Adient India Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 1(1), Pune

ITA 2986/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4167 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-04-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Fair market value; TDS; Set aside
• Section: 143(3); 10B; 201; 13; 22; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C , PUNE VIRTUAL COURT BEFORE SH RI R.S. SYAL, VICE PRESIDENT AND SH RI S .S. VISWANETHRA RAVI , J UDICIAL MEMBER I TA NO. 2 986 /PUN/20 17 / ASSESSMENT YEAR : 20 1 3 - 1 4 ADIENT INDIA PRIVATE LIMITED P LOT NO.1, S NO.235 & 245, HINJEWADI, TAL - MULSHI, PUNE - 411057 PAN : AA ACT6342D VS. D CIT , CIRCLE - 1(1) , PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL A SSESSMENT O RDER DATED 27 - 1 0 - 2017 PASSED BY THE ASSESSING OFFICER (AO) U/S. 143(3) READ WITH SECTION 144C(13) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 201 3 - 1 4 . 2 . THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST TRANSFER PRICING ADDITION OF RS.5,95,39,429. SUCCINCTLY, THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE WAS EARLIER A 50:50 JOINT A SSESSEE BY SHRI DHANESH BAFNA RE VENUE BY S /S HRI KALIKA SINGH & MADHAVAN A.M. KRISHNAN DATE OF HEARING 27 - 0 5 - 202 1 DATE OF PRONOUNCEMENT 31 - 0 5 - 202 1 ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 2 VENTURE BETWEEN JOHNSON CONTROLS INTERNATIONAL B.V. NETHERLANDS AND TATA AUTOMOTIVE COMPONENTS SYSTEMS LIMITED (TACO). W ITH EFFECT FROM 25 - 03 - 2013, 50% OF TACOS STAKE WAS PURCHASED BY JOHNSON CONTROL AUTO INDIA LIMITED, THEREBY MAKING IT A 100% SUBSIDIARY OF JOHNSON CON TROLS GROUP. THE ASSESSEE HA S BEEN ENGAGED IN MANUFACTURE & SALE AND TRADING OF AUTOMOTIVE SEATING SYSTEMS. THE RETURN WAS FILED DECLARING TOTAL INCOME OF RS.60.60 CRORE S . THE ASSESSEE REPORTED CERTAIN INTERNATIONAL TRANSACTIONS AND S PECIFIED D OMESTIC T R ANSACTIONS (SDT S ) . THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING THE ARM'S LENGTH PRICE (ALP) OF SUCH TRANSACTIONS. IN THIS APPEAL, WE ARE CONCERNED ONLY WITH THE SDT OF SERVICE CHARGES PAID TO TACO AMOUNTING TO RS.5,95, 39,429. THE ASSESSEE APPLIED THE COMPARABLE UNCONTROLLED PRICE ( CUP ) METHOD FOR DEMONSTRATING THIS TRANSACTION TO BE AT ALP. IN DOING SO, THE ASSESSEE CHOSE 13 AGREEMENTS FROM ROYALTSTAT AND KTMINE DATABASE OF BUYING & SALES AGENT, DISTRIBUTION, SALES REP RESENTATIVE, MARKETING & ADVERTISING WITH THE AVERAGE FEE PAID AT 5.43% AS AGAINST IT S PAYMENT FOR THE SERVICES AT 1% ONLY. THE TPO REQUIRED THE ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 3 ASSESSEE TO TENDER EVIDENCE OF AVAILING THE SERVICES FROM TACO. AFTER ENTERTAINING THE EVIDENCE SUBMITTED BY T HE ASSESSEE, T HE TPO HELD THAT THERE WAS NO WORTHWHILE EVIDENCE OF RECEIPT OF THE SERVICES AND EVEN IF SOME SERVICES WERE AVAILED, THOSE WERE ONLY EITHER GENERAL OR IN THE NATURE OF THE SHAREHOLDERS ACTIVITIES. HE FURTHER HELD THAT THE ASSESSEE FAILED TO EXHIBIT ANY BENEFIT DERIVED FROM SUCH SERVICES. IN THE HUE OF SUCH FACT UAL PANORAMA , T HE TPO REFUSED TO ACCEPT THE CUP METHOD ORIGINALLY APPLIED BY THE ASSESSEE , WHICH WAS BASED ON THE COMPARABLES CHOSEN THAT WERE RENDERING M ARKETING SERVICES ONLY AS A GAINST THE ASSESSEE AVAILING SERVICES IN H UMAN RESOURCE AND TRAINING, GROUP POLICIES/ DATABASES, M ARKETING AND SALES, F INANCE, L EGAL AND TAXATION ADVISORY AND OTHER STRATEGIC SERVICES. DURING THE COURSE OF THE PROCEEDINGS BEFORE THE TPO , THE ASSESSEE CAME FORWARD WITH AN ALTERNATE BENCHMARKING ANALYSIS UNDER TRANSACTIONAL NET MARGINAL METHOD (TNMM) BY AGGREGATING THE TRANSACTION OF RECEIPT OF ADMINISTRATIVE SERVICES ALONG WITH OTHER S , WHICH THE TPO REFUSED TO ACCEPT ON THE GROUND OF AGGREGATION . HE TOOK REC OURSE TO ANY OTHER METHOD UNDER RULE 10AB OF THE INCOME - TAX RULES, 1962 (HEREINAFTER REFERRED ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 4 TO AS THE RULES) AND OBSERVED THAT THIS METHOD ALSO RECOGNIZES ` THE PRICE WHICH WOULD HAVE BEEN PAID AS A VALID BAS E FOR DETERMINING THE ALP. THE TPO OPINED THAT SINCE NO SERVICES REQUIRING PAYMENT OF ANY CONSIDERATION WERE AVAILED BY THE ASSESSEE, NO INDEPENDENT PARTY WOULD HAVE PAID ANYTHING FOR SUCH SERVICES. TH IS IS HOW, THE TPO DETERMINED NIL ALP OF THE TRANSA CTION OF SERVICE CHARGES PAID. THIS RESULTED I N PROPOSING A TRANSFER PRICI NG ADJUSTMENT OF RS.5.95 CRORES. THE AO NOTIFIED THE TRANSFER PRICING ADDITION OF THE EQUAL AMOUNT IN THE DRAFT ORDER . THE DISPUTE RESOLUTION PANEL (DRP) DID NOT FIND ANYTHING AMISS IN THE VIEW TAKEN BY THE AO/ TPO AND COUNTENAN CED THE ADDITION, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 3 . WE HAVE COGITATED OVER THE RIVAL SUBMISSIONS THROUGH VIRTUAL COURT AND SCANNED THE RELEVANT MATERIAL ON RECORD. THE TPO DETERMINED NIL ALP OF THE SDT OF SERVICE CHARGES PAID TO TACO ON THE PREMISE THAT THE ASSESSEE DID NOT AVAIL ANY SERVICES FOR WHICH ANY COMPENSATION COULD HAVE BEEN PAID. THE ISSUE UNDER CONSIDERATION CAN BE DECIDED BY ANSWERING THE FOLLOWING TWO QUESTIONS: ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 5 I. WHETHER ANY SERVICES REQUIRING PAY MENT WERE AVAILED BY THE ASSESSEE? AND II. IF YES, WHAT IS ITS ALP? WE ESPOUSE THESE TWO QUESTIONS AD SERIATIM. I. WHETHER ANY SERVICES REQUIRING PAYMENT WERE AVAILED BY THE ASSESSEE? 4.1. THE ASSESSEE ENTERED INTO ADMINISTRATIVE SERVICE AGREEMENT (AS A) ON 02 - 02 - 2005 WITH TACO FOR RECEIPT OF SERVIC ES COMPRISING OF HUMAN RESOURCE, GROUP POLICIES/DATABASES, MARKETING AND SALES, FINANCE AND LEGAL & TAXATION ADVISORY SERVICES. A DETAILED CHART HAS BEEN PLACED AT PAGES 434 ONWARDS OF PAPER BOOK INDICATING THE DESCRIPTION OF VARIOUS SERVICES UNDER THE ABOVE REFERRED BROAD CATEGORIES OF SERVICES AVAILED . UNDER MARKETING AND SALES SUPPORT SERVICES, THE ASSESSEE HAS REFERRED TO THE SERVICES RECEIVED FROM TACO TEAM WHOSE DETAILS HAVE BEEN PROVIDED AT PAGES 449 TO 527 OF PAPER BOOK. THE FIRST DOCUMENT AT PAGE 449 ONWARDS IS RECOMMENDATION OF THE PRICE STRATEGIES AND OTHER COMMERCIAL TERMS BY TACO TEAM WHICH PROVIDED ASSISTANCE TO THE ASSESSEE BY CIRCULATING SIAM MONTHLY MONITOR - COMMODITY PRICES, A GUIDELINE ON PRICE TRENDS OF VARIOUS COMMODITIES ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 6 WHICH MAY INFLUENCE THE AUTOMOBILE INDUSTRY. THE NEXT DOCUME NT IS THE TACO TEAM ASSISTING THE ASSESSEE IN EVALUATING VARIOUS PRODUCTION AND SALES REPORT ON Y EARLY BASIS OF GENERAL MOTORS WITH PRODUCTION SCHEDULE OF THE RELEVANT MODELS. THE NEXT DOCUMENT IS SHARING OF CUMULATIVE DETAILS OF PRODUCTION OF PASSENGER VEHICLES, COMMERCIAL VEHICLES, TWO WHEELERS AND THREE WHEELERS IN THE MARKET WITH A VIEW TO HELP THE ASSESSEE IN ANALYZING THE OVERALL MARKET TREND AND PLANNIN G THE PRODUCTION BASED ON THE PROJECTED TREND. UNDER THE NEXT BROADER HEAD OF GROUP POLICIES/ DATABASE S , TACO PROVIDED SERVICES WHICH HAVE BEEN DETAILED AT PAGES 542 TO 606 OF PAPER BOOK. THE FIRST DOCUMENT IS OF TACO PROVIDING ACCESS TO THE ASSESSEE TO I TS OPERATING SYSTEM IN ORDER TO ENSURE THAT THE POLICIES ARE ACCESSIBLE TO ALL THE EMPLOYEES AT A SINGLE STOP. THERE IS ANOTHER DOCUMENT GIVING THE MOBILE PHONE AND ACCESSORIES POLICY LAYING DOWN THE ELIGIBILITY OF THE EMPLOYEES WHO SHALL BE ENTITLED TO R ECEIVE A MOBILE PHONE AND OTHER RELATED ACCESSORIES. ALL THE RELEVANT E - MAILS ON SUCH SERVICES HAVE BEEN PLACED IN THE PAPER BOOK . THE NEXT BROADER HEAD OF THE SERVICES IS HUMAN RESOURCE AND TRAINING . THE DETAILS OF SUCH SERVICES ALONG WITH E - MAILS ARE AVAILABLE AT PAGES 608 TO ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 7 681 OF PAPER BOOK. THROUGH SUCH DOCUMENTS AND E - MAILS, TACO RECRUITED THE ASSESSEES PERSONNEL, SALES MANAGERS, ENGINEERS AND OPERATORS, ETC. AND ALSO T OOK HR REVIEWS. IT ALSO CIRCULATED A STANDARD FORMAT OF INCREMENT LETTER AN D PROMOTION LETTER, ETC. THE NEXT BROADER HEAD OF THE SERVICES IS FINANCE . THE DETAILS OF SUCH SERVICES HAVE BEEN SET OUT AT PAGES 698 TO 772 OF PAPER BOOK. THE SERVICES AVAILED BY THE ASSESSEE UNDER THIS HEAD RELATE TO GUIDELINES OF BUDGETING, MONITOR ING THE ENTIRE PROCESS OF PREPARING OF BUDGETS; INTERNAL AUDITING AND RELEVANT REGISTERS / RECORDS TO BE MAINTAINED. SIMILAR IS THE POSITION UNDER THE HEAD OF LEGAL AND TAXATION ADVISORY SERVICES . THE DETAILS OF SUCH SERVICES HAVE BEEN GIVEN AT PAGES 774 TO 901 OF PAPER BOOK, WHICH DEAL WITH THE CIRCULATION OF RELEVANT CASE LAWS ON ALLOWABILITY OF INTEREST, CIRCULATION OF INCOME - TAX INSTRUCTIONS WITH RESPECT TO STANDARD OPERATING PROCEDURE FOR FILING OF APPEALS TO HIGH COURT, ETC., UPDATION OF TDS CERTIFI CATES, CASE LAWS ON ADMISSIBILITY OF INPUT SERVICE TAX CREDIT TO THE ASSESSEE, ADVANCE TAX TEMPLATE, DIFFERENTIAL CUSTOM DUTY AND CASE LAW UNDER RELEVANT TAX PROVISIONS. FROM THE ABOVE CUMULATIVE DETAILS OF ALL THE SERVICES RUNNING INTO MORE THAN 450 PAGE S, IT ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 8 IS MORE THAN EVIDENT THAT TACO PROVID E D SPECIFIC AND A L S O EXCLUSIVE SERVICES UNDER THE AGREEMENT TO THE ASSESSEE ALONG WITH CERTAIN OTHER GROUP ENTITIES , WHICH ARE NOT GENERAL IN NATURE BUT PRECISE, DETAILED AND SPECIFIC. 4. 2. THE TPO DETERMINED NI L ALP BY ASSIGNING ANOTHER RAISON D`ETRE THAT THE ASSESSEE FAILED TO SHOW ANY BENEFIT RECEIVED BY IT FROM THE SERVICES. IN OUR CONSIDERED OPINION, WHAT IS RELEVANT IS TO CONSIDER THE AVAILING OF THE SERVICES AND NOT THE RESULTANT BENEFIT ARISING THERE FRO M. EVERY EXPENDITURE INCURRED BY A BUSINESSMAN CANNOT NECESSARILY LEAD TO SWELLING THE PROFIT. IF THE PROPOSITION OF THE TPO IS TAKEN TO A LOGICAL CONCLUSION, THEN IT WOULD MEAN THAT NO BUSINESS WOULD EVER INCUR LOSS , WHICH IS NOT A REALITY. THE IMPOR TANT CONSIDERATION IS THE INCURRING OF BONA FIDE EXPENDITURE AND AVAILING OF SERVICE, WHICH MAY OR MAY NOT LEAD TO THE INCREASED INCOME. APPLICATION OF THE BENEFIT TEST IS NOT WARRANTED. ENQUIRY IN THIS REGARD SHOULD COME TO AN END AS SOON AS THE FACT UM OF AVAILING THE SERVICES FOR THE BUSINESS PURPOSE IS ESTABLISHED. W E HAVE NOTICED ABOVE THAT THE ASSESSEE DID AVAIL THE SERVICES FROM TACO FOR RUNNING ITS BUSINESS OPERATIONS. AS SUCH, THERE WAS NO NEED TO LOOK BEYOND THAT AND SEARCH FOR SOME ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 9 BENEFIT ACCR UING TO THE ASSESSEE AS A PRE - CONDITION FOR ALLOWING THE DEDUCTION. 4.3 . THE TPO ALSO HELD THAT THE SERVICES, IF ANY, AVAILED BY THE ASSESSEE WERE IN THE NATURE OF SHAREHOLDERS SERVICES, NOT REQUIRING PAYMENT OF ANY CONSIDERATION. SUFFICE TO SAY, S HAREHOL DER OR STEWARDSHIP SERVICES TAKE PLACE WHEN SOME ACT OR SERVICE IS DONE BY A SHAREHOLDER TO THE COMPANY IN ORDER TO ENSURE THAT HIS INVESTMENT IN THE SHARES IS SAFE AND FURTHER SUCH AN ACT OR SERVICE DOES NOT PRODUCE ANY EFFECT TO THE COMPANY RECEIVING IT. FROM THE DETAILED NARRATION OF SERVICES ABOVE, IT IS OVERT THAT THE SERVICES DID PRODUCE EFFECT TO THE ASSESSEE COMPANY. AS SUCH, THEY GO OUTSIDE THE AM BIT OF THE SHAREHOLDER SERVICES AS BRANDED BY THE TPO. IT IS, TH EREFORE, HELD THAT TACO RENDERED SPECI FIC AND ALSO EXCLUSIVE SERVICES TO THE ASSESSEE, WHICH ARE NOT IN THE NATURE OF SHAREHOLDER SERVICES, AND HENCE REQUIRE PAYMENT OF CONSIDERATION AS A QUID PRO QUO IN AN UNCONTROLLED SITUATION. II. IF YES, WHAT IS ITS ALP? 5.1 . HAVING FOUND THAT THE ASSESS EE AVAILED SERVICES FROM TACO REQUIRING PAYMENT OF CONSIDERATION, T HE NEXT QUESTION ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 10 IS DETERMINATION OF ITS ALP . IT IS SEEN THAT THE ASSESSEE ENTERED INTO 16 INTERNATIONAL TRANSACTIONS AND 10 SDTS IN TOTAL . THE SDT UNDER CONSIDERATION WAS BENCHMARKED BY T HE ASSESSEE UNDER THE CUP METHOD. THE ASSESSEE, IN ALTERNATIVE AND WITHOUT PREJUDICE TO THE CUP AS THE MOST APPROPRIATE METHOD, ALSO PUT FORTH THE ALP DETERMINATION UNDER THE TNMM BEFORE THE TPO , WHO REJECTED BOTH OF THEM AND APPLIED THE `OTHER METHOD UN DER RULE 10AB TO DETERMINE NIL ALP. NOW THE CASE OF THE ASSESSEE BEFORE THE TRIBUNAL IS THAT THE CUP METHOD WAS CORRECTLY APPLIED BY I T AND FURTHER THAT I F THIS METHOD IS NOT ACCEPTABLE, THEN THE TNMM , AS APPLIED BY IT , SHOULD BE ACCEPTED. THE LAST ALTERNA TIVE CONTENTION IN THIS REGARD IS THAT I N ANY CASE, THE `OTHER METHOD CAN BE APPLIED BASED ON THE `REASONABLENESS OF THE AMOUNT PAID. WE WILL EXAMINE THESE CONTENTIONS, ONE BY ONE. A. CUP METHOD 6.1. WHILE APPLYING THE CUP METHOD, THE ASSESSEE SELECT ED 13 AGREEMENTS FROM ROYALTSTAT AND KTMINE DATABASE S FOR BUYING & SALES AGENT, DISTRIBUTION, SALES REPRESENTATIVE, MARKETING & ADVERTISING. THE TPO DID NOT ACCEPT THE DETERMINATION OF THE ALP UNDER THIS METHOD MAINLY BECAUSE OF ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 11 THE FUNCTIONAL DIFFERENCE IN THE NATURE OF SERVICES AVAILED BY THE ASSESSEE AND THOSE SELECTED UNDER THE EXTERNAL CUP METHOD. IN THIS REGARD, IT IS OBSERVED FROM THE A SA THAT THE ASSESSEE AVAILED A BOUQUET OF SERVICES FROM TACO COMPRISING OF HUMAN RESOURCE, GROUP POLICIES/DATABASE S, MARKETING AND SALES, FINANCE AND LEGAL & TAXATION ADVISORY SERVICES. A S AGAINST THAT THE ASSESSEE CHOSE CERTAIN 13 COMPARABLES AGREEMENTS FROM FOREIGN DATABASE S WHICH WERE IN THE FIELD OF M ARKETING ONLY. RULE 10B (2) PROVIDES THAT F OR THE PURPOSES OF SU B - RULE (1), ` THE COMPARABILITY OF AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMESTIC TRANSACTION WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO THE FOLLOWING, NAMELY: (A) THE SPECIFIC CHARACTERISTICS OF THE PROPERTY TRANSFERRED OR SE RVICES PROVIDED IN EITHER TRANSACTION; (B) THE FUNCTIONS PERFORMED, TAKING INTO ACCOUNT ASSETS EMPLOYED OR TO BE EMPLOYED AND THE RISKS ASSUMED, BY THE RESPECTIVE PARTIES TO THE TRANSACTIONS; ... THUS IT IS EVIDENT THAT THE SPECIFIC CHARACTERISTICS OF THE SERVICES PROVIDED MUST BE SIMILAR WHILE BENCHMARKING A SDT. SINCE THE CUP METHOD SEEKS COMPARISON ON THE BASIS OF PRICE CHARGED OR PAID, AS OPPOSED TO PR OFIT RATE IN MOST OTHER METHODS , THE FUNCTIONAL SIMILARITY ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 12 BETWEEN THE TRANSACTION UNDER CONSIDERATIO N AND THAT OF THE COMPARABLES ASSUMES FUNDAMENTAL IMPORTANCE. T HE NATURE OF SERVICES/ PROPERTIES RECEIVED/ TRANSFERRED MUST BE QUITE S IMILAR , IF NOT IDENTICAL WITH THE TRANSACTION UNDER CONSIDERATION. THE LEVEL OF SIMILARITY BETWEEN THE COMPARABLE TRANSACTI ON (S) AND THE TRANSACTION TO BE BENCHMARKED NEEDS TO BE OF THE HIGHEST ORDER UND ER TH E CUP METHOD. IT IS WHOLLY IM PERMISSIBLE TO PICK UP ANY SERVICE AND THEN COMPARE IT WITH SERVICE TO BE BENCHMARK ED . IF THE FUNCTIONAL COMPARABILITY LACK S , AS IS THE CASE UNDER CONSIDERATION, THEN THE CUP METHOD CANNOT BE APPLIED WITH SUCH A TRUNCATED DATA. AS THE ASSESSEE IN THE INSTANT CASE AVAILED A BUNCH OF SERVICES CONSISTING OF F INANCE, H UMAN RESOURCES, L EGAL, M ARKETING AND GROUP POLICIES/ DATABASE S , IT CANNOT BE LOGI CALLY COMPARED WITH COMPANIES RENDERING ONLY MARKETING SERVICES. 6.2 . ANOTHER FACTOR WHICH IS OF QUITE SIGNIFICANCE IN THE CASE UNDER CONSIDERATION IS THAT T HE ASSESSEE CHOSE 13 COMPARABLE AGREEMENTS FROM ROYALTSTAT AND KTMINE DATABASE S THAT RECORD TRAN SA CTIONS OF FOREIGN CO UNTRIES ONLY. RULE 10B (2) ALSO ADDS THAT F OR THE PURPOSES OF SUB - RULE (1), ` THE COMPARABILITY OF AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMESTIC TRANSACTION ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 13 WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO . (D) CO NDITIONS PREVAILING IN THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE , INCLUDING THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORCE, COSTS OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONOM IC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WHOLESALE OR RETAIL. AS THE ASSESSEE IS AN INDIAN ENTITY AND HAS PAID TO TACO, AN OTHER INDIAN ENTITY FOR THE SERVICES AVAILED IN INDIA, COMPARISON HAS TO BE NECESSARILY MADE WITH THE PAR TIES AVAILING SIMILAR SERVICES IN INDIA ONLY. 6.3. THE ABOVE ANALYSIS DELINEATES AND DECIPHERS THAT NEITHER THE COMPARABLES CHOSE N BY THE ASSESSEE RENDERED SIMILAR SERVICES NOR WERE THEY LOCATED IN INDIA . I N OUR CONSIDERED OPINION, THE AUTHORITIES BEL OW WERE JUSTIFIED IN REJECTING THE CUP METHOD APPLIED BY THE ASSESSEE IN SUCH A MANNER . B . ANY OTHER METHOD 7.1. THE TPO , AFTER REJECTING THE ASSESSEES BENCHMARKING UNDER THE CUP METHOD , PROCEEDED TO DETERMINE THE ALP OF THE TRANSACTION UNDER OTHER METHOD AS PER R ULE 10AB OF THE RULES. HE FOUND THIS METHOD CONTEMPLAT ING THE ALP ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 14 DETERMINATION NOT ONLY ON THE BASIS OF THE PRICE CHARGED OR PAID FOR THE SAME OR SIMILAR TRANSACTION S BUT ALSO THE PRICE THAT WOULD HAVE BEEN CHARGED OR PAID. SINCE HE CAME TO THE CONCLUSION THAT THE ASSESSEE DID NOT AVAIL ANY SERVICES REQUIRING THE PAYMENT, HE HELD THAT NO INDEPENDENT PARTY WOULD HAVE PAID FOR SIMILAR SERVICES AND THUS DETERMINED NIL ALP UNDER THIS METHOD. 7.2. RULE 10AB PROVIDES THAT: FOR THE PURPOSES OF CLAUSE ( F ) OF SUB - SECTION (1) OF SECTION 92C, THE OTHER METHOD FOR DETERMINATION OF THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMESTIC TRANSACTION SHALL BE ANY METHOD WHICH TAKES INTO ACCOUNT THE PRICE WHICH HAS B EEN CHARGED OR PAID, OR WOULD HAVE BEEN CHARGED OR PAID, FOR THE SAME OR SIMILAR UNCONTROLLED TRANSACTION, WITH OR BETWEEN NON - ASSOCIATED ENTERPRISES, UNDER SIMILAR CIRCUMSTANCES, CONSIDERING ALL THE RELEVANT FACTS. A BARE PERUSAL OF THE RULE MAKES IT GR APHICALLY CLEAR THAT THE `OTHER METHOD IS THE ONE WHICH NOT ONLY ENCOMPASSES THE PRICE ACTUALLY CHARGED OR PAID FOR BENCHMARKING BUT ALSO THE PRICE WHICH WOULD HAVE BEEN CHARGED OR PAID IN A COMPARABLE UNCONTROLLED TRANSACTION. ANY POTENTIAL PRICE WHICH COULD BE ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 15 CHARGED OR PAID FOR SIMILAR GOODS/SERVICES , EVEN THOUGH NOT ACTUALLY TRANSACTED, CAN ALSO BE ACCEPTED FOR BENCHMARKING THE SDT UNDER CONSIDERATION. IN PRINCIPLE, NO FAULT CAN BE FOUND WITH THE TPO IN INTERPRETING THE RULE IN THE WAY HE DID . HOWEV ER, THE STEPS FOLLOWING SUCH AN INTERPRETATION WENT AWRY AS HE DETERMINED THE N IL ALP ON THE BEDROCK THAT NO SERVICES WERE ACTUALLY AVAILED BY THE ASSESSEE REQUIRING PAYMENT OF ANY CONSIDERATION , WHICH HAS BEEN OVERTURNED SUPRA . THUS, THE APPLICATION OF T HIS METHOD BY THE TPO IN THIS WAY IS RENDERED NUGATORY. 7.3. THE LD. AR URGED FOR THE APPLICATION OF THE OTHER METHOD IN THE INSTANT CASE AND HA RPED ON REASONABLENESS OF THE EXPENDITURE AS A YARDSTICK FOR DEEMING THE TRANSACTION TO BE AT ALP. TO BUTTRE SS HIS POINT OF VIEW, HE RELIED ON THE TRIBUNAL ORDER PASSED IN CERTAIN GROUP COMPANIES , IN WHICH SIMILAR ISSUE WAS INVOLVED ABOUT PAYMENT TO TACO FOR AVAILING SIMILAR SERVICES . OUR ATTENTION WAS DRAWN TOWARDS THE TRIBUNAL ORDER IN YAZAKI INDIA PRIVATE LIM ITED VS. DCIT FOR THE A.Y. 2009 - 10 DELET ING THE DISALLOWANCE , PAID AT 1.31% OF THE SALES, U/S 40A(2) FOR AVAILING S IMILAR SERVICES FROM TACO. IN THIS ORDER DATED 11 - 07 - 2019 IN ITA NO.621/PUN/2014, THE ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 16 TRIBUNAL OBSERVED THAT IN THE CASE OF TATA JOHNSON CO NTROLS AUTOMOTIVE LTD. VS. DCIT, THE PUNE BENCHES OF TRIBUNAL ACCEPTED THE PAYMENT TO TACO AT 1% OF TURNOVER AS REASONABLE. SIMILAR VIEW WAS TAKEN IN ANOTHER GROUP COMPANY , TATA FICOSA AUTOMOTIVE SYSTEMS LTD. VS. DCIT, IN WHICH PAYMENT WAS MADE TO TACO FO R SIMILAR SERVICES AT 2% OF NET SALES , WHICH WAS DISALLOWED BY THE AO U/S 40A(2) AND THE PUNE TRIBUNAL DELETED THE SAME. THE LD. AR FURTHER REFERRED TO THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2008 - 09 IN WHICH DISALLOWANCE U/S 4 0A(2) FOR SUCH SERVICES CAME TO BE DELETED. IT IS ON THE STRENGTH OF THE ACCEPTABILITY BY THE TRIBUNAL OF THE PAYMENTS MADE BY THE GROUP CONCERNS TO TACO FOR SIMILAR SERVICES AS REASONABLE , WHICH WERE DISALLOWED BY THE AO U/S 40A(2) , THAT THE LD. AR SUBM ITTED THAT THE SAME ` REASONABLENESS CRITERIA SHOULD BE APPLIED IN DETERMINING THE ALP UNDER RULE 10AB ALSO. THE LD. DR TOOK STRONG EXCEPTION TO THE VIEW CANVASSED BY THE LD. AR IN THIS REGARD. 7.4. THE FINANCE ACT, 2012 BROUGHT SDTS WITHIN PURVIEW OF TRANSFER PRICING PROVISIONS UNDER CHAPTER X OF THE ACT W.E.F. 1.4.2013 . THE TERM `SDT HAS BEEN DEFINED U/S 92 BA TO ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 17 INCLUDE, INTER ALIA, ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE TO A PERSON REFERRED TO IN SECTION 40A(2)( B). PRIOR TO THAT, THE DISALLOWANCE WAS GOVERNED BY SECTION 40A(2) ONLY . CLAUSE (I) CONTAINING THE ABOVE MANDATE REMAINED ON THE STATUTE TILL 1.4.2017 BEFORE ITS OMISSION BY THE FINANCE ACT, 2017. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2013 - 14 AND ACC ORDINGLY CLAUSE (I) IS APPLICABLE, WHICH REQUIRES DETERMIN ING THE ALP OF THE SDT OF PAYMENT TO TACO FOR AVAILING THE SERVICES. IT GOES WITHOUT SAYING THAT T HE CRITERIA FOR DETERMINING THE ALP UNDER CHAPTER X IS ENTIRELY DIFFERENT FROM EXAMINING THE REASONA BLENESS OF EXPENDITURE U/S 40A(2). HAD THE POSITION BEEN SIMILAR, THERE WAS NO NEED TO INCLUDE SECTION 40A(2) DISALLOWANCE CASES WITHIN THE PURVIEW OF THE TRANSFER PRICING PROVISIONS. SECTION 40A(2) SIMPLY PROVIDES FOR MAKING DISALLOWANCE OF ANY EXPENDITU RE WHICH IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS OR SERVICES, ETC. ON THE OTHER HAND, CHAPTER X CONTEMPLATES DETERMINING THE ALP STRICTLY AS PER ONE OF THE METHOD S PRESCRIBED IN INCOME - TAX RULES. FURTHER, PRIMARY RESPONSIBILITY OF DEMONSTRATING THAT THE SPECIFIED DOMESTIC TRANSACTIONS IS AT ALP IS THAT OF THE ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 18 ASSESSEE AS AGAINST THE RESPONSIBILITY OF THE AO TO PROV E THAT THE EXPENDITURE WAS EXCESSIVE U/S 40A(2). THE CONCEPT OF REASONABLENESS U/S 40A(2) IS ALIEN TO CHAPTER X THAT SIMPLY REQUIRES DETERMINATION OF THE ALP UNDER ONE OF THE METHODS PRESCRIBED AS PER SECTION 92C. ALL THE DECISIONS RELIED BY THE L D. AR HAVE BEEN DELIVERED IN THE CONTEXT OF DISALLOWANCE MADE U/S 40A(2) FOR T HE ASSESSMENT YEARS 2009 - 10 O R PRIOR THERETO. THE CONCLUSION ARRIVED AT BY THE TRIBUNAL IN SUCH ORDERS DELETING THE DISALLOWANCE U/S 40A(2) IS OF NO AVAIL I N DETERMINING THE ALP OF SDTS UNDER THE TRANSFER PRICING PROVISIONS . ONCE THE ALP IS TO BE DETERMINED UNDER CHAPTER X, ONE NEEDS TO STRICTLY ADHERE TO THE MECHANISM SET OUT IN THE RESPECTIVE METHODS AND NOT GO ARBITRARILY BY ANY NON - PRESCRIBED MODE OR METHOD. VINDICATING THE ASSESSEES CONTENTION OF APPLYING THE TEST OF `REASONABLENESS IN THE CONTEXT OF TRANSFER PRICING PROVISIONS WOULD BE TOO SIMPLISTIC AN APPROACH LEADING TO LAYING DOWN A PREPOSTEROUS INTERPRETATION OF THE CHAPTER - X. 7.5 . THERE IS ANOTHER REASON FOR NOT ACCEPTING THE ASSESSEES CONTENTION O F ACCEPT ING THE SDT AT ALP ON THE BASIS OF REASONABLENESS OF THE EXPENDIT URE . ALL THE CASES RELIED BY THE ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 19 L D. AR ARE THE TRANSACTIONS BETWEEN TACO AND OTHER GROUP COMPANIES, SUCH AS, TATA JOHNSON CONTROLS AUTOMOTIVE LTD., TATA FICOSA AUTOMOTIVE SYSTEMS LTD. AND THE ASSESSEE ITSELF. RELEVANT PART OF RULE 10AB PROVIDES FOR CONSID ERING THE PRICE WHICH HAS BEEN CHARGED OR PAID, OR WOULD HAVE BEEN CHARGED OR PAID, FOR THE SAME OR SIMILAR UNCONTROLLED TRANSACTION, WITH OR BETWEEN NON - ASSOCIATED ENTERPRISES . I T IS OVERT FROM THE LANGUAGE OF RULE 10AB THAT THE RULE MAKING AUTHORITY H AS ENVISAGED COMPARISON OF THE SDT WITH THE PRICE CHARGED OR PAID OR WOULD HAVE BEEN CHARGED OR PAID FOR THE SAME OR SI MILAR UNCONTROLLED TRANSACTION WITH OR BETWEEN NON - ASSOCIATED ENTER PRISES. TWO EXPRESSIONS HAVE BEEN SIMULTANEOUSLY USED IN THE RULE, N AMELY, `UNCONTROLLED TRANSACTION AND `BETWEEN NON - ASSOCIATED ENTERPRISES. RULE 10A(AB) DEFINES UN CONTROLLED TRANSACTION TO MEAN : `A TRANSACTION BETWEEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHETHER RESIDENT OR NON - RESIDENT. IT IS THUS MANIFES T THAT THE PROHIBITION TO USE TRANSACTIONS BETWEEN THE ASSOCIATED ENTERPRISES FOR THE ALP DETERMINATION UNDER THE `OTHER METHOD HAS BEEN DOUBLY ENSURED, FIRSTLY, BY S TATING THAT THERE SHOULD BE AN `UNCONTROLLED TRANSACTION AND THEN FURTHER ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 20 QUALIFYING IT BY `WITH OR BETWEEN NON - ASSOCIATED ENTERPRISES. A FORTIORI , I F THE TRANSACTIONS FOR COMPARISON ARE BETWEEN ASSOCIATED ENTERPRISES OR IN OTHER WORDS, CONTROLLED TRANSACTIONS, THE SAME CANNOT BE CONSIDERED FOR THE BENCHMARKING EXERCISE . 7.6 . INDISPUTABLY , ALL THE TRANSACTