IN LIEU OF THE MANAGEMENT SERVICE & UNIT CHARGES. B) BEYOND A DESCRIPTION OF THE SERVICES, NO EVIDENCE, MUCH LESS CONCRETE EVIDENCE, ESTABLISHING THE ACTUAL RENDERING OF SERVICES HAS BEEN PROVIDED. C) THE BULK OF THE SO - CALLED 'EVIDENCE' FURNISHED DURING THE PROCEEDINGS BEFORE THE TPO AS WELL THE DRP CONSISTS OF THE DEBIT NOTES, MANUALS, POLICY DOCUMENTS, MENTION OF BUDGET AMOUNTS, INTERNAL CORRESPONDENCE, WHICH BY THEMSELVES DO NOT ESTABLISH THAT SUCH SERVICES HAVE ACTUALLY BEEN RECEIVED BY THE ASSESSEE D) THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE ECONOMIC AND COMMERCIAL BENEFITS DERIVED BY IT ON ACCOUNT OF SUCH SERVICES E) WITHOUT PREJUDICE TO THE ABOVE, THE COST ALLOCATION AMONGST THE DIFFERENT UNITS OR ASSOCIATE ENTERPRISES, PURPORTEDLY ON THE BASIS OF THE REPORTS OF EXTERNAL CONSULTANTS, ARE COMPLETELY ARBITRARY AS THEY ARE BASED ON AD - HOC FACTORS LIKE HEAD - COUNTS HOURLY RATES ETC. AND PREPARED DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 6 BY THE EXTERNAL CONSULTANTS ON THE BASIS OF THE INPUTS ON SUCH AD - HOC FACTORS GIVEN BY THE AES THEMSELVES F) NO COMPARABLE INDEPENDENT ENTERPRISE WOULD HAVE PAID FOR THE SERVICES INCOMPARABLE CIRCUMSTANCES G) THERE IS AN ELEMENT OF DUPLICATION IN RESPECT OF SOME OF THE SERVICES COMPRISED IN THE MANAGEMENT SERVIC E & UNIT CHARGES (ACCOUNTING, TAXATION, COST CONTROL ETC. ) CLAIMED TO HAVE BEEN RENDERED BY M/S BGIL IN THAT THE INDIA PROJECT OFFICE IS ALSO INDEPENDENTLY LOOKING AFTER SUCH FUNCTIONS. H) WITHOUT PREJUDICE TO THE FINDINGS REGARDING THE ACTUAL RENDERING OF SERVICES AND THE NON - EXISTENCE OF THE ECONOMIC OR COMMERCIAL BENEFIT DERIVED BY THE ASSESSEE, THE SERVICES ARE ESSENTIALLY IN THE NATURE OF SHARE - HOLDERS/STEWARDSHIP SERVICES WHICH ARE FOR THE BENEFIT OF THE PARENT COMPANY AND HENCE TO THAT EXTENT THE ALP IS LIABLE TO BE TREATED AS NIL. 3.2 THE HON'BLE DRP HAS ERRED IN NOT APPRECIATING THE FACT THAT IN TERMS OF THE JOINT OPERATING AGREEMENT (JOA'), THE ALL COSTS ARE SHARED AMONG THE JOINT VENTURE PARTNERS IN RATIO OF THEIR PARTICIPATING INTEREST AND THAT THE TWO OTHER PARTIES TO THE JOA( M/S ONGC AND RELIANCE INDUSTRIES LTD) , WHICH ARE UNRELATED PARTIES, WOULD NOT PAY THE COST OF THE SERVICES OF ASSOCIATE ENTERPRISES WHICH WOULD HAVE BEEN IN EXCESS OF THE ALP 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, THE HON'BLE DRP HAS ERRED IN DIRECTING THE AO/TPO TO RESTRICT THE PROPOSED ADJUSTMENT OF RS. 22,58,422/ - ON ACCOUNT OF THE LOAN TRANSACTION BETWEEN THE ASSESSEE AND M/S BG ASIA PACIFIC HOLDING LTD (BGAPHL) TO RS. 14,61,247/ - ONLY. 4.1 THE HON'BLE DRP ERRED IN HOLDING THAT THE AO/TPO WAS WRONG IN WORKING OUT THE ADJUSTMENT ON THE BASIS OF AN INTEREST RATE OF 12.5% AS THE LOAN TRANSACTION UNDER CONSIDERATION WAS IN THE NATURE OF A FORCED TRANSACTION, HAVING ARISEN DUE TO THE ACTION OF THE AO IN UNILATERALLY ADJUSTING A REFUND DUE TO THE ASSESSEE AGAINST A DEMAND DUE FROM M/S DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 7 BGAPHL IN A PREVIOUS YEAR (WHICH WAS SUBSEQUENTLY REDUCED IN FIRST APPEAL RESULTING INTO A REFUND IN THE HANDS OF M/S BGAPHL WHICH IN TURN PAID BACK THE AMOUNT TO THE ASS ESSEE WITHOUT ANY INTEREST). 4.2 THE HON'BLE DRP ERRED IN NOT APPRECIATING THE FACT THAT ONCE A TRANSACTION ADMITTEDLY TAKES THE CHARACTER OF A LOAN BETWEEN ASSOCIATE ENTERPRISES, IT BECOMES IMMATERIAL WHETHER OR NOT THE TRANSACTION WAS UNDERTAKEN VOLUNTA RILY AND THEREFORE, THE RECEIPT OF THE LOAN AMOUNT FROM M/S BGAPHL WITHOUT CHARGING ANY INTEREST, CALLED FOR ADJUSTMENT AT AN APPROPRIATE INTEREST RATE ON ACCOUNT OF BENEFIT AVAILED BY BGAPHL 5 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E HON'BLE DRP HAS ERRED IN DIRECTING THE AO/TPO TO DROP THE PROPOSED ADDITION OF RS. 39,59,606 ON ACCOUNT OF EXPENSES CLAIMED TO HAVE BEEN INCURRED IN RELATION TO CLUB ENTRANCE AND SUBSCRIPTION FEES FOR ITS EMPLOYEES 5.1 THE HON'BLE DRP HAS ERRED IN NOT AP PRECIATING THE FACT THE EXPENSES UNDER CONSIDERATION ARE ADMITTEDLY IN THE NATURE OF CLUB EXPENSES AND HENCE THE SAME CANNOT BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. 6 THE APPELLANT PRAYS FOR L EAVE TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APPEAL. 2. THE ASSESSEE IN HIS CROSS OBJECTION RAISED THE FOLLOWING GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2009 - 10 IN CO. 13/DEL/2015 IN ITA NO. 2227/DEL/2014: - 1. THE LEARNED DRP / AO ERRED IN LAW AND IN FACTS IN DISALLOWING RS. 503,071,917 IN RESPECT OF EXPLORATION COST REIMBURSED TO ONGC. WITHOUT PREJUDICE, THE LEARNED AO ERRED IN NOT STATING THAT THE EXPENDITURE OF RS. 503,071,917 SHOULD BE AL LOWED AS A DEDUCTION IN THE YEAR IN WHICH DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 8 THE EXPENDITURE BECAME INFRUCTUOUS I.E. IN THE YEAR IN WHICH THE AREA WAS SURRENDERED PRIOR TO COMMERCIAL PRODUCTION VIZ. FINANCIAL YEAR 2011 - 12. IN THIS CONNECTION, HAVING REGARD TO THE OBSERVATIONS MADE BY THE DR P IN ITS DIRECTIONS, THE APPELLANT HAS FILED A REVISED RETURN FOR ASSESSMENT YEAR 2012 - 13 (CORRESPONDING TO FINANCIAL YEAR 2011 - 12) IN ORDER TO SAFEGUARD ITS CLAIM OF DEDUCTION FOR THE SAID EXPENDITURE. CROSS OBJECTION NO. 2: RECOVERY OF EXPENSES FROM BG ASIA PACIFIC HOLDING LTD. ('BGAPHL'> 2. THE UNILATERAL ACT OF THE LEARNED AO OF WRONGLY ADJUSTING THE APPELLANT'S REFUND WITH THE DEMAND OF THE ASSOCIATED ENTERPRISE I.E. BGAPHL IS NOT AN INTERNATIONAL TRANSACTION, ACCORDINGLY, THE AMOUNT OF INTEREST ADDED TO THE INCOME OF THE APPELLANT BY THE LEARNED AO SHOULD BE DELETED. CROSS OBJECTION NO. 3: ERRONEOUS INITIATION OF PENALTY PROCEEDINGS 3. THE LEARNED AO ERRED IN LAW AND IN FACTS IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT. CROSS OBJECTION NO. 4: ERRONEOUS LEVY OF INTEREST 4. THE LEARNED AO ERRED IN LAW AND IN FACTS IN DIRECTING TO CHARGE INTEREST UNDER SECTIONS 234A, 234B AND 234C DISREGARDING THE FACT THAT THE APPELLANT IS A NON - RESIDENT WHOSE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE, CROSS OBJECTION NO. 5: GENERAL 5. EACH ONE OF OUR GROUNDS OF OBJECTION IS WITHOUT PREJUDICE TO THE OTHER. 3. THE ASSESSEE , A NON - RESIDENT COMPANY , ENGAGED IN THE BUSINESS OF EXPLORATION AND EXTRACTION OF MINERAL OILS AND ENTERED INTO PRODUCTION SELLING CONTRACTS, AS MENTIONED IN PARA NO. 3 OF THE ORDER OF THE LD. ASSESSING OFFICER, FILED ITS RETURN OF INCOME ON 3 0 /09/2009 DECLARING TOTAL INCOME OF RS. 10081318857/ . ASSESSEE HAS ENTERED IN TO SOME INTERNATIONAL TRANSACTIONS MEN TIONED AT PARA NO. 4 OF THE ORDER OF THE LD. ASSESSING OFFICER DETERMINING DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 9 ITS ARMS LENGTH PRICE AS MENTIONED AT PAGE NO. 3 OF THE ORDER . THE INTERNATIONAL TRANSACTION AND ITS ALP IN DISPUTE IS MANAGEMENT SERVICES UNIT CHARGES OF RS. 1 520966005/ PAID BY THE ASSESSEE TO BG INTERNATIONAL LTD BENCHMARKED USING THE T RANSACTION N ET M ARGIN M ETHOD SUBMITTING THAT IT IS AT ARMS LENGTH. THE LD. TRANSFER PRICING OFFICER COMPUTED THE ARMS LENGTH PRICE OF MANAGEMENT AND UNIT RECHARGE PAID BY ASSESSEE TO BG IL FOR FOLLOWING SERVICES AS NIL. I) FEDERAL GREEN CHARGES RS. 148573458/ - II) MANAGEMENT UNIT RECHARGES RS 1229573658/ III) TECHNOLOGY RECHARGES RS. 142818869/ - TOTAL RS. 1 520965985/ 4. SIMILARLY, THE LD. TRANSFER PRICING OFFICER ALSO NOTED THAT OUT OF THE TOTAL GENERAL AND ADMINISTRATIVE EXPENSES OF RS. 171 2 20433/ , THIRD PARTY COST ARE RS. 14 CRORE AND THE BALANCE OF RS. 31220433/ PERTAINS TO TIME WRITING COST. THE LD. TRANSFER PRI CING OFFICER HELD THAT THE THIRD - PARTY COSTS ARE VERIFIABLE AND THEREFORE THEY ARE TREATED AT ARMS LENGTH. FURTHER WITH RESPECT TO THE BALANCE EXPENSES OF RS. 106104934/ NO EVIDENCES HAVE BEEN PRODUCED TO SHOW THAT THE SERVICES HAVE BEEN PROVIDED TO THE ASSESSEE. THE ARMS LENGTH PRICE OF THAT TRANSACTION WAS CONSIDERED AT NIL. AS THE AMOUNT PAID TO THE ASSOCIATED CONCERN WAS NET OF TAXES, THE AMOUNT OF TAXES OF RS. 7220888/ WAS HELD TO BE AT ARMS LENGTH AND THEREFORE ADJUSTMENT U/S 92CA OF THE ACT W AS PROPOSED OF THE NET EXPENDITURE OF RS. 98884046/ . 5. ON OBJECTION BEFORE THE LD. DISPUTE RESOLUTION PANEL , V IDE PARA NO. 6.6 OF THE DIRECTION , IT WAS HELD THAT ASSESSEE HAS RECEIVED THE SERVICES AND DERIVES BENEFIT FROM THE SERVICES . IT WAS FURTHER HELD THAT IT IS NOT THE SHAREHOLDERS ACTIVITY AND THE COST ALLOCATION KEY APPLIED BY THE ASSESSEE IS APPROPRIATE . THE DRP ALSO CAME TO THE CONCLUSION THAT TNMM IS THE MOST APPROPRIATE METHOD IN THIS CASE AND CUP METHOD CANNOT BE APPLIED IN ABSENCE OF D ATA AVAILABILITY IN CASE OF COMPARABLE CASES . AS THE MARGIN OF DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 10 THE ASSESSEE WAS MUCH ABO VE THE COMPARABLE COMPANIES, THE LD. DISPUTE RESOLUTION PANEL DIRECTED THE LD. ASSESSING OFFICER/ T RANSFER P RICING O FFICER TO DELETE THE ADJUSTMENT PROPOSED . IN THE RESULT, THE LD. DISPUTE RESOLUTION PANEL DIRECTED THE LD. TRANSFER PRICING OFFICER TO DELETE ADJUSTMENT OF RS. 1520966005/ WITH RESPECT TO MANAGEMENT UNIT CHARGES PAID TO BGIL AND ALSO GENERAL AND ADMINISTRATIVE EXPENSES PAID TO THE SAME ASSOCIATED ENTERPRISE AMOUNTING TO RS. 98884046/ . THEREFORE, REVENUE BY GROUND NO. 1, 2 AND 3 OF THE APPEAL HAS CHALLENGED THE DIRECTION OF DISPUTE RESOLUTION PANEL . 6. BOTH THE PARTIES AGREED BEFORE US THAT THE ISSUE COVERED IN THIS APPEAL IS IDENTICAL TO GROUND NO. 1 - 3 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2010 11 IN ITA NO. 1581/DEL/2015 FOR WHICH DETAILED ARGUMENTS HAVE BEEN PLACED ON RECORD BY BOTH THE PARTIES. IT WAS FURTHER SUBMITTED THAT THERE ARE NO CHANGES IN THE FACTS AND LAW IN THIS APPEAL AS COMPARED TO THE APPEAL OF REVENUE FOR ASSESSMENT YEAR 2010 11. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE RELEVANT RECORDS PRODUCED BEFORE US AS WELL AS THE ORDER OF THE LD. ASSESSING OFFICER AND DIRECTION OF THE LD. DISPUTE RESOL UTION PANEL . BASED ON OUR EXAMINATION WE ALSO FOUND THAT THE ISSUE IS SQUARELY COVERED BY THE GROUNDS OF APPEAL IN APPEAL OF REVENUE FOR ASSESSMENT YEAR 2010 - 11. WE HAVE DEALT WITH THE ISSUE VIDE PARA NO. 67 TO 72 OF OUR ORDER DATED 24/04/2017 IN ITA NO . 1581/DEL/2015 FOR ASSESSMENT YEAR 2010 - 11 AS UNDER: - 67. GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS WITH RESPECT TO SEVERAL ASPECTS ARISING ON DETERMINATION OF ARMS LENGTH PRICE WITH RESPECT TO INTRAGROUP SERVICES SUCH AS THAT LD. DISPUTE RESOLUTION PANEL LD. ASSESSING OFFICER HAS ERRED IN REJECTING THE ECONOMIC ANALYSIS OF THE ASSESSEE AND HOLDING THAT THE TRANSACTIONAL NET MARGIN METHOD ADOPTED BY THE ASSESSEE IS THE MOST APPROPRIATE METHOD AND THE OPERATING PROFIT MARGINS BASED ON THE SALES IS THE CORRECT PROFIT LEVEL INDICATOR AS USED BY THE ASSESSEE. THE LD. AO IS FURTHER AGGRIEVED BY THE ORDER OF LD. DISPUTE RESOLUTION PANEL S WHERE IT IS ACCEPTED THAT ALL THE TRANSACTIONS ARE REQUIRED TO BE AGGREGATED FOR THE PURPOSES OF BENCHMARKING. HE IS FURT HER AGGRIEVED BY THE ORDER OF LD. DISPUTE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 11 RESOLUTION PANEL WHEREIN IT IS REJECTED THE FINDING OF THE LD. TRANSFER PRICING OFFICER THAT CUP METHOD IS THE MOST APPROPRIATE METHOD. HE IS FURTHER AGGRIEVED THAT MOST OF THE SERVICES ARE DUPLICATE SERVICES AND S HAREHOLDER SERVICES FOR WHICH NO 3 RD PARTY WOULD HAVE REMUNERATED. GROUND NO. 2 OF THE REVENUE IS THAT LD. DISPUTE RESOLUTION PANEL HAS ADMITTED THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE HOLDING THAT NO PROPER ADEQUATE OPPORTUNITY WAS GIVEN TO THE ASS ESSEE, THOUGH ACCORDING TO THE LD. TPO THERE WAS AN ADEQUATE OPPORTUNITY IS THE 1 ST NOTICE WAS ISSUED TO THE ASSESSEE ON 14 TH OF FEBRUARY 2013 GIVING TIME OF A 11 AND HALF MONTHS TO THE ASSESSEE. GROUND NO. 3 OF THE APPEAL IS WITH RESPECT TO DIRECTION OF T HE LD. DISPUTE RESOLUTION PANEL TO THE LD. TRANSFER PRICING OFFICER TO DROP THE ADJUSTMENT OF RS. 3 329766244/ ON ACCOUNT OF INTRAGROUP SERVICES. THE LD. TPO IS AGGRIEVED THAT ASSESSEE COULD NOT ESTABLISH THAT WHETHER IT HAS ACTUALLY RECEIVED ANY INTRAGRO UP SERVICES BY PRODUCING ANY EVIDENCE. ACCORDING TO HIM THE EVIDENCES SO SUBMITTED WERE ONLY THE DEBIT NOTES, MANUALS, POLICY DOCUMENTS, THE BUDGETS, INTERNAL CORRESPONDENCES WHICH ARE NOT ADEQUATE TO SHOW THAT INTRAGROUP SERVICES HAVE BEEN RENDERED. HE WA S FURTHER OF THE VIEW THAT ASSESSEE ALSO COULD NOT ESTABLISH THE ECONOMIC AND COMMERCIAL BENEFITS DERIVED BY IT ON ACCOUNT OF SUCH SERVICES. THE MAIN CONTENTION OF THE LD. ASSESSING OFFICER/TRANSFER PRICING OFFICER WAS THAT THAT THE EXPENSES INCURRED BY TH E ASSESSEE THROUGH ITS ASSOCIATED ENTERPRISE WERE NOT APPROVED AND SHARED BY THE JOINT VENTURE PARTNERS WHICH ITSELF SHOWS THAT EITHER NO MEANINGFUL SERVICES WERE RECEIVED FROM SUCH ASSOCIATED ENTERPRISES OR SUCH SERVICES DO NOT HAVE ANY VALUE WITH RESPECT TO THE BUSINESS OF THE ASSESSEE AND THEREFORE LD. TRANSFER PRICING OFFICER WAS JUSTIFIED IN DETERMINING THE ARMS LENGTH VALUE OF INTRAGROUP SERVICES AT NIL. THE LD. TRANSFER PRICING OFFICER HAS ALSO QUESTIONED THE ALLOCATION KEY ACCEPTED BY THE LD. DISPU TE RESOLUTION PANEL PROVIDED BY THE ASSESSEE FOR ALLOCATION OF THOSE GROUP EXPENSES. FURTHER, THE LD. ASSESSING OFFICER IS AGGRIEVED BY THE DIRECTION OF DISPUTE RESOLUTION PANEL FOR DELETION OF THE PROPOSED ADJUSTMENT OF RS. 8201326441/ ON THE AMOUNT PAID TO THE ASSOCIATED ENTERPRISE AS ALLOCATION OF COST FOR JOINT ACQUISITION OF IT INFRASTRUCTURE AND SOFTWARE. THE MAIN CONTENTION OF THE ASSESSING OFFICER/TRANSFER PRICING OFFICER IS THAT SUCH IT INFRASTRUCTURE IS A CAPITAL ASSET WHICH IS CREATED AND OWNED BY THE PARENT COMPANY WHO HAS A RIGHT OVER THOSE ASSETS AND THEREFORE SUCH COSTS PAID FOR ACQUISITION OF THE SAID BY THAT ASSOCIATED ENTERPRISE CANNOT BE ALLOWED IN THE HANDS OF THE ASSESSEE AS NEITHER THE ASSESSEE OWNS THOSE ASSETS NOR THOSE ASSETS HAVE B EEN PUT TO USE FOR ITS BUSINESS IN INDIA. WITH RESPECT TO THESE 3 GROUNDS, THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. TRANSFER PRICING OFFICER AND EXTENSIVELY READ THE RELEVANT PARAGRAPHS FROM THE ORDER OF THE LD. TRANSFE R PRICING DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 12 OFFICER. HE ALSO REFERRED TO THE DECISION OF COORDINATE BENCH IN CASE OF M/S KNORR BERMESE INDIA PRIVATE LIMITED VERSUS ACIT (ITA NO. 5097/DEL/2011) (ASSESSMENT YEAR 2007 08) DATED 31 ST OF OCTOBER 2012 WHERE THE ADOPTION OF NIL VALUE FOR THE IN TRAGROUP SERVICES WERE UPHELD. HE ALSO RELIED ON THE DECISION OF THE COORDINATE BENCH IN CASE OF M/S GEM PLUS INDIA PRIVATE LIMITED VERSUS ACIT( 352/BANG /2009). IN VIEW OF THIS, THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY LEASE STATED THAT DIRECTIONS GIVEN BY THE LD. DISPUTE RESOLUTION PANEL WERE NOT IN ACCORDANCE WITH THE LAW AND THEREFORE DESERVES TO BE CANCELLED. 68. THE LD. AUTHORIZED REPRESENTATIVE VEHEMENTLY RELIED UPON THE DIRECTION OF LD. DISPUTE RESOLUTION PANEL . HE VEHEMENTLY SUPPORTED THAT WITH RESPECT TO THE OBSERVATION OF INTRAGROUP SERVICES GIVEN AT PARA NO. 4 OF THE DIRECTION IS EXHAUSTIVE AND COMPLETELY IN ACCORDANCE WITH THE LAW. HE EXTENSIVELY READ THAT PARAGRAPH STARTING FROM PAGE NO. 3 - 31 OF THE ORDER OF THE LD. DISPUTE RESOLUTION PANEL . HE SUBMITTED TO PAPER BOOK VOLUMES OF INDEX OF VARIOUS JUDICIAL PRECEDENTS RELIED UPON BY HIM TO SUPPORT HIS CONTENTION. HE RELIED UPON: - A. CIT V CUSHMAN & WAKEFIELD INDIA P LTD 367 ITR 730 B. CIT V EKL APPLIANCES LIMITED 345 ITR 241 C. REEBOOK INDIA CO V ACIT (DEL ITAT) 5857/DEL/2012 D. ATOTECH INDIA LIMITED V ACIT 104 /DEL/2012 E. DRESSER RAND INDIA CO V ACIT 8753/MUM/2010 F. ERICSSON INDIA P LTD V DCIT 141/DEL/2011 G. GE MONEY FINANCIAL SERVICES P LTD V ACIT 5882/DEL/2010 H. PERI INDIA P LTD V DCIT ( MUM ITAT) I. MARUTI SUZUKI INDIA LTD V CIT 381 ITR 117 J. SONY ERICSSON MOBILE COMMUNICATION INDIA P LTD V CIT 374 ITR 118 K. CIT V LUMAX INDUSTRIES LIMITED ITA NO 102/2014 L. DEMAG CRANES & COMPONENTS LIMITED V DCIT 1683/PN/2011 M. CUMM INS INDIA LIMITED V ADDL CIT ITA NO 1616/PN/2011 69. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDER OF THE LD. ASSESSING OFFICER AND DIRECTIONS OF THE LD. DISPUTE RESOLUTION PANEL . WITH RESPECT TO THE OBJECTION OF THE LD. ASSESSING OFFICER THAT DRP DOES NOT HAVE RIGHT TO ADMIT THE ADDITIONAL EVIDENCE MEAN WOULD LIKE TO REFER THE PROVISIONS OF SECTION 144C OF THE INCOME TAX ACT, WHETHER THE REFERENCE DISPUTE RESOLUTION PANEL IS DEALT WITH. ACCORDING TO THE PROVISIONS OF SECTION 144 C (6) OF THE DISPUTE RESOLUTION PANEL HALL ISSUE THE DIRECTION AFTER CONSIDERING EVIDENCES COLLECTED BY OR CAUSE TO BE COLLECTED BY IT AND RESULT OF ANY ENQUIRY MADE OR CAUSE TO BE MADE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 13 BY IT. THER EFORE IT IS APPARENT THAT THE LD. DISPUTE RESOLUTION PANEL CAN TAKE INTO CONSIDERATION ANY FURTHER EVIDENCES WHICH HAS BEEN COLLECTED BY IT OR FURNISHED BEFORE IT. RECENTLY, A DIVISION BENCH OF HON'BLE BOMBAY HIGH COURT, WHILE DECIDING THE WRIT PETITION FI LED BY VODAFONE INDIA SERVICES PVT. LTD. VS UNION OF INDIA AND OTHERS ( WRIT PETITION NO. 1877 OF 2013) DIRECTED VODAFONE INDIA SERVICES PVT. LTD TO APPROACH THE DISPUTE RESOLUTION PANEL (DRP) TO SUBMIT OBJECTIONS TO THE INCOME TAX DEPARTMENT'S DEMAND AND MADE THE FOLLOWING OBSERVATION WITH REGARDS TO DRP. 'THE PROCEEDING BEFORE THE DRP IS NOT AN APPEAL PROCEEDING BUT A CORRECTING MECHANISM IN THE NATURE OF A SECOND LOOK AT THE PROPOSED ASSESSMENT ORDER BY HIGH FUNCTIONARIES OF THE REVENUE KEEPING IN MIND THE INTEREST OF THE ASSESEE . IT IS A CONTINUATION OF THE ASSESSMENT PROCEEDINGS TILL SUCH TIME A FINAL ORDER OF ASSESSMENT WHICH IS APPEALABLE IS PASSED BY THE ASSESSING OFFICER. THIS ALSO FINDS SUPPORT FROM SECTION 144C(6) WHICH ENABLES T HE DRP TO COLLECT EVIDENCE OR CAUSE ANY ENQUIRY TO BE MADE BEFORE GIVING DIRECTIONS TO THE ASSESSING OFFICER UNDER SECTION 144C(5) . THE DRP PROCEDURE CAN ONLY BE INITIATED BY AN ASSESSEE OBJECTING TO THE DRAFT ASSESSMENT ORDER. THIS WOULD ENABLE CORRECTIO N IN THE PROPOSED ORDER (DRAFT ASSESSMENT ORDER) BEFORE A FINAL ASSESSMENT ORDER IS PASSED. THEREFORE, WE ARE OF THE VIEW THAT IN THE PRESENT FACTS THIS ISSUE COULD BE AGITATED BEFORE AND RECTIFIED BY THE DRP.' 70. IT IS APPARENT FROM THE ABOVE DECISION OF THE HONBLE BOMBAY HIGH COURT THAT IT IS NOT AN APPEAL PROCEEDINGS, BUT A CORRECTING MECHANISM WHEREBY A SECOND LOOK IS GIVEN TO THE PROPOSED ASSESSMENT MADE BY THE LD. TRANSFER PRICING OFFICER WROTE ASSESSING OFFICER BY THE HIGHER FUNCTIONARIES OF THE R EVENUE WHEREIN THE INTEREST OF THE ASSESSEE IS KEPT IN MIND, AND THEREFORE IT IS A CONTINUATION OF ASSESSMENT PROCEEDINGS ONLY. FURTHER, WHILE READING THE ORDER OF THE LD. DISPUTE RESOLUTION PANEL IT HAS BEEN NOTED THAT ASSESSEE HAS FILED THOUGH VOLUME OF SUBMISSIONS AS AN ADDITIONAL EVIDENCES, THE SAME WERE SENT TO THE LD. TRANSFER PRICING OFFICER FOR HIS COMMENTS. HOWEVER, THE LD. TRANSFER PRICING OFFICER WIDE LETTER DATED 12/11/2013 HAS NOT EXAMINE THOSE EVIDENCE WAS SUBMITTED THAT THOUGH ASSESSEE WAS GI VEN AMPLE OPPORTUNITY BUT THOSE ARE NOT SUBMITTED BEFORE HIM. THEREFORE HE OBJECTED TO THE ADDITIONAL EVIDENCES SUBMITTED. WE ARE NOT IN AGREEMENT WITH SUCH AN APPROACH OF THE LD. TRANSFER PRICING OFFICER IN 1 ST NOT VERIFYING THE ADDITIONAL EVIDENCES SUB MITTED BY THE ASSESSEE FOR WHICH A PROPER OPPORTUNITY HAS BEEN GIVEN BY THE LD. DISPUTE RESOLUTION PANEL DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 14 AND SECONDLY NOW OBJECTING BEFORE US THAT LD. DISPUTE RESOLUTION PANEL HAS AD IN ADMITTING THE ADDITIONAL EVIDENCES. THE CORRECT APPROACH WOULD HAVE BE EN THOUGH OBJECTING TO THE ADMISSION OF THE ADDITIONAL EVIDENCES BUT ALSO OPINING ON THE MERIT IN CASE THE LD. DISPUTE RESOLUTION PANEL DECIDES TO ADMIT THE ADDITIONAL EVIDENCES, SO THAT SUCH OBJECTION ON THE MERIT CAN ALSO BE CONSIDERED BY THE LD. DISPUTE RESOLUTION PANEL OR ANY HIGHER FORUM. THIS APPROACH CAN SAVE THE PRECIOUS TIME OF EVERYBODY INVOLVED EITHER IN RESOLVING THE DISPUTE A DISPUTE RESOLUTION MECHANISM OR AT APPELLATE FORUM. AS THE LD. TRANSFER PRICING OFFICER DID NOT RESPOND TO THE ADDITION AL EVIDENCES SUBMITTED BY THE ASSESSEE ON MERITS OF THE CASE, AND LD. DISPUTE RESOLUTION PANEL HAS ADMITTED THOSE EVIDENCES FOR THE REASON THAT NO PROPER OPPORTUNITY HAS BEEN GIVEN BY THE LD. TRANSFER PRICING OFFICER, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LD. DISPUTE RESOLUTION PANEL ON ADMISSION OF THE ADDITIONAL EVIDENCES SUBMITTED BEFORE IT AND ADJUDICATING ON IT. THEREFORE, THE FINDING GIVEN BY THE LD. DISPUTE RESOLUTION PANEL IN PARA NO. 4.3 OF ITS DIRECTION ADMITTING THE ADDITIONAL EVIDENCE DOES NOT SUFFER FROM ANY INFIRMITY. WITH RESPECT TO THE REASONABLE OPPORTUNITY GRANTED BY THE LD. TRANSFER PRICING OFFICER TO THE ASSESSEE WE HAVE ALREADY SUPPLIED OUR VIEW, WHETHER REASONABLE OPPORTUNITY WAS GRANTED BY THE LD. TRANSFER PRICING OFFICER OR NOT. 71. NOW COMING TO THE MERITS OF THE CASE, THE ABOVE ISSUE HAS BEEN DISCUSSED AT LENGTH BY THE LD. DISPUTE RESOLUTION PANEL IN PARA NO. 4 ONWARDS OF ITS DIRECTION AS UNDER: - DRP OBSERVATION INTRA GROUP SERVICES 4. OBJECTION NO. 1, 2 AND 3 ARE COMMON TO ALL OTHER GROUNDS ON THE ADDITIONS MADE BY THE TPO. OBJECTIONS NO. 4 TO 7 ARE ON THE DETERMINATION OF ALP OF INTRA GROUP SERVICES WHICH ARE TAKEN UP TOGETHER. THE MAIN ISSUE UNDER THESE OBJECTIONS IS THE REJECTION OF TNMM AS THE MOST APPROPRIATE METHOD USED BY THE ASSESSEE. THE ASSESSEE HAD BENCHMARKED THE INTRA GROUP SERVICES USING TNMM AS THE MOST APPROPRIATE METHOD AND IT HAD EARNED A MARGIN OF 48.71%. ALL THE INTERNATIONAL TRANSACTIONS RELATING TO INTRA GROUP SERV ICES WERE CLUBBED TOGETHER AND ASSESSEE BENCHMARKED THE SAME UNDER TNMM, IN THE PROVISION OF BUSINESS SUPPORT SERVICES, THE ASSESSEE HAS USED TNMM AND HAD SHOWN A MARGIN OF COST PLUS 12%. THE PAYMENT OF INTEREST WAS BENCHMARKED BY OBTAINING QUOTATIONS AND CORROBORATED BY DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 15 PROVIDING LIST OF INDEPENDENT COMPANIES' COMPARABLE PAYMENT OF INTEREST ON ECBS. 4.1. THE TPO REJECTED THE APPROACH OF THE ASSESSEE AND USED CUP AS THE MOST APPROPRIATE METHOD IN INTRA GROUP SERVICES. THE JUSTIFICATION GIVEN BY THE TPO CAN BE SUMMARIZED AS UNDER: (I) EACH TRANSACTION BEING A SEPARATE CLASS OF TRANSACTIONS BY ITSELF, THE SAME HAVE TO BE BENCHMARKED SEPARATELY; (II) TAXPAYER FAILED TO SUBMIT DOCUMENTARY EVIDENCES IN RESPECT OF THE INTRA - GROUP SERVICE TRANSACTIONS AND JUST IFY THE ARM'S LENGTH PRICE (III) THE ASSESSEE DID NOT COME UP WITH ANY DOCUMENTARY EVIDENCE REGARDING ITS NEED FOR THESE SERVICES DURING THE YEAR UNDER CONSIDERATION AS THEY REMAIN SAME FOR FAIRLY GOOD AMOUNT OF TIME AND THERE IS NO INCREMENTAL VALUE AD D AS SUCH; (IV) THE DETAILS SUBMITTED IN SUPPORT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS DO NOT ESTABLISH NEED AND INEVITABILITY OF THESE SERVICES, PROOF REGARDING RECEIPT OF THESE SERVICES, BENEFITS ACCRUED TO THE ASSESSEE, AND THE REASONA BLE COST THEREOF; (V) ASSESSEE HAS SUBMITTED VOLUMINOUS DETAILS RUNNING INTO THOUSANDS OF PAGES, MOST OF THEM SEEM TO BE IRRELEVANT TO BENCHMARK INTRAGROUP SERVICES; (VI) THE SERVICES ONLY ENRICH THE TALENT POOL OF BGIL, THE BENEFIT OF WHICH CAN BE REAPED BY BGIL (VII) NO LOGIC FOR PAYMENT OF INTRA - GROUP SERVICES YEAR AFTER YEAR; (VIII) MOST OF THE SERVICES ARE DUPLICATE IN NATURE OR RELATING TO THE HEAD QUARTERS TO PROTECT THE INTEREST OF SHAREHOLDERS; (IX) COST OF THE SERVICES ALLOCATED TO ASSESSEE IS ON ADHOC BASIS AND NOT LINKED TO THE BENEFIT DERIVED BY THE ASSESSEE; ASSESSEE HAD FILED VOLUMINOUS SUBMISSIONS AS ADDITIONAL EVIDENCE. THE SAME WAS SENT TO THE TPO FOR HIS COMMENTS. TPO THROUGH LETTER DATED 12.11.2013 HAS STATED THAT ASSESSEE WAS GIVEN AMPLE OPPORTUNITY TO SUBMIT THE EVIDENCE DURING THE COURSE OF THE TP PROCEEDINGS. HOWEVER, THE ASSESSEE FAILED TO USE THE OPPORTUNITY TO PRODUCE THE EVIDENCES AND THEREFORE THE ADDITIONAL PRODUCED BEFORE THE TPO COULD NOT BE ENTERTAINED. Y 4.2. THE ASSESSEE HAS MADE THE SUBMISSIONS ELABORATELY WHICH CAN BE SUMMARIZED AS DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 16 FOLLOWS: 1) THE ASSESSEE IS ENGAGED IN ONLY ONE BUSINESS ACTIVITY, NAMELY THE EXPLORATION AND PRODUCTION OF OIL AND GAS. FOR CARRYING OUT ITS OBLIGATIONS IN RESPECT OF THE PR ODUCTION SHARING CONTRACTS THE ASSESSEE HAS SOUGHT TECHNICAL, MANAGERIAL AND ADMINISTRATIVE ASSISTANCE OF BGIL. ACCORDINGLY, SUCH SERVICES ARE SUB - FUNCTIONS OR CONSTITUENTS OF THE PRIME FUNCTION OF THE ASSESSEE'S BUSINESS AND ACCORDINGLY BY NO STRETCH OF I MAGINATION CAN BE SAID TO NOT BE CLOSELY LINKED OR NOT HAVING A CLOSE NEXUS TO THE CORE REVENUE GENERATING ACTIVITY OF EXPLORATION AND PRODUCTION OF OIL AND GAS. 2) IN THE CASE OF THE APPLICANT, RECEIPT OF MSU CHARGES AND G&A ARE SUPPORT SERVICES ARE INTRINSICALLY LINKED TO THE ENTIRE BUSINESS OPERATIONS OF THE APPLICANT AND ARE NOT REVENUE GENERATING ACTIVITIES OF THE APPLICANT. THE SAID SERVICES HAVE BEEN AVAILED BY THE APPLICANT FOR THE PURPOSE OF OPTIMIZING RESOURCE UTILIZATION AND INCREASING PRODU CTIVITY IN OPERATIONS OF EXPLORATION AND PRODUCTION WHICH IS ITS MAIN BUSINESS ACTIVITY. 3) THE TPO COMPLETELY DISREGARDED THE DETAILED DOCUMENTS/EVIDENCES SUBMITTED TO JUSTIFY ACTUAL AVAILING OF SERVICES I.E. DETAILED NATURE OF SERVICES RECEIVED, SKILL SUPPLY AGREEMENTS, EMAILS EVIDENCING RECEIPT OF SERVICES, REPORTS, ETC. 4) BRUSHED ASIDE THE VOLUMINOUS DETAILS / SUBMISSIONS FILED BY THE ASSESSEE AND STATED NO EVIDENCE WAS PRODUCED BEFORE HIM - ACTION OF TPO/AO DEVOID OF ANY MERITS AND RATION AL. 5) TABULAR CHART DETAILING THE NATURE OF SERVICES RECEIVED BY THE ASSESSEE AND THE BENEFITS DERIVED THEREFROM, AS SUBMITTED BEFORE THE TPO, IS ALSO PROVIDED IN THE ADDITIONAL EVIDENCE SUBMISSIONS MADE BEFORE YOUR GOODSELF. 6) COSTS WERE ALLOCATED BASED ON GLOBAL COST ALLOCATION POLICY, ON COST TO COST BASIS WITHOUT CHARGING ANY MARK - UP THEREON 7) SUCH POLICY HAS ALSO BEEN CERTIFIED BY INDEPENDENT THIRD PARTY CONSULTANTS - PRICEWATERHOUSECOOPERS LLP, UK AND LANCASTER MACLEAN. 8) TPO/AO FAILED TO BRING ANYTHING ON RECORD TO: A. NEGATE THE INFORMATION AND / OR SUPPORTINGS PROVIDED; AND B. SUPPORT THAT NO INDEPENDENT PERSON WOULD MAKE PAYMENTS IN SIMILAR CIRCUMSTANCES DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 17 9) SUCH HIGHLY TECHNICAL EXPERTS MAY NOT BE REQUIRED BY ASSESSEE ALL THE TIME. THUS, ECONOMICALLY AND COMMERCIALLY UNVIABLE FOR ASSESSEE TO EMPLOY SUCH PERSONNEL ON PERMANENT BASIS. HENCE, NEED BASED SUPPORT OBTAINED. 10) ASSESSEE'S PREROGATIVE TO USE SERVICES FROM GROUP ENTERPRISES OR / AND THIRD PARTIES - DIRECTING THE ASSESSEE ON HOW TO CONDUCT ITS BUSINESS OPERATIONS IS BEYOND THE POWERS OF THE TPO/AO. 11) RULE 108 DOES NOT AUTHORIZE DISALLOWANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY 12) RELIANCE PLACED ON FOLLOWI NG JUDICIAL PRECEDENTS: A. AWB INDIA PVT. LTD. . B. MCCANN ERICKSON INDIA PVT. LTD. C. ERICSSON INDIA PVT. LTD. D. EKL APPLIANCES LTD. 13) OECD GUIDELINES: SHAREHOLDER ACTIVITY - INTRA - GROUP ACTIVITIES ESSENTIALLY PERFORM ED BY A PARENT COMPANY IN ITS CAPACITY AS A SHAREHOLDER EVEN THOUGH THE RECIPIENT GROUP MEMBERS MAY NOT NEED THE ACTIVITY 14) ASSESSEE HAS RECEIVED SIGNIFICANT SUPPORT FROM BGIL, IN ABSENCE OF SUCH SERVICES FROM BGIL, THE ASSESSEE WOULD HAVE HAD TO UNDE RTAKE THESE SERVICES ITSELF OR SEEK SERVICES OF THIRD PARTY SERVICE PROVIDERS. 15) THIS CLEARLY ESTABLISHES THAT SUCH SERVICES CANNOT BE CONSIDERED AS SHAREHOLDER ' ACTIVITIES. 16) THE TPO HAS FAILED TO CONSIDER THE SUBMISSION AND THE DOCUMENTARY EV IDENCE FURNISHED BY THE ASSESSEE AND HAS MADE CASUAL AND GENERAL OBSERVATIONS THAT THE VALUABLE SERVICES RECEIVED BY THE ASSESSEE HAVE NO DIRECT LINK WITH ITS REQUIREMENTS AND ARE ONLY FOR THE FURTHERANCE OF THE AE'S OWN PRESENT / FUTURE BUSINESS. 17) T HE NATURE OF SERVICES RECEIVED BY THE ASSESSEE IS REQUIRED BY THE ASSESSEE FOR ITS BUSINESS AND THE TPO IS UNJUSTIFIED IN HOLDING THAT THE VALUABLE SERVICES RECEIVED BY THE ASSESSEE HAVE NO DIRECT LINK WITH ITS REQUIREMENTS AND ARE ONLY FOR THE FURTHERANCE OF THE AE'S OWN PRESENT / FUTURE BUSINESS. 18) TPO IN THE CASE OF BGEPIL HELD IN NUMBER OF INSTANCES THAT THE ASSESSEE FAILED TO PROVE THAT SERVICES WERE ACTUALLY RECEIVED DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 18 19) CONTRARY APPROACH OF TPO IN THE CASE OF BGIL (SERVICE PROVIDER ENTITY) - HELD THAT SUCH MANAGEMENT SERVICES WERE PROVIDED BY BGIL TO THE ASSESSEE, 20) THE ABOVE CLEARLY DEMONSTRATES THAT SERVICES WERE PROVIDED BY BGIL AND RECEIVED BY BGEPIL 21) ONCE ASSESSEE DISCHARGES ITS ONUS OF ESTABLISHING ALP, THE ONUS SHIFTS TO THE TPO TO PROVE OTHERWISE 22) TPO/AO FAILED TO DISCHARGE ITS RESPONSIBILITY BY MAKING CASUAL OBSERVATIONS THAT THE ASSESSEE HAS FAILED TO FURNISH DOCUMENTARY EVIDENCE TO DEMONSTRATE / SUPPORT RECEIPT OF SERVICES. 23) THE ASSESSEE HAD ARGUED THAT IT HAD SUBMITTED VOLUMINOUS EVIDENCE, ON SAMPLE BASIS, TO DEMONSTRATE ACTUAL RECEIPT OF SERVICES AND IT WOULD NOT BE HUMANELY POSSIBLE FOR THE ASSESSEE TO FURNISH EACH AND EVERY EVIDENCE FOR RECEIPT OF SERVICE. THE HON'BLE PANEL HAD HELD THAT BASED ON THE TEST CHECKING IT CAN BE SEEN THAT THE ASSESSEE HAS INDEED RECEIVED SUCH SERVICES AND THEREBY HAD ARRIVED AT THE CONCLUSION THAT TNMM IS THE MOST APPROPRIATE METHOD IN THIS CASE AND THAT CUP CANNOT BE APPLIED IN THE ABSENCE OF ANY DATA AVAILABILITY IN CASE OF COMPARABLE CASES. ACCORDINGLY, THE ENTIRE TRANSFER PRICING ADDITION, ON ACCOUNT OF INTRA GROUP SERVICES WAS DELETED. 24) ASSUMING BUT NOT ADMITTING THAT THE ARM'S LENGTH PRICE OF G&A A ND MSUS AVAILED BY THE ASSESSEE IS NIL (AS CONTENDED BY THE TPO/AO), WE WOULD LIKE TO SUBMIT THAT THE TPO/AO HAS GROSSLY ERRED IN NOT EXCLUDING THE AMOUNT OF TAX GROSSED UP BY THE ASSESSEE ON SUCH PAYMENT WHILE DISALLOWING THE SAME. IN RESPONSE TO THIS OBJ ECTION RAISED BY THE ASSESSEE BEFORE THE TPO/AO VIDE SUBMISSION DATED 9TH JANUARY 2014 (ANNEXURE 2 - PAGE 1 TO 534 OF VOLUME VA OF THE PAPERBOOK), THE TPO HAS NOT COMMENTED ON THE SAME AND HAS COMPLETELY DISREGARDED THE SUBMISSIONS OF THE ASSESSEE 25} THIS CONTENTION OF THE TPO IS EXTRANEOUS TO THE APPLICATION OF ARM'S LENGTH STANDARD IN RESPECT OF INTRA - GROUP SERVICES AS THE ASSESSEE IS ONLY REQUIRED TO SHOW THAT THESE SERVICES ARE RECEIVED AND HAVE BENEFITED IT AND WHERE NON - DUPLICATIVE AND NON - SHARE HOLDER IN NATURE AND THE ASSESSEE HAS FULLY DISCHARGED HIS ONUS IN THIS REGARD. 4.3. DRP HAS CONSIDERED THE SUBMISSION OF THE ASSESSEE. THE PROCEEDINGS BEFORE THE DRP ARE ONLY A CONTINUATION OF THE ASSESSMENT PROCEEDINGS. THEREFORE, DRP IS BOUND TO ACCEPT ANY ADDITIONAL EVIDENCE FILED BY THE ASSESSEE DURING THE COURSE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 19 OF ITS PROCEEDINGS. I T IS ALSO CLEAR THAT THE TIME GIVEN BY THE TPO TO FURNISH THE EVIDENCE WAS AT THE FAG END OF THE TP PROCEEDINGS. IT IS ONLY FAIR TO GIVE A CHANCE TO THE ASSESSEE TO EXPLAIN ITS POSITION. THEREFORE, THE ADDITIONAL EVIDENCES ARE ADMITTED. 