Asst.C.I.T., Bangalore V. M/s Fosroc chemicals India Private Limited, Bangalore

ITA 295/BANG/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3767 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Transfer pricing; Opportunity of being heard; International transaction
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER IT(TP)A NO.188/BANG/2015, IT(TP)A NOS. 87 & 88/BANG/2016 ASSESSMENT YEARS : 2010-11, 2007-08 & 2011-12 M/S. FOSROC CHEMICALS (INDIA) PVT. LTD., # 38, 12 TH CROSS, III FLOOR, PSIRD CBI ROAD, GANGANAGAR NORTH, BANGALORE 560 032. PAN: AAACF 2300D VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, CIRCLE 1, BANGALORE. APPELLANT RESPONDENT IT(TP)A NO. 295/BANG/2015, ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT, BANGALORE. VS. M/S. FOSROC CHEMICALS (INDIA) PVT. LTD., BANGALORE 560 032. PAN: AAACF 2300D APPELLANT RESPONDENT ASSESSEE BY : SHRI S. RAMASUBRAMANIAN, CA REVENUE BY : MISS NEERA MALHOTRA, CIT(DR) DATE OF HEARING : 25.08.2016 DATE OF PRONOUNCEMENT : 17.10.2016 O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER OUT OF FOUR APPEALS, TWO APPEALS ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2007-08 AND 2011-12 AND REMAINING TWO APPEALS ARE FOR ASSESSMENT YEAR 2010-11 WHICH ARE CROSS APPEALS FIL ED BY THE ASSESSEE AND IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 2 OF 11 REVENUE. ALL THESE WERE HEARD TOGETHER AND ARE BEI NG DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO.87/ BANG/2016 ARE AS UNDER:- 1. THAT THE ORDER OF THE LEARNED ASSESSING OFFICE R IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT IS BAD AND ERRONE OUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE HON'BLE DISPUTE RESOLUTION PANEL ERRED IN LAW AND ON FACTS IN HOLDING THAT IT HAS NO JURISDICTION TO ENTERTAIN TH E OBJECTION U/S 144C OF THE ACT AGAINST THE DRAFT ASSESSMENT ORDER PASSED I N CONSEQUENCE OF THE DIRECTIONS GIVEN BY THE HON 'BLE TRIBUNAL EARLIER. 3. THAT THE HONBLE TRANSFER PRICING OFFICER (TPO) E RRED IN LAW AND ON FACTS IN PASSING THE CONSEQUENTIAL ORDER WITHOUT GI VING AN OPPORTUNITY TO THE APPELLANT WHILE PASSING THE CONSEQUENTIAL OR DER U/S 92CA OF THE ACT. 4. THAT THE LEARNED TPO ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAS TO ESTABLISH THAT THE PAYMENTS MADE W ERE COMMENSURATE TO THE VOLUME AND QUALITY OF SERVICE AND COST AND C OMMENSURATE BENEFITS WERE DERIVED AND SUCH FINDING OF THE LEARN ED TPO IS CONTRARY TO THE CLEAR DIRECTIONS OF THE HONBLE TRIBUNAL IN ITA (TP) 1256/BANG/2011. 5. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT SHOULD DEMONSTRATE THAT IT HAS R ECEIVED THE BENEFIT FORM VARIOUS SERVICES. SHOULD FURNISH A COST BENEFI T ANALYSIS TO JUSTIFY THE PRICE PAID FOR THE INTERNATIONAL TRANSACTION AN D THAT SUCH SERVICES ARE NECESSARY. 6. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LA W AND ON FACTS IN HOLDING THAT THE TNMM IS NOT MOST APPROPRIATE METHOD BUT TH E CUP METHOD IS MOST APPROPRIATE METHOD EVEN THOUGH THE SERVICE TRA NSACTIONS ARE INTEGRALLY CONNECTED WITH MANUFACTURING BUSINESS OF THE APPELLANT. 7. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LA W AND ON FACTS IN NOT DETERMINING THE ALP EVEN UNDER CUP METHOD BY FOLLOW ING THE PROCEDURE UNDER RULE 10B (L) (A) OF INCOME-TAX RULE S. 1962. 8. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN ADOPTING A HYPOTHETICAL CUP FOR DETERMINING THE ALP OF THE S ERVICES RECEIVED. IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 3 OF 11 9. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN DETERMINING THE ALP AS NIL ON THE GROUND IN A HYPOT HETICAL SITUATION, NO THIRD PARTY WOULD MAKE PAYMENT FOR THESE KIND OF SERVICES. 10. THAT THE LEARNED ASSESSING OFFICER ERRED IN LA W AND ON FACTS IN LEVYING INTEREST U/S 234D ON RS.78,61,430 INSTEAD OF RS.77, 34,386. 11. THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN HOLDING THAT A SUM OF RS. 50,51,711 HAS BEEN RECEIVED ON 17 .03.2010 AND SUCH A FINDING IS PERVERSE AS THE APPELLANT HAS NOT RECE IVED THE ABOVE SUM. 12. THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN HOLDING INTEREST U/S 234D OF THE ACT ON A SUM OF RS. 50,51, 711 EVEN THOUGH THE APPELLANT HAS NOT RECEIVED THE REFUND AT ALL. 13. THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN LEVYING INTEREST U/S 220(2) OF THE ACT EVEN THOUGH THE DEMA ND RAISED IN THE ORIGINAL ASSESSMENT ORDER DOES NOT SURVIVE ONCE THE HONBLE TRIBUNAL HAS SET ASIDE SUCH ASSESSMENT. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON'BLE INCOME TAX AP PELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR OTHERWISE MODIF Y ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR THE TIME OF HEAR ING OF THIS APPEAL. 3. GROUND NO. 1 IS GENERAL AND NO SEPARATE ADJUDICA TION IS CALLED FOR. REGARDING GROUND NO.2, IT WAS SUBMITTED BY THE LD. AR OF ASSE SSEE THAT DRP SHOULD HAVE DECIDED THE ISSUE ON MERIT AND IT IS NOT CORRECT ON THE PART OF DRP TO SAY THAT DRP HAS NO JURISDICTION TO DECIDE THE MATTER ARISING OU T OF DRAFT ASSESSMENT ORDER PASSED IN CONSEQUENCE TO THE DIRECTIONS OF TRIBUNAL U/S. 2 54. 4. REGARDING GROUND NO.3, IT WAS SUBMITTED THAT THE TPO SHOULD HAVE PROVIDED OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE P ASSING CONSEQUENTIAL ORDER U/S. 92CA AS PER THE DIRECTIONS OF DRP. 5. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AU THORITIES BELOW. IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 4 OF 11 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE THE PROVISIONS OF SECTION 144C FROM WHERE THE DRP GETS THE POWER AND JURISDICTION. THESE ARE AS UNDER:- 144C. (1) THE ASSESSING OFFICER SHALL, NOTWITHSTANDING A NYTHING TO THE CONTRARY CONTAINED IN THIS ACT, IN THE FIRST INSTAN CE, FORWARD A DRAFT OF THE PROPOSED ORDER OF ASSESSMENT (HEREAFTER IN THIS SEC TION REFERRED TO AS THE DRAFT ORDER) TO THE ELIGIBLE ASSESSEE IF HE PROPOSE S TO MAKE, ON OR AFTER THE 1ST DAY OF OCTOBER, 2009, ANY VARIATION IN THE INCO ME OR LOSS RETURNED WHICH IS PREJUDICIAL TO THE INTEREST OF SUCH ASSESS EE. (2) ON RECEIPT OF THE DRAFT ORDER, THE ELIGIBLE ASS ESSEE SHALL, WITHIN THIRTY DAYS OF THE RECEIPT BY HIM OF THE DRAFT ORDER, ( A ) FILE HIS ACCEPTANCE OF THE VARIATIONS TO THE ASSE SSING OFFICER; OR ( B ) FILE HIS OBJECTIONS, IF ANY, TO SUCH VARIATION WI TH, ( I ) THE DISPUTE RESOLUTION PANEL; AND ( II ) THE ASSESSING OFFICER. (3) THE ASSESSING OFFICER SHALL COMPLETE THE ASSESS MENT ON THE BASIS OF THE DRAFT ORDER, IF ( A ) THE ASSESSEE INTIMATES TO THE ASSESSING OFFICER THE ACCEPTANCE OF THE VARIATION; OR ( B ) NO OBJECTIONS ARE RECEIVED WITHIN THE PERIOD SPEC IFIED IN SUB-SECTION (2). 7. FROM SUB-SECTION (1) OF SECTION 144C, IT IS SEEN THAT IN THIS SUB-SECTION, THE WORDS FIRST INSTANCE HAS BEEN USED AND THE DRP HA S DRAWN CONCLUSION FROM THESE WORDS THAT THEY HAVE TO DECIDE ONLY A DISPUTE ARISI NG OUT OF DRAFT ASSESSMENT ORDER PASSED ORIGINALLY AND NOT OUT OF DRAFT ASSESSMENT O RDER PASSED AS PER DIRECTION OF TRIBUNAL BUT THE SAME IS MISCONCEIVED BECAUSE AS PE R THE SCHEME OF THIS SECTION, THE AO SHALL PASS DRAFT ASSESSMENT ORDER AT THE FIR ST INSTANCE AND FORWARD THE SAME TO THE ASSESSEE AND WITHIN 30 DAYS OF RECEIPT OF DR AFT ORDER, THE ASSESSEE CAN FILE HIS IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 5 OF 11 ACCEPTANCE OF THE DRAFT ORDER OR HE MAY FILE OBJECT IONS WITH DRP OR WITH THE AO AND THE AO SHALL COMPLETE THE ASSESSMENT ON THE BASIS O F DRAFT ASSESSMENT ORDER, IF THE ASSESSEE INTIMATES TO THE AO THAT THE DRAFT ASSESSM ENT ORDER IS ACCEPTABLE TO THE ASSESSEE AND IF NO OBJECTIONS ARE RECEIVED WITHIN T HE PERIOD SPECIFIED UNDER SUB- SECTION (2) OF SECTION 144C. HENCE THESE WORDS FI RST INSTANCE IS NOT WITH THIS PURPOSE THAT THE DRP WILL GET JURISDICTION ONLY AGA INST THE ORIGINAL DRAFT ASSESSMENT ORDER AND NOT AGAINST THE DRAFT ASSESSMENT ORDER PA SSED AS PER DIRECTION OF THE TRIBUNAL. HENCE ON THIS ASPECT, WE REVERSE THE ORD ER OF DRP AND HOLD THAT DRP SHOULD HAVE DECIDED THE ISSUE ON MERITS INSTEAD OF SAYING THAT DRP HAS NO JURISDICTION WHEN THE DRAFT ASSESSMENT ORDER IS PAS SED BY THE A. O. ON THE SET ASIDE OF EARLIER ORDER BY THE TRIBUNAL. IDEALLY IN THIS SITUATION, WE SHOULD HAVE RESTORED BACK THE MATTER TO THE FILE OF DRP FOR DECISION ON MERITS BUT IN VIEW OF THE GROUND NO.3 OF ASSESSEES APPEAL AND AS PER THE ORDER PASS ED BY THE TPO U/S. 92CA, WE FIND THAT THE TPO HAS PASSED THE ORDER WITHOUT GIVI NG ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. WE FIND THAT IN THE ORDER OF TPO DATED 30.01.201 5, THE TPO HAS REPRODUCED THE DIRECTIONS OF THE TRIBUNAL AND THEREAFTER, HE H AS STATED THAT ACCORDINGLY THIS ORDER IS BEING PASSED AND HE HAS PASSED THE ORDER ON VARI OUS ISSUES SUCH AS MOST APPROPRIATE METHOD, VARIABLES, DETERMINATION OF ALP AND THERE IS NO WHISPER IN THIS ORDER OF TPO THAT ANY OPPORTUNITY OF BEING HEARD WA S PROVIDED BY HIM TO THE ASSESSEE. HENCE, WE FEEL IT PROPER THAT THIS MATTE R SHOULD GO BACK TO THE FILE OF TPO FOR FRESH DECISION AFTER PROVIDING REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. WE ORDER ACCORDINGLY. IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 6 OF 11 9. IN VIEW OF OUR ABOVE DECISION, THE OTHER GROUNDS RAISED BY THE ASSESSEE DO NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. 11. NOW WE TAKE UP THE REMAINING TWO APPEALS OF ASS ESSEE FOR THE AYS 2010-11 AND 2011-12. IN BOTH THESE YEARS, GROUNDS NO.1 TO 5 ARE IDENTICAL AND THEREFORE, THESE GROUNDS ARE REPRODUCED BELOW FROM ASSESSEES APPEAL FOR AY 2011-12 I.E. IT(TP)A NO.88/BANG/2016:- 1. THAT THE ORDER OF THE LEARNED LOWER AUTHORITIE S IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT IS BA D AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAS NOT RECEIVED THE SER VICES FROM ITS ASSOCIATED ENTERPRISE AND SUCH A FINDING IS PERVERSE AS BEING CONTRARY TO MATERIALS ON RECORD AND NOT SUPPORTED BY ANY EVIDENCE ON RECORD. 3. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT SHOULD DEMONSTRATE THAT IT HAS RECEIVED THE BENEFIT FORM VARIOUS SERVICES, SHOULD FURNISH A COS T BENEFIT ANALYSIS TO JUSTIFY THE PRICE PAID FOR THE INTERNATIONAL TRANSA CTION AND THAT SUCH SERVICES ARE NECESSARY. 4. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LA W AND ON FACTS IN HOLDING THAT THE TNMM IS NOT MOST APPROPRIATE METHO D BUT THE CUP METHOD IS MOST APPROPRIATE METHOD EVEN THOUGH THE S ERVICE TRANSACTIONS ARE INTEGRALLY CONNECTED WITH MANUFACTURING BUSINES S OF THE APPELLANT. 5. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN NOT DETERMINING THE ALP EVEN UNDER CUP METHOD BY FOLLOW ING THE PROCEDURE UNDER RULE 1 OB( 1 )(A) OF INCOME-TAX RULES. 1962. 12. IN THIS REGARD, IT WAS SUBMITTED BY THE LD. AR OF ASSESSEE THAT AS PER TRIBUNALS ORDER IN AY 2007-08 IN ITA NO.1256/ BANG/2015 DATED 5.4.2013, COPY AVAILABLE ON PAGES 1 TO 13 OF PB, TH E TRIBUNAL RESTORED THE IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 7 OF 11 MATTER BACK TO THE FILE OF TPO WITH A DIRECTION TO AGAIN RECONSIDER THE ISSUE OF THE ADOPTION OF MOST APPROPRIATE METHOD AND SHAL L ARRIVE AT ALP BEFORE MAKING ADJUSTMENT AFTER TAKING APPROPRIATE COMPARAB LES AS EVEN FOR COMPUTATION OF ALP BY ADOPTING CUP METHOD, DECISION OF COMPARABLES IS ESSENTIAL. IT IS SUBMITTED THAT ACCORDINGLY IN TH E PRESENT TWO YEARS ALSO, ENTIRE MATTER IN CONNECTION WITH THE TP ISSUE SHOUL D BE RESTORED BACK TO THE FILE OF TPO FOR FRESH DECISION WITH SIMILAR DIR ECTIONS. 13. THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IN THE PRESENT TWO YEARS, THE MAIN OBJECTION OF THE TPO IS THAT THE ASSESSEE HAS NOT SHOWN THAT THE ALLIED SERVICES RECEIVED FROM TH E AE ARE REQUIRED FOR THE ASSESSEES BUSINESS AND ALSO THAT THE ASSESSEE IS NOT CAPABLE OF GETTING THESE SERVICES LOCALLY OR ON ITS OWN. THER EAFTER, THE TPO CONCLUDED THAT THE ASSESSEE DID NOT SHOW AS TO WHAT IS TANGIBLE AND SUBSTANTIAL COMMERCIAL BENEFIT DERIVED BY THE ASSES SEE FROM THE ALLIED SERVICES AND CONSEQUENT PAYMENT OF TECHNICAL AND MA NAGEMENT COST AND ON THIS BASIS, HE DISALLOWED THE ENTIRE PAYMENT. 15. FOR THE AY 2007-08, SIMILAR ISSUE WAS BEFORE TH E TRIBUNAL AND AS PER THE TRIBUNAL ORDER FOR AY 2007-08 (COPY AVAILAB LE IN PAPERBOOK), THIS ISSUE WAS DECIDED BY THE TRIBUNAL VIDE PARA 9.1, WH ICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE:- 9.1 NOW WHETHER ANY SERVICES HAVE BEEN RENDER ED BY THE AE TO THE ASSESSEE COMPANY IS TO BE EXAMINED. THE ASSESSEE HA S DRAWN OUR ATTENTION TO PAGES 61 TO 67 OF THE PAPER BOOK WHICH CONSISTS OF THE E-MAILS BETWEEN THE IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 8 OF 11 ASSESSEE AND THE PERSONNEL OF THE AE AND ALSO REPOR TS OF THE PERSONNEL OF AE WHO HAVE VISITED INDIA WHICH ARE AT PAGES 61-523. W E FIND THAT THE TPO HAS BRUSHED ASIDE THESE DOCUMENTS PERFUNCTORILY STATING THAT THERE ARE ONLY THE E- MAILS AND IS NOT EVIDENCE OF THE SERVICES RENDERED. WE ARE OF THE OPINION THAT THE TPO OUGHT TO HAVE CONSIDERED THE DOCUMENTS IN P ROPER PERSPECTIVE TO SEE WHETHER THE ASSESSEE HAS RECEIVED ANY SERVICES. THE DOCUMENTS PURPORTEDLY ARE ADVICES GIVEN BY THE AE TO THE ASSESSEE ON VARIOUS ISSUES CONCERNING ITS BUSINESS. AS HELD BY THE HON'BLE DELHI HIGH COURT I N THE CASE OF CIT VS E.K.L APPLIANCES LTD (IN ITA NOS.1068/2011 & 1070/2011..W HETHER OR NOT TO ENTER INTO A TRANSACTION IS FOR THE ASSESSEE TO DECIDE AN D THE TPO CAN ONLY EXAMINE AND COMPUTE THE QUANTUM OF ALP, BUT HE HAS NO AUTHO RITY TO DISALLOW THE ENTIRE EXPENDITURE OR A PART THEREOF ON THE GROUND THAT THE ASSESSEE HAS SUFFERED CONTINUOUS LOSSES AND THEREFORE, NOT GAINED ANY COM MENSURATE BENEFIT THERE FROM. SIMILAR VIEW WAS EXPRESSED BY THE BENCH OF TH E TRIBUNAL AT MUMBAI IN THE CASE OF DRESSER RAND INDIA (P) LTD., CITED SUPR A. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE TPO HAS NO AUTHORITY TO HOLD THAT SINCE THE ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE COMMENSURATE BENEFIT F OR THE EXPENDITURE INCURRED BY IT, THE ALP TO BE DETERMINED IS NIL. AS THE TPO HAS ERRED IN APPRECIATING CLAUSE 9.2 OF THE LICENCE AGREEMENT AN D COMING TO ERRONEOUS CONCLUSION WITH THE SAID CLAUSE AUTHORISES THE ASSE SSEE TO ONLY REIMBURSE THE EXPENSES, WE HOLD THAT THE SAID CLAUSE REQUIRES THE ASSESSEE TO MAKE THE PAYMENT OVER AND ABOVE THE REIMBURSEMENT OF EXPENSE S. FURTHER, AS REGARDS THE QUANTIFICATION OF THE EXPENSES AND THE COMMENSU RATE BENEFIT IS CONCERNED, WE HOLD THAT THE TPO CANNOT GO INTO THE FACT WHETHE R THE ASSESSEE IS ACTUALLY BENEFITED FROM SUCH EXPENDITURE. AS HELD BY THE HON 'BLE GUJARAT HIGH COURT IN THE CASE OF VEER GEMS (CITED SUPRA). THE TPO IS ONL Y REQUIRED TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION, BUT CANNOT EX AMINE WHETHER THERE WAS ANY INTERNATIONAL TRANSACTION BETWEEN THE ASSESSEE AND ITS AE. THIS POWER IS VESTED WITH THE AO ONLY. HAVING REGARD TO THE COMPA RABLE CASES, AS FAR AS QUANTIFICATION OF THE EXPENSES IS CONCERNED, WE FIN D THAT AS HELD BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF M/ S CONSOLID ATED COFFEE LTD., VS STATE OF KARNATAKA 248 ITR 432 (CITED SUPRA), HAS HELD TH AT ALLOCATION OF EXPENDITURE ON THE BASIS OF TURNOVER IS JUSTIFIED. SINCE THESE FINDINGS OF THE TPO ON THE RENDERING OF SERVICES AND ALLOCATION OF EXPENSES AR E ERRONEOUS, WE SET ASIDE THE MATTER TO THE TPO WITH A DIRECTION TO RECOMPUTE THE ALP BY TAKING INTO CONSIDERATION THE ALLOCATED EXPENSES BY THE AE TO A SSESSEE. FURTHER, IT IS ALSO TO BE OBSERVED THAT THE REVENUE AUTHORITIES HAVE TO AD OPT A UNIFORM AND CONSISTENT APPROACH IN THE CASE OF THE ASSESSEE ON THE SAME SE T OF FACTS FOR EACH YEAR. THOUGH, THE ASSESSEE HAS BEEN RECEIVING THE SERVICE S FROM ITS AE FROM THE YEAR 2003 ONWARDS, THE TPO HAS NOT MADE ANY TRANSFER PRI CING ADJUSTMENT TILL THE AY: 2006-07 AND EVEN FOR THE SUBSEQUENT AY: 2008-09 WHERE THE ASSESSEE HAS RECEIVED THE SERVICES FROM ITS AE. ONCE THE TPO HAS ACCEPTED THE ALP COMPUTED BY THE ASSESSEE BY VIRTUE THE VERY SAME LI CENCE AGREEMENT DATED 31- 10-2003 (AS PER WHICH THE ASSESSEE HAS BEEN RECEIVI NG SERVICES YEAR AFTER YEAR), IT CANNOT TAKE A CONTRARY VIEW ONLY FOR THE ASSESSM ENT YEAR 2007-08 HOLDING IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 9 OF 11 THAT THE ASSESSEE IS NOT RECEIVING ANY SERVICES. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF T HE TPO FOR RECOMPUTING OF THE ALP WITHOUT INSISTING UPON THE QUANTIFICATION OF EA CH OF THE SERVICES RECEIVED BY THE ASSESSEE AND THE COMMENSURATE BENEFIT THAT H AS ACCRUED TO THE ASSESSEE. THE ENTIRE PAYMENT MADE BY THE ASSESSEE TOWARDS 'MA NAGEMENT SERVICES' SHALL BE TAKEN AS THE AGGREGATE PAYMENT FOR ALL THE SERVI CES RENDERED BY THE AE. THE TPO IS ALSO DIRECTED TO AGAIN RECONSIDER THE ISSUE ON THE ADOPTION OF THE MOST APPROPRIATE METHOD AND SHALL ARRIVE AT THE ALP BEFO RE MAKING THE ADJUSTMENT AFTER TAKING THE APPROPRIATE COMPARABLES, AS EVEN F OR COMPUTATION OF ALP BY ADOPTING CUP METHOD, IDENTIFYING COMPARABLES IS ESS ENTIAL. 16. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, IN THE PRESENT TWO YEARS ALSO, WE DECIDE THE ISSUE ON SIMILAR LINE AND RESTO RE THIS MATTER BACK TO TPO FOR A FRESH DECISION WITH THE SAME DIRECTIONS A S WAS GIVEN BY THE TRIBUNAL IN AY 2007-08. ACCORDINGLY, THESE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 17. THEREAFTER, IT WAS SUBMITTED BY THE LD. DR OF R EVENUE THAT GROUNDS RAISED BY THE REVENUE IN ITS APPEAL FOR AY 2010-11 AND GROUND NO.9 TO 10 OF THE ASSESSEES APPEAL IN AY 2010-11 ARE ON THE S AME ISSUE I.E., REGARDING PAYMENT OF ROYALTY FOR RUDRAPUR UNIT. IN THIS REGARD, THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS T HE LD. AR OF ASSESSEE SUPPORTED THE ORDER OF LD. CIT (APPEALS) F OR AY 2010-11. IT WAS ALSO SUBMITTED THAT ON PAGE 108 OF PB IS A LETTER R EGARDING ROYALTY WAIVER. THEREFORE, DIRECTION OF DRP IN AY 2010-11 SHOULD BE UPHELD ON THIS ACCOUNT. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE ASSESSEE IS PAYING ROYALTY @ 8% ON EXPORTS AND 5% F OR SALE WITHIN INDIA IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 10 OF 11 AS PER THE LICENSE AGREEMENT DATED 31.10.2003. SUB SEQUENTLY, THE PRINCIPAL AGREED TO WAIVE ROYALTY IN RESPECT OF RUD RAPUR PLANT OF THE ASSESSEE W.E.F. 1 ST APRIL, 2007. IT IS NOT THE CASE OF THE AO OR THE TPO THAT THE ROYALTY RATE OF OTHER UNITS EXCLUDING RUDR APUR UNIT HAS BEEN INCREASED ON WAIVER OF ROYALTY FOR RUDRAPUR UNIT. IT IS ALSO NOT THE CASE OF AO/TPO THAT SALES FROM RUDRAPUR UNIT WAS ALSO INCLU DED TO COMPUTE ROYALTY PAYABLE TO THE PRINCIPAL. UNDER THESE FACT S, IN OUR CONSIDERED OPINION, NO PART OF ROYALTY PAYMENT CAN BE CONSIDER ED AS ROYALTY OF RUDRAPUR UNIT AND THEREFORE, THE ACTION OF AO/TPO T O APPORTION PART OF ROYALTY PAYMENT TO RUDRAPUR UNIT IS NOT VALID AND P ROPER. WE HOLD ACCORDINGLY AND APPEAL OF REVENUE FOR AY 2010-11 IS DISMISSED AND GROUND NOS. 9 & 10 OF ASSESSEES APPEAL FOR AY 2011 -12 ARE ALLOWED. 19. REGARDING GROUND NO.11 OF ASSESSEES APPEAL FOR AY 2011-12, THE LD. AR OF ASSESSEE REITERATED THE SAME CONTENTIONS WHICH WERE RAISED BEFORE DRP. THE LD. DR SUPPORTED THE ORDERS OF AUT HORITIES BELOW. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IT IS NOTED BY DRP ON PAGE 9 OF ITS ORDER THAT ASSESSEE HAS PRO VIDED SAMPLE COPY OF INVOICE REGARDING ADDITION TO FIXED ASSETS. HENCE IT IS SEEN THAT EVEN BEFORE DRP, FULL DETAILS AND SUPPORTING INVOICES RE GARDING CLAIM OF ADDITION TO FIXED ASSETS WERE NOT FURNISHED. HENCE ON THIS ISSUE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF AO/TPO. ACCORDINGLY G ROUND NOS. 11 OF ASSESSEES APPEAL IS REJECTED. 21. IN THE RESULT, APPEAL OF ASSESSEE FOR AY 2010-1 1 IS ALLOWED FOR IT(TP)A NOS.188 & 295/BANG/2015 & 87 & 88/BANG/2016 PAGE 11 OF 11 STATISTICAL PURPOSE AND FOR AY 2011-12 IS PARTLY AL LOWED FOR STATISTICAL PURPOSES AND APPEAL OF REVENUE FOR AY 2010-11 IS DI SMISSED. 22. IN THE COMBINED RESULT, APPEAL OF ASSESSEE FOR AY 2007-08 & 2010- 11 ARE ALLOWED FOR STATISTICAL PURPOSES, FOR AY 201 1-12 IS PARTLY ALLOWED FOR STATISTICAL AND APPEAL OF REVENUE FOR AY 2010-11 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF OCTOBER, 2016. SD/- SD/- (SUNIL KUMAR YADAV ) ( A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH OCTOBER, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.