Appeal details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 6374 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 10 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-03-2017
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
I1
Next Hearing Date
27-03-2017
Assessment Year
2008-2009
Appeal Filed On
02-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2624/DEL./2013 (ASSESSMENT YEAR : 2008-09) DCIT, CIRCLE 3 (1), VS. M/S. CUSHMAN & WAKEFIELD NEW DELHI. INDIA PVT. LTD., B 6/8, COMMERCIAL COMPLEX, SAFDARJUNG ENCLAVE, NEW DELHI 110 029. (PAN : AAACC5006B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.C. SRIVASTAVA, ADVOCATE REVENUE BY : SHRI AMRENDRA KUMAR, SENIOR DR DATE OF HEARING : 27.03.2017 DATE OF ORDER : 29.03.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 3 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE R EVENUE) BY FILING THE AFORESAID APPEAL SOUGHT TO SET ASIDE THE ORDER DATED 25.02.2013 PASSED BY THE COMMISSIONER OF INCOME-TA X (APPEALS)- XX, NEW DELHI QUA THE ASSESSMENT YEAR 2008-09 ON TH E REVISED GROUNDS FILED VIDE APPLICATION DATED 05.02.2016, WH ICH IS ALLOWED ITA NO.2624/DEL./2013 2 BEING NECESSARY FOR COMPLETE ADJUDICATION OF THE CO NTROVERSY AT HAND INTER ALIA THAT :- 1. WHETHER THE LD. CIT(A) HAS ERRED ON FACTS AND I N LAW IN ALLOWING THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITION OF RS.73,50,612/- BY IGNORING THE FACT THAT THE ASSESSEE HAD MADE PAYMENT OF RS.40,50,153/- AND RS.30,00,459/- (TOTALING TO RS.73,50,612/-) TO CSW AND CWHK RESPECTIVELY FOR NO SERVICES? 2. WHETHER THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION MADE BY AO, AS THE TPO IN HIS REPORT HAS CLEARLY POINTED OUT THAT THE APPELLANT HAD FAILED TO ESTABLISH THAT THE EMPLOYEE WAS INDEED ASSIGNED OR DEPUTED TO THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION AND ON THE ISSUE OF E-LEARNING SOFTWARE CHARGES AND INTEREST COLLECTION ETC. ALSO THE TPO HAS STATED THAT THERE ARE DUPLICATION OF THESE SERVICES AS APPELLANT HAS SEPARATELY BOOKED THE EXPENSES IN ITS P&L ACCOUNT UNDER THESE HEADS? 2. BRIEFLY STATED FACTS OF THIS CASE ARE : THE ASSE SSEE COMPANY IS A WHOLLY OWNED SUBSIDIARY OF CUSHMAN & WAKEFIELD MA URITIUS HOLDING INC., ENGAGED IN THE BUSINESS OF RENDERING SERVICES QUA ACQUISITION, SALES AND LEASE OF REAL ESTATE PROPERT Y AND OTHER SERVICES, SUCH AS, ADVISORY AND RESEARCH, FACILITIE S MANAGEMENT, PROJECT MANAGEMENT, ETC. IN THE REAL ESTATE SECTOR. ASSESSEE COMPANY HAS MORE THAN 11,000 EMPLOYEES OPERATING FR OM 49 COUNTRIES. CUSHMAN & WAKEFIELD AND HEALEY & BAKER, WHICH MERGED INTO CUSHMAN & WAKEFIELD IN 1998, PROVIDES A WIDE RANGE ITA NO.2624/DEL./2013 3 OF REAL ESTATE SERVICES ACROSS NORTH AND SOUTH AMER ICA, EUROPE, THE MIDDLE EAST, AFRICA AND THE ASIA-PACIFIC REGION. 3. DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE C OMPANY ENTERED INTO INTERNATIONAL TRANSACTIONS AS UNDER :- S.NO. DESCRIPTION OF TRANSACTION METHOD VALUE (IN RS.) 1 PAYMENT OF REFERRAL FEE TNMM 6,25,91,392 2 PROVISION OF PROFESSIONAL SERVICES TNMM 9,47,,242 3 RECEIPT OF REFERRAL FEE TNMM 3,54,135 4 PROVISION OF LEASE REVIEW SERVICES TNMM 4,46,010 5 PROVISION OF LEASE RENEWAL SERVICES TNMM 6,48,842 6 PROVISION OF PROJECT MANAGEMENT CONSULTANCY TNMM 8,84 ,273 7 PROVISION OF VALUATION SERVICES CUP 75,81,919 8 REIMBURSEMENT TO AES PAID - 80,86,661 9 REIMBURSEMENT RECEIVED FROM AES - 4,66,509 4. EXCEPT INTERNATIONAL TRANSACTION RELATING TO REI MBURSEMENT OF ASSOCIATED ENTERPRISES TO THE TUNE OF RS.80,86,661/ -, THE TPO ACCEPTED ALL THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE COMPANY AT ARMS LENGTH. HOWEVER, ASSESSEE CLAIMED THAT THIS TRANSACTION IS COST TO COST RECHARGES AND SECO NDLY, THE MARGIN OF THE ASSESSEE WAS ABOVE THE MEAN MARGIN EARNED BY THE COMPARABLES UNDER TNMM ANALYSIS, HENCE THE SAME IS ALSO AT ARMS LENGTH. 5. TPO BY REJECTING THE TRANSFER PRICING STUDY UNDE RTAKEN BY THE ASSESSEE COMPANY ISSUED A SHOW-CAUSE NOTICE TO THE ASSESSEE COMPANY. TPO, AFTER REJECTING THE CONTENTIONS RAIS ED BY THE ITA NO.2624/DEL./2013 4 ASSESSEE COMPANY, USED COMPARABLE UNCONTROLLED PRIC E (CUP) METHOD AND PROCEEDED TO CONCLUDE THAT NO UNCONTROLL ED ENTERPRISE WOULD HAVE PAID ANY PRICE FOR SERVICES WHICH DO NOT LEAD TO DEMONSTRATE BENEFITS AND, THEREFORE, THE VALUE OF T HE INTERNATIONAL TRANSACTIONS HELD TO BE NIL AND RESULTANTLY, ENHANC ED THE RETURNED INCOME OF THE ASSESSEE COMPANY BY RS.73,50,612/- 6. ASSESSEE CARRIED THE MATTER BY FILING THE APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION BY ALLOWING TH E APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE T HE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 7. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. UNDISPUTEDLY, TPO HAS ACCEPTED ALL THE INTERNATI ONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE AT ARMS LEN GTH EXCEPT TRANSACTION AS TO REIMBURSEMENT PAID TO THE AE, WHI CH ARE DETAILED AS UNDER :- (A) REIMBURSEMENT OF COMPANY SHARE OF SALARY FOR COMMON MANPOWER RESOURCE, PER COST SHARING ARRANGEMENT OF RS.33,00,459/- PAID TO CUSHMAN HONGKONG; ITA NO.2624/DEL./2013 5 (B) REIMBURSEMENT OF COMPANY SHARE OF SALARY FOR COMMON MANPOWER RESOURCE, PER COST SHARING ARRANGEMENT OF RS.40,57,820/- PAID TO CUSHMAN SINGAPORE. 9. AFTER REJECTING THE CONTENTIONS RAISED BY ASSESS EE COMPANY, TPO CAME TO THE CONCLUSION THAT ASSESSEE HAS MADE P AYMENT OF RS.40,50,153/- AND RS.33,00459/- (TOTALING TO RS.73 ,50,612/-) TO CWS AND CWHK RESPECTIVELY FOR NO SERVICES WHICH MAY BE SAID TO BE IN THE NATURE OF INTRA GROUP SERVICES. 10. HOWEVER, DURING THE APPELLATE PROCEEDINGS BEFOR E LD. CIT (A), ASSESSEE COMPANY FILED APPLICATION FOR ADDITIO NAL EVIDENCE, ON WHICH REMAND REPORT WAS CALLED, VIDE WHICH THE TPO STATED THAT SINCE FROM THE DUPLICATION OF THESE SERVICES AS ASS ESSEE HAS SEPARATELY BOOKED THE PROFIT IN ITS PROFIT & LOSS A CCOUNT UNDER THESE HEADS, THE ADDITIONAL EVIDENCE DOES NOT SERVE ANY P URPOSE. CIT (A) AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES O F THE CASE, AND THE FACT THAT THIS ISSUE WAS SUBJECT MATTER OF THE LITIGATION IN THE EARLIER YEAR ALSO AND AS SUCH, ADJUSTMENTS WERE DEL ETED BY THE TRIBUNAL, CAME TO THE FOLLOWING CONCLUSION :- 4.9. I HAVE GONE THROUGH THE ORDER OF THE TPO, SUBMISSION OF THE APPELLANT AS WELL AS ORDER OF THE HON'BLE ITAT IN THE APPELLANT'S OWN CASE FOR THE AY 2006-07. THE FACTS AND CIRCUMSTANCES OF THE CASE REMAINS THE SAME AS COMPARED TO THE DECIDED CASE BY THE HON'BLE ITAT. FOR EXAMPLE, THE MAIN CUSTOMER IN SINGAPORE AGREEMENT IS IBM. THE AGREEMENT IS DATED ITA NO.2624/DEL./2013 6 01.01.2006 AND THE PERSON EMPLOYED FOR THIS PURPOSE , NAMELY, MR. ROYDEN BY THE SINGAPORE ENTITY REMAINS THE SAME. IT IS ALSO A FACT, APPELLANT DERIVES SUBS TANTIAL REVENUE FROM IBM. THE DOCUMENTATION PRESENTED BY THE APPELLANT BEFORE THE ITAT AS WELL AS DURING THE COURSE OF THIS APPEAL PROCEEDING ARE ALSO SIMILAR. FURTHER, THE TRANSACTION WITH HONG KONG AE IS ALSO SIMILAR AS COMPARED TO THE DECIDED CASE BY THE HON' BLE ITAT. IN VIEW OF THE IDENTICAL FACTS EXISTING IN TH E AY 2008-09, THE RATIO OF THE ASSESSEE'S OWN CASE DECID ED BY THE HON'BLE ITAT IS APPLICABLE. RESPECTFULLY FOLLOW ING THE DECISION OF THE HON'BLE ITAT AS QUOTED IN THE EARLIER PARAGRAPH, I HOLD THAT THE CONCLUSION ARRIV ED BY THE TPO THAT THERE WAS NO BENEFIT DERIVED BY THE APPELLANT FROM THESE TRANSACTIONS IS UNWARRANTED AN D UNSUBSTANTIATED. THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT DURING THE APPEAL PROCEEDINGS ALSO ESTABL ISH 'THE SERVICES RENDERED BY THE THIRD PARTY ENTITIES WHICH WAS ROUTED THROUGH THE AE. THE EXPENSES INCURRED LI KE INTERNET CHARGES, BLACKBERRY LICENSE FEE, CONFERENC E EXPENSES, TRAVEL COST AND OTHER SOFTWARE EXPENSES A RE ALLOWABLE DEDUCTIONS IN THE HANDS OF THE APPELLANT IF IT WERE DIRECTLY BILLED TO THE APPELLANT: IT -IS NOT P OSSIBLE TO CONCLUDE THAT THERE WERE DUPLICITY OF THESE EXPENSE S OR THEY WERE SUPERFLUOUS IN NATURE. THEY ARE PART OF T HE TRANSACTION WITHIN THE GROUP WHICH IS REIMBURSED BY THE APPELLANT AT COST. IN VIEW OF THIS, I HOLD THAT THE RE IS NO JUSTIFICATION FOR THE TPO TO COME TO THE CONCLUSION THAT INDEPENDENT ENTERPRISES WOULD NOT HAVE PAID FOR SUC H SERVICES. IN VIEW OF THIS, TPO / AO IS DIRECTED TO DELETE THE ADDITION OF RS.73,50,612/- MADE IN THIS REGARD. 11. TPO PRIMARILY MADE THE ADDITION ON THE GROUND T HAT THE ASSESSEE HAS MADE PAYMENT OF RS.40,50,153/- AND RS. 33,00459/- (TOTAL AMOUNTING TO RS.73,50,612/-) TO CUSHMAN & WA KEFIELD SINGAPORE AND CUSHMAN & WAKEFIELD HONG KONG RESPECT IVELY FOR NO SERVICES RENDERED BY THEM WHICH MAY BE SAID TO B E IN THE NATURE ITA NO.2624/DEL./2013 7 OF INTRA GROUP SERVICES AND HELD ARMS LENGTH PRICE OF THE SERVICES TO BE NIL ON APPLICATION OF CUP METHOD AS NO UNCONTROL LED ENTERPRISE WOULD HAVE PAID ANY AMOUNT FOR SERVICES WHICH DO NO T TANTAMOUNT TO INTRA GROUP SERVICES WITH DEMONSTRATE-ABLE BENEF ITS. HOWEVER, CIT (A) IN APPEAL HELD THAT THE ASSESSEE ESTABLISHE D THAT THE SERVICES HAVE BEEN RENDERED BY THE THIRD PARTY ENTI TIES WHICH WERE ROUTED THROUGH AE. THE EXPENSES INCURRED LIKE INTE RNET CHARGES, BLACKBERRY LICENSE FEE, CONFERENCE EXPENSES, TRAVEL COST AND OTHER SOFTWARE EXPENSES ARE ALLOWABLE DEDUCTION SIN THE H ANDS OF THE ASSESSEE IF IT WERE DIRECTLY BILLED TO THE ASSESSEE AND AS SUCH, CANNOT BE CONCLUDED THAT THERE WERE DUPLICITY OF TH E EXPENSES OR THERE WERE SUPERFLUOUS IN NATURE AND THEY WERE PART OF THE TRANSACTION WITHIN GROUP WHICH IS REIMBURSED BY THE ASSESSEE AT COST. 12. HOWEVER, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN ITA NO.475 / 2 012 DATED 23.05.2014 BY REMANDING THE CASE TO AO, FOR ALP ASS ESSMENT BY TPO FOLLOWED BY THE AOS ORDER IN ACCORDANCE WITH L AW WHICH HAS NOT BEEN CONTROVERTED BY THE LD. DR. 13. WE HAVE PERUSED THE AFORESAID JUDGMENT OF HONB LE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN WHICH ITA NO.2624/DEL./2013 8 FOLLOWING IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED BY THE HONBLE HIGH COURT :- IS THE TRIBUNAL CORRECT IN HOLDING THAT BENCHMARKI NG WAS NOT NECESSARY IN RESPECT OF THE COST REIMBURSEM ENT REPORTED BY THE ASSESSEE THAT WAS LATER SUBJECT TO DISALLOWANCE BY THE AO, SINCE THE TPO HELD THAT ALP IN RESPECT OF THIS COMPONENT WAS NIL? 14. HONBLE HIGH COURT IN PARA 13 OF THE AFOREMENTI ONED JUDGMENT OBSERVED THAT :- 13. THE ARGUMENTS ADVANCED BEFORE THIS COURT APPEARS TO DIVIDE THIS ISSUE IN TWO PARTS : FIRST, WHETHER SERVICES HAVE INDEED BEEN PROVIDED BY CWHK AND CWS TO THE ASSESSEE, AND SECOND, WHETHER THESE SERVICES OUGHT TO BE BENCHMARKED TO DETERMINE TO ALP CONSIDERING THE PROVISIONS OF SECTION 92 (3). 15. HONBLE HIGH COURT WHILE DECIDING THE ISSUE IN ASSESSEES OWN CASE IN THE EARLIER YEAR OBSERVED AS UNDER :- 19. THE COURT NOTES THAT THE COSTS INCURRED BY CWS AND CWHK HAVE NOT BEEN DISPUTED BY THE REVENUE. THEY WERE ACTUALLY INCURRED. EQUALLY, IT IS AN ADM ITTED FACT THAT THE ASSESSEE DID NOT ATTEMPT TO BENCHMARK THIS INTERNATIONAL TRANSACTION THROUGH ANY OF THE METHOD S INDICATED UNDER RULE 10C OF THE INCOME TAX RULES, 1961, TO DETERMINE THE ALP FOR THESE TRANSACTIONS. NEITHER WAS SUCH AN EXERCISE CONDUCTED BY THE TPO, AND ACCORDINGLY, TILL DATE, THAT VACUUM EXISTS. THI S VACUUM REMAINS DESPITE SECTION 92(3) OF THE ACT. SECTION 92 CREATES A REGIME FOR DETERMINING THE TRU E VALUE OF A TRANSACTION BETWEEN TWO RELATED PARTIES, IN THIS CASE, THE ASSESSEE AND CWS/CWHK, TO ENSURE THA T TAXABLE INCOME IS NOT TRANSFERRED TO ANOTHER ENTITY OR JURISDICTION. THE VERY PURPOSE OF SECTION 92 THUS I S TO ENSURE THAT THE TOTAL TAXABLE INCOME IS REPORTED ITA NO.2624/DEL./2013 9 CORRECTLY TO INCREASE TAX COLLECTION. NATURALLY, CL AUSE (3) PROVIDES THAT IF SUCH AN ALP RESULTS IN A DECREASE IN THE TAX INCIDENCE IN INDIA, THE TRUE VALUE OF THE TRANS ACTION WILL BE THE VALUE STATED BY THE ASSESSEE AND NOT TH E ALP. IN OTHER WORDS, IF AN ASSESSEE IS PAYING GREATER IN COME TAX THAN WOULD OTHERWISE BE PAID IN AN UNCONTROLLED TRANSACTION, SECTION 92 WILL NOT ALTER THE INCOME S TATED IN THE RETURN. THIS CONCLUSION, HOWEVER, CAN ONLY B E REACHED AFTER AN ASSESSMENT OF THE ALP AND COMPARISON WITH THE INCOME STATED IN THE RETURN. . 29. THE ARGUMENT IN THIS CASE IS THAT THE ASSESSEE ONLY PAID FOR THE COST INCURRED, WHILE AN UNCONTROL LED TRANSACTION WOULD INVOLVE AN ADDITIONAL ELEMENT OF PROFIT, THUS LEADING TO A GREATER CLAIM FOR REIMBURSEMENT. IF TRUE, THIS WOULD NO DOUBT PLACE T HIS TRANSACTION WITHIN SECTION 92(3). HOWEVER THIS CANN OT BE THE CASE. UNDOUBTEDLY CERTAIN AMOUNTS WERE CHARG ED BY THE AES AS REIMBURSEMENT FOR ACTUAL COSTS INCURR ED. NEVERTHELESS, WHETHER A THIRD PARTY IN AN UNCONTR OLLED TRANSACTION WITH THE ASSESSEE WOULD HAVE CHARGED AMOUNTS LOWER, EQUAL TO OR GREATER THAN THE AMOUNTS CLAIMED BY THE AES, CWS AND CWHK HAS TO PERFORCE BE TESTED UNDER THE VARIOUS METHODS PRESCRIBED IN SECTION 92C OF THE ACT. THE QUESTION THUS REQUIRED TO BE ADDRESSED - AND DETERMINED, IS WHETHER AN INDEPENDE NT ENTITY FOR THE SAME LIAISONING AND CLIENT INTERAC TION SERVICES AS WERE PROVIDED BY CWS AND CWHK CHARGES AN AMOUNT LESS THAN OR EQUAL TO OR MORE THA N SGD 74,330/- AND SGD 281,265/-. AN INDEPENDENT ENTITY WOULD QUITE POSSIBLY INCLUDE A MARK-UP OVER AND ABOVE THE COST, AND THUS, EXCEED THE VALUE CHARGED BY THE AES IN THIS CASE. THE SEQUITUR CANNOT BE THAT T HE COST INCURRED BY THOSE ENTITIES WOULD BE THE SAME A S THE AES IN THIS CASE. IT MAY BE GREATER (IN WHICH CASE SECTION 92(3) WOULD CLEARLY APPLY), OR LOWER. THIS CANNOT BE A MATTER OF SPECULATION. NOR IS THE APPLICATION OF SECTION 92(3) A LOGICAL INFERENCE FR OM THE FACT THAT CWS AND CWHK HAVE ONLY ASKED FOR REIMBURSEMENT OF COST. THIS BEING A TRANSACTION BETWEEN RELATED PARTIES, WHETHER THAT COST ITSELF I S INFLATED OR NOT ONLY IS A MATTER TO BE TESTED UNDER A ITA NO.2624/DEL./2013 10 COMPREHENSIVE TRANSFER PRICING ANALYSIS. THE ASSESS EE DID NOT BENCHMARK THESE COSTS IN ITS TRANSFER PRICI NG STUDY. NEITHER WAS ANY TRANSFER PRICING STUDY CONDU CTED BY THE TPO, WHO, CRUCIALLY, DID NOT SAY THAT THE AL P WAS LOWER THAN THE AMOUNT CLAIMED. HE, INSTEAD DISALLOWED THE EXPENDITURE ALTOGETHER ON THE GROUND THAT THERE WERE NO SERVICES RENDERED TO BEGIN WITH. THE ITAT OVERRULED THE TPO ON THAT LIMITED GROUND, BUT DID NOT CONCERN ITSELF WITH A TRANSFER PRICING ANALYSIS AS CONTEMPLATED UNDER SECTION 92; TO THE CONTRARY, IT ACCEPTED THE ASSESSEES STATED RETURN (ABSENT ANY BENCHMARKING) AS THE TRUE AND CORRECT VALUE UNDER A N IMPLICIT (AND INCORRECT) UNDERSTANDING OF SECTION 92(3). 16. ASSESSEE FILED COMPREHENSIVE SUBMISSIONS TO BRI NG ON RECORD THE SERVICES RECEIVED FROM CWHK AND CSW WHIC H WERE SUMMARIZED AS UNDER :- SERVICES RECEIVED FROM CUSHMAN & WAKEFIELD HONG KONG REGARDING IDENTIFICATION OF SERVICES AVAILED ONLY S COPE OF SERVICES GIVEN IN THE AGREEMENT HAS BEEN STATED, WH ICH ARE BEING REPRODUCED HEREUNDER: TO LIAISE AND COORDINATE WITH OFFICES OF CLIENTS OF C&W INDIA. TO DEVELOP FROM TIME TO TIME A MARKETING PLAN IN RESPECT OF POTENTIAL CLIENTS, WITH LIKELY REVENUE POTENTIAL FOR C& W INDIA, TO IDENTIFY POTENTIAL OPPORTUNITIES TO PROVIDE ADDITIONAL SERVICES TO EXISTING CLIENTS AND OBTAIN INSTRUCTION THEREOF AND TO ASSIST C&W INDIA IN SETTING OUT BUSINESS BROCHURES, FINANCIAL PLANNING AND STRATEGY IN RESPE CT OF CORPORATE SERVICES GENERALLY FOR THE INDIA REGIO N. SERVICES RECEIVED FROM CUSHMAN & WAKEFIELD SINGAPORE ITA NO.2624/DEL./2013 11 REGARDING IDENTIFICATION OF SERVICES AVAILED ONLY S COPE OF SERVICES GIVEN IN THE AGREEMENT HAS BEEN STATED, WH ICH ARE BEING REPRODUCED HEREUNDER: CWS PROVIDES SUPPORT SERVICES TO THE ASSESSEE WHEREBY IT ACTS AS A LIAISON BETWEEN THE ASSESSEE A ND ITS CLIENT, REGIONAL HEADQUARTERS OF IBM SINCE CWS WOULD LIAISE WITH IBM ON A REGULAR BASIS, IF ASSISTS THE ASSESSEE IN MAINTAINING AND IMPROVIN G ITS RELATIONSHIP WITH IBM CWS UNDERTAKES COORDINATION ACTIVITIES WITH IBM ON BEHALF OF CUSHMAN GROUP ENTITIES WITHIN ASIAN REGION. 17. AFTER EXAMINING THE DETAIL OF SERVICES RECEIVED BY THE ASSESSEE, TPO CAME TO THE CONCLUSION THAT THE ASSES SEE HAS MADE PAYMENT OF RS.73,50,612/- TO CWS AND CWHK FOR NO SE RVICES RENDERED BY THEM. 18. IN THE JUDGMENT IN ASSESSEES OWN CASE (SUPRA) , THE HONBLE HIGH COURT OBSERVED THAT THE AUTHORITY OF THE TPO I S TO CONDUCT THE TRANSFER PRICING ANALYSIS TO DETERMINE THE ALP AND NOT TO DETERMINE WHETHER THERE IS A SERVICE OR NOT FROM WHICH THE AS SESSEE BENEFITS. THIS ASPECT OF THE EXERCISE IS LEFT TO THE AO. HON BLE HIGH COURT FURTHER HELD THAT IN THIS CASE, THE ISSUE IS, WHETHER AN INDEPENDENT ENTITY WOULD HAVE PAID FOR SUCH SERVICES. IMPORTANTLY IN REACHING THIS CONCLUSION, NEITHER THE REVENUE, NOR THIS COUR T, MUST QUESTION THE COMMERCIAL WISDOM OF THE ASSESSEE, OR REPLACE I TS OWN ASSESSMENT OF THE COMMERCIAL VIABILITY OF THE TRANS ACTION. THE SERVICES RENDERED BY CWS AND CWHK IN THIS CASE CONC ERN LIAISING ITA NO.2624/DEL./2013 12 AND CLIENT INTERACTION WITH IBM ON BEHALF OF THE AS SESSEE INTERACTION WITH IMBS REGIONAL OFFICES IN SINGAPOR E AND US WAS NECESSARY. IT IS FURTHER HELD BY HONBLE HIGH COUR T WHETHER IT IS COMMERCIALLY PRUDENT OR NOT TO EMPLOY OUTSIDERS TO CONDUCT THIS ACTIVITY IS A MATTER THAT LIES WITHIN THE ASSESSEE S EXCLUSIVE DOMAIN AND CANNOT BE SECONDGUESSED BY THE REVENUE. 19. SO, FOLLOWING THE AFORESAID JUDGMENT RENDERED B Y HONBLE HIGH COURT IN ASSESSEES OWN CASE IN EARLIER YEAR, THE DETAIL OF SPECIFIC ACTIVITIES FOR WHICH COST WAS INCURRED BY BOTH CWS AND CWHK AND THE ATTENDING BENEFIT TO THE ASSESSEE HAVE NOT BEEN CONSIDERED TILL DATE, WHICH NEED TO BE PROVIDED, IN ADDITION TO THE CONSIDERATION OF THE ALP VIS--VIS THE TOTAL COST C LAIMED BY THESE AES, THE CASE IS REMANDED TO THE AO/TPO FOR ALP ASS ESSMENT, FOLLOWED BY THE AOS ASSESSMENT ORDER IN ACCORDANCE WITH LAW. 20. SO FAR AS QUESTION CONCERNING REIMBURSEMENT OF COST AND PAYMENT OF REFERRAL FEES TO THE FOREIGN AES ARE CON CERNED, HONBLE HIGH COURT IN THE ASSESSEES OWN CASE (SUPRA) HELD AS UNDER :- 46. ACCORDINGLY, THE FINDINGS OF THE ITAT CONCERNI NG REIMBURSEMENT OF COSTS AND PAYMENT OF REFERRAL FEES TO THE FOREIGN AES ARE SET ASIDE. THE MATTER IS REMANDED T O THE FILE OF THE AO, IN VIEW OF THE DIRECTIONS IN THE PARAGRA PHS 37 AND 45 ABOVE. ON THE QUESTION OF REIMBURSEMENT OF C OSTS, THE MATTER IS REMANDED TO THE FILE OF THE AO, FOR A N ALP ASSESSMENT BY THE TPO, FOLLOWED BY THE AOS ASSESSM ENT ORDER IN ACCORDANCE WITH LAW. ON THE QUESTION OF RE FERRAL FEES, THE REPORT OF THE TPO VALIDATING THE ARMS LE NGTH PRICE OF THE TRANSACTIONS IS BINDING ON THE AO, WHO MAY V ERIFY THE ITA NO.2624/DEL./2013 13 TRANSACTIONS AND ASSESS THE DEDUCTIONS UNDER SECTIO N 37 OF THE ACT IN ACCORDANCE WITH LAW. FOR THESE REASONS, THE APPEAL IS PARTLY ALLOWED. THERE SHALL BE NO ORDER A S TO COSTS. 21. AGAIN FOLLOWING THE AFORESAID JUDGMENT PASSED BY THE HONBLE HIGH COURT IN ASSESSEES OWN CASE, THE CASE IS REMANDED TO THE FILE OF AO TO COMPLY WITH THE DIRECTIONS CON TAINED IN PARAS 37 AND 45 OF THE JUDGMENT (SUPRA) ON THE QUESTION O F REFERRAL FEES, THE REPORT OF TPO VALIDATING THE ARMS LENGTH PRICE IS BINDING ON THE AO WHO MAY VERIFY THE TRANSACTIONS AND ASSESSED THE DEDUCTIONS U/S 37 OF THE ACT IN ACCORDANCE WITH LAW. 22. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, PRESE NT APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND THE CASE IS RE MANDED TO THE AO/TPO FOR AN ALP ASSESSMENT BY THE TPO FOLLOWED BY THE AO IN ACCORDANCE WITH THE JUDGMENT PASSED BY THE HONB LE HIGH COURT IN ASSESSEES OWN CASE IN THE EARLIER YEAR. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF MARCH, 2017. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF MARCH, 2017 TS ITA NO.2624/DEL./2013 14 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