4.4. THE ASS ESSEE IS RECEIVING SERVICES UNDER DIFFERENT HEADS, NAMELY, A. GENERAL AND ADMINISTRATIVE, B. INFORMATION MANAGEMENT RELATED SERVICES, C. MANAGEMENT AND UNIT CHARGES D. FEDERAL GREEN CHARGE E. TECHNOLOGY RECHARGE I F. PAYROLL EXPENSES ' : ' THE ASSESSEE HAS PROVIDED VOLUMINOUS DOCUMENTS WHICH ARE CONTAINING THE FOLLOWING PAGES: DRP SUBMISSION S.NO. VOLUME NO. NO. OF PAGES 1 VOLUME - III 390 2 VOLUME - IV 853 3 VCLUME - VA 534 4 VOLUME - VB 671 5 VOLUME - VIA 665 6 VOLUME - VLB 590 7 VOLUME - VII 898 8 VOLUME - VIII 394 TOTAL PAGES OF DRP SUBMISSION 4995 ADDITIONAL SUBMISSION TO DRP S.NO. VOLUME NO. NO. OF PAGES 1 VOLUME - 1 528 2 VOLUME - 2A 495 3 VOLUME - 28 489 4 VOLUME - 3 417 5 VOLUME - 4 490 6 VOLUME - 5 431 DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 20 TOTAL PAGES OF ADDITIONAL SUBMISSION TO DRP 2850 TOTAL PAGES 7845 4.5. THE MAIN OBJECTION OF THE TPO WAS THAT ASSESSEE HAS NOT PRODUCED THE EVIDENCE AND ASSESSEE HAS NOT ESTABLISHED RECEIVING ANY BENEFIT ON ACCOUNT OF RECEIPT O/THIS SERVICE. THE ABOVE VOLUMINOUS DOCUMENTS WERE FURTHER SUMMARIZED BY THE ASSESSEE WITH REFERENCE TO EACH AND EVERY PAGES SUBMITTED BEFORE THE DRP AND THE TPO. THE SUMMARY OF THE EVIDENCES AND THE BENEFIT RECEIVED ON ACCOUNT OF THESE SERVICE S ARE REPRODUCED BELOW: A. . GENERAL & ADMINISTRATIVE EXPENSES I. T THIRD PARTY DESCRIPTION OF SERVICES RECEIVED | SALARY & OTHER COSTS - THESE COSTS PRIMARILY PERTAIN TO EMPLOYEE STOCK OPTION PLAN ('ESOP') EXERCISED BY BGEPIL EMPLOYEES. BGEPIL EMPL OYEES RECEIVE SHARES FROM THE PARENT COMPANY AS STOCK OPTIONS. THESE SHARES ARE ALLOTTED AT 'NIL' COST TO THE EMPLOYEES. HOWEVER, THE COST RELATING TO THESE SHARES ARE SUBSEQUENTLY RECOVERED/CHARGED TO INDIVIDUAL ASSET. RELOCATION COSTS - THIS HEAD COMPRIS E COSTS IN RESPECT OF RELOCATION OF ASSIGNEES/EMPLOYEES INCLUDING FAMILIARIZATION EXPENSES, TRAVEL COSTS, COST OF TRANSPORTING THE ASSIGNEES PERSONAL BELONGINGS, STORAGE COSTS, ETC. ALSO FORM A PART OF THIS HEAD. CONSULTANCY FEES , - CONSULTING SERVICES MA INLY COMPRISE OF SERVICES AVAILED FROM THIRD PARTIES BY BG/L ON BEHALF OF THE ASSESSEE. FOR INSTANCE, SERVICES WERE AVAILED FROM GLOBAL TAX AND LEGAL FIRMS IN RELATION TO EXPAT TAXATION OF THE BG EMPLOYEES. PROFESSIONAL SUBSCRIPTIONS AND LICENSE COST - PR OFESSIONAL SUBSCRIPTIONS AND LICENSE COST MAINLY COMPRISE OF PAYMENTS MADE FOR SUBSCRIPTION TO JOURNALS MAGAZINES AND OTHER REPORTS RELEVANT TO THE BUSINESS SECTOR OF - THE ASSESSEE VIZ. OIL AND GAS JOURNALS, FEES PAID FOR PLATTS REPORTS, FEES PAID FOR REPORTS ISSUED BY SOCIETY OF PETROLEUM ENGINEERS/OTHER PROFESSIONAL INSTITUTES (I.E. GEOQUEST/PEEP/HIS DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 21 ENERGY/SCHLUMBERGER, OTHER ENERGY INDUSTRY RELATED PUBLICATIONS ETC.). BANK CHARGES ; - BANK CHARGES ARE PREDOMINANTLY RECOVERY OF COST INCURRED BY BGIL IN ARRANGING FOR PROVIDING BANK GUARANTEE TO BGEPIL. I TRAVEL & SUBSISTENCE TRAVEL AND SUBSISTENCE REFERS TO BUSINESS TRAVEL EXPENSES INCURRED BY BGIL ON BEHALF OF THE ASSESSEE. ALSO INCLUDES COST OF MEALS, PER DIEM EXPENSES AND OTHER INCIDENTAL CHARGES. DIMINIMUS CHARGES - DIMINIMUS CHARGES ARE EXPENSES INCURRED BY BGIL IN RELATION TO THE EXPATS ON PHONE CALLS/VISA COST/INSURANCE COST/FAMILIARIZATION COST. THESE COSTS ARE INCURRED ON THE EMPLOYEES EITHER SECONDED TO INDIA OR TRAVELLING TO INDIA FOR A PRO JECT. THUS, THESE COSTS ARE ASSET SPECIFIC COST. GENERAL AND ADMINISTRATIVE EXPENSES - SERVICE TAX - SERVICE TAX REPRESENTS AMOUNT OF TAX PAID ON THE SERVICES RECEIVED FROM BGIL TOWARDS G&A. . - EVIDENCE FILED BEFORE THE TPO (FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON 6, 2014) SALARY & OTHER COSTS ' SAMPLE COPIES OF RELEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES AND BENEFITS REC EIVED THEREON. (PAGE 259 TO 293 OF VOLUME IV OF THE PAPERBOOK) > RELOCATION COSTS : SAMPLE COPIES OF RELEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES AND BENEFITS RECEIVED THEREON. (PAG E 294 TO 296 OF VOLUME IV OF THE PAPERBOOK) CONSULTANCY SERVICES SAMPLE COPIES OF RELEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES AND BENEFITS RECEIVED THEREON. (PAGE 297 TO 394 OF VOLUME IV OF THE PAPERBOOK) PROFESSIONAL SUBSCRIPTIONS AND LICENSE COST SAMPLE COPIES OF RELEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 22 AND BENEFITS RECEIVED THEREON. (PAGE 325 TO 330 OF VOLUME IV OF THE PA PERBOOK) BANK CHARGES SAMPLE COPIES OF RELEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS (ON SAMPLE BASIS) TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES AND BENEFITS RECEIVED THEREON. (PAGE 331 TO 336 OF VOLUME IV OF THE PAPERBOOK) TRAVEL & SUBSISTENCE SAMPLE COPIES OF RELEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES AND BENEFITS RECEIVED THEREON. (PAGE 337 TO 363 OF VOLUME IV OF THE PAPERBOOK) DIMINIMUS CHARGES . SAMPLE COPIES OF RE LEVANT DEBIT NOTES ALONG WITH THIRD PARTY INVOICES/DOCUMENTS TO DEMONSTRATE THE ACTUAL RECEIPT OF SERVICES AND BENEFITS RECEIVED THEREON. (PAGE 364 TO OF VOLUME 493 OF THE PAPERBOOK). : SERVICE TAX COPY OF THE SERVICE TAX RETURN COMPRISING OF SERVICE TAX PAID IN RESPECT OF SERVICES RECEIVED FROM BGIL AND IDS CERTIFICATE IN RESPECT OF SERVICES RECEIVED FROM BGIL. (PAGE 494 TO 517 OF VOLUME IV OF THE PAPERBOOK) : III. ADDITIONAL EVIDENCE FILED BEFORE LD. DRP ONNOVEMBER 7, 2014 GENERAL AND ADMINISTRATIVE EXPENSES - TRAVEL & SUBSISTENCE SAMPLE INTER - COMPANY DEBIT NOTESAND AMERICAN EXPRESS COPIES WHICH DEMONSTRATE THE : '~ - TRAVEL OF THE EMPLOYEE FOR INDIA PROJECT FOR THE RELEVANT PERIOD AND THIRD PARTY COSTS FOR THE SAME: ! XXXXXX (REFER PAGE 1 TO 202 OF VOLUME 1 OF THE ADDITIONAL EVIDENCE PAPER BOOK) GENERAL AND ADMINISTRATIVE EXPENSES - OTHERS GENERAL & ADMINISTRATIVE (G&A) MANUAL FOR USE BY THE GLOBAL FINANCE TEAM PREPARED BY BGIL TO PROVIDE CLARITY AROUND G&A COSTS WITHIN BG AND IN SO DOING BRING CONSISTENCY IN UNDERSTANDING AND TREATMENT OF G&A COSTS WITHIN THE GROUP. - (REFER PAGE 203 TO 259 OF VOLUME 1 OF THE ADDITIONAL EVIDENCE PAPER BOOK ) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 23 IV. BENEFITS DERIVED SALARY & OTHER COSTS : IT IS AN EXPENSE INCURRED TO RETAIN, MOTIVATE AND AWARD EMPLOYEES OF SUBSIDIARY COMPANY, IT IS SIMILAR TO SALARY COST AND IT IS BUSINESS EXPENDITURE. CONSULTANCY SERVICES SERVICES AVAILED FROM GLOBAL TAX AND LEGAL FIRMS IN RELATION TO EXPAT TAXATION OF THE BG EMPLOYEES. PROFESSIONAL SUBSCRIPTIONS REDUCTION IN WASTAGE OF TIME, EFFORTS AND COST AS BGIL PROCURES THESE LICENSES FOR THE COMMON USE AND BENEFIT OF BG GROUP ENTITIES INCLUDING BGEPIL BGEPIL HAS ACCESS OF GLOBAL BUSINESS INFORMATION RELATING TO OIL AND G AS INDUSTRY ACCESS TO THE KNOWLEDGE POOL AND HUGE DATABASE OF INFORMATION AND TECHNICAL KNOWLEDGE. ; . RELOCATION, BANK CHARGES. DEMINIMUS CHARGES ; THE EXPENSES PERTAINING TO THESE SERVICES ARE IN RELATION TO ADMINISTRATIVE CONVENIENCE INCURRED PARTICULARLY IN ARRANGING FOR PROVIDING BANK GUARANTEE TO BGEPIL, RENT OR HOTEL EXPENSES INCURRED BY THE EMPLOYEES OF BGIL WHILE PROVIDING VARIOUS SERVICES. TRAVEL & SUBSISTENCE THESE EXPENSES PERTAIN TO BGEPIL BGEPIL HAS REIMBURSED THE TRAVEL AN D SUBSISTENCE EXPENSES TO BGIL. THESE ARE PURE THIRD PARTY COSTS. II. TIME WRITING I. DESCRIPTION OF SERVICES RECEIVED : TECHNICAL AND ENGINEERING CONSULTANCY SERVICES - TIME WRITING CHARGES THE COSTS RECHARGED ON ACCOUNT.OF TECHNICAL AND ENGINEERING CONSULTANCY SERVICES INCLUDE SPECIFIC TIME - WRITING COSTS BOOKED BY THE EMPLOYEES OF BGIL FOR ASSISTANCE WITH DEVELOPMENT PROJECTS THAT WERE PROPOSED FOR THE PMT OI! FIELDS TECHNICAL EXPERTS WHOSE ASSISTANCE HAS BEEN AVAILED B Y THE ASSESSEE INTER ALIA INCLUDE ENGINEERS, PROJECT RISK EXPERTS, DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 24 SUBSURFACE ASSURANCE MANAGERS, CONTRACTS/PROCUREMENT MANAGERS AND GEOPHYSICAL MANAGERS EVIDENCE FILED BEFORE THE TPO {FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON MAY 6, 2013) TABLE OF BENEFITS DETAILING THE DESCRIPTION OF THE SERVICES, MODE OF RECEIVING THE SERVICES, BENEFITS DERIVED AND A LIST OF DOCUMENTARY EVIDENCE {IN THE NATURE OF DEBIT NOTES, INVOICES AND BACK - UP OF DOCUMENT PROVIDING DETAILS OF PERSONNEL OF BGIL WHO HAVE WRITTEN TIME ON INDIA PROJECTS) IN SUPPORT OF THE TIME WRITING CHARGES. (PCGE 99 TO 513 OF VOLUME VLI OF THE PAPERBOOK AND PAGE 516 TO 772 OF VOLUME IV OF THE PAPERBOOK) ADDITIONAL EVIDENCE FILED BEFORE LD. DRP ON NOVEMBER 7, 2014 SAMPLE HIGH VALUE INTER - COMP ANY DEBIT NOTES (ABOVE INR 10 LAKHS) WHICH DEMONSTRATE THAT THE TIME WRITING CHARGES WERE IN RELATION TO THE WORK DONE ON INDIA PROJECTS AND THE INVOICE WAS RAISED ACCORDINGLY. FURTHER, THE DESCRIPTION OF TIME WRITING COST SHEET DEMONSTRATES THAT THE SAME PERTAINS TO THE INDIA PROJECT. XXXXXXX (REFER PAGE 260 TO 518 OF VOLUME 1 OF THE ADDITIONAL EVIDENCE PAPER BOOK) TIMESHEETS OF INDIVIDUALS EVIDENCING THE ACTUAL WORK DONE PERTAINING TO INDIA PROJECTS. THE SAID TIMESHEET CLEARLY DEMONSTRATES THAT THOSE EMPL OYEES HAD WORKED IN RELATION TO WHICH COST HAS BEEN CHARGED TO BGEPIL. SAMPLE INTER - COMPANY DEBIT NOTES AND SKILL SUPPLY AGREEMENT COPIES WHICH DEMONSTRATE THAT THE TIME WRITING CHARGES WERE IN RELATION TO THE SAID SSAS AND THE INVOICE WAS RAISED UNDER THE SAID SSA. FURTHER, THE DESCRIPTION OF TIME WRITING COST SHEET DEMONSTRATES THAT THE SAME PERTAINS TO THE INDIA PROJECT. (REFER PAGE 236 TO 281 OF VOLUME 1 OF THE ADDITIONAL EVIDENCE PAPER BOOK) TIMESHEETS OF INDIV IDUALS EVIDENCING THE ACTUAL WORK DONE PERTAINING TO INDIA PROJECTS. THE SAID TIMESHEET CLEARLY DEMONSTRATES THAT THOSE EMPLOYEES HAD WORKED FOR THE SSA'S IN RELATION TO WHICH COST HAS BEEN CHARGED TO BGEPIL (REFER PAGE 282 TO 294 OF VOLUME 1 OF THE ADDITI ONAL EVIDENCE PAPER BOOK) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 25 EMAIL EVIDENCES CONTAINING EMPLOYEE DECLARATIONS (FOR SAMPLE SSAS) DEMONSTRATING THAT ACTUAL WORK DONE PERTAINS TO INDIA PROJECTS. COPIES OF REPORTS MADE BY SUCH EMPLOYEES UNDER THE SSA. (REFER PAGE 296 TO 532 OF VOLUME 1 OF THE ADDITIONAL EVIDENCE PAPER BOOK) IV. BENEFITS DERIVED EXPATRIATE EMPLOYEES PROVIDE TECHNICAL ASSISTANCE AS REQUIRED BY BGEPIL WHICH ASSISTS THEM IN TERMS OF QUALITY, INDUSTRY DETAILS, UNDERSTANDING GLOBAL IDEAS AND BEST PRACTICES WHICH BGEPIL WOULD NOT HAVE READY ACCESS. B. MANAGEMENT AND UNIT RECHARGES - INFORMATION MANAGEMENT ('HWL RELATED SERVICES I. DESCRIPTION OF SERVICES RECEIVED (A) IT SUPPORT SERVICES - SEAMLESS IT SUPPORT TO THE ASSESSEE'S PERSONNEL ON ANY IT ISSUES FACED BY IT ON A DAY - TO - DAY BASIS. UNDERTAKING NETWORK IMPROVEMENTS ON A SCHEDULED BASIS. (B) EMAIL SERVICES - E - MAIL RELATED SUPPORT SERVICES IN THE NATURE OF CREATING STANDARDIZED CORPORATE E - MAIL ACCOUNT FOR ALL EMPLOYEES AC ROSS THE GLOBE, MAINTAINING CONTROL ON MAKING EACH E - MAIL ACCOUNT A SEPARATE AND UNIQUE E - MAIL ACCOUNT, MANAGING E - MAIL SERVICES. (C) BG INTRANET PORTAL - DEVELOPMENT AND MAINTENANCE OF THE PORTAL! IS UNDERTAKEN BY BGIL. BGIL INPUTS VARIOUS POLICIES AND GUIDELINES OF THE GROUP ON THE INTRANET PORTAL. (D) INTERNET SERVICES - PROVISION OF INTERNET ACCESS TO ASSESSEE. MAINTENANCE OF INTERNET SERVICES TO ENSURE ASSESSEE IS PROTECTED FROM CYBER - ATTACKS AND CYBER - CRIME. MONITORING ACTIVITIES OF VARIOUS EMPLOYE ES ON INTERNET AND CORRECTIVE ACTIONS TAKEN IN CASE OF REPORTS OF HACKING, ETC. (E) ENABLING MOBILE/OFFSITE WORKING - 24X7 PLATFORM PROVIDED BY BGIL SO THAT ASSESSEE'S PERSONNEL CAN WORK EVEN IF NOT IN OFFICE. (F) IM CENTRAL SERVICES - ACCESS TO VARIOUS LICENSES PURCHASED BY BGIL FROM THIRD PARTIES SUCH AS PROCON LICENSE, ORACLE LICENSE, COGNOS LICENSE, SAP LICENSE. RECEIVES SUPPORT IN CASE OF ANY ISSUES FACED BY BGEPIL IN USING SAP ORACLE ETC. BENEFITS DERIVED IT SUPPORT SERVICES DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 26 (A) ACCESS TO HIGHLY EXPERIENCE AND TECHNICAL IT RESOURCES WITHOUT HAVING TO INVEST IN AN IN - HOUSE DEDICATED IT TEAM. THUS, REDUCTION IN DOWNTIME AND IDLE TIME COST. (B) REDUCTION IN INVESTMENT ON STANDBY ASSETS AS SUCH STANDBY ASSETS ARE OWNED AND MAINTAIN ED BY BGIL. {C) CONSISTENT IT PLATFORM AND INFRASTRUCTURE MAINTAINED BY BGIL WHICH PROVIDES ASSESSE ACCESS TO THE KNOWLEDGE POOL AND HUGE DATABASE OF INFORMATION AND TECHNICAL KNOWLEDGE. FURTHER, CONSISTENT IT PLATFORM ALSO ENSURES ON - TIME PERFORMANCE OF SERVICES. EMAIL SERVICES (A) CORPORATE E - MAIL ACCOUNT ENSURES CONFIDENTIALITY OF SENSITIVE INFORMATION CLOSELY ASSOCIATED WITH THE APPLICANT'S BUSINESS AND GIVES IT BETTER CONTROL OVER USE OF EMAIL BY PERSONNEL FOR PERSONAL USE. (B) ENABLES ASSESSE TO T RACK THE TRAIL OF E - MAILS MUCH FASTER. (C) A SEPARATE AND UNIQUE E - MAIL ACCOUNT ENABLES THE ASSESSEE TO HAVE BETTER CONTROL OVER THE USE OF E - MAILS BY ITS EMPLOYEES. (D) CREATING A CORPORATE E - MAIL PROVIDES OPPORTUNITY TO THE ASSESSEE TO PRESCRIBE STRUCTURE OF E - MAILS TO EMPLOYEES AND FOR STANDARDIZATION OF E - MAIL COMMUNICATIONS FOR SPECIFIC PURPOSES/EVENTS. (E} ASSESSEE RECEIVES THE BENEFIT OF ON - GOING AND CONTINUOUS DEVELOPMENT IN IT ARENA. BG INTRANET PORTAL , REDUCTION IN WASTAGE OF TIME, EFFOR TS AND COST ON THE FOLLOWING GROUNDS: PORTAL PROVIDES A PLATFORM FOR AND FACILITATES NETWORKING OF EMPLOYEES; READY ACCESS TO THE EMPLOYEES OF SUPPORT FUNCTION OF THE ASSESSE ON THE POLICIES AND GUIDELINES I.E. ACCOUNTING POLICY MANUAL ETC.; AND ! SUCH STA NDARD DOCUMENTS ASSIST THE ASSESSEE IN FORMULATING / IMPLEMENTING SIMILAR CONTROLS IN PLACE EASILY. INTERNET SERVICES A. MAINTENANCE OF INTERNET SERVICES TO ENSURE ASSESSEE IS PROTECTED FROM CYBER - ATTACKS AND CYBER - CRIME. DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 27 B. MONITORING ACTIVITIES OF VARIOUS EMPL OYEES ON INTERNET AND CORRECTIVE ACTIONS TAKEN IN C. CASE OF REPORTS OF HACKING ETC. (C} ENSURE UNIFORM CONNECTIVITY AS PER THE ASSESSEE'S REQUIREMENTS. D. CORRECTIVE ACTIONS AGAINST HACKING ENABLE ASESSEE TO FUNCTION EFFICIENTLY AT LOWER COST. E. MONITORING INTERNET ACTIVITIES OF EMPLOYEES CREATES AWARENESS AND CONTROL AMONG EACH EMPLOYEE IN USAGE OF INTERNET FACILITIES ONLY ON NEED BASIS. AVOIDANCE OF UNNECESSARY II. BENEFITS DERIVED IT SUPPORT SERVICES . L : - - .'. - ; . A) ACCESS TO HIGHLY EXPERIENCE AND TECHNICAL IT RESOURCES WITHOUT HAVING TO INVEST IN AN IN - HOUSE DEDICATED IT TEAM. THUS, REDUCTION IN DOWNTIME AND IDLE TIME COST. B) REDUCTION IN INVESTMENT ON STANDBY ASSETS AS SUCH STANDBY ASSETS ARE OWNED AND MAINTAINED BY BGIL. C) CO NSISTENT IT PLATFORM AND INFRASTRUCTURE MAINTAINED BY BGIL WHICH PROVIDES ASSESSE ACCESS TO THE KNOWLEDGE POOL AND HUGE DATABASE OF INFORMATION AND TECHNICAL KNOWLEDGE. FURTHER, CONSISTENT IT PLATFORM ALSO ENSURES ON - TIME PERFORMANCE OF SERVICES. EMAIL SER VICES . [ A) CORPORATE E - MAIL ACCOUNT ENSURES CONFIDENTIALITY OF SENSITIVE INFORMATION CLOSELY ASSOCIATED WITH THE APPLICANT'S BUSINESS AND GIVES IT BETTER CONTROL OVER USE OF EMAIL BY PERSONNEL FOR PERSONA! USE. B) ENABLES ASSESSE TO T RACK THE TRAIL OF E - MAILS MUCH FASTER. C) A SEPARATE AND UNIQUE E - MAIL ACCOUNT ENABLES THE ASSESSEE TO HAVE BETTER CONTROL OVER THE USE OF E - MAILS BY ITS EMPLOYEES. D) CREATING A CORPORATE E - MAIL PROVIDES OPPORTUNITY TO THE ASSESSEE TO PRESCRIBE STRUCTURE OF E - M AILS TO EMPLOYEES AND FOR STANDARDIZATION OF E - MAIL COMMUNICATIONS FOR SPECIFIC PURPOSES/EVENTS. E) ASSESSEE RECEIVES THE BENEFIT OF ON - GOING AND CONTINUOUS DEVELOPMENT IN IT ARENA. BG INTRANET PORTAL , REDUCTION IN WASTAGE OF TIME, EFFORTS AND COST ON THE F OLLOWING GROUNDS: - PORTAL PROVIDES A PLATFORM FOR AND FACILITATES NETWORKING OF EMPLOYEES; DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 28 - READY ACCESS TO THE EMPLOYEES OF SUPPORT FUNCTION OF THE ASSESSE ON THE POLICIES AND GUIDELINES I.E. ACCOUNTING POLICY MANUAL ETC.; AND ; - SUCH STANDARD DOCUMENTS ASSIST THE ASSESSEE IN FORMULATING / IMPLEMENTING SIMILAR - CONTROLS IN PLACE EASILY. - INTERNET SERVICES A. MAINTENANCE OF INTERNET SERVICES TO ENSURE ASSESSEE IS PROTECTED FROM CYBER - ATTACKS AND CYBER - CRIME. B. MONITORING ACTIVITIES OF VARIOUS EMPLOYEES ON INTER NET AND CORRECTIVE ACTIONS TAKEN IN CASE OF REPORTS OF HACKING ETC. C. ENSURE UNIFORM CONNECTIVITY AS PER THE ASSESSEE'S REQUIREMENTS. D. CORRECTIVE ACTIONS AGAINST HACKING ENABLE ASESSEE TO FUNCTION EFFICIENTLY AT LOWER COST. E. MONITORING INTERNET ACTIVITIES OF EMPLOYEES CREATES AWARENESS AND CONTROL AMONG EACH EMPLOYEE IN USAGE OF INTERNET FACILITIES ONLY ON NEED BASIS. AVOIDANCE OF UNNECESSARY OF INTERNET FOR PLAYING GAMES ETC. THUS, OPTIMAL UTILIZATION OF BANDWIDTH FOR OFFICIA L PURPOSE. ENABLING MOBILE/OFFSITE WORKING , ENSURES CONTINUITY OF WORK AND OPTIMUM UTILIZATION OF TIME OF THE EMPLOYEES OF ASSESSEE. ENCRYPTION AND SAFETY PRECAUTIONS TAKEN CARE OF SAVING OF COST BY ALLOWING AN EMPLOYEE TO WORK FROM ANYWHERE IN THE WORLD. IM CENTRAL SERVICES T : A. SAPS, ORACLE ETC., ARE CRUCIAL FOR DAY TO DAY FUNCTIONING OF BUSINESS. B. PURCHASE OF SUCH LICENSE BY BGIL FOR ALL GROUP ENTITIES LEADS TO COST EFFICIENCY. C. COST SAVINGS TO BGEPIL - NOT REQUIRED TO EMPLOY FU LLY DEDICATED PERSONNEL TO PROVIDE SUPPORT ON ISSUES FACED IN USING SAP ETC. III. EVIDENCE FILED BEFORE THE TPO (FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON MAY 6,2014 ! (A) INTER - COMPANY DEBIT NOTES ' ! SAMPLE C OPIES OF ICDNS WITH DETAILS OF NATURE OF EXPENSES AND THE COSTS ASSOCIATED UNDER EACH SUCH EXPENSE HEAD: ' DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 29 ICDN NO. 1 - 17:IM RECHARGES BY BGIL TO BGEPIL PROPORTIONATELY ON THE BASIS OF NUMBER OF USERS IN BGEPIL TO TOTAL USERS OF BG GROUP (PAGE 49 TO 98 OF V OLUME VII OF THE PAPERBOOK) (B) COST ALLOCATION METHODOLOGY - LANCASTER MACLEAN REPORT CERTIFYING COST ALLOCATION METHODOLOGY PRICEWATERHOUSECOOPERS REPORT CERTIFYING COST ALLOCATION POLICY (C) DOCUMENTS TO EVIDENCE RECEIPT OF SERVICE SAMPLE COPIES OF E - MAILS STATING SERVICE BEING PROVIDED IN THE NATURE OF INSTALLATION OF WINDOWS SECURITY ON THE SERVERS OF THE ASSESSE, CONTINUOUS MONITORING OF THE SERVER FOR UP GRADATION, RESOLVING DAY TO DAY IT ISSUES FACED BY THE PERSONNEL OF THE ASSE SSEE ETC. (PAGE 824 TO 947 OF VOLUME VB OF THE PAPERBOOK) IV. ADDITIONAL EVIDENCE FILED BEFORE LD. DRP ON NOVEMBER?, 2014 A) SAMPLE COPIES OF INTER COMPANY DEBIT NOTES ('ICDNS') WITH DETAILS OF NATURE OF EXPENSES AND THE COSTS ASSOCIATED IN RELATION TO IM SERVICES. THIS INCLUDES IM RECHARGES BY BGIL TO BGEPIL PROPORTIONATELY ON THE BASIS OF NUMBER OF USERS IN BGEPIL TO TOTAL USERS OF BG GROUP. (PAGE 1 TO 75 OF VOLUME 2A OF THE ADDITIONAL EVIDENCE PAPERBOOK) ( I - - \ XXXXXXXX B) SNAPSHOTS OF THE LI ST OF APPLICATIONS TO WHICH PERSONNEL OF ASSESSEE HAVE ACCESS TO(PAGE 76 TO 77 OF VOLUME 2A OF THE ADDITIONAL EVIDENCE PAPERBOOK) C} LIST OF USERS AT BGEPIL HAVING ACCESS TO SOME OF THE TECHNICAL APPLICATIONS PAGE 78 TO 79 OF VOLUME 2A OF THE ADDITIONAL EVIDENCE PAPERBOOK) D) SNAPSHOTS OF THE INTRANET PORTAL MAINTAINED BY BGIL WHICH IS ACCESSIBLE TO ALL THE GROUP ENTITIES INCLUDING BGEPIL ( PAGE 80 TO 96 OF VOLUME 2A OF THE ADDITIONAL EVIDENCE PAPERBOOK) E) DETAILED LIST OF SOPHISTICATED IT APPLIC ATION TO WHICH PERSONNEL OF ASSESSEE HAVE ACCESS TO WHERE DAY TO DAY OPERATIONS OF THE ASSESSEE ARE CARRIED OUTRAGE 97 TO 495 OF VOLUME 2A OF THE ADDITIONAL EVIDENCE PAPERBOOK AND PAGE 1 TO 489 OF VOLUME 28 OF THE ADDITIONAL EVIDENCE PAPER BOOK) C. MANAG EMENT AND UNIT RECHARGES - HR. ACCOUNTS. TAXATION, INSURANCE ETC I. DESCRIPTION OF SERVICES RECEIVED HR SUPPORT - DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 30 SUPPORT ON DEPLOYMENT OF GLOBALLY MOBILE EXPATRIATE STAFF: BGIL'S HR INTERNATIONAL TEAM COORDINATES ALL EXPAT REQUIREMENTS BASED ON NATURE OF WORK, PROFILE OF ACTIVITIES, RESOURCE AVAILABILITY, COST FACTORS, ETC. MANAGES ISSUES CONNECTED WITH THE TRANSFER OF STAFF BETWEEN VARIOUS PROJECTS OF BG GROUP ENTITIES INCLUDING THE ASSESSEE, REPATRIATION OF STAFF AT THE END OF A SECONDMENT ETC. . MANAGING THE INTERNATIONAL MOVEMENT OF INDIAN NATIONALS WHO GO TO OTHER BUSINESS UNITS WITHIN BG GROUP FOR DEVELOPMENTAL ASSIGNMENTS. FOR AREAS LIKE COMPENSATION AND BENEFITS, STANDARDS AND METHODS ARE DEVELOPED, MANAGED AND MONITORED CENTRALLY TO ENSURE CONSISTENCY OF PROCESS. ACCOUNTING AND TAXATION SUPPORT FINANCIAL SYSTEMS AND ANALYSIS - MAIN FINANCIAL SYSTEMS (SAP, COGNOS ETC.) USED BY THE ASSESSEE ARE MANAGED CENTRALLY BY BGIL IMPLEMENTATION OF SUCH SYSTEMS, TRAINING AND PROVISION OF ONGOING ADVICE UNDERTAKEN BY BGIL. FINANCIAL TECHNICAL ACCOUNTING AND ASSURANCE SUPPORT - IMPLEMENTATION OF VARIOUS INTERNATIONAL ACCOUNTING PRINCIPLES, TRAINING THE ASSESSEE'S EMPLOYEES AND SOLVING THEIR QUERIES ON A DAY TO DAY BASIS, IF ANY. FINANCIAL REPORTING - ASSISTANCE ON INTERNAL AND EXTERNAL FINANCIAL REPORTING REQUIREMENTS. PROVIDES ADVICE TO THE ASSESSEE ON THE GROUP F INANCIAL REPORTING REQUIREMENTS AND POLICIES AND IMPACT OF LOCAL PROJECTS ON THE OVERALL FINANCIAL REPORTING. . MANAGEMENT REPORTING - GUIDANCE PROVIDED TO ASSESSEE ON CORPORATE REQUIREMENTS, COLLECTION OF DATA AND OTHER MANAGEMENT REPORTING MATTERS. ASSIS TANCE ON LOCAL TAXATION ISSUES - GUIDANCE ON HOW THE PARTICULAR TAX POSITION WILL BE LOOKED AT IN INTERNATIONAL PARLANCE IN VIEW OF HEAD OFFICE BEING LOCATED IN OVERSEAS COUNTRY. ASSISTANCE ON LOCAL AND GROUP TAX ACCOUNTING MATTERS. ASSISTANCE ON MANAGING TAX AUDITS/ ASSESSMENT/ APPEALS AND OTHER ISSUES AS AND WHEN REQUIRED INSURANCE SUPPORT : SUPPORT ON INSURANCE RELATED MATTERS DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 31 LOOK AFTER INSURANCE COVERAGE OF VARIOUS ASSETS AND ACTIVITIES OF BG GROUP ENTITIES INCLUDING THE ASSESSEE ASSISTS IN OBTAINING NECESSARY INSURANCE COVERAGE TO PROTECT THE BG GROUP ENTITIES INCLUDING THE ASSESSEE FROM POTENTIAL / POSSIBLE LOSS IN CASE OF AN UNFORESEEN EVENT ASSISTANCE IN MANAGING AND MAKING INSURANCE CLAIMS AND DEALING WITH SETTLEMENT AND OTHER ISSUES , II. EVIDENCE FILED BEFORE THE TPO (FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON MAY 6,2014 HUMAN RESOURCES A) A MANUAL IN RELATION TO BUSINESS TRAVEL AND EXPENSES STANDARD WHICH IS GOVERNED BY BG GROUPS HUMAN RESOURCES POLICY AND SETS MANDATORY REQUIREMENTS REGARDING UNDERTAKING BUSINESS TRAVEL ON BEHALF OF BG GROUP AND THE CLAIMING OF EXPENSES ASSOCIATED WITH BUSINESS TRAVEL AND OTHER BUSINESS ACTIVITIES PAGE 535 TO 562 OF VOLUME VBOFTHE PAPERBOOK) B) A TALENT MANAGEMENT MODEL OF BG GROUP WHICH SUMMARIZES THE POTENTIAL QUALITIES AND SKILL SET WHICH IS REQUIRED TO BE MAINTAINED BY BG GROUP EMPLOYEES (PAGE 563 TO 575 OF VOLUME VB OF THE PAPERBOOK) C) E - MAIL CORRESPONDENCES BY BGIL SLOGANING YOUNG LEADER S RESEARCH BEING RECOMMENDED AS A MEASURE THAT WOULD BE RESEARCHING ON THE GRADUATE POPULATION TO PROVIDE SUPPORT TO BGEPIL INPUT PROVIDED THEREBY BY BGIL {PAGE 676 TO 678 OF VOLUME VBOFTHE PAPERBOOK) D) E - MAIL CORRESPONDENCES BY BGIL DEMONSTRATING SUPPO RT PROVIDED BY BGIL TO BGEPIL ON TRAINING, ON JOB LEARNING, VENDOR SUPPORTIVE WEB BASED TOOLS ALONG WITH THE COMPETENCY AND DEVELOPMENT REVIEW FOR EMPLOYEES. POWER POINT PRESENTATIONS PROJECTING APPROPRIATE TRAINING AND ADR APPROACH, THE 360 TOOL AND WALLE T CARDS ARE BEING ATTACHED FOR REFERENCE {PAGE 611 TO 640 OF VOLUME VB OF THE PAPERBOOK)] E) E - MAIL CORRESPONDENCES BY BGIL WHICH DEMONSTRATES THE INTERNATIONAL PLACEMENT POLICY COMMUNICATED TO BGEPIL SPECIFYING THE PLACEMENT CRITERIA ALONG WITH THE COS T OF LIVING AND SALARY CAPS. THE POLICY STANDS ATTACHED HEREWITH. (PAGE 679 TO 733 OF VOLUME VB OF THE PAPERBOOK) . F) E - MAIL CORRESPONDENCES BY BGIL IN RELATION TO THE RECRUITMENT POLICIES. POWER POINT PRESENTATIONS DEMONSTRATING GRADUATE DEVELOPMENT MO VE PROJECTIONS NECESSARY AS A RECRUITMENT DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 32 AGENDA FOR BGEPIL (PAGE 607 TO 608 OF VOLUME VB OF THE PAPERBOOK) G) E - MAIL CORRESPONDENCES BY BGIL WHICH DEMONSTRATES THAT BGEPIL AVAILS SUPPORT IN RELATION TO ANNUAL INCENTIVE SCHEME PERFORMANCE AND SALARY REV IEW ALONG WITH THE PROGRESSION PANEL CONSIDERING THE EMPLOYER - EMPLOYEE RELATIONSHIP WITH A LONG TERM PERSPECTIVE. (PAGE 607 TO 608 OF VOLUME VB OF THE PAPERBOOK) H) SNAPSHOTS ON GLOBAL MOBILITY AND DEMONSTRATION ON PROFESSIONAL AND AREA DEVELOPMENT. EMPL OYEE RESOURCING AND RECRUITMENT STRATEGY SUMMARY OF POGE 735 TO 741 OF VOLUME VB OF THE PAPERBOOK) I) EXTRACT OF SERVICE AGREEMENTS PROVIDING CERTAIN STAFF, SUPPORT AND PERSONNEL SERVICES OF PAGE 808 TO 823 OF VOLUME VB OF THE PAPERBOOK) ACCOUNTING. FI NANCE. TAXATION & LEGAL SUPPORT ! A. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO ACCOUNTING MATTERS FPAGESSS TO 590 OF VOLUME VB OF THE PAPERBOOK) B. E - MAIL CORRESPONDENCES EVIDENCING SUBSTANTIAL SUPPORT RECEIVED FROM BGIL IN RELATION TO TAXATION AND PROVISIONING MATTERSFPAGE 578 TO 581 OF VOLUME VB OF THE PAPERBOOK) C. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO WTFPA GE 582 TO 587 OF VOLUME VB OF THE PAPERBOOK) D. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ANALYSISFFOGE 588 TO 588 OF VOLUME VB OF THE PAPERBOOK E. E - MAIL CORRESPONDENCES EVIDENCING SU PPORT RECEIVED FROM BGIL IN RELATION TO LEGAL MATTERS, SAP SUPPORT ETC. QUARTER REVIEW OF USER ACCESS SUMMARY ALONG WITH SAP ROLE ASSIGNMENT FORMS IN RESPECT OF EMPLOYEES(PAGE 533 TO 562 OF VOLUME VB OF THE PAPERBOOK) F. E - MAIL CORRESPONDENCE EVIDENCING SUPPO RT RECEIVED FROM BGIL PACKAGING SUPPLEMENTARY INFORMATION. (PAGE 591 TO 562 OF VOLUME VB OF THE PAPERBOOK) G. THE ALLOCATION OF THE TECHNOLOGY EXPENSES HAVE BEEN MADE ON COST TO COST BASIS. EVIDENCE THAT ALLOCATION IS ON COST TO COST IS IN FORM OF GLOBAL COST ALLOCATION POLICY (PAGES 773 TO 788 OF VOLUME IV OF PAPERBACK) CERTIFIED BY PRICE WATERHOUSE COOPERS VIDE THEIR REPORT. (PAGES 789 TO 826 OF VOLUME IV OF PAPERBOOK) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 33 H. IN ADDITION, REPORT OF THE INDEPENDENT CONSULTANT CERTIFYING THE COST ALLOCATION METHODOLOG Y FOR THE YEAR 2009 IS ALSO PROVIDED. (PAGES 773 TO 853OF VOLUME IV OF PAPERBOOK) III, ADDITIONAL EVIDENCE FILED BEFORE LD. DRP ON NOVEMBER?, 2014 HUMAN RESOURCES - I * A) A SLIDE DECK PREPARED BY BGIL ON 360 FEEDBACK TOOL WHICH PROVIDES A FRAMEWORK FOR BEHAVIOURS CRITICAL TO EXCELLENCE OFFERING DEPTH AND LEVEL OF GUIDANCE SOUGHT, (PAGE 1 , TO 5 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPER BOOK) B) GUIDELINES PREPARED BY BGIL ON 360 FEEDB ACK TOOL ARE INTENDED TO SUPPORT HR MANAGERS AND ADVISORS IN UNDERSTANDING THE 360 PROCESS IN BG GROUP AND THEIR ROLE AS TRAINED 360 HR COACHES. THESE GUIDELINES ARE TO ENSURE THAT A MINIMUM STANDARD IS ADOPTED AND MAINTAINED ACROSS THE GROUP IN THE FEEDBA CK AND SUPPORT PARTICIPANTS RECEIVE FROM THE HR COACH IN COMPLETING THEIR 360 REVIEW. IT IS THE FIRST TIME BG HAS INTRODUCED A 360 TOOL AT GROUP LEVEL IN YEAR 2009.(PAGE 6 TO 11 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPER BOOK) C) A SLIDE DECK OF BGIL DATED OCTOBER 2009 ON AWARENESS TRAINING FOR MENTORS & MENTEES CONTAINING AN AGENDA OF SAFETY MOMENTS, ROLE OF MENTOR, DEVELOPMENTAL APPROACH TO MENTORING, ROLE OF A MENTEE, GROUND RULES FOR MENTORING RELATIONSHIP, ETC.FPAGE 12 TO 33 OF VOLUME 3 OF THE ADDITIONA L EVIDENCE PAPER BOOK) D) A SLIDE DECK ON PEOPLE AGENDA UPDATE FOR YEAR 2009 WHICH REFERS ACTIVITIES IN RELATION TO PERFORMANCE MANAGEMENT, REWARD, TALENT MANAGEMENT, ON - LINE ADR, ETC.FPAGE 34 TO 50 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPER BOOK) E) A PLANNIN G DOCUMENT ON BG GROUP RELATIVES RESPONSE PLAN DECEMBER 2009 WHICH DESCRIBES HOW BG GROUP MANAGES ENQUIRIES FROM RELATIVES OF BG PEOPLE IN AN INCIDENT. IT EXPLAINS THE CONTEXT OF BG GROUP'S CRISIS MANAGEMENT SYSTEM. IT F) DESCRIBES THE ORGANIZATION, PROCESSES , ROLES AND RESPONSIBILITIES OF THE RELATIVES RESPONSE TEAM (RRT).(PAGE 51 TO 56 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPER BOOK) ' '..... , G) A FUNCTIONAL CAREER LADDER OR A JOB DESCRIPTION RESPONSIBILITY MATRIX IN RELATION TO HSSE MANAGEMENT, FINANCE & PLANNING, GLOBAL IT&T AND HR WHICH SUMMARIZES POSITION / DESIGNATION, REQUISITE SKILL SET REQUIRED, KEY ACCOUNTABILITY ETC. POGE 57 TO 60 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) H) SAMPLE COPIES OF INTER COMPANY DEBIT NOTES RAISED BY BG1L ON BGEPIL WHICH PROVIDES DETAILS OF COST RECHARGED IN RELATION TO HR ACTIVITIES (PAGE 61 TO 71 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) H) A MANUAL IN RELATION TO BUSINESS TRAVEL DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 34 AND EXPENSES STANDARD WHICH IS GOVERNED BY BG GROUP'S HUMAN RESOURCES POLIC Y AND SETS MANDATORY REQUIREMENTS REGARDING UNDERTAKING BUSINESS TRAVEL ON BEHALF OF BG GROUP AND THE CLAIMING OF EXPENSES ASSOCIATED WITH BUSINESS TRAVEL AND OTHER BUSINESS ACTIVITIES (POGE 72 TO 95 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) I) A SAMPLE HR INDUCTION CHECKLIST PREPARED BY BG GROUP FOR NEW STARTERS / NEW EMPLOYEESFPOGE 96 TO 98 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) J) A SLIDE DEPICTING LIST OF SAP HR SUPER USERS AMONG THE GROUP ENTITIES (PAGE 99 TO 99 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) K) SNAPSHOTS OF PORTAL WHICH PROVIDES ACCESS TO VARIOUS WEBSITES, DOCUMENTS, MANUALS, STANDARDS ETC. WHICH ARE PROVIDED BELOWPOGE 100 TO 118 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) A. ACCESS TO LEARNING MANAGEMENT SYSTEM B. PORTAL WHICH PROVIDES INFORMATION / ROLE IN RELATION TO BG GROUP EMPLOYEE C. BEHAVIORS I C. PORTAL RELATED TO BG GROUP AND TALENT MANAGEMENT D. ASSISTANCE FROM BGIL IN RELATION TO TRAVEL RELATED QUERIES E. ACCESS TO BG PORTAL WHICH PROVIDES VARIOUS SERVICES D. INFORMATION RELATED TO ANNUAL INCENTIVE SCHEME PROVIDED TO BG GROUP EMPLOYEES G. INFORMATION RELATED TO HR FUNCTIONS H. INFORMATION RELATED TO ORGANIZATIONAL FUNCTIONS I. INFORMATION & ASSISTANCE RELATED TO TRAVEL RELATED DOCUMENTATIONS AC COUNTING. FINANCE. TAXATION & LEGAL SUPPORT A) A REPORT PREPARED BY BGIL ON CAPITAL EXPENDITURE WHICH PROVIDES DETAILED PROCESS TRANSACTION FLOW, IDENTIFY FINANCIAL REPORTING RISKS INHERENT IN THE PROCESS, AND THE RELATED CONTROL OBJECTIVES. IT ALSO HELPS IDE NTIFY THE CONTROLS IN OPERATION, AND MAP THESE TO THE CONTROL OBJECTIVES IDENTIFIED. IT DEMONSTRATES HOW THE CONTROLS ADDRESS THE RELEVANT ASSERTIONS FOR THE MATERIAL FINANCIAL STATEMENT BALANCES AFFECTED BY THIS PROCESS. IT ALSO HELPS IDENTIFY THE METHOD OF MONITORING AND NATURE OF EVIDENCE B) REQUIRED TO CONFIRM OPERATION OF CONTROLS. (PAGE 119 TO 133 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) C) A MANUAL / REFERENCE NOTE FOR THE YEAR 2009 PREPARED BY BGIL WHICH HELPS THE REGIONAL INVESTMENT COMMITTEE TO APPROVE ORDINARY COURSE BUSINESS EXPENDITURE ON CAPITAL PROJECTS AND FINANCIAL COMMITMENTS FOR THE REGION, THE SUBSTITUTION CAPITAL FUNDING WITHIN THE REGION'S CURRENT APPROVED BUDGET FOR NEW PROJECTS, RE - APPROVING CAPITAL INVESTMENTS, APPROVE PRE - SANCTION CAPITAL EXPENDITURE INCURRED IN YEAR OF SANCTION, DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 35 APPROVE PHYSICAL ENERGY COMMODITY SALES AND PURCHASE AGREEMENTS (INCLUDING ASSOCIATED TRANSPORT ATION / REGASIFICATION CAPACITY AND TRADING ACTIVITIES), ETC.FPAGE 134 TO 138 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) D) A SLIDE DECK PREPARED BY BGIL DATED MAY 2009 WHICH SUMMARIZES PROCESS IMPROVEMENTS AND OVERVIEW OF BENCHMARKING OF FINANCIAL SHA RED SERVICES ETC.(PAGE 139 TO 151 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) ,. -- .. -- - .. - > - > E) A SLIDE DECK DATED MAY 2009 PREPARE BY BGIL WHICH PROVIDES A GUIDANCE TOWARDS COST CONTROL, COST MANAGEMENT, G&A MANAGEMENT, TRAVEL SAVING STRATEGY, COS T REDUCTION ETC.(PAGE 152 TO 1 89 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) F) COPIES OF BG GROUP FINANCE NEWSLETTER FOR QUARTER 1, 3 & 4 OF 2009 WHICH PROVIDES VARIOUS USEFUL GUIDELINES IN RELATION TO FINANCE. IT ALSO PROVIDES UPDATES ON THE HAPPENING OF EVENTS AT VARIOUS GROUP ENTITIES AND KEEP THE GROUP UPDATED ON THE FINANCIAL FRONTPAGE 190 TO 236 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) G) A SLIDE DECK DATED MAY 2009 PREPARED FOR A WORKSHOP IN RELATION TO COST RECOVERY FOR VIRTUAL CONFERENCE UNDERTAKEN BY &G \ L(PAGE 237 TO 242 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) H) A SLIDE DECK PREPARED BY BGIL WHICH PROVIDES THE GROUP ENTITIES WITH A TRAINING GUIDELINES TO EXTRACT VARIOUS REPORTS FROM SAP. (PAGE 243 TO 245 OF VOLUME 3 OF THE ADDITIO NAL EVIDENCE PAPERBOOK) I) A FUNCTIONAL CAREER LADDER OR A JOB DESCRIPTION RESPONSIBILITY MATRIX IN RELATION TO TAXATION WHICH SUMMARIZES POSITION / DESIGNATION, REQUISITE SKILL SET REQUIRED, KEY ACCOUNTABILITY ETC. (PAGE 246 TO 246 OF VOLUME 3 OF THE ADDITIO NAL EVIDENCE PAPERBOOK) , . , . J) A SLIDE DECK PREPARED BY BGIL TO TRAIN THE GROUP ENTITIES ON SOURCES OF EMPLOYMENT LAW, VICARIOUS LIABILITY, CONTRACT OF EMPLOYMENT, VARIOUS LITIGATION & LAWS. (PAGE 247 TO 283 OF VOLUMES OF THE ADDITIONAL EVIDENCE PAPERBOOK ) ; INSURANCE RELATED SUPPORT SERVICES AND OTHER MISCELLANEOUS SUPPORT SERVICES A. A SLIDE DECK DATED NOVEMBER 2009 ON TRAVEL INSURANCE POLICIES WHICH PROVIDES GUIDELINES ON APPLICABLE INSURANCE POLICIES FOR ELIGIBLE EMPLOYEES. (PAGE 284 TO 292 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) B. A GUIDELINE DATED DECEMBER 2009 WHICH ESTABLISHES BG GROUP INSURANCE PHILOSOPHY AND RESPONSIBILITIES WHICH APPLIES TO ALL DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 36 LOCATIONS OF BG GROUP INCLUDING BGEPIL - FPOGE 293 TO 305 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) C. A GUIDELINE DATED DECEMBER 2009 WHICH CONFIRMS THE PROCEDURE ADOPTED BY THE BG D. GROUP INSURANCE TEAM FOR THE APPOINTMENT OF A PROJECT - SPECIFIC INSURANCE BROKER LEADING TO THE PURCHASE OF INSURANCE AND SERVICING OF THE INSURANCE NEEDS, INCLUDING C LAIMS {1MB - CLAIMS HANDLING MAY BE SUBJECT TO SEPARATE CONTRACT). THE DOCUMENT ALSO ADDRESSES THE PROCEDURE ADOPTED FOR THE RELATIVELY LIMITED DIRECT APPROACHES MADE TO INSURERS WITHOUT THE USE OF BROKERS. (PAGE 306 TO 311 OF VOLUME 3 OF THE ADDITIONAL EVI DENCE PAPERBOOK) \ E. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAINING TO RENEWAL OF VARIOUS INSURANCE COVERAGESFPOGE 312 TO F. 364 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) G. E - MAIL CORRESPONDENCES EV IDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAINING TO RENEWAL PREMIUM CALCULATION FOR 2010 BGEPIL (POGE 365 TO 367 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) H. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL I N RELATION TO INSURANCE ISSUES PERTAINING TO FORECAST GUIDELINES ON INSURANCE ASSUMPTIONSFPOGE 36S TO 371 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) I. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAIN ING TO BGEPIL - OPERATIONAL INSURANCE RENEWAL 2009/LOFPOGE 372 TO 372 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) . .. J. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAINING TO RENEWAL OF VARIOUS INSURANCE COVERAGESFPOGE 373 TO 374 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) K. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RE CEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAINING TO RENEWAL OF INSURANCE 2010FPOGE 375 TO 377 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK} L. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAINI NG TO PREMIUM PAID INCLUSIVE OF TAX(POGE 378 TO 378 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) M. E - MAIL CORRESPONDENCES EVIDENCING SUPPORT RECEIVED FROM BGIL IN RELATION TO INSURANCE ISSUES PERTAINING TO A POTENTIAL LEAK WHICH HAS BEEN DETECTED FROM B G HSSE REPORT AND WHETHER ANY DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 37 ADVICE TO INSURERS IS REQUIRED FOR THE SAME. (PAGE 379 TO 379 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK} N. A FUNCTIONAL CAREER LADDER OR A JOB DESCRIPTION RESPONSIBILITY MATRIX IN RELATION TO INSURANCE WHICH SUMMARIZES PO SITION / DESIGNATION, REQUISITE SKILL SET REQUIRED, KEY ACCOUNTABILITY ETC. (PAGE 380 TO 380 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK} O. TERMS OF PERSONAL ACCIDENT INSURANCE SCHEME PROVIDED TO BG GROUP EMPLOYEES WHICH MENTIONS BENEFIT FOR EMPLOYEES, NON - EMPLOYEES, GUIDANCE FOR CLAIMS, EXCLUSIONS IF ANY, ETC.(PAGE 381 TO 382 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) P. SAMPLE COPY OF INTER COMPANY DEBIT NOTES RAISED BY BGIL ON BGEPIL IN RELATION TO MISCELLANEOUS EXPENSES WHICH SUMMARIZES VARIOUS A CTIVITIES UNDERTAKEN BY BGIL FOR WHICH COST IS CHARGED. (PAGE 383 TO 417 OF VOLUME 3 OF THE ADDITIONAL EVIDENCE PAPERBOOK) IV. BENEFITS DERIVED SUPPORT ON DEPLOYMENT OF GLOBALLY MOBILE EXPATRIATE STAFF : ASSESSEE LEVERAGES ON THE SERVICES OF BGIL'S HR TEAM FOR OBTAINING STAFFING RESOURCE AND EXPERTISE OF THE WIDER GROUP THEREBY SAVING ON THE RECRUITMENT COSTS INCLUDING FEES PAYABLE TO SEARCH FIRMS AND HEAD HUNTERS. ASSESSEE'S STAFF PARTICIPATES IN GROUP WIDE COMPENSATION INITIATIVES THEREBY ENABLING AS SESSEE TO BE INCENTIVE BETTER AND ON A MORE COST EFFICIENT BASIS (AS THE ASSESSEE NEED NOT INVESTIGATE AND IMPLEMENT ITS OWN SEPARATELY DESIGNED COMPENSATION AND REWARDS SCHEMES) CAPABILITY BUILDING OF THE ASSESSEE'S WORKFORCE BY MANAGING THEIR INTERNATION AL MOVEMENT TO OTHER BUSINESS UNITS WITHIN BG GROUP, ACCOUNTING AND TAXATION SUPPORT FINANCIAL SYSTEMS AND ANALYSIS - CONSISTENCY OF REPORTING AND SECURITY OF DATA OF THE ASSESSE. RECEIVED TRAINING AND OTHER ADVICE ON THE USE OF SAP AND OTHER FINANCIAL SYSTEMS. FINANCIAL TECHNICAL ACCOUNTING AND ASSURANCE SUPPORT * ASSESSEE BEING A PROJECT OFFICE OF A FOREIGN COMPANY IS REQUIRED TO FOLLOW INTERNATIONAL ACCOUNTING STANDARDS. ASSESSEE'S PERSONNEL ARE TRAINED TO KEEP PACE WITH THE RECENT DEVELOPMENTS IN THE INTERNATIONAL ARENA. TECHNICAL ACCOUNTING ISSUES OF THE ASSESSEE ARE RESOLVED BY BGIL DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 38 FINANCIAL REPORTING : SAVINGS IN TIME AND COST BY USING A SHARED OVERALL GROUP FINANCE REPORTING SYSTEM. MANAGEMENT REPORTING SAVINGS IN TIME AND COST. ! ASSISTANCE ON LOCAL TAXATION ISSUES ONGOING ASSISTANCE ON INTERNATIONAL TAXATION MATTERS AND UPDATE ON DEVELOPMENTS IN THE INTERNATIONAL ARENA (EXTREMELY CRUCIAL FOR THE ASSESSEE SINCE IT IS A PROJECT OFFICE OF THE FOREIGN ENTITY IN INDIA). INSURANCE SUPPORT CENTRAL INSURANCE MANAGEMENT TEAM MANAGES INSURANCE FOR THE GROUP AS A WHOLE THEREBY REDUCING THE OVERALL RISK AND COSTS AND ENJOYING ECONOMIES OF SCALE REMOVES NECESSITY TO EMP LOY A FULL TIME INSURANCE SPECIALIST - REDUCTION IN DOWNTIME AND IDLE TIME COST. ACCESS TO MORE EXPERIENCED AND SKILLED INSURANCE SPECIALIST D. FEDERAL GREEN RECHARGE DESCRIPTION OF SERVICES RECEIVED THE ASSESSEE IS PROVIDED WITH GUIDELINES IN RELATION TO BEST PRACTICES, E&A BUDGET MANAGEMENT E&A BUDGET PLANNING, PEER NETWORKS, PARENTING & RESOURCING, TRAININGS ETC. IN RELATION TO EXPLORATION, DEVELOPMENTS, OPERATIONS, HEALTH SAFETY SECURITY ENVIRON MENT ('HSSE'), PROJECTS ETC. TO ENSURE SMOOTH AND EFFICIENT FUNCTIONING. THE AFORESAID SERVICES ARE ALSO IN RELATION TO DEVELOPMENT OF C&P INFRASTRUCTURE C&P SYSTEMS STRATEGY, CONTRACTOR RELATIONSHIP MANAGEMENT, MARKET INTELLIGENCE, PROCON - ENHANCEMENT, SAP WAVE, PARENTING, AND PROJECT MANAGEMENT ETC. VARIOUS ASSETS (INCLUDING THE ASSESSEE) AGREE TO PARTICIPATE IN COMMON FEDERAL GREEN PROJECTS ON ISSUES THAT AFFECT THEM ON A COMMON BASIS SO THAT THE PROJECT STUDIES CAN SERVE AS VALUABLE INPUTS IN THEIR EXPLO RATION AND PRODUCTION EFFORTS. WHENEVER, THE STUDIES ARE COMMISSIONED BY VARIOUS ASSETS, THE COSTS ARE SHARED BETWEEN THEM AND WHENEVER THE STUDY OR PROJECT IS COMMISSIONED ONLY BY THE ASSESSEE, THE CHARGES ARE BASED ON NUMBER OF HOURS SPENT BY THE EXPERTS OF THE ASSOCIATED ENTERPRISE. II. EVIDENCE FILED BEFORE THE TPO (FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON MAY 6,2014 DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 39 (A) BG GROUP HSSE INCIDENT REVIEW PANEL REPORT SUMMARIZING PERFORMANCE ANALYSIS (PAGE 75TO 75OF VOLUME VA OF PAPERBOOK) (B) A REPORT ON ASSET INTEGRITY PROGRAMME BY THE OFFSHORE DIVISION OF HSE'S HAZARDOUS INSTALLATIONS DIVISION (PAGE 76 TO 147 OF VOLUME VA OF PAPERBOOK) (C) POWERPOINT PRESENTATION SUMMARIZING THE EGYPTIAN LNG'S ASSET INTEGRITY JOURNEY OF EXCELLENCEFPOGE 148 TO 152 OF VOLUME VA OFPAPERBOOK) (D) HSSE INCIDENT REVIEW REPORT FOR THE MONTH OF JUNE 2QQB(PAGES 153TO 181OF VOLUME VA OFPAPERBOOK (E) HSSE REPORT FOR ALL THE FOUR QUARTERS OF FY 2QQ9 - LQ(PAGE 182 TO 228 OF VOLUME VA OF PAPERBOOK) _ (F) THE ALLOCATION OF T HE TECHNOLOGY EXPENSES HAVE BEEN MADE ON COST TO COST BASIS. EVIDENCE THAT ALLOCATION IS ON COST TO COST IS IN FORM OF GLOBAL COST ALLOCATION POLICY (PAGES 773TO 788OF VOLUME IV OFPAPERBOOK) CERTIFIED BY PRICE WATERHOUSE COOPERS VIDE THEIR REPORT. (PAGES 7 89TO 826OF VOLUME IV OF PAPERBOOK) (G) IN ADDITION, REPORT OF THE INDEPENDENT CONSULTANT CERTIFYING THE COST ALLOCATION METHODOLOGY FOR THE YEAR 2009 IS ALSO PROVIDED. (PAGES 773 TO 853OF VOLUME IV OF PAPERBOOK) (H) INTERCOMPANY DEBIT NOTES WITH DETAILS OF TIME WRITING I.E. NAMES OF SUCH PEOPLE AND HOURS BOOKED BY THEM (PAGES 3 TO 48 OF VOLUME VII OFPAPERBOOK) I. III. ADDITIONAL EVIDENCE FILED BEFORE LD. DRP ONNOVEMBER 7, 2014 (A) DETAILED DESCRIPTION OF THE ACTIVITIES UNDERTAKEN FOR FEDERAL RECHARG E (PAGE 1 TO 7 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (B) A STANDARD GUIDANCE NOTE ISSUED ON DECEMBER 2009 IN RELATION TO FLOATING PRODUCTION, STORAGE AND OFFLOADING SYSTEMS (FLNG)WHICH SETS OUT MANDATORY COMPANY REQUIREMENTS FOR THE DESIGN AND CONSTRUCTION OF MONOHULL (SHIP - SHAPED) NEW BUILD FLNG FACILITIES WORLDWIDE. (PAGE 8 TO 63 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (C) GUIDELINE ISSUED ON JULY 2009 ON MATERIAL SELECTION & CORROSION CONTROLWHICH DEFINES THE MINIMUM COMPANY REQUIREMENTS FOR SELECTING MATERIALS OF CONSTRUCTION AND CORROSION CONTROL MEASURES TO SUPPORT THE CORROSION MANAGEMENT STRATEGY FOR A DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 40 FACILITYFPAGE 64 TO 127 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (D) A GUIDELINE I SSUED ON JULY 2009 ON FABRICATION OF EQUIPMENT AND PIPING WHICH DEFINES MINIMUM COMPANY REQUIREMENTS FOR THE FABRICATION, JOINING, INSPECTION AND TESTING OF METALLIC AND NON - METALLIC STRUCTURES (INCLUDING OFFSHORE JACKETS, TRESTLES ETC.), STATIC EQUIPMENT (INCLUDING PRESSURE VESSELS, TANKS, BOILERS, FURNACES, SUB - SEA MANIFOLDS, MACHINERY AND VALVE CASINGS), PIPING SYSTEMS AND PIPELINES (INCLUDING FLOW LINES, TRUNK LINES AND R \ SERS)(PAGE 128 TO 171 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (E) A GUID ANCE NOTE ISSUED ON FEBRUARY 2010 PREPARED BY BGIL TO DEFINE BG'S OPERATING POLICY AND PROCEDURES FOR THE SAFE ISOLATION, AND REVASFTATEICA&ICVT O JPW \ FROM SOURCES OF HYDROCARBONS AND OTHER FLUIDS.THIS DOCUMENT APPLIES TO THE PREPARATION FOR MECHANICAL ISOLATION, REINSTATEMENT AND LEAK TESTING OF PROCESS UTILITY AND DRILLING SYSTEMS. IT SHOULD BE FOLLOWED AT ALL BG OPERATED SITES, BOTH ONSHORE AND OFFSHORE, AND APPLIES TO ALL PROCESS SYSTEMS INCLUDING SUBSEA PIPELINES.FOGE 172 TO 226 OF V OLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (F) A HANDBOOK ISSUED ON FEBRUARY 2010 BY BGIL ON OPERATION GUIDELINE ON SAFE ISOLATION AND REINSTATEMENT OF PLANT WHICH FORMS PART OF THE BG GROUP OPERATIONS REQUIREMENTS FOR ALL GLOBAL ASSETS.(PAGE 227 TO 29 9 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (G) A SLIDE DECK ISSUED ON DECEMBER 2009 PREPARED BY BGIL ON PROJECT & WELL ACCOUNTING WHEREIN THE OVERVIEW AND STATISTICS OF BG GROUP ASSETS INCLUDING BGEPIL CAPEX FRAMEWORK, KEY PROJECTS & PLANS, PROJE CT ACCOUNTANT ROLE, INTERACTION WITH PMT & WELL ENGINEERS, WELL RECONCILIATION, REPORTS ETC. ARE SUMMARIZED. (PAGE 300 TO 347 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) . (H) A GRAPHICAL CHART SUMMARIZING BG GROUP FINANCE HSSE SCHEDULE FOR 2009 WHICH SUMMARIZING VARIOUS FEDGREEN ACTIVITIES DURING THE PERIOD/PAGE 348 TO 348 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) . (I) SNAPSHOTS OF ACCESS TO INTRANET PORTAL AS WELL AS INFORMATION IN RELATION TO FOLLOWING FEDGREEN ACT IVITIESFPAGE 349 TO 356 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 41 A. HSSE B. HEALTH RISK MANAGEMENT . C. EXPLORATION ACTIVITY D. DEVELOPMENT ACTIVITY E. POLICIES F. GROUP OPERATING MODE G. ASSET INTEGRITY H. CONTRACTS & PROCUREMENT ACTIVITY I. PRODUCTION & OPERATIONS ACTIVITY J. CORPORATE RESERVES ETC. (J) A GRAPHICAL REPRESENTATION OF COMBINED OPERATIONS SAFETY CASE PREPARED BY BG INTERNATIONAL ARMADA DEVELOPMENT WHICH GIVES GUIDELINES OF OPERATION SAFETY CA SE WHICH CAN BE UNDERTAKEN BY OTHER GROUP ENTITIES. PAGE 357 TO 361 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (K) A GUIDANCE NOTE ISSUED BY BGIL FOR EFFECTIVE ENVIRONMENTAL MANAGEMENT WHICH DELIVERS AND PROTECTS BUSINESS VALUE THROUGHOUT THE LIFEC YCLE OF AN ASSET AND REDUCES TO AS LOW AS PRACTICABLE IMPACTS AND RISKS RELATED TO THE NATURAL ENVIRONMENT. CPAGE 362 TO 411 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) ' (I) A GUIDELINE ISSUED BY BGIL ON THE SAFETY CASE, WHICH IS THE MEANS OF BO TH ENSURING AND DEMONSTRATING THAT SUITABLE AND SUFFICIENT MEASURES ARE IN PLACE TO PREVENT A MAJOR ACCIDENT OR ENVIRONMENTAL EVENT, AND TO REDUCE THE EFFECTS OF THESE EVENTS SHOULD THEY OCCUR. FPAGE 412 TO 449 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERB OOK) (M) A DOCUMENT OF BGIL WHICH PROVIDES THE DEFINITION AND GUIDANCE ON THE LAYOUT & CONTENT OF A SAFETY CASE FOR COMBINED OFFSHORE OPERATIONS. IT ENABLES SUCH SAFETY CASES TO BE PREPARED CONSISTENT WITH THE REQUIREMENTS OF THE BG GROUP STANDARD. (PAGE 45 1 TO 482 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (N) A STANDARD ISSUED BY BGIL ON INCIDENT REPORTING AND INVESTIGATION WHICH SETS OUT PROCEDURES FOR ESTABLISHING REPORTING AND INVESTIGATION PROCESSES, REPORTING AND INVESTIGATION OF INCIDENTS AND SUBSEQUENT LEARNING FROM INCIDENTS. PAGE 483 TO 490 OF VOLUME 4 OF THE ADDITIONAL EVIDENCE PAPERBOOK) IV. BENEFITS DERIVED DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 42 THE AFORESAID SERVICES PROVIDE THE ASSESSEE WITH ACCESS TO EVER - EVOLVING TECHNICAL STANDARDS AND GUIDELINES THAT HELPS IN ACHIEVING HIGHER LEVEL OF EFFICIENCY AND SAFETY. THIS LE ADS TO IMPROVEMENT IN PROCESSES BY GAINING ACCESS TO WORKFLOW MANUALS. THE DIRECT BENEFITS ARE AS BELOW: A) IMPROVED PROCESSES / FUNCTIONAL MANAGEMENT SYSTEMS ETC. ' B) DEVELOPMENT AND SUSTAINING NETWORKS AMONGST FUNCTIONAL PEER GROUPS. UNDERTAKING F UNCTIONAL CONFERENCES, TECHNICAL WORKSHOPS, TELECONFERENCES ETC. SUPPORT IN TECHNICAL PROBLEM SOLVING. , ! ; ' ' ' C) DEVELOPING & DELIVERING TECHNICAL AND FUNCTIONAL TRAINING. D) SUPPORT IN RELATION TO DEVELOPMENT OF GOVERNANCE AND ASSURANCE PRINCIPLES. E) REDUCTION IN EXPOSURE TO POTENTIAL MAJOR INCIDENT DUE TO INTEGRITY FAILURE F) REDUCED RISKS OF DAMAGE, LOSS OF PRODUCTION OR LOSS OF REVENUE G) REDUCED RISKS TO THE ENVIRONMENT ETC. E. MANAGEMENT AND UNIT RECHARGES - TECHNOLOGY RECHARGE I. DESCRIPTION O F SERVICES RECEIVED REPRESENTS COSTS INCURRED BY BGIL TO RUN TECHNOLOGY PROGRAMMES FOR IDENTIFICATION, DEVELOPMENT AND IMPLEMENTATION OF NEW AND ENHANCED TECHNIQUES TO THE EXISTING EXPLORATION AND PRODUCTION OPERATIONS IN ORDER TO ADDRESS THE TECHNOLOGICAL CHALLENGES FACED BY THE ASSESSEE IN FOLLOWING AREAS: - STRUCTURAL GEOLOGY - WELL ENGINEERING - PRODUCTIONS OPERATIONS TECHNOLOGY - BOREHOLE GEOPHYSICS - GEOLOGY TECHNOLOGY MANAGEMENT - GEOPHYSICS TECHNOLOGY WATCH I MANAGEMENT - PETRO PHYSICS TECHNOLOGY PROGRAM - TRANSMISSION AND DISTRIBUTION - COMMERCIAL ; DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 43 IN RELATION TO STRUCTURAL GEOLOGY AND PETRO PHYSICS TECHNOLOGY PROGR AM, BGIL FINANCIALLY SUPPORTS RESEARCH ACTIVITIES CONDUCTED BY VARIOUS INDEPENDENT THIRD PARTY UNIVERSITIES AND ORGANIZATIONS. II. EVIDENCE FILED BEFORE THE TPO (FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON MAY 6,2014) - (A) MANUAL DESCRIBING THE TECHNOLOGY PROGRAMMES PROPOSED TO BE UNDERTAKEN BY BGIL WHICH EVIDENCES THE ACTIVITIES THAT HAS BEEN UNDERTAKEN, THE COST INVOLVED, THE BENEFITS DERIVED BY THE BSSELSFPAGES 268 TO 534 OF VOLUME VA OF PAPERBOOK) (B) TECHNOLOGY BULLETI N FOR GROUP TECHNOLOGY STRATEGYFPOGES 237 TO 265 OF VOLUME VA OF, PAPERBOOK) (C) SNAPSHOTS OF VARIOUS PORTALS IN RELATION TO TECHNOLOGY RECHARGE (PAGES 230 TO 236 OF VOLUME VA OFPAPERBOOK) (I) T HE ALLOCATION OF THE TECHNOLOGY EXPENSES HAVE BEEN MADE ON C OST TO COST BASIS. EVIDENCE THAT ALLOCATION IS ON COST TO COST IS IN FORM OF GLOBAL COST ALLOCATION POLICY (PAGES 773 TO 788 OF VOLUME IV OF PAPERBOOK) CERTIFIED BY PRICE WATERHOUSE COOPERS VIDE THEIR REPORT. (PAGES 789 TO 826 OF VOLUME IV OF PAPERBOOK) ( D) IN ADDITION, REPORT OF THE INDEPENDENT CONSULTANT CERTIFYING THE COST ALLOCATION METHODOLOGY FOR THE YEAR 2009 IS ALSO PROVIDED. (PAGES 853 TO 297 OF VOLUME IV OF PAPERBOOK) ; : III. ADDITIONAL EVIDENCE FILED BEFORE LD. DRP ONLMOVEMBER 7, 2014 (A) A REPORT OF BGIL ON 2009 TECHNOLOGY PROGRAM TO IDENTIFY, DEVELOP AND IMPLEMENT NEW AND ENHANCED TECHNIQUES AND CAPABILITIES TO THE BENEFIT OF BG ASSET CHALLENGES.{PAGE 1 TO 54 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (B) A DOCUMENT OF BGIL ON 2 009 TECHNOLOGY PROGRAM WHICH PROVIDES VARIOUS PROJECT DEFINITIONS ON PROJECTS SUCH AS GEOLOGY, GEOPHYSICS, PETROPHYSICS, RESERVOIR ENGINEERING, ETC.FPAGE 55 TO 124 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (C) A MANUAL ISSUED ON JUNE 2009 ON DATA ROOM VISIT GUIDELINE ISSUED BY BGIL WHICH PROVIDES GUIDELINES/CHECKLISTS FOR KEY DISCIPLINES INVOLVED IN THE EVALUATION OF DATA PROVIDED IN A 'DATAROOM'. THE DATAROOM IS A KEY OPPORTUNITY TO ASSIST BG IN THE EVALUATION OF AN OPPORTUNITY AND IN ORDER TO MAN AGE THE RISKS ASSOCIATED WITH A BUSINESS DECISION. (PAGE 125 TO 152 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 44 (D) A GUIDELINE ISSUED ON JULY 2009 ON METERING ISSUED BY BGIL WHICH PROVIDES GUIDANCE AND INSTRUCTION WHICH OUTLINES BEST PRACTICE APPROACHES TO BE FOLLOWED WHEN PROVIDING NEW METERING OR MEASUREMENT SYSTEMS OR UPGRADING EXISTING SYSTEMS.FPAGE 153 TO OF VOLUM E 187 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (E) A GUIDELINE ISSUED ON OCT 2009 ON HUMAN MACHINE INTERFACES ISSUED BY BGIL WHICH DISPLAYS NEED TO BE AT THEIR MOST EFFECTIVE DURING ABNORMAL OPERATION WHEN THE OPERATOR IS UNDER MOST STRESS, AND THE CONSEQUEN CES OF ERROR ARE HIGHEST. THIS DOCUMENT PROVIDES BEST PRACTICE GUIDANCE IN THE DESIGN OF OPERATOR INTERFACES.(PCRSFE 188 TO 214 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK} (F) A GUIDELINE ISSUED ON JULY 2009 ON HOT TAPPING ON PIPELINES, PIPING AND A SSOCIATED EQUIPMENT ISSUED BY BGIL WHICH DEFINES THE MINIMUM COMPANY REQUIREMENTS FOR SAFE HOT TAPPING OPERATIONS. (PAGE 215 TO 236 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK} (G) A GUIDELINE ISSUED ON DECEMBER 2009 ON ENGINEERING TECHNICAL STANDARD - RELIEF, BLCWDOWN& FLARING ISSUED BY BGIL WHICH SETS OUT MANDATORY COMPANY REQUIREMENTS FOR THE DESIGN OF RELIEF, BLOWDOWN AND FLARING FACILITIES FOR OFFSHORE AND ONSHORE ASSETS FOR BOTH NEW 'GREEN FIELD' DEVELOPMENTS AND 'BROWN FIELD' MODIFICATIONS. (PAGE 237 TO 259 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (H) A GUIDELINE ISSUED ON AUG 2009 ON SUPPLY BASE ISSUED BY BGIL WHICH CAPTURES THE FIRST DRAFT IN PROVIDING GUIDELINES FOR SUPPLY BASE INFRASTRUCTURE DEVELOPMENT, MANAGEMENT AND OPERATION. (PAG E 260 TO 336 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (I) A GUIDELINE ISSUED ON DECEMBER 2009 ON APPLICATION OF PROCESS ISOLATIONS ISSUED BY BGIL WHICH IS PROVIDED TO CONTROLS AND PROCEDURES WHERE PROCESS ISOLATIONS ARE UNDERTAKEN AND WILL BE US ED AS THE BASIS OF ANY ASSESSMENT OR ASSURANCE ACTIVITY RELATING TO ITS SUBJECT MATTER.FPOGE 337 TO 356 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (J) A GUIDELINE ISSUED ON JULY 2009 ON FIELD DEVELOPMENT ENGINEERING PREPARED BY BGIL WHICH PRESENTS A PHILOSOPHY FOR DEVELOPMENT ENGINEERING AND PROVIDES GUIDANCE FOR INTEGRATING DEVELOPMENT AND ENGINEERING WORK STREAMS IN ORDER THAT ROBUST CONCEPTS ARE PRODUCED. (PAGE 357 TO 392 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 45 (K) SNAPSHOTS OF ACCESS TO INTRANET PORTAL AS WELL AS INFORMATION IN RELATION TO TECHNOLOGY RECHARGE ACTIVITIES WHICH ARE PROVIDED BELOWFPAGE 393 TO 399 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK): A. POLICY B. ENGINEERING ACTIVITIES C. GROUP WELL RISK MANAGEMENT ACTIVITIES (L) A GUIDELINE ISSUED ON AUG 2009 ON TEMPORARY REPAIR OF PIPING SYSTEMS ISSUED BY BGIL WHICH IS INTENDED TO PROVIDE GUIDANCE ON THE DIFFERENT TYPES OF TEMPORARY REPAIRS/JOINTS THAT ARE TO BE UTILISED DURI NG AN UNPLANNED REPAIR TO A PROCESS OR UTILITY SYSTEM. (PAGE 400 TO 419 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK) (M) ICDNS WITH DETAILS OF NATURE OF EXPENSES AND THE COSTS ASSOCIATED UNDER EACH SUCH EXPENSE HEAD.(PAGE 420 TO 431 OF VOLUME 5 OF THE ADDITIONAL EVIDENCE PAPERBOOK} F. PAYROLL EXPENSES I. DESCRIPTION OF SERVICES RECEIVED I BGIL HAS DEPUTED ITS EMPLOYEES TO THE VARIOUS PROJECTS OF THE ASSESSEE IN INDIA. THE SAID EMPLOYEES HAVE, HOWEVER, WORKED UNDER THE DIRECT CONTROL AND SUPER VISION OF THE ASSESSEE. BGIL HAS NOT RENDERED ANY OTHER SERVICE TO THE ASSESSEE IN THIS REGARD EXCEPT FACILITATING THE PAYMENT OF SALARY TO ITS ABOVE EMPLOYEES. THE ASSESSEE HAS REIMBURSED THE SALARY OF SUCH PERSONNEL TO BGIL ON A COST - TO - COST BASIS. II. EVIDENCE FILED BEFORE THE TPO (FORMING PART OF PAPER - BOOK FILED WITH FORM 35A ON MAY 6, 2014 A) WORKSHEET CONTAINING NAMES AND JOB RESPONSIBILITIES OF THE EXPATRIATES SECONDED TO BGEPIL (PAGE 3 OF VOLUME III OF THE PAPERBOOK) B) SAMPLE COPIES OF TAX RETURNS FILED BY THE EMPLOYEESFPCRGE 4 TO 267 OF VOLUME III OF THE PAPERBOOK) C) SAMPLE COPIES OF DEBIT NOTES RAISED BY BGIL ON THE ASSESSEE, ETC. (PAGE 268 TO 291 OF VOLUME III OF THE PAPERBOOK) D) LETTERS OF SECONDMENT ISSUED BY BGIL (PAGE 292TO 309 OF VOLUME III OF THE PAPERBOOK) DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 46 4.6 FROM THE ABOVE EVIDENCE, DRP IS OF THE VIEW THAT THE ASSESSEE HAS ESTABLISHED THE FACT THAT IT HAS RPRPIVPDTHP_5EN/ICP<: AND IT IS A USEFUL SERVICE WHICH IT HAS RECEIVED. THE NEXT QUESTION BEFORE THE DRP IS WHETHER ASSESSEE HAD TO ESTABLISH THE ARM'S LENGTH NATURE OF EACH AND EVERY TRANSACTION SEPARATELY OR IT WAS AVAILABLE TO THE ASSESSEE TO CLUB THE TRANSACTION TOGETHER. DRP HAS CONSIDERED THIS ISSUE OF SEPARATE BENCHMARKING NF THP INTERN ATIONAL TRANSACTIPN CAREFULLY. THE INCOME TAX ACT AND RULES PROVIDE FOR CLUBBING OF TRANSACTIONS WHEN A CLASS OF TRANSACTIONS ARE INVOLVED. THE RELEVANT PART OF THE SECTION/ RULE IS REPRODUCED BELOW: SECTION 92C. (1) THE ARM'S LENGTH PRICE IN RELATION TO A N INTERNATIONAL TRANSACTION [OR SPECIFIED DOMESTIC TRANSACTION] SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING THE MOST APPROPRIATE METHOD, HAVING REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTION OR CLASS OF ASSOCIATED PERSONS OR FU NCTIONS PERFORMED BY SUCH PERSONS OR SUCH OTHER RELEVANT FACTORS AS THE BOARD MAY PRESCRIBE , NAMELY : ....... RULE 10C. (1) FOR THE PURPOSES OF SUB - SECTION (1) OF SECTION 92C, THE MOST APPROPRIATE METHOD SHALL BE THE METHOD WHICH IS BEST SUITED TO THE FAC TS AND CIRCUMSTANCES OF EACH PARTICULAR INTERNATIONAL TRANSACTION, AND WHICH PROVIDES THE MOST RELIABLE MEASURE OF AN ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION. (2) IN SELECTING THE MOST APPROPRIATE METHOD AS SPECIFIED IN SUB - RULE (1) , THE FOLLOWING FACTORS SHALL BE TAKEN INTO ACCOUNT NAMELY: ,+.' . . : ' (A) THE NATURE AND CLASS OF THE INTERNATIONAL TRANSACTION; RULE 10D . (1) EVERY PERSON WHO HAS ENTERED INTO AN INTERNATIONAL TRANSACTION SHALL KEEP AND MAINTAIN THE FOLLOWING INFORMATION AND DOCUMENTS, NAMELY: (D) HE NATURE AND TERMS (INCLUDING PRICES) OF INTERNATIONAL TRANSACTIONS ENTERED INTO WITH EACH ASSOCIATED ENTERPRISE, DETAILS OF PROPERTY TRANSFERRED OR SERVICES PROVIDED AND THE QUANTUM AND THE VALUE OF EACH SUCH TRANSACTION OR CLASS OF SUCH TRANSACTION: (/) A DESCRIPTION OF THE METHODS CONSIDERED FOR DETERMINING THE ARM'S LENGTH PRICE IN RELATION TO EACH INTERNATIONAL TRANSACTION OR CLASS OF TRANSACTION, THE METHOD SELECTED AS THE MOST APPROPRIATE METHOD ALONG WITH EXPLANATIONS AS TO WHY SUCH METHOD WAS SO S ELECTED, AND HOW SUCH METHOD WAS APPLIED IN EACH CASE; DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 47 FROM THE READING OF THE ABOVE SECTION/ RULES, IT IS CLEAR THAT WHEN THE TRANSACTIONS ARE CLOSELY INTERRELATED, IT IS BUT NATURAL TO CLUB SUCH TRANSACTIONS AND BENCHMARK IT TOGETHER. THE JUSTIFICATION GIVEN BY THE ASSESSEE IN THIS REGARD IS WORTH CONSIDERING. 'THE INTERNATIONAL TRANSACTIONS PERTAINING TO INTRA - GROUP SERVICES RECEIVED BY THE ASSESSEE (I.E. MSU CHARGES, INCLUDING FEDERAL GREEN AND TECHNOLOGY RECHARGE, G&A CHARGES, IM AND OTHER TIME WRITIN G SERVICES, PERSONNEL SERVICES AND JOINT ACQUISITION AND DEVELOPMENT OF IT INFRASTRUCTURE AND SOFTWARE} HAVE BEEN AGGREGATED AND BENCHMARKED ON A WHOLE ENTITY LEVEL USING TRANSACTIONAL NET MARGIN METHOD (TNMM'), SINCE SUCH TRANSACTIONS ARE CLOSELY LINKED T O THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE OF EXPLORATION AND PRODUCTION OF OIL AND GAS. FURTHER, PARA 4.2.1 OF THE TP STUDY REPORT (PAGE 268 TO 269 OF VOLUME II OF PAPERBOOK) SPECIFICALLY PROVIDES THE REASONS FOR REJECTION OF THE OTHER FOUR METHODS. SP ECIFIC REASONS RECORDED FOR REJECTION OF THE CUP METHOD ARE SUMMARIZED BELOW: THE ASSESSEE RECEIVES SERVICES FROM ITS AE AND DOES NOT RECEIVE THE SAME SERVICES DIRECTLY FROM ANY UNRELATED PARTIES IN INDIA OR OVERSEAS; THE AE DOES NOT PROVIDE S UCH SERVICES TO ANY UNRELATED PARTY IN INDIA; AND NO PUBLIC INFORMATION IS AVAILABLE WITH REGARD TO THE PRICE PAID FOR SIMILAR SERVICES, AS WOULD BE RENDERED BETWEEN UNRELATED PARTIES. CONSIDERING THE FUNCTIONAL AND RISK PROFILE OF THE INTRA - GROUP SE RVICES RECEIVED AND THE AVAILABILITY AND RELIABILITY OF COMPARABLE DATA, TNMM USING NET OPERATING PROFIT MARGIN ON SALES ('NPM') AS THE PROFIT LEVEL INDICATOR, WAS SELECTED TO BE THE MOST APPROPRIATE METHOD. A SEARCH FOR BROADLY COMPARABLE COMPANIES THAT P ERFORM SIMILAR FUNCTIONS AND CARRY RISK PROFILE SIMILAR TO THAT OF ASSESSEE IN RESPECT OF ITS OIL AND GAS EXPLORATION AND PRODUCTION FUNCTION WAS CONDUCTED. THE SEARCH PROCESS YIELDED A SET OF 9 COMPANIES THAT ARE BROADLY COMPARABLE TO THE FUNCTIONAL PROFI LE OF ASSESSEE'S OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES. FOR THE YEAR ENDED 31 ST MARCH 2010, THE ASSESSEE HAS EARNED AN NPM OF 48.71 PERCENT WITH RESPECT ITS OIL AND GAS EXPLORATION DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 48 AND PRODUCTION ACTIVITIES. THE NPM EARNED BY ASSESSEE BEING HIGHER THAN THE AVERAGE NPM OF COMPARABLE COMPANIES, IT HAS BEEN CONCLUDED THAT THE ASSESSEE'S INTERNATIONAL TRANSACTION OF RECEIPT OF INTRA - GROUP SERVICES FROM ITS AE, IS ON AN ARM'S LENGTH BASIS. FURTHER, IN SUPPORT OF ITS CLAIM THAT THE INTRA - GROUP SERVICES RECEIVED FROM ITS AE ARE 'CLOSELY' LINKED TO THE MAIN BUSINESS ACTIVITY OF THE COMPANY I.E. EXPLORATION AND EXTRACTION OF OIL AND GAS, THE ASSESSEE ALSO PLACED RELIANCE UPON THE US REGULATIONS, OECD REGULATIONS AND OECD DRAFT NOTES ON COMPARABILITY (SUBMISSION DATED 9 TH JANUARY 2014}' IN VIEW OF THE ABOVE, DRP HOLDS THAT TNMM WAS THE MOST APPROPRIATE METHOD IN THIS CASE AND ASSESSEE WAS JUSTIFIED IN OBTAINING THE SERVICES AS MENTIONED IN THE EARLIER PARAGRAPHS. THEREFORE, DRP HOLDS THAT THE DETERIORATION OF ARM'S LENGTH PRICE BY THE TPO IN THE INTRA GROUP SERVICES TO THE TUNE OF RS. 332,97,66,244/ - IS ERRONEOUS AND DESERVES TO BE DELETED. [EXTRACTED FROM THE DIRECTIONS OF DRP 9 TABLES EXCLUDED] 72. ON THE EXAMINATION OF THE VOLUMINOUS DETAILS SUBMITTED BY THE ASSESSEE. THE LD. DISPUTE RESOLUTION PANEL HAS COME TO THE CONCLUSION THAT ASSESSEE HAS RECEIVED THE SERVICES AND THOSE SERVICES ARE USEFUL SERVICES.. WITH RESPECT TO THE CLUBBING OF THE TRANSACTION IT WAS HELD THAT WHEN THE TRANSACTIONS ARE CLOSELY INTERRELATED IT IS BUT NATURAL TO CLUB SUCH TRANSACTION AND BENCHMARKED IT TOGETHER. THE LD. DISPUTE RESOLUTION PANEL AT PAGE NO. 30 31, HAS CONSIDERED THE SUSPECT AND AGREED WITH THE CONTENTION OF THE ASSESSEE THAT INTRAGRO UP SERVICES RECEIVED FROM ITS ASSOCIATED ENTERPRISE ARE CLOSELY LINKED TO THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE COMPANY PLACING RELIANCE ON THE US REGULATIONS, OECD REGULATIONS AND OECD DRAFT NOTES ON COMPARABILITY. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY AND NONE WAS POINTED OUT BEFORE US BY THE LD. DEPARTMENTAL REPRESENTATIVE IN THE ORDER OF THE LD. DISPUTE RESOLUTION PANEL . CONSEQUENTLY, AFTER VERIFYING THAT ASSESSEE HAS DEMONSTRATED NEED FOR THOSE SERVICES, BENEFIT DERIVED FROM THOSE SERVICES, EVIDENCE OF RECEIPT OF SUCH SERVICES AND SUBMITTING THAT THOSE SERVICES ARE NEITHER DUPLICATIVE IN NATURE AND NOR ARE SHARE HOLDER ACTIVITIES, THE DRP DIRECTED THE LD. TRANSFER PRICING OFFICER TO DELETE THE ADJUSTMENT PROPOSED WITH RESPECT TO THE INTRAGR OUP SERVICES OF RS. 3329766244/ , DESERVES TO BE UPHELD. THE JUDICIAL PRECEDENTS CITED BEFORE US ALSO SUPPORTS THE VIEW THAT THE NEEDED TEST, THE BENEFIT TEST ARE ALSO REQUIRED TO DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 49 BE VIEWED FROM THE PERSPECTIVE OF A BUSINESSPERSON AND NOT FROM THE PERSPECT IVE OF THE REVENUE. FURTHER, NO EVIDENCES HAVE BEEN LED BEFORE US BY REVENUE STATING THAT THESE SERVICES ARE DUPLICATIVE IN NATURE AND ALSO SERVES ONLY THE INTEREST OF THE SHAREHOLDER. ACCORDING TO THE INFORMATION SUPPLIED BY THE ASSESSEE AND EXAMINED BY T HE LD. DISPUTE RESOLUTION PANEL DOES NOT GIVE ANY SUCH INDICATION. FURTHER REGARDING NON - SHARING OF THE COST BY THE JOINT - VENTURE PARTNERS WE HAVE GIVEN OUR FINDINGS WHILE DECIDING THE APPEAL OF THE ASSESSEE THAT SUCH AN ACTION OF THE JOINT - VENTURE PARTNER S CANNOT BE THE REASON TO DETERMINE THE ARMS LENGTH PRICE OF THE SERVICES WHICH IS BEEN RECEIVED BY THE ASSESSEE AT NIL. IN VIEW OF THIS WE UPHOLD THE FINDING OF THE LD. DISPUTE RESOLUTION PANEL HOLDING THAT TRANSACTIONS OF INTRAGROUP SERVICES ARE INTERLI NKED, THEREFORE, THEY SHOULD BE BENCHMARKED TOGETHER BY ADOPTING TNMM AS THE MOST APPROPRIATE METHOD , HENCE, DIRECTING THE LD. TRANSFER PRICING OFFICER TO DELETE THE ADJUSTMENT PROPOSED OF RS. 3 329766244/ . IN THE RESULT GROUND NO. 1 TO 3 OF THE APPE AL OF THE REVENUE ARE DISMISSED. 8. FOR THE YEAR BEFORE US THE ASSESSEE HAS SUBMITTED 11 PAPAERBOOKS. ACCORDING TO PAPER BOOK NO 5 ASSESSEE HAS DEMONSTRATED THE NATURE OF THE SERVICES IN RELATION TO GENERAL AND ADMINISTRATIVE EXPENSES . IN PAPER BOOK NO 6 ASSESSEE HAS SUBMITTED THE DETAILS OF RECOVERY OF EXPENSES DETAILS OF PAYMENT MADE OF MANAGEMENT UNIT CHARGES BY THE ASSESSEE. PAPER BOOK NO 7 , 8, 10, 11 AND 12 CONTAINS THE DETAILS OF THE BENEFIT RECEIVED BY THE ASSESSEE ON RECEIPT OF SERVICES WIT H RESPECT TO GENERAL AND ADMINISTRATIVE EXPENSES, SHOWING THE TIME SHEETS OF INDIVIDUAL FRO TIME WRITING COST ETC. AND DETAILS OF THIRD PARTY COSTS. PAPER BOOK NO 9 CONTAINS THE DETAILS OF LIST OF APPLICATION TO WHICH THE ASSESSEES EMPLOYEES HAVE ACCESS TO SHOW THAT THE ASSETS ARE USED BY THE ASSESSEE. THE LD DR COULD NOT POINT OUT ON ANY INFIRMITY IN THE ABOVE SUBMISSION OF THE ASSESSEE WITH RESPECT TO SATISFACTION OF NEED, BENEFIT, DUPLICITY, OR SHAREHOLDERS ACTIVITY TEST. WE DO NOT FIND ANY REA SON TO DEVIATE FROM OUR FINDING AS THE FACTS AND CIRCUMSTANCES LEADING TO THE DISPUTE ARE IDENTICAL. IN VIEW OF THIS WE DISMISS GROUND NO. 1, 2 AND 3 OF THE APPEAL OF THE REVENUE. DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 50 9. GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS AGAINST THE DIRECTION OF THE LD . DISPUTE RESOLUTION PANEL TO RESTRICT THE PROPOSED ADJUSTMENT TO RS. 1461247/ - INSTEAD OF RS. 2258422/ ON ACCOUNT OF LOAN TRANSACTION BETWEEN THE ASSESSEE AND M/S BG ASIA - PACIFIC HOLDING LTD . THE BRIEF FACTS OF THE CASE STATED IN PARA NO. 9 OF THE ORDER OF THE LD. TRANSFER PRICING OFFICER WHEREIN A DEMAND OF RS. 18067380/ WAS RAISED ON BG ASIA - PACIFIC HOLDING LTD FOR ASSESSMENT YEAR 2004 05 V IDE ORDER UNDER SECTION 143 (1 ) OF THE INCOME TAX ACT, WHICH WAS ADJUSTED AGAINST THE REFUND OF RS. 18067380/ DUE TO THE ASSESSEE FOR ASSESSMENT YEAR 2005 06 . SUBSEQUENTLY THE CASE OF BG ASIA - PACIFIC HOLDING LTD WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED UNDER SECTION 143 (3) OF THE INCOME TAX AC T AND THE CREDIT OF TAX PAID WAS GI VEN TO THE ASSESSEE, RESULTING INTO NIL TAX DEMAND. THE BG ASIA - PACIFIC HOLDING LTD PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO DIRECT ED THAT THE INTEREST BE CALCULATED AND THUS THE ASSESSMENT WAS REVISED UNDER SECTION 251 OF THE INCOME TAX ACT, R ESULTI NG INTO A REFUND OF RS. 1806 7380/ WHICH WAS ADJUSTED EARLIER. SUBSEQUENTLY, THE REVENUE REFUNDED THE SUM OF RS. 1 806 7380/ BACK TO THE BG ASIA - PACIFIC HOLDING LTD ALONG WITH INT EREST OF RS. 1461247/ - AMOUNTING IN ALL TO RS. 1952 8627/ . RS 18067380/ - WAS RECOVERED BY THE ASSESSEE FROM BG ASIA - PACIFIC HOLDING LTD WHICH WAS EARLIER ADJUSTED FROM THE REFUND OF THE ASSESSEE . THEREFORE APPARENTLY ASSESSEE RECEIVED BACK RS 18067380/ - . THE LD. TRANSFER PRICING OFFICER NOTED THAT THOUGH THE SUM WAS RECOVERED BY REVENUE FROM THE REFUND DUE TO THE ASSESSEE , IT IS A KIN TO LOAN GIVEN BY THE ASSESSEE TO BG ASIA - PACIFIC LTD, WHICH WAS SUBSEQUENTLY REFUNDED WITH INTEREST TO BG ASIA - PACIFIC BY THE REVENUE . THEREFORE, THE LD. TRANSFER PRICING OFFICER HELD THAT INTERES T @ 12.5% AMOUNTING TO RS. 2258422/ SHALL BE CHARGED WHICH IS THE RETURN AN INDEPENDENT ENTITY WOULD EXPECT ON MONEY GIVEN AS LOAN . THEREFORE LD. TRANSFER PRICING OFFICER PROPOSED AN ADJUSTMENT OF RS. 2258422/ . ASSESSEE PREFERRED OBJECTIONS BEFORE THE LD. DISPUTE RESOLUTION PANEL , VIDE PARA NO. 8.3 OF THE DIRECTION , THE LD. TRANSFER PRICING OFFICER WAS DIRECTED TO RESTRICT THE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 51 ADDITION TO RS. 1461247/ WHICH IS ACTUAL INTEREST ALLOWED BY REVENUE TO BG ASIA - PACIF IC LTD .. AGAINST THIS DIRECTION, THE REVENUE IS IN APPEAL. 10. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER/ TRANSFER PRICING OFFICER AND CONTESTED THAT WHEN THE LOAN IS GIVEN BY ASSESSEE TO ITS ASSOCIATED ENT ERPRISE IT IS REQUIRED TO BE BENCHMARKED WITH THE MARKET RATE OF INTEREST AND THE LD. TRANSFER PRICING OFFICER HA S CORRECTLY IT @ 12.5%. 11. THE LD. AUTHORIZED REPRESENTATIVE, VEHEMENTLY SUBMITTED THAT THERE IS NO TRANSACTION AS PER SECTION 92 F ( V) AND THEREFORE THERE IS NO INTERNATIONAL TRANSACTION , WHICH COULD BE BENCHMARKED . HE FURTHER PRESSED INTO SERVICE THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF WHIRLPOOL OF INDIA LTD VERSUS DCIT 381 ITR 154, MARUTI SUZUKI INDIA LTD VERSUS CIT 381 ITR 117 AND HONDA SEIL POWER PRODUCTS LTD VERSUS DCIT 295 CTR 466. THE LD AR STATED THAT IT IS NOT A LOAN TRANSACTION AND THEREFORE CANNOT BE AN INTERNATIONAL TRANSACTION . HE FURTHER REFERRED TO FACT THAT ASSESSEE IN ITS CROSS OBJECTION IS OBJECTI NG EVEN THE AMOUNT UPHELD BY THE DRP ON THIS GROUND. IN THIS REGARD, IT WAS SUBMITTED THAT THE FORCED AND UNAUTHORIZED ADJUSTMENT DONE BY THE ASSESSING OFFICER DOES NOT CONSTRUE AN INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF THE ACT S O AS TO INVOKE THE PROVISIONS OF CHAPTER X. HE REFERRED THAT CLAUSE (V) OF SECTION 92F OF THE ACT DEFINES THE TERM TRANSACTION TO INCLUDE AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERN, WHETHER OR NOT, THE SAME IS FORMAL OR IN WRITING, OR INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDINGS . HE FURTHER SUBMITTED THAT THAT THERE WAS NO UNDERSTANDING OR ARRANGEMENT BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISE IN CONNECTION WITH THE ADJUSTMENT OF REFUND OR GRANTING OF LOAN SO AS TO CONSTRUE THE EXIS TENCE OF A TRANSACTION BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISE . IN THE RESULT, HE SUBMITTED THAT ADJUSTMENT PROPOSED BY THE LD TPO IS ERRONEOUS. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDER OF THE LD. ASSESSING OFFICER/ TRANSFER PRICING OFFICER AND DIRECTION OF THE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 52 LD. DISPUTE RESOLUTION PANEL . THE TRANSACTION RELATES TO ALLEGED FORCED ADJUSTMENT OF REFUNDS OF RS 1,80,67,380 DUE TO THE APPELLANT AGAINST THE DEMAND DUE IN THE CASE OF THE ASSOCIATED ENTERPRISE NAMELY BG ASIA PACIFIC HOLDING LTD. (BGAPHL) . THIS ACTION OF THE ASSESSING OFFICER WAS NOT APPROVED BY THE CIT(A) AND ACCORDINGLY A SUM OF RS 1,95,28,627 (TAX OF RS 1,80,67,380 + INTEREST OF RS 14,61,247) WAS REFUNDED TO BGAPHL. THE LD DRP HELD THAT NO MARKET INTEREST RATE CAN BE IMPUTED AS THE TRANSACTION IS FORCED ON THE ASSESSEE DUE TO UNAUTHORIZED ACTION OF THE ASSESSING OFFICER AND RESTRICTED THE ADJUSTMENT TO RS 14,61,247, THE ACTUAL AMOUNT OF INTEREST RECEIVED BY BGAPHL . IN THIS FACTUAL MATRIX, F IRST ISSUE TO BE DECIDED WHETHER THIS TRANSACTION CAN BE SAID TO BE A TRANSACTION WITHIN THE MEANING OF SECTION 92F ( V) AND THEN WHETHER IT CAN BE SAID TO BE AN INTERNATIONAL TRANSACTION WITHIN MEANING OF SECTION 92B OF THE ACT . PROVISIONS OF SECTION 92F (V) OF THE ACT PRESCRIBES AS UNDER : - : - (V)'TRANSACTION' INCLUDES AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERT, -- (A) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS FORMAL OR IN WRITING ; OR (B) WHETHER OR NOT SUCH ARRA NGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDING. FROM THE ABOVE DEFINITION, IT IS CLEAR THAT IF TWO PARTIES ARE ACTING IN CONCERT THEN IT CAN BE SAID THAT THEY HAVE ENTERED INTO A TRANSACTION . THE PERSONS CAN BE SAID TO BE ACTING IN CONCERT IF THERE IS AN ELEMENT OF COOPERATION WHICH CAN BE EXTENDED IN MANY WAYS DIRECTLY OR INDIRECTLY THROUGH AN AGREEMENT, FORMAL OR INFORMAL . FURTHER, THE PERSONS BY VIRTUE OF THEIR BUSINESS RELATIONS CAN ALSO BE SAID TO BE PERSON ACTING IN CONCERT . IF THAT BE NOT SO THEN IT WOULD BE THE DUTY OF THE PARTIES TO DEMONSTRATE IT THAT THEY ARE NOT ACTING IN CONCERT. IN THE PRESENT CASE, THE TAX DEMAND WITH RESPECT TO ASSOCIATED ENTERPRISE HAS BEEN RECOVERED FROM THE ASSESSEE BY ADJUSTING THE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 53 REFUND DUE TO THE ASSESSEE AGAINST THE TAX DEMAND OF THE ASSOCIATED ENTERPRISE BY THE REVENUE . IT IS NOT KNOWN WHETHER THE ADJUSTMENTS WERE MADE WITH THE CONSENT OF THE ASSESSEE WHOSE CASE THE REFUND IS DUE . EVEN IF THER E IS NO CONSENT TAKEN FROM THE ASSESSEE THEN IF THE ASSESSEE IS AGGRIEVED BY THAT ACTION THEN IT CAN ALWAYS AGITATE THIS ISSUE BEFORE THE HIGHER AUTHORITIES. IN THE PRESENT CASE EVEN AFTER THE ADJUSTMENT OF THE REFUND DUE TO THE ASSESSEE NO EVIDENCES HAVE BEEN PLACED BEFORE US THAT ASSESSEE OBJECTED IT BEFORE HIGHER AUTHORITIES AND ALSO UNDERTOOK ANY REMEDIAL MEASURES IN OBTAINING THE ALLEGED FORCEFUL REFUND RECOVERED . IF THE ASSESSEE REMAINS IN INACTION , IT TANTAMOUNT AS CONSENT OF THE ASSESSEE . NO SUC H CORRESPONDENCE / COMMUNICATION OBJECTING TO SUCH ADJUSTMENT WAS PRODUCED BEFORE US . FURTHER, IN THE PRESENT CASE BOTH, THE PARTIES HAVE COMMON BUSINESS INTEREST AND IN THE ABOVE TRANSACTION, THERE IS AN ELEMENT OF COOPERATION, WHICH IS EVIDENT FROM ASSESSEE NOT OBJECTING TO ADJUSTMENT OF ITS REFUND . IN VIEW OF THIS IT SATISFIES ALL THE CONDITIONS OF DEFINITION OF A TRANSACTION AS PROVIDED UNDER SECTION 92F (V) OF THE ACT. FURTHER, IT MAY BE A TRANSACTION BUT IF IT IS NOT AN INTERN ATIONAL TRANSACTION WITHIN THE MEANING OF THE PROVISIONS OF SECTION 92B OF THE ACT , THE ARMS LENGTH PRICE OF IT IS NOT REQUIRED TO BE DETERMINED . THEREFORE, IT IS IMPERATIVE TO EXAMINE WHETHER IT SATISFIES THE CONDITIONS LAID DOWN UNDER THAT SECTION . A CCORDING TO SECTION 92B, LENDING OR BORROWING OF MONEY BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES MEANS AN INTERNATIONAL TRANSACTION . IN THE PRESENT CASE, THE ASSESSEE HAS LENT MONEY TO THE ASSOCIATED ENTERPRISES BY LIQUIDATING ITS ASSET OF REFUND DUE FOR REPAYMENT OF THE TAX DUES OF A SSOCIATED ENTERPRISE . IN VIEW OF THIS , MONEY HAS BEEN L ENT BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISES HENCE IT SATISFIES THE BASIC CONDITION LAID DOWN UNDER SECTION 92B (1) OF THE ACT . EVEN OTHERWISE IT IS ALSO I NCLUDED IN CLAUSE (I) ( C ) OF THE EXPLANATION TO SECTION 92B OF THE ACT AS IT IS A TRANSACTION AKIN TO CAPITAL FINANCING IN THE FORM OF ADVANCE TO THE ASSOCIATED ENTERPRISE BY THE ASSESSEE. THEREFORE, IN OUR OPINION THE ABOVE TRANSACTION IS AN I NTERNATIONAL TRANSACTION WITHIN THE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 54 MEANING OF SECTION 92B OF THE INCOME TAX ACT . NOW AFTER HOLDING , SO IT WOULD BE MANDATORY TO COMPUTE THE ARM S LENGTH PRICE OF THE ABOVE TRANSACTION BY APPLYING ONE OF THE METHODS OF DETERMINATION AS PER THE PROVI SIONS OF SECTION 92C OF THE INCOME TAX ACT. IN THE PRESENT CASE THE LD. ASSESSING OFFICER HAS ASSUMED THE RATE OF INTEREST @ 12.5 % WITHOUT ANY BASIS BUT MERELY ON ASSUMPTIONS AND PRESUMPTIONS . FURTHERMORE THE LD. DISPUTE RESOLUTION PANEL HAS ALSO HELD THAT THE REFUND AMOUNT OF THE ASSESSEE WAS WRONGLY ADJUSTED AND ONLY ACTUAL AMOUNT OF INTERES T RECEIVED FROM THE DEPARTMENT BY THE ASSOCIATED ENTERPRISE SHALL BE RETAINED AS AN ADDITION . WE ALSO DO NOT APPROVE THE FINDING OF THE LD. DISPUT E RESOLUTION PANEL AND WE FAILED TO UNDERSTAND WHAT RELATIONSHIP THE AMOUNT OF INTEREST ON REFUND RECEIVED BY THE ASSOCIATED ENTERPRISE HAVE WITH THE AMOUNT OF ARMS LENGTH PRICE OF THE INTEREST ON LOANS GIVEN BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISE. IN FACT THE INTEREST ON REFUND GIVEN BY THE REVENUE TO THE AE IS STATUTORY INTEREST RATES, WHICH CANNOT BE USED FOR BENCHMARKING OF LOAN BETWEEN TWO BUSINESS CONCERNS. IN VIEW OF THIS WE SET ASIDE THIS GROUND OF APPEAL OF THE REVENUE BACK TO THE FILE OF THE LD. TRANSFER PRICING OFFICER TO DETERMINE ARMS LENGTH PRICE OF INTEREST IN ONE OF THE PRESCRIBED METHOD AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92C OF THE INCOME TAX ACT. FURTHER WE HAVE PERUSED THE DECISIONS RELIED UPON BY THE LD. AUTHORI ZED REPRESENTATIVE STATING THAT THERE IS NO INTERNATIONAL TRANSACTION IN ABSENCE OF EXISTENCE OF SOME TANGIBLE MATERIAL. AS WE HAVE ALREADY H E LD THAT IN THE PRESENT CASE THE PARTIES ARE ACTING IN CONCERT WITH ITS ASSOCIATED ENTERPRISE AND THERE IS A LI QUIDATION OF THE ASSETS OF THE ASSESSEE FOR PAYING THE TAX LIABILITY OF THE ASSOCIATED ENTERPRISE WE DO NOT FIND THOSE DECISION S CAN BE APPLIED TO THE FACTS OF THIS CASE. IN VIEW OF THIS GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. 13. GROUND NO. 5 OF THE APPEAL OF THE REVENUE IS AGAINST THE DIRECTION OF THE LD. DISPUTE RESOLUTION PANEL IN DROPPING THE PROPOSED ADDITION OF RS. 3959606/ - DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 55 ON ACCOUNT OF EXPENSES CLAIMED TO HAVE BEEN INCURRED IN RELATION TO CLUB ENTRANCE AND SUBSCRIPTION FEES FOR THE EMPLOYEES OF THE COMPANY . 14. BOTH THE PARTIES SUBMITTED THAT THAT THE ISSUE IS IDENTICAL TO GROUND NO. 5 OF THE APPEAL OF THE REVENUE IN ITA NO. 1581/DE L/201 5 FOR ASSESSMENT YEAR 2010 - 2011, THE REASONS GIVEN BY THE LOWER AUTHORITIES, AND THE ARGUMENTS OF THE BOTH THE PARTIES ALSO REMAINS THE SAME. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE BEFORE US AND WE ARE OF THE VIEW THAT ISSUE IS IDENTICAL TO GROUND NO. 5 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2010 2011 WHEREIN WE HAVE HELD TH AT THE LD. DISPUTE RESOLUTION PANEL HAS CORRECTLY DIRECTED THE LD. ASSESSING OFFICER TO DELETE THE DISALLOWANCE WAS RESPECT TO THE CLUB EXPENDITURE. FOR THE SAME REASONS AND ON THE SAME LOGIC WE ALSO HOLD THAT LD. DISPUTE RESOLUTION PANEL HAS CORRECTLY DIR ECTED THE LD. TRANSFER PRICING OFFICER /LD. ASSESSING OFFICER TO DELETE THE DISALLOWANCE WITH RESPECT TO THE CLUB EXPENDITURE AMOUNTING TO RS. 3 959606/ . IN THE RESULT GROUND NO. 5 OF THE APPEAL OF THE REVENUE IS DISMISSED. 16. IN THE RESULT APPEAL FILED BY THE REVENUE IN ITA NO. 2227//DEL/2014 FOR ASSESSMENT YEAR 2009 - 10 IS DISMISSED. 17. NOW WE COME TO THE CROSS OBJECTION FILED BY THE ASSESSEE IN CEO NO. 13/DEL/2015. 18. THE GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS REGARDING THE CLAIM OF THE EXPENDITURE OF RS. 50 3071947/ AS DEDUCTION IN THE YEAR IN WHICH THE EXPENDITURE BECOME INFRUCTUOUS. THE FACTUAL MATRIX OF THE CLAIM OF THE ASSESSEE IS THAT ONGC HAD EXECUTED A PRODUCTION SHARING CONTRACT WITH THE GOVERNMENT OF INDIA IN 2004. ACCORDING TO THAT PRODUCTION SHARI NG CONTRACT ONGC WAS THE OWNER OF HUNDRED PERCENT OF THE PARTICIPATING INTEREST IN THE BLOCK. THEREAFTER IN 2008, ASSESSEE AND ONGC ENTERED INTO AN AGREEMENT FOR ASSIGNMENT OF 25% OF THE PARTICIPATING INTEREST BY ONGC TO THE ASSESSEE. AS PER ARTICLE NO. 4 .1 OF THAT AGREEMENT ASSESSEE WAS REQUIRED TO PAY ONGC THE PAST COST INCURRED BY ONGC IN PROPORTION TO THE INTEREST WHICH IS RS. DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 56 503071917/ . ON PAYMENT OF SUCH SUM THE ASSESSEE CLAIMED IT AS A DEDUCTION WHICH WAS DISALLOWED BY THE LD. ASSESSING OFFICER HO LDING THAT THE APPELLANT IS NOT ELIGIBLE TO CLAIM THE AFORESAID DEDUCTION AS THE APPELLANT HAD NOT COMMENCED PRODUCTION DURING THE RELEVANT YEAR IN TERMS OF THE PROVISIONS OF SECTION 42 OF THE ACT. THE LD. DISPUTE RESOLUTION PANEL UPHELD THE CONTENTION OF THE LD. ASSESSING OFFICER. BEFORE THE LD. DISPUTE RESOLUTION PANEL THE ASSESSEE SUBMITTED AN ALTERNATIVE ARGUMENT THAT THE EXPENDITURE SHOULD BE ALLOWED AS DEDUCTION IN THE FINANCIAL YEAR 2011 12, BEING THE YEAR IN WHICH THE EXPENDITURE BECAME INFRUCTUOU S. ON TH IS ARGUMENT, THE LD. DISPUTE RESOLUTION PANEL STATED THAT ADMITTEDLY, THE EXPENDITURE BECAME INFRUCTUOUS IN THE FINANCIAL YEAR 2011 12, BEING THE YEAR IN WHICH THE AREA WAS SURRENDERED PRIOR TO COMMERCIAL PRODUCTION. THEREFORE, NO CLAIM CAN BE A LLOWED IN THIS YEAR. REGARDING THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT THE LD. ASSESSING OFFICER MAY BE DIRECTED TO ALLOW THE SAID EXPENDITURE AS DEDUCTION IN THE YEAR IN WHICH BECAME INFRUCTUOUS , IT WAS HELD THAT IT DOES NOT HAVE JURISDICTION TO ISSU E ANY SUCH DIRECTION AS LD. DISPUTE RESOLUTION PANEL IS AUTHORIZED TO GIVE DIRECTION TO THE ASSESSING OFFICER WITH REFERENCE TO THE ADDITION S PROPOSED IN THE DRAFT ASSESSMENT ORDER AGAINST WHICH THE OBJECTION S HAVE BEEN FILED AND NOT FOR ANY FUTURE ASSESS MENT. 19. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT D URING THE YEAR UNDER CONSIDERATION, BGEPIL HAD FILED A LETTER DATED 28.04.2008 WITH THE GOI CONTAINING A PROPOSAL FOR ASSIGNMENT OF 25% OF THE PARTICIPATING INTEREST BY ONGC IN THE AFORESAID BLOCK. THIS PROPOSAL WAS ACCEPTED BY THE GOI, MINISTRY OF PETROLEUM & NATURAL GAS VIDE THEIR LETTER DATED 21.11.2008. THEREAFTER, BGEPIL AND ONGC ENTERED INTO A FARMOUT AGREEMENT FOR ASSIGNMENT OF 25% OF THE PARTICIPATING INTEREST BY ONGC TO THE ASSESSEE IN THE BLOCK MN - DWN - 2002/2. SUBSEQUENTLY, ON 31.03.2009, BGEPIL RECEIVED A LETTER FROM ONGC SEEKING REIMBURSEMENT OF PAST AND INTERIM COST. AS PER THE SAID LETTER, PAST AND INTERIM COST AMOUNTED TO RS. 50,30,71,917. SINCE, THE INDIAN GOVERNMENT HA D PROVIDED THE APPROVAL FOR THE ASSIGNMENT OF COST DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 57 ON 21.11.2008, THE LIABILITY UNDER THE FARMOUT AGREEMENT WAS CRYSTALLIZED AND BGEPIL CREATED A PROVISION IN ITS BOOKS OF ACCOUNTS WHILE RECOGNIZING THE EXPENDITURE AS CAPITAL WORK IN PROGRESS IN TERMS OF A RTICLE 4.4 OF THE SAID AGREEMENT. IT WOULD BE PERTINENT TO MENTION THAT THE AFORESAID EXPENDITURE WERE IN THE NATURE OF NON - DRILLING EXPLORATION COST. FURTHER, IT WAS SUBMITTED THAT THE APPELLANT, AS PER THE ACCOUNTING POLICIES CONSISTENTLY FOLLOWED, CLAI MS ALL NON - DRILLING EXPLORATION EXPENDITURE AS A DEDUCTION IN THE YEAR IN WHICH SUCH EXPENDITURE IS INCURRED. IT IS SUBMITTED THAT WHILE ASSESSING THE APPELLANTS TAXABLE INCOME, ALL THE EXPENDITURE INCURRED BY IT FOR ITS BUSINESS WOULD HAVE TO BE CONSIDER ED AND EVALUATED TO DETERMINE THE DEDUCTIBILITY AS PER THE NORMAL PROVISIONS OF THE ACT (AS AGAINST CONSIDERING ONLY THOSE EXPENSES WHICH ARE SHARED WITH THE OTHER CONTRACTORS AS PER THE PSC) .SECTION 37 OF THE ACT PROVIDES FOR DEDUCTION OF EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEIN G IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE APPELLANT) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. THUS, FOR EXPENDITURE TO BE ALLOWABLE UNDER SECTION 37 OF THE ACT, THE FOLLOWING CONDITIONS NEED TO BE SATISFIED I)EXPENSE SHOULD BE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS;(II) THE EXPENSE SHOULD BE REVENUE IN NATURE. IN THIS REGARD, REFERENCE MAY BE MADE TO THE DECISION OF THE DELHI ITAT IN THE CASE OF ONGC VIDESH LTD. VS. DCI T: 37 SOT 97 WHEREIN THE ASSESSEE WAS ENGAGED IN BUSINESS OF EXPLORATION AND PRODUCTION OF HYDROCARBONS, INCURRED EXPENDITURE ON PURCHASE AND EVALUATION OF SEISMIC DATA OF FOREIGN BLOCKS. IT WAS HELD THAT EXPENDITURE SO INCURRED WAS FOR FURTHERANCE OF ACTI VITIES UNDERTAKEN BY IT IN NORMAL COURSE OF BUSINESS AND, THEREFORE, SAME WAS TO BE ALLOWED AS BUSINESS EXPENDITURE. REFERENCE WA S ALSO MADE TO THE FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THAT EXPENSES INCURRED TOWARDS EXTENSION OF BUSINESS WHICH WAS SUBSEQUENTLY ABANDONED ARE ALLOWABLE AS DEDUCTION: DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 58 I) CIT VS. VARDHMAN SPINNING AND GENERAL MILLS : 176 TAXMAN 157 (P&H) II) INDO RAMA SYNTHETICS LTD.: 333 ITR 18 (DEL.) III) CIT V. PRIYA VILLAGE ROADSHOWS LTD.: 332 ITR 594 (DEL.) IV) CIT V. EURO INDIA LTD.: [2014] 223 TAXMAN 97 (DEL.) V) HINDUSTAN ALUMINIUM CORPORATION LTD. VS. CIT: 159 ITR 673 (CAL.) VI) ASIATIC OXYGEN LTD. VS. CIT (CAL.) VII) CIT VS. GRAPHITE INDIA LTD.: 221 ITR 420 (CAL.) VIII) BINANI CEMENT LTD. V. CIT: 277 CTR 49 (CAL.) IX) DCIT V. GUJARAT NARMADA VALLEY FERTILIZERS CO . LTD.: 57 TAXMANN.COM (GUJ.) 20. WITHOUT PREJUDICE, THE APPELLANT RESPECTFULLY SUBMITS THAT THE AO SHOULD HAVE STATED THAT THE EXPENDITURE OF RS. 50,30,71,917 SHOULD BE ALLOWED AS A DEDUCTION IN THE FINANCIAL YEAR 2011 - 12 VIZ. BEING THE YEAR IN WHICH THE EXPE NDITURE BECAME INFRUCTUOUS (I.E. IN THE YEAR IN WHICH THE AREA WAS SURRENDERED PRIOR TO COMMERCIAL PRODUCTION) . ACCORDINGLY, IN TERMS OF SECTION 42 OF THE ACT, THE APPELLANT REQUESTS TO DIRECT THE AO TO ALLOW THE SAID EXPENDITURE AS A DEDUCTION IN THE FINA NCIAL YEAR 2011 - 12, THE YEAR IN WHICH THE AFORESAID EXPENDITURE BECAME INFRUCTUOUS. 21. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE LD ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS PUT A NOTE IN COMPUTATION OF THE TOTAL INCOME STATING THAT ; - DURING THE FINANCIAL YEAR 2008 - 09, BGEPIL RECEIVED APPROVAL FROM THE GOVERNMENT OF INDIA FOR ACQUIRING 25 PER CENT PARTICIPATING INTEREST IN BLOCK MN - DWM - 2002/2 AND 30 PERCENT PARTICIPATING INTEREST IN BLOCK KG - DWN/98/4 FROM ONGCL (REFER TO NOTE - 1 IN SCHE DULE 12 - NOTE TO FINANCIAL DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 59 STATEMENTS). BGEIPL HAS ACCRUED A LIABILITY TOWARDS REIMBURSEMENTS OF THE EXPLORATION COSTS (RS. 696649450/ - ) RELATING TO THESE BLOCKS PAYABLE TO ONGC AS ON 31 MARCH 2009 FOR WHICH A DEDUCTION HAS BEEN CLAIMED AS PER THE PROVISIO N OF SECTION 42 OF THE ACT. 22. ACCORDING TO THE PROVISIONS OF SECTION 42(1)(A) THE ASSESSEE IS ELIGIBLE FOR ALLOWANCE OF A NY EXPENDITURE BY WAY OF INFRU CTUOUS OR ABORTIVE EXPLORATION EXPENSES IN RESPECT OF ANY AREA SURRENDERED PRIOR TO THE BEGINNING OF CO MMERCIAL PRODUCTION BY THE ASSESSEE. ACCORDINGLY, SUCH EXPENSES SHALL BE DEDUCTIBLE PRIOR TO THE BEGINNING OF COMMERCIAL PRODUCTION IN THAT BLOCK. ACCORDING TO SECTION 42(1)(B) THE ASSESSEE IS ENTITLE TO DEDUCTION OF EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF DRILLING AND EXPLORATION ACTIVITIES OR IN RESPECT OF PHYSICAL ASSETS USED IN THAT CONNECTION. ACCORDINGLY, ALL OPERATING EXPENSES IN RESPECT OF DRILLING AND EXPLORATION ACTIVITIES INCLUDING CAPITAL EXPENDITURE SHALL BE ALLOWED ONLY AFTER BEGINN ING OF COMMERCIAL PRODUCTION. ACCORDING TO SECTION 42(1)(C) THE ASSESSEE IS FURTHER ALLOWED DEPLETION OF MINERAL OIL FROM THE YEAR IN WHICH COMMERCIAL PRODUCTION HAS BEGUN. THE CLAIM OF THE ASSESSEE IN THE PRESENT CASE IS TABULATED AT PARA NO. 11.1.1 OF THE DRP AS UNDER: - 11.1. 1. AS PER SECTION 42 ALLOWANCE ARE TO BE COMPUTED AS MADE IN THE MANNER SPECIFIED IN THE AGREEMENT AS PER ARTICLE 15 FOR RECOVERY OF COST PETROLEUM. AS PER ARTICLE 15 EXPLORATION COST INCURRED BY THE CONTRACTOR IN TH E CONTRACT SHALL BE ENTITLED TO RECOVER THE AGGREGATE OF SUCH EXPLORATION COSTS OUT OF THE COST PETROLEUM AT THE RATE OF 00% PA OF SUCH EXPLORATION COSTS BEGINNING FROM THE DATE OF SUCH COMMERCIAL PRODUCTION. THE ASSESSEE HAS SUBMITTED THAT COST BEGINNING FROM THE DATE OF SUCH COMMERCIAL PRODUCTION. THE ASSESSEE HAS SUBMITTED THAT COST OF EXPENSES INCURRED FOR BLOCK MN - DWN - 2002/2 HAS BEEN AUDITED TILL 31.03.2007 ONLY. SECTION 42 DOES NOT ALLOW THE ASSESSEE TO CLAIM DEDUCTION OF A LIABILITY INCURRED FOR REIM BURSEMENTS OF EXPLORATION COST WHERE THE PRODUCTION HAS NOT COMMENCED DURING THE YEAR. IN THE CASE OF THE ASSESSEE PRODUCTION FOR THE BLOCK MN - DWN - 2002/2 HAS NOT COMMENCED DURING THE YEAR. HENCE, THE ABOVE EXPLORATION COST OF RS. 503071917/ - . 23. IN THE CAS E OF JOSHI TECHNOLOGIES INTERNATIONAL INC. V. UOI, 374 ITR 322, IT WAS HELD THAT WHERE THE PRODUCTION SHARING CONTRACT ENTERED INTO BETWEEN DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 60 THE ASSESSEE WITH MINISTRY OF PETROLEUM AND NATURAL GAS DID NOT INCORPORATE CLAUSE FOR GRANTING BENEFITS UNDER SEC TION 42 OF THE ACT, IT CANNOT BE SAID THE FAILURE TO INCORPORATE THE SAME IN THE CONTRACT WAS NOT INADVERTENTLY OMITTED AND, THEREFORE, ASSESSEE WAS NOT ENTITLE FOR DEDUCTION UNDER SECTION 42 OF THE ACT . SO FIRST OF ALL IT IS MANDATORY THAT THESE EXPENDITURE ARE MENTION IN THE PSC, THEN ONLY THE QUESTION OF ITS ALLOWABILITY ARISES IN ANY ASSESSMENT YEAR U/S 42 OF THE ACT. IT IS ALSO ME NTIONED IN THE ORDERS OF LOWER AUTHORITIES THAT THE ASSESSEE HAS NOT MADE CLAIM IN RESPECT OF SAID EXPENDITURE WHEN THE EXPENDITURE BECOME INFR U CTUOUS I.E. IN FY 2011 - 12 BEING THE YEAR IN WHICH THE AREA WAS SURRENDERED PRIOR TO COMMERCIAL PRODUCTION. FROM THE ABOVE OBSERVATION IT IS APPARENT THAT THAT THE CLAIM OF THE ASSESSEE FALLS IN SECTION 42(1)(A) WHEN THE EXPENDITURE BECOMES INFR U CTUOUS. APPARENTLY, SUCH EXPENDITURE BECAME INFR UC TUOUS IN ASSESSMENT YEAR 2011 - 12. IN VIEW OF THIS THE LD ASSESSING OFFICE R AS WELL AS THE LD DISPUTE RESOLUTION PANEL HAS CORRECTLY HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION THEREFORE, IN THIS YEAR I.E. AY 2009 - 10, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. 24. THE ASSESSEE ALTERNATIVELY CLAIMED THAT THE DEDUCTION M AY BE ALLOWED IN THE YEAR IN WHICH IT HAS BECOME INFRUCTUOUS AND HAS ALSO RELIED UPON PLETHORA OF CASE LAWS WHICH SHOWS THAT THE EXPENSES ARE DEDUCTIBLE IN THE YEAR IN WHICH THEY HAVE BECOME INFRUCTUOUS WITH RESPECT TO THE ABANDONED PROJECTS ETC. ON THE AR GUMENT OF LD AR THAT LD ASSESSING OFFICER MAY BE DIRECTED TO GRANT DEDUCTION OF THIS SUM IN AY 2012 - 13, WE ARE OF THE OPINION THAT WE ARE NOT EMPOWERED TO DO SO. A CCORDING TO THE PROVISION OF SECTION 254(1) THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. IF AN APPEAL RELATES TO A PARTICULAR ASSESSMENT YEAR, THE FINDING AND DIRECTION MUST NECESSARILY BE LIMITED TO THAT PARTICULAR YEAR AND WE DO NOT HAVE ANY JURISDICTION TO GIVE DIRECTION WITH REGARD TO THE PROCEEDINGS OF THE EARLIER YEAR OR TO INCLUDE OR EXCLUDE THE ABOVE AMOUNT IN ANY OTHER ASSESSMENT YEAR. WE DO NOT HAVE JURISDICTION TO TRAVEL OUTSIDE THE SCOP E OF THE APPEAL AND PURPORT DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 61 TO GIVE DIRECTION BEYOND OUR LIMITS. IN HOLDING THIS VIEW WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE KERALA HIGH COURT IN CIT VERSUS CHACKOLA SPINNING AND WEAVING MILLS LTD 188 ITR 532 (KER) WHERE IN IT IS HELD THAT : - W E ANSWER QUESTION NO. 2 TO THIS EFFECT: THE OBSERVATION THAT THE PAYMENT WILL BE DEDUCTIBLE FOR THE ASSESSMENT YEAR 1981 - 82, WHILE DISPOSING OF THE APPEAL FOR THE ASSESSMENT YEAR 1980 - 81, WAS ONLY AN INCIDENTAL ONE ; SUCH A MATTER NEVER AROSE FOR CONSIDERA TION. THE OBSERVATION WAS UNAUTHORIZED AND UNCALLED FOR. IT IS TRUE THAT THERE IS NO FINDING IN THE STRICT SENSE. EVEN SO, THE OBSERVATION AFORESAID IS ILLEGAL AND UNJUSTIFIED. WE ARE FORTIFIED IN THIS VIEW BY THE FOLLOWING, AMONG OTHER DECISIONS : ITO V. MURLIDHAR BHAGWAN DAS [1964] 52 ITR 335 (SC); P. J. UDANI V. CIT [1967] 63 ITR 766 (AP) AND BAKSHISH SINGH V. ITO [1974] 93 ITR 178 (CAL). IN THIS CONNECTION, IT SHOULD BE REMEMBERED THAT THE TRIBUNAL WAS DISPOSING OF THE APPEAL FILED BY THE REVENUE BEFORE IT FOR THE YEAR 1980 - 81, AND NOT AN APPEAL FILED BY THE ASSESSEE. AND THERE IS NO MATERIAL OR EVEN A WHISPER TO SHOW THAT A N ALTERNATE PLEA OR APPROACH WAS MOOTED BY THE ASSESSEE FOR THE CLAIM MADE BY IT WHEN THE TRIBUNAL ADJUDICATED THE APPEAL, NAMELY, THAT THE AMOUNT IS CLAIMABLE FOR THE SUBSEQUENT YEAR 1981 - 82 AND THAT THE ALTERNATE PLEA NECESSITATED THE OBSERVATIONS MADE, IN WHICH CASE, THE RATIO OF THE DECISION IN MOTILAL BAWALAL V. CIT [1963] 50 ITR 249 (BOM) MAY CALL FOR APPLICATION. SUCH IS NOT THE CASE HERE. 25. HENCE WE REJECT THIS ALTERNATIVE ARGUMENTS OF THE ASSESSEE FOR D IRECTION TO LD AO FOR GRANTING DEDUCTION IN AY 2012 - 13. THE ASSESSEE MAY EXERCISE ITS RIGHT U/S 264 OF THE ACT OR ANY OTHER PROVISIONS OF THE LAW . IN THE RESULT GROUND NO. 1 OF THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 26. GROUND NO. 2 OF THE CROSS O BJECTION IS WITH RESPECT TO UNILATERAL ACT OF THE ASSESSING OFFICER OF WRONGLY ADJUSTING THE APPELLANTS REFUND WITH THE DEMAND OF AE WHICH IS NOT AN INTERNATIONAL TRANSACTION AND ACCORDINGLY, THE AMOUNT OF INTEREST ADDED TO THE INCOME OF THE APPELLANT MAY BE DELETED . THE FACTS RELATING TO THIS GROUND OF APPEAL ARE ALREADY DISCUSSED IN GROUND NO. 4 OF THE APPEAL OF THE REVENUE. A SSESSEE HAS CON TESTED THAT THE FORCED AND UNAUTHORIZED ADJUSTMENT DONE BY THE ASSESSING OFFICER DOES NOT CONSTRUE AN INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B OF THE ACT. HE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 62 FURTHER SUBMITTED THAT CLAUSE (V) OF SECTION 92F DEFIES THE TERM TRANSACTION TO INCLUDE AN ARRANGEMENT, UNDERSTANDING OR ACTION IN CONCERT IRRESPECTIVE OF SAME BEING FORMAL OR IN WRITING OR ENFORCEABLE BY LEGAL PROCEEDINGS. HE FURTHER SUBMITTED THAT THERE IS NO UNDERSTANDING OR ARRANGEMENT . HE ALSO RELIED ON THE SAME JUDICIAL PREC EDENT, WHICH HE RELIED IN GROUND NO. 4 OF THE APPEAL OF THE REVENUE. 27. LD DR ALSO ADVANCED THE IDENTICAL ARGUMENT AS WERE RAISED IN THAT GROUND. 28. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS . WHILE DECIDING GROUND NO. 4 OF THE APPEAL OF THE REVENUE WE HAVE ALREADY HELD THAT ABOVE TRANSACTION IS AN INTERNATIONAL TRANSACTION UNDER SECTION 92B OF THE INCOME TAX ACT AND THEREFORE ARMS LENGTH PRICE OF SUCH TRANSACTION IS REQUIRED TO BE DETERMINED IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 92C OF THE INCOME TAX ACT AND SET ASIDE THE ISSUE TO THE FILE OF THE LD. TRANSFER PRICING OFFICER . THEREFORE ACCORDINGLY WE DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 29. GROUND NO. 3 OF THE CROSS OBJECTION OF THE ASSESSEE IS AGAINST INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF THE ACT. THE ABOVE GROUND IS AGAINST THE INITIATION OF THE PENALTY PROCEEDINGS AND NOT AGAINST THE LEVY OF THE PENALTY , THEREFORE IT IS PREMATURE HENCE WE DISMISS THE SAME. 30. GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS THAT LD. ASSESSING OFFICER HAS DIRECTED TO CHARGE INTEREST UNDER SECTION 234B AND 234C DISREGARDING THE FACT THAT THE APPELLANT IS A NON - RESIDENT WHOSE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. BEFORE US THE LD. AUTHORIZED REPRESENTATIVE AND LD. DEPARTMENTAL REPRESENTATIVE RAISED THE SAME ARGUMENTS , WHICH WERE, RAISED IN GROUND NO 9 OF THE APPEAL OF THE ASSESS EE FOR AY 2010 - 11 . THIS GROUND IS IDENTICAL TO THE GROUND NUMBER 9 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2010 11. THEREFORE FOR SIMILAR REASONS WE SET ASIDE GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE BACK TO THE FILE OF THE LD. ASSESSING OFF ICER TO RECOMPUTE THE INTEREST UNDER SECTION 234B OF THE ACT ACCORDINGLY AS DIRECTED BY US WHILE DDIT V B G EXPLORATION & PRODUCTION INDIA LIMITED ITA NO 2227/DEL/2014 & CO 13/DEL/2015 A Y 2009 - 10 63 DECIDING GROUND NO 9 OF THE APPEAL OF THE ASSESSEE FOR AY 2010 - 11 . IN THE RESULT GROUND NO 4 OF CO OF THE ASSESSEE IS ALLOWED ACCORDINGLY. 31. IN THE RESULT APP EAL OF THE ASSESSEE IN CO NO. 13/DEL/2015 FOR ASSESSMENT YEAR 2009 10 IS PARTLY ALLOWED. 32. IN THE RESULT APPEAL OF THE REVENUE AND CO OF THE ASSESSEE FOR ASSESSMENT YEAR 2009 10 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 /04/2017. - SD/ - - SD/ - (I.C.SUDHIR) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 /04/2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI