DIMENSION DATA INDIA PVT. LTD. (FORMERLY KNOWN AS DIMENSION DATA INDIA LTD.), MUMBAI V. DCIT RANGE 6(2)(2), MUMBAI

ITA 2280/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0345 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMAR
• Keywords: Transfer pricing; International transaction; Additional evidence
• Section: 92C; 143(3)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./2280/MUM/2016, /ASSESSMENT YEAR: 2010-11 DIMENSION DATA INDIA PRIVATE LIMITED (FORMERLY KNOWN AS DIMENSION DATA INDIA LIMITED) ONE BKC, B&C WING, LEVEL-17, G- BLOCK, PLOT NO.C-65, BANDRA (EAST), BANDRA KURLA COMPLEX,MUMBAI-400 051. PAN:AAACD 2145 G VS. DCIT RANGE- 6(2)(2) ROOM NO.504, 5TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD CHURCH GATE, MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI JAYANT KUMAR- DR ASSESSEE BY: SHRI VIJAY MEHTA / DATE OF HEARING: 14.08.2017 / DATE OF PRONOUNCEMENT: 16.08.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 25/2/2016 OF THE AO PA SSED U/S. 143(3) R.W.S.144C (13) OF THE ACT, PASSED IN PURSUANCE OF THE DIRECTIONS OF DISPUTE RE SOLUTION PANEL-I (DRP.-I) ,MUMBAI, DATED 31/ 12/2015,THE ASSESSEE HAS FILED THE PRESENT APPEAL. ASSESSEE-COMPANY ,ENGAGED IN THE BUSINESS OF DESIGNING,DEVELOPING,MARKETING AND SERVICING OF TEL E-COMMUNICATION, FILED ITS RETURN OF INCOME ON 30/11/2011,DECLARING TOTAL INCOME AT RS.14.70 CR ORES. 2. FIRST GROUND OF APPEAL IS ABOUT TRANSFER PRICING(TP )ADJUSTMENT OF RS.8.27CRORES.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD ENTERED INTO INTERNATIONAL TRANSACT - IONS(IT.S) WITH ITS ASSOCIATED ENTERPRISES, (AE.S), THAT THE VALUE OF IT.S WAS MORE THAN RS.50 CRORES. HE MADE A REFERENCE TO TRANSFER PRICING OFF ICER(TPO) TO DETERMINE THE ARMS LENGTH PRICE (ALP)OF THE IT.S.DURING THE TP PROCEEDINGS,TH E TPO FOUND THAT THE ASSESSEE HAD ENTERED INTO FOLLOWING IT.S S.NO. NATURE OF INTERNATIONAL TRANSACTIONS A.Y. 201 1-12 AMOUNT (RS.) SEGMENT 1. PURCHASE OF GOODS FOR RESALE 996,329/- 2. SALE OF GOODS 45,982,164/- 3. GLOBAL ACCOUNT MANAGEMENT SERVICE (AMT. RECEIVABLE) 643,318/- 4. GLOBAL ACCOUNT MANAGEMENT SERVICE (AMT. PAYABLE) 12,288,416/- 5. MAINTENANCE & TECHNICAL SERVICES 49,831,419/- 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 2 AVAILED DISTRIBUTION AND SUPPORT SERVICE SEGMENT 6. MAINTENANCE SERVICES PROVIDED 83,215,751/- 7. RENDERING OF ADVISORY SERVICES IN CONNECTION WITH MARKETING OF PRODUCTS (COMMISSION) 21,704,295/- 8. ALLOCATION OF MANAGEMENT 229,122,265/- 9. ALLOCATION OF TRAINING FEES 15,349,345/- 10. REIMBURSEMENT OF EXPENSE RECEIVABLE 162,586,415/- 11. REIMBURSEMENT OF EXPENSE PAYABLE 25,480,883/- 12. TECHNICAL SUPPORT SERVICES PROVIDED 65,685,460/- ITES HE FOUND THAT THE ASSESSEE HAD USED TNMM FOR BENCH MARKING THE ITEMS MENTIONED AT SL.NO.11 OF THE ABOVE TABLE,THAT THE MARGIN OF THE ASSESSEE WAS 9.87% AS AGAINST COMPARABLES- MARGIN OF 4.35%, THAT IT WAS CONTENDED THAT MARGIN WAS BETTER THAN THE MARGINS OF COMPARABLES AND THAT TRANSACTIONS SHOULD BE TAKEN AT ARMS LENGTH.HE FUR THER FOUND THAT ASSESSEE HAD PAID MANAGEMENT FEE OF RS.22.91 CRORES,THAT THE ISSUE OF PAYMENT O F MANAGEMENT FEE CAME UP IN THE AY.2010- 11,THAT THE TPO ,IN THAT AY.,HAD REJECTED THE TNMM METHOD IN RESPECT OF MANAGEMENT FEE AND HAD APPLIED CUP METHOD FOR THE PURPOSE OF BENCHMARK ING, THAT THE THEN TPO HAD HELD THAT PAYMENTS MADE BY THE ASSESSEE UNDER THE HEAD FINANC E AND SPECIFIC SUPPORT SERVICES,INFORMATION TECHNOLOGY SERVICES AND STRATE GY EXECUTION AND BUSINESS DEVELOPMENT SERVICES WERE AT ARM,S LENGTH, THAT THE THEN TPO HA D SUGGESTED ADJUSTMENT WITH REGARD TO THREE HEADS,NAMELY,CORPORATE COMMUNICATION & BRAND MANAGE MENT SERVICES,(II)HUMAN RESOURCES SERVICES AND(III)SALES AND MARKETING SERVICES.HE DI RECTED THE ASSESSEE TO SHOW CAUSE AS TO WHY SIMILAR ADDITIONS SHOULD NOT BE MADE FOR THE YEAR U NDER CONSIDERATION.AFTER CONSIDERING THE DETAILED SUBMISSIONS,THE TPO SUGGESTED TOTAL ADJUST MENT OF RS.8,39,98,906/- FOR THE IT.S ENTERED INTO BY THE ASSESSEE WITH ITS AE.THE AO ISSUED A DR AFT ASSESSMENT ORDER TO THE ASSESSEE ON 27/ 3/2015 AS PER THE PROVISIONS OF SECTION 144C (1) R. W.S. 143(3). 3. AGGRIEVED BY THE AFORESAID DRAFT ORDER THE ASSESSEE FILED ITS OBJECTIONS BEFORE THE DRP-I.BEFORE IT,THE ASSESSEE FILED ADDITIONAL EVIDENCE WITH RESP ECT TO PROPOSED TP ADDITIONS.THE DRP REMANDED THE EVIDENCES TO THE TPO FOR VERIFICATION AND COMMENTS.THE TPO FILED HIS REMAND REPORT ON 15/12/ 2015. ON 22/12/2015 THE ASSESSEE F ILED DETAILED REPLY AGAINST THE REMAND REPORT. BEFORE THE DRP THE ASSESSEE ARGUED THAT THE TPO HAD NOT APPORTIONED THE TOTAL MANAGEMENT FEE INTO DIFFERENT CATEGORIES CORRECTLY, THAT IT HAD RE CEIVED DIFFERENT TYPES OF SERVICES FROM THE AE FOR WHICH MANAGEMENT FEE HAD BEEN PAID,THAT NUMBER OF T HE EMPLOYEES FALLING UNDER THREE HEADS 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 3 CONSTITUTED 78% OF THE TOTAL MANPOWER EMPLOYED BY T HE AE,THAT THE TPO SHOULD HAVE ACCEPTED 78% OF THE TOTAL MANAGEMENT FEE OF RS.22.91 CRORES, THAT HE SHOULD HAVE RESTRICTED THE ADJUSTMENT ONLY WITH RESPECT TO BALANCE AMOUNT OF 22% OF RS.22 .91 CRORES I.E. RS.5.04 CRORES,THAT THE TPO HAD FAILED TO APPRECIATE THE FACT THAT THE MANAGEME NT FEE WAS FOR BUNDLE OF SERVICES AND THE VALUE OF BENEFITS ASSESSEE RECEIVED WAS MUCH HIGHER THAN THE PAYMENTS MADE AS MANAGEMENT FEES, THAT AGAINST THE TOTAL MANAGEMENT FEES OF RS. 12.91 CROR ES THE BENEFIT ACCRUED TO THE ASSESSEE WAS TO BE RS.64.22 CRORES ON ACCOUNT OF GUARANTEE SUPPORT AND SUPPORT IN GLOBAL PROCUREMENT, THAT THE ORDER OF THE DRP FOR THE AY. 2010 -11 WAS NOT EFFIC ACIOUS FOR THE YEAR UNDER CONSIDERATION, THAT THE TPO HAD ERRED IN APPLYING THE CUP METHOD, THAT HE HAD WRONGLY TREATED SOME OF THE SERVICES PROVIDED BY THE AE TO THE ASSESSEE SAYS SHAREHOLDER S ACTIVITIES. 3.1. THE DRP OBSERVED THAT THE ASSESSEE HAD NOT FILED AN Y BREAK UP OF FEE CHARGED BY THE AE AGAINST THE DIFFERENT TYPE OF SERVICES CLAIMED TO H AVE BEEN RENDERED BY AE,THAT DURING THE TP PROCEEDINGS THE TPO HAD SPECIFICALLY RAISED THE ISS UE OF BREAKUP OF PRICE CHARGED ,THAT THE ASSESSEE HAD FURNISHED THE BREAK UP VIDE ITS LETTER DATED 14/1/2015,THAT SAME WAS NOT GIVING COMPLETE PICTURE, THAT THE ASSESSEE WAS A DISTRIBUT OR OF CISCO PRODUCTS,THAT THE AE WAS OBTAINING THE SAME ON BULK BASIS FROM CISCO,THAT WHEN GOODS W ERE PROCURED ON A GLOBAL BASIS THE BENEFIT TO THE ASSESSEE AND THE BENEFIT TO OTHER AES WERE ON ACCOUNT OF JOINT PURCHASE OF BULK QUANTITIES, THAT IT WAS TRACEABLE TO THE MEMBERSHIP OF THE ASSE SSEE IN THE MULTINATIONAL GROUP,THAT THE GAINS IN THE PURCHASE PRICE, IF ANY,WAS NOT ON ACCOUNT OF ANY CONCERTED ACTION OF THE AE BUT WAS ON ACCOUNT OF THE MEMBERSHIP OF THE ASSESSEE IN THE MU LTINATIONAL GROUP,THAT THE BENEFITS WERE ARISING OUT OF GROUP SYNERGIES,THAT AT THE MOST THE AE COULD RECOVER THE SALARY COST PLUS OVERHEADS AND ARMS LENGTH MARKUP,THAT THE SO-CALLE D GAINS OF RS. 56.08 CRORES COULD NOT BE GROUND TO CHARGE RS. 22 CRORES AS FEES OF EMPLOYEES WHO WERE INVOLVED IN NEGOTIATION ON BEHALF OF THE ASSESSEE, THAT THE ASSESSEE HAD CLAIMED THAT THE AE HAD NEGOTIATED ON ITS BEHALF TO CISCO, THAT THE COMPENSATION TO THE AE SHOULD HAVE TO BE S EEN IN RESPECT OF THE NEGOTIATION CARRIED OUT BY IT, THAT THE REDUCTION IN PRICE OFFERED BY THE S ELLER COULD BY NO STRETCH OF IMAGINATION BE TREATED AS A CONCESSION FOR THE NEGOTIATING FUNCTIO N PERFORMED BY THE AE, THAT THE CORPORATE GUARANTEE SUPPORT PROVIDED BY THE AE WAS ON ACCOUNT OF THE MEMBERSHIP OF THE ASSESSEE IN THE MULTINATIONAL GROUP, THAT THERE WAS NO EVIDENCE OF THE AE EXTENDING GUARANTEE IN FAVOUR OF THE ASSESSEE SEPARATELY, THAT IT HAD NOT PRODUCED ANY E VIDENCE OF ANY GUARANTEE COMMISSION CHARGES PAID BY THE AE. WITH REGARD TO THE ARGUMENT OF THE ASSESSEE OF PROVIDING A BUNDLE OF SERVICES, 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 4 THE DRP STATED THAT THERE WAS NO WARRANT TO ARRIVE AT THE CONTENTION THAT PRICE PAID BY IT HAD TO BE EVALUATED ON A GLOBAL BASIS AND NOT ON AN INDIVIDUA L BASIS. IT FURTHER OBSERVED THAT THE ASSESSEE WAS CONFUSING THE WHOLE ISSUE BY STATING THAT IT CO ULD OBTAIN FAVOURABLE PURCHASES TERM OR FAVOURABLE CREDIT TERMS TO THE EXTENT OF RS. 64 CRO RES, THAT PROFITS ARISING OUT OF CENTRALISED PURCHASING FUNCTION HAD TO BE PASSED ONTO THE CONCE RNED ENTITY, THAT THE PERSON PERFORMING THE PURCHASE FUNCTION WAS AT BEST ENTITLED TO COST PLUS MARKUP REMUNERATION,THAT THE ASSESSEE WAS DIRECTED TO PROVIDE THE PARTICULARS OF TIME DEVOTED BY THE EMPLOYEES OF THE AE TO PROVIDE THE SERVICE TO IT ALONG WITH THEIR COST,THAT IT HAD FAI LED TO PRODUCE THE REQUISITE INFORMATION, THAT IT WAS PERSISTING ON JUSTIFYING THE FEES PAID ON THE B ASIS OF THE SAID FUNCTION, THAT THE ASSESSEE HAS FAILED TO PROVE THAT FACTS OF THE YEAR UNDER CONSID ERATION WERE DIFFERENT FROM THE FACTS FOR THE EARLIER YEAR, THAT THE ORDER OF THE DRP FOR THE LAS T ASSESSMENT YEAR WAS VERY MUCH RELEVANT TO DECIDE THE ISSUE ON HAND,THAT THE ASSESSEE HAD NEIT HER JUSTIFIED THE MARKUP OF 10% CHARGED BY THE AE OVER AND ABOVE ITS COST NOR HAD IT SHOWN THAT TH E COST INCURRED BY THE AE WERE IN FACT IN RESPECT OF SERVICES ACTUALLY RENDERED,THAT THE TRAN SACTION OF RS.21 CRORES, IN THE OVERALL PROFITABILITY IN RESPECT OF TURNOVER OF RS.400 CROR ES,WAS TOO SMALL TO ARRIVE AT ANY CONCLUSION, THAT IT ATTEMPTED TO AGGREGATE THE MEAGRE AE TRANSA CTION WITH THE SUBSTANTIAL NON-AE TRANSACTION AND TO APPLY THE TNM METHOD WAS NOT IN ACCORDANCE W ITH THE LAW,THAT THE TPO HAD RIGHTLY REJECTED THE METHOD, THAT INTRA GROUP SERVICES HAD TO BE BENCHMARKED SEPARATELY, THAT THE TPO HAD RIGHTLY APPLIED THE CUP METHOD, THAT THE EVIDEN CES PRODUCED BY THE ASSESSEE INDICATED THAT SOME INCIDENTAL BENEFIT MIGHT HAVE BEEN ACCRUED TO IT,THAT AN INDIAN COMPANY COULD NOT CHARGE THE AE FOR SOME INCIDENTAL BENEFIT THAT THE AE MIGH T DERIVE OUT OF THE ACTIVITIES PERFORMED,THAT THE TPO HAD BEEN QUITE LIBERAL IN QUANTIFYING THE N UMBER OF HOURS AND DETERMINING THE ALP, THAT HE HAD ALLOCATED A SUM OF RS. 9.16 CRORES UNDER THE HEAD TOTAL MANAGEMENT FEE. FINALLY,THE DRP HELD THAT A FURTHER ALLOWANCE OF RS. 12.75 LAKHS WA S TO BE ALLOWED TO THE ASSESSEE,THAT THE AO SHOULD RESTRICT THE ADDITION OF RS. 8.27 CRORES AS AGAINST RS.8.39 CRORES,AS SUGGESTED BY THE TPO. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)ARGUED T HAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH ITS AE TO AVAIL CERTAIN SERVICES,SER VICES WERE NOT OF WATER TIGHT COMPARTMENT NATURE, THAT SOME OF THEM WERE OVER-LAPPING,THAT TH E AGREEMENT WITH THE AE WAS NOT DOUBTED BY THE DEPARTMENTAL AUTHORITIES, THAT IT PROVIDED A BU NDLE OF SERVICES, THAT THE TPO AND DRP ARTIFICIALLY DIVIDED INTO TWO SEGMENTS,THAT IN THE EARLIER YEARS PAYMENTS MADE BY IT TO ITS AE WERE ALLOWED BY THE AO WITHOUT MAKING ANY TP ADJUSTMENTS , THAT THE PAYMENTS WERE MADE FOR 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 5 VARIOUS SERVICES AND NOT FOR SPECIFIC SERVICES, THA T PAYMENTS MADE IN PURSUANCE OF AN AGREEMENT FOR AVAILING SERVICES HAD TO BE ALLOWED, THAT NO TP ADJUSTMENT WAS REQUIRED TO BE MADE. HE REFERRED TO THE CHART GIVING DETAILS OF MANAGEMENT FEE PAID TO THE AE AND THE TP ADJUSTMENT MADE.REFERRING TO THE AGREEMENT FOR PROVISION OF MA NAGEMENT GENERAL SUPPORT AND ADMINISTRA - TIVE SERVICES,HE STATED THAT ASSESSEE WAS TO BE REN DERED SERVICES AS PER THE SCHEDULE 1 (PAGE 8 OF THE PAPER BOOK),THAT THE TPO HAD ALLOWED THE EXPEND ITURE INCURRED FOR THREE SERVICES OUT OF TOTAL SIX SERVICES. HE RELIED UPON THE CASES OF MERCK LTD .(389 ITR 70) AND NIELSEN (INDIA) PRIVATE LTD. (ITA/8799/MUM/2012, DATED 27/05/2016).THE DEPARTMEN TAL REPRESENTATIVE (DR) CONTENDED THAT THE ASSESSEE HAD AVAILED ONLY THREE SERVICES, THAT THE ASSESSEE HAD NOT PROVIDED DETAILS CALLED FOR BY THE TPO,THAT THE AGREEMENT ITSELF DIVIDED THE SE RVICES INTO SIX SEGMENTS, THAT THE ASSESSEE HAD NOT EXPLAINED AS TO HOW THE SERVICES WERE CHARGED. HE RELIED UPON THE CASES OF KNORR-BREMSE INDIA (P.) LTD. (63 TAXMANN.COM 186) AND CRANES SOF TWARE INTERNATIONAL LTD. (52 TAXMANN.COM 19). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE IS PART OF THE DIMENSION DATA GROUP AND IS A SUBSIDIARY OF DIMENSION DATA ASIA PACIFIC PTE.LTD., THAT THE GROUP IS A DEALER FOR CISCO NETW ORKING PRODUCTS, THAT AS PER THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND ITS AE THE AS SESSEE WAS TO BE RENDERED SERVICES BY ITS AE UNDER TEN DIFFERENT HEADS, THAT THE ASSESSEE HAD AV AILED CERTAIN SERVICES FROM ITS AE AS PER THE AGREEMENT AND HAD MADE PAYMENT ACCORDINGLY, THAT TH E AE HAD SIMILAR TYPE OF AGREEMENTS WITH OTHER ENTITIES OF THE GROUP,THAT THE ALLOCATION KEY USED FOR CHARGING MANAGEMENT FEE TO VARIOUS ENTITIES OF THE GROUP BY THE AE WAS TURNOVER OF AN ENTITY VIS-A-VIS TURNOVER OF THE ENTIRE ASIA- PACIFIC GROUP FOR THE YEAR UNDER CONSIDERATION.WE A RE OF THE OPINION THAT THE BASIC ISSUE TO BE DECIDED IN THE MATTER BEFORE US IS AS TO WHETHER TH E PAYMENT MADE BY THE ASSESSEE UNDER THE HEAD MANAGEMENT SERVICE SHOULD BE ALLOWED OR NOT. IT IS A FACT, ASSESSEE HAD, DURING THE YEAR UNDER CONSIDERATION,NOT AVAILED SERVICES UNDER THE HEADS (I)CORPORATE COMMUNICATION & BRAND MANAGEMENT SERVICES,(II)HUMAN RESOURCES SERVICES AN D(III)SALES AND MARKETING SERVICES. IT IS ALSO A FACT THAT AS PER THE AGREEMENT THE ASSESSEE WAS ENTITLED TO AVAIL ALL THE SERVICES. WE FIND THAT SIMILAR ISSUE HAS BEEN DELIBERATED UPON AND DE CIDED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MERCK LTD.(SUPRA).IN THAT MATTER THE AS SESSEE HAD ENTERED INTO AN AGREEMENT WITH ITS AE.S TO PROVIDE TECHNICAL KNOW-HOW OR CONSULTANCY I N 12 FIELDS,AS INDICATED THEREIN,FOR A CONSIDERATION OF RS.1.57 CRORES. DURING THE PREVIO US YEAR RELEVANT TO THE AY.2003-04, THE 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 6 ASSESSEE AVAILED OF SERVICES OF ITS AE.S ONLY IN TH REE OUT OF TWELVE FIELDS LISTED IN THE AGREEMENT.THE TPO PROCEEDED TO HOLD THAT THE ENTIRE CONSIDERATION OF RS.1.57 CRORES WAS ATTRIBUTABLE TO THE THREE TECHNICAL SERVICES WHICH THE ASSESSEE AVAILED OF AND HELD THAT NO CONSIDERATION WAS PAYABLE IN RESPECT OF NINE SERVIC ES PROVIDED FOR IN THE AGREEMENT.THUS THE ENTIRE PAYMENT OF RS. 1.57 CRORES WAS ATTRIBUTABLE ONLY TO THE THREE SERVICES AVAILED OUT OF THE TWELVE LISTED IN THE AGREEMENT.HE FURTHER HELD THAT ONLY RS. 40 LAKHS COULD BE CONSIDERED AS ARMS LENGTH PRICE ATTRIBUTABLE TO THREE SERVICES A ND MADE ADJUSTMENT OF RS. 1.17 CRORES RESULTING IN ITS ADDITION TO THE TAXABLE INCOME. THE FAA CONF IRMED THE ORDER OF THE AO.THE TRIBUNAL HELD THAT THE AE WAS OBLIGED TO PROVIDE TECHNICAL ASSIST ANCE IN THE 12 AREAS LISTED IN THE AGREEMENT AND IT WAS FOR THE AVAILABILITY OF THE ASSISTANCE I N ALL TWELVE AREAS THAT THE CONSIDERATION WAS PAID AND THUS, NO ADJUSTMENT WAS REQUIRED. DISMISSING TH E APPEAL FILED BY THE DEPARTMENT THE HONBLE HIGH COURT HELD AS UNDER: ...(C)THE GRIEVANCE OF THE REVENUE BEFORE US IS TH AT SERVICES ONLY IN THREE AREAS HAD BEEN AVAILED OF BY THE RESPONDENT-ASSESSEE FROM ITS ASSOCIATED E NTERPRISES OUT OF THE TWELVE AREAS LISTED IN THE AGREEMENT. THEREFORE, THE CONSIDERATION PAID TO THE ASSOCIATED ENTERPRISES IS ONLY ATTRIBUTABLE TO THE SERVICES RECEIVED/AVAILED. (D) THE FINDING OF THE TRIBUNAL THAT THE TRANSFER P RICING OFFICER HAS NOT APPLIED ANY OF THE METHOD PRESCRIBED UNDER SECTION 92C OF THE ACT TO D ETERMINE THE ARM'S LENGTH PRICE IN RESPECT OF FEES FOR TECHNICAL KNOW-HOW/ CONSULTANCY FEE PAID B Y THE RESPONDENT-ASSESSEE TO ITS ASSOCIATED ENTER PRISES IS NOT DISPUTED BEFORE US. FURTHER, TH E FINDING OF THE TRIBUNAL THAT EVEN IN RESPECT OF THREE FIELDS WHERE THE RESPONDENT-ASSESSEE HAD AVAI LED THE SERVICES, NO EXERCISE TO BENCH MARK THE SAME WITH SIMILAR TRANSACTIONS ENTERED INTO BET WEEN INDEPENDENT PARTIES WAS CARRIED OUT BEFORE HOLDING THAT THE ARM'S LENGTH PRICE IN THE T HREE AREAS AVAILED OF IS RS. 40 LAKHS, IS NOT DISPUTED. THE FINDING OF THE TRIBUNAL THAT THE AGRE EMENT FOR TECHNICAL KNOW-HOW/CONSULTANCY WAS IN RESPECT OF ALL THE TWELVE SERVICES AND THE RESPO NDENT-ASSESSEE COULD AVAIL OF ALL OR ANY ONE OF THESE TWELVE AREAS LISTED OUT IN THE AGREEMENT AS A ND WHEN THE NEED AROSE. WE FIND THE AGREEMENT IS SIMILAR TO A RETAINER AGREEMENT. CONSEQUENTLY, T HE FINDING OF THE ASSESSING OFFICER ATTRIBUTING NIL VALUE TO NINE OF THE SERVICES LISTED IN THE AGR EEMENT WHICH WERE NOT AVAILED OF BY THE RESPONDENT-ASSESSEE IN THE PRESENT FACTS WAS NOT JU STIFIED. MOREOVER, NOT ADOPTING ONE OF THE MANDATORILY PRESCRIBED METHODS TO DETERMINE THE ARM 'S LENGTH PRICE IN RESPECT OF FEES FOR TECHNICAL SERVICES PAYABLE BY THE RESPONDENT-ASSESS EE TO ITS ASSOCIATED ENTERPRISE, MAKES THE ENTIRE TRANSFER PRICING AGREEMENT UNSUSTAINABLE IN LAW. (E) IN VIEW OF THE ABOVE, THE FINDING OF FACT ARRIV ED AT BY THE TRIBUNAL THAT RS. 1.57 CRORES PAID BY IT TO ITS ASSOCIATED ENTERPRISES IS IN RESPECT OF I TS RIGHT TO AVAIL AND THE OBLIGATION OF THE ASSOCIATED ENTERPRISES TO PROVIDE TECHNICAL ASSISTA NCE IN ANY OF THE TWELVE SERVICES LISTED OUT IN THE TECHNICAL KNOW-HOW AGREEMENT ENTERED INTO BETWE EN THE RESPONDENT-ASSESSEE WITH ITS ASSOCIATED ENTERPRISES IS NOT SHOWN TO BE PERVERSE. THE VIEW TAKEN BY THE TRIBUNAL IN THE PRESENT FACTS IS A POSSIBLE VIEW. HERE,WE WOULD ALSO LIKE TO REFER TO THE MATTER OF A C NIELSEN (INDIA) PRIVATE LTD.(SUPRA).RELEVANT PORTION OF THE ORDER READS AS UNDER: 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 7 2.2. THE TPO FOUND THAT DURING THE YEAR THE ASSESSEE HAD PAID RS. 11.14 CRORES TO ITS AE,THAT THE SAID PAYMENT WAS MADE IN VIEW OF BUSINESS SUPPORT S ERVICES RECEIVED FROM THE AE. IT WAS CLAIMED THAT ABOVE-MENTIONED PAYMENT WAS IN THE NATURE OF I NTRA-GROUP SERVICES PAYMENT. HE FOUND THAT THE FIRST WAS SIGNED ON 02/06/203 AND ITS SPECIFIED A MARK UP OF 5% IN ACCORDANCE WITH ARTICLE 4, WHEREAS THE SECOND AGREEMENT WAS SIGNED ON 28/11/20 07 AND WAS STATED TO BE EFFECTIVE FROM 01/01/2007.HE FOUND THAT THE ASSESSEE HAD PAID EURO 113315+ 339945+USD103385 UNDER THE HEAD REGIONAL GSA(BUSINESS SUPPORT SERVICES) FOR CL IENT SERVICES.HE FURTHER FOUND THAT UNDER THE HEADS FINANCE(EURO 19,000+ 5700+ US DOLLAR 45, 713) AND IT (EURO 48, 851+ EURO 146552 PLUS US DOLLAR 18,759)THE ASSESSEE HAD MADE PAYMENT S TO ITS AE. THE TPO DIRECTED THE ASSESSEE TO JUSTIFY THE ALP IN RESPECT OF THE GSA CHARGES PAID TO ITS AE AND TO SUBMIT THE GROSS ALLOCATION BASE, COMPUTATION OF ALLOCATION BASE, KEY OF ALLOCATION AND THE BASIS OF THE KEY OF ALLOCATION.THE TPO EXAMINED THE REGIONAL EXPENSES ALLOCATION OF RS.9.01 CRORES.AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE DATED 25/09/2010, 11/10/ 2010, 12/ 10/ 2010 AND 19/ 10/2010,THE TPO HELD THAT THE IT WAS B ASED UPON COMPONENTS OF COSTS,THAT THE ASSESSEE HAD NOT DISCLOSED THE BASIS FOR THE ALLOCA TION,THAT NO DETAILS OF SPECIAL MARKETING SUPPORT WAS BROUGHT ON RECORD TO SHOW THAT SPECIALI ST MARKETING AND COMPLICATION SUPPORT SERVICE HAVE BEEN PROVIDED BY THE AE TO THE TAXPAYE R, THAT THE COST ALLOCATION INCLUDED EXPENSES ON REGIONAL INFORMATION TECHNOLOGY TEAM CONSISTING OF HUNDREDS OF EMPLOYEES LOCATED IN NEW ZEALAND AUSTRALIA AND INDIA AND 140 PEOPLE IN OTHER COUNTRIES, THAT THE ASSESSEE HAD NOT BROUGHT ANY EVIDENCE ON RECORD REGARDING EMPLOYEES LOCATED IN INDIA, THAT NO CUSTOMISED RESEARCH WAS CONDUCTED FOR THE YEAR FOR THE ASSESSEE BY THE REGI ONAL CENTRE, THAT IT HAD PAID CERTAIN AMOUNTS TOWARDS BUSINESS SUPPORT SERVICES TO ITS AES, THAT THE TOTAL ALLOCATION COULD NOT BE ACCEPTED TO BE INDIA SPECIFIC,THAT THE SUBMISSION OF INTRA-GROUP I NVOICES COULD NOT BE CONSTRUED AS SUFFICIENT COMPLIA -NCE TO SHOW THAT PAYMENTS MADE FOR GSA SER VICES WERE AT ARMS LENGTH, THAT ACTUAL WORKING FOR GENERAL COSTS INCURRED AND ITS COMPONEN TS WERE NOT PRODUCED FOR VERIFICATION, THAT IT WAS NOT PROVED THAT THE ASSESSEE HAD REALLY BENEFIT ED OUT OF THE SERVICES OF THE REGIONAL TEAM, THAT NO ONE WOULD PAY ANY AMOUNT WITHOUT KNOWING THE ACT UAL BASIS AND ALSO THE ACTUAL ALLOCATION FIGURES IN A THIRD-PARTY SITUATION,THAT THE ASSESSE E HAD ITS OWN CLIENT/SERVER SYSTEM,THAT TOTAL ALLOCATION COULD NOT BE ACCEPTED TO BE INDIA SPECIF IC. HE HELD THAT ADJUSTMENT HAD TO BE MADE IN THE TP ORDER.ACCORDINGLY,HE MADE AN ADJUSTMENT OF R S. 4.50 CRORES (50% OF RS. 9.01 CRORES). 2.8. IT IS NOT DENIED BY THE TPO/DRP THAT EXPENSES INCUR RED BY ACNIELSEN CORPORATION WERE NOT ALLOCATED TO ALL THE GROUP ENTITIES ON THE BASIS OF REVENUE.THE ASSESSEE HAD MADE A CLAIM THAT ACNIELSEN ASIA PACIFIC HAS PREPARED A MASTER FILE T O DETERMINE AN ARM'S LENGTH MARK-UP TO BE CHARGED FOR THE INTRA-GROUP SERVICES.BOTH THE AUTHO RITIES HAS NOT COMMENTED UPON THE SAID EVIDENCE AND ALLEGED ERRORS,IF ANY,OF THE METHOD AP PROVED BY THE GROUP.IN SHORT,THE ASSESSEE HAD PROVED WITH DOCUMENTARY EVIDENCES THAT CHARGES PAI D BY THE ASSESSEE WERE AT ARMS LENGTH AND THAT OTHER ARMS LENGTH ENTITY WAS PREPARED TO PAY FOR SUCH SERVICES IN COMPARABLE CIRCUMSTANCES. 2.9. WE ARE NOT AGREEABLE TO THE PROPOSITION,ADVANCED BY THE TPO/DRP,THAT WHEN EXPENDITURE IS INCURRED FOR THE BENEFIT OF THE GROUP AS A WHOLE NO CHARGE OF SUCH EXPENDITURE IS REQUIRED. SERVICES RENDERED BY AE HELP NOT ONLY THE GROUP AS A WHOLE,BUT ALSO HELPS OTHERS.THEREFORE, THERE IS NOTHING WRONG IN CHARGING COST FOR SUCH SE RVICES.AS THE COST INCURRED BY THE AE HAD BEEN ALLOCATED TO ALL THE GROUP COMPANIES ON THE BASIS O F THE REVENUE AND DETAILED WORKINGS WAS SHARED WITH THE TPO AND DRP,SO,IT CANNOT BE HELD T HAT REQUISITE INFORMATION WAS NOT MADE AVAILABLE.IT IS OTHER THING THAT BOTH OF THEM DID N OT TAKE NOTICE OF THE DETAILS FILED,AS DISCUSSED EARLIER.WE ARE UNABLE TO UNDERSTAND THE LOGIC BEHIN D THE ARGUMENT OF BOTH THE AUTHORITIES THAT IF THE ASSESSEE HAD ITS OWN CLIENT SERVICE TEAM THEN WHY COSTS OF CLIENT SERVICE TEAMS WAS INCLUDED. ACCORDING TO US,IT IS GROSS VIOLATION OF THE LAMAN -REKHA DRAWN BY THE BASIC AND FUNDAMENTAL TAXATION JURISPRUDENCE.NO AUTHORITY IS REQUIRED TO HOLD THAT THE JURISDICTION OF THE AO U/S.37 OF THE ACT AND THAT OF THE TPO U/S.92CA ARE DISTINCT.T HE AUTHORITY OF THE TPO IS TO CONDUCT A TP ANALYSIS TO DETERMINE THE ALP AND NOT TO DETERMINE WHETHER OR NOT THERE IS A SERVICE FROM WHICH 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 8 THE ASSESSEE BENEFITS. SO,WHEN THE TPO HOLDS THAT T HE ASSESSEE DID NOT BENEFIT FROM THESE SERVICES IT AMOUNTS TO DISALLOWING EXPENDITURE.SUCH A DECISI ON IS OUTSIDE THE AUTHORITY OF THE TPO.THE DECISION AS TO WHETHER THE EXPENDITURE WAS LAID OU T OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS IS A FACT DETERMINATION O R VERIFICATION AND THAT EXERCISE IS TO BE UNDERTAKEN BY THE AO.THAT DETERMINATION IS NOT AND CANNOT BE MADE BY THE TPO.THE HONBLE DELHI HIGH COURT IN THE CASE OF EKL APPLIANCES LTD. (345 ITR 241) HAS HELD AS UNDER: IT IS NOT OPEN TO THE TRANSFER PRICING OFFICER TO QUESTION THE JUDGMENT OF THE ASSESSEE AS TO HOW IT SHOULD CONDUCT ITS BUSINESS AND REGARDING THE NECESSITY OR OTHERWISE OF INCURRING THE EXPENDITURE IN THE INTEREST OF ITS BU SINESS. IT IS ENTIRELY THE CHOICE OF THE ASSESSEE AS TO FROM WHOM IT CONTEMPLATES TO SOURCE ITS TECHNOLOGY OR TECHNICAL KNOW-HOW AND AS TO WHAT STEPS SHOULD BE TAKEN TO MEET THE CO MPETITION PREVALENT IN THE MARKET AND TO STAVE OFF THE COMPETITORS. THIS IS THE DOMAIN OF THE BUSI NESSMAN AND THE TRANSFER PRICING OFFICER HAS NO SAY IN THE MATTER. AS HELD B Y THE SUPREME COURT IN S. A. BUILDERS LTD. V. CIT (APPEALS) [2007] 289 ITR 26 (SC) THE RE VENUE CANNOT JUSTIFIABLY CLAIM TO PLACE ITSELF IN THE ARM CHAIR OF BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS THE REASO NABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. 22. EVEN RULE 10B(1)(A) DOES NOT AUTHORISE DISALLOW ANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HAVE INCURRED THE SAME OR THAT IN THE VIEW OF THE REVENUE THE EXPENDITURE WAS UNREMUNERATIVE OR THAT IN VIEW OF THE CONTINUED LOSSES SUFFERED BY THE ASSESSEE IN HIS BU SINESS, HE COULD HAVE FARED BETTER HAD HE NOT INCURRED SUCH EXPENDITURE. THESE ARE IRRELEV ANT CONSIDERATIONS FOR THE PURPOSE OF RULE 10B. WHETHER OR NOT TO ENTER INTO THE TRANSACT ION IS FOR THE ASSESSEE TO DECIDE........SO LONG AS THE EXPENDITURE OR PAYMENT HAS BEEN DEMONST RATED TO HAVE BEEN INCURRED OR LAID OUT FOR THE PURPOSES OF BUSINESS, IT IS NO CONCERN OF THE TRANSFER PRICING OFFICER TO DISALLOW THE SAME ON ANY EXTRANEOUS REASONING. AS P ROVIDED IN THE OECD GUIDELINES, HE IS EXPECTED TO EXAMINE THE INTERNATIONAL TRANSACTIO N AS HE ACTUALLY FINDS THE SAME AND THEN MAKE SUITABLE ADJUSTMENT BUT A WHOLESALE DISALLOWAN CE OF THE EXPENDITURE, PARTICULARLY ON THE GROUNDS WHICH HAVE BEEN GIVEN BY THE TRANSFER P RICING OFFICER IS NOT CONTEMPLATED OR AUTHORISED. IN THE CASE UNDER CONSIDERATION ACTUALLY THE TPO HA D DRP HAVE COMPLETELY TAKEN OVER THE ROLE OF THE AO.INSTEAD OF DECIDING THE ALP OF THE IT.S REPO RTED BY THE ASSESSEE,THEY HAVE DECIDED THE ISSUE OF ALLOWABILITY OF EXPENDITURE INCURRED BY IT .THEREFORE,IN OUR OPINION,THEIR ORDER ARE NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. FROM THE ABOVE,IT IS CLEAR THAT WHILE DECIDING THE ALP OF UMBRELLA OF SERVICES WHAT HAS TO CONSIDERED IS THE RIGHT OF ASSESSEE THAT IT IS ENTI TLED TO AVAIL.IF IT AVAILS ONLY A FEW SERVICES OUT OF THE BOQUET OF SERVICES THE TPO SHOULD NOT REJECT TH E TP STUDY OF THE ASSESSEE ON THE GROUND THAT IT DID NOT AVAIL ALL THE SERVICES OR THE MAJORITY O F SERVICES AS MENTIONED IN THE AGREEMENT.AVAILING SELECTED SERVICES FROM A COMPOSITE AGREEMENT IS SUF FICIENT FOR CLAIMING THE DEDUCTION.FOR REJECTING THE TP STUDY OF THE ASSESSEE THE TPO SHOU LD PROVE THAT PRICE SHOWN BY THE ASSESSEE FROM THE SERVICES AVAILED WAS NOT AT ARMS LENGTH.N ON-AVAILING OF SERVICES CANNOT BE THE BASIS FOR REJECTING THE CLAIM.THESE ARE TWO DIFFERENT THINGS AND ARE FUNDAMENTALLY SEPARATE.IN THE CASE UNDER CONSIDERATION THE TPO OR THE DRP HAS NOT STAT ED THAT PAYMENT MADE BY THE ASSESSEE TO ITS 2280/M/16 (11-12) DIMENSION DATA INDIA PVT. LTD. 9 AE WERE NOT AT ARMS LENGTH.THEREFORE,RESPECTFULLY FOLLOWING THE ABOVE MENTIONED CASES,WE DECIDE THE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS FAR AS CASES RELIED UPON BY THE DR ARE CONCERNED ,WE WOULD LIKE TO STATE THAT BOTH OF THEM DO NOT DEAL WITH THE ISSUE.DISPUTE BEFORE US,AS STATED EARLIER,IS AS TO WHETHER ANY TP ADJUSTMENT CAN BE MADE IF AN ASSESSEE AVAILS ONLY CERTAIN SERVICES OUT OF THE BUNCH OF SERVICES MENTIONED IN AN AGREEMENT SPECIALLY WHEN THE TPO DOES NOT DOUBT THE ARMS LENGTH PRICE OF AVAILED SERVICES. BOTH THE CASES ARE NOT HELPFUL TO DECIDE THE ISSUE BEFORE US. 6. SECOND GROUND OF APPEAL DEALS WITH ADDITION OF RS.3 1.50 LAKHS ON ACCOUNT OF NON RECONCILIA- TION OF TDS STATEMENT AND THE COMPUTATION OF INCOME .BEFORE US,THE AR STATED THAT DUE TO MISTAKES COMMITTED BY SOME OF THE DEDUCTORS OF TAX MISMATCH OF INCOME HAD OCCURRED,THAT PROPER VERIFICATION WAS NOT DONE BY THE AO IN THAT REGARD.THE DR STATED THAT THE ISSUE COULD BE DECIDED ON MERITS.IN OUR OPINION,IN THE INTEREST OF JUSTICE MATTER SHOULD BE REMANDED BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTE D TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.THE ASSESSEE WOULD SUBMIT ALL THE N ECESSARY DOCUMENTS TO RECONCILE THE TDS STATEMENT WITH COMPUTATION OF INCOME.SECOND GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH ,AUGUST, 2017. 16 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 16.08 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.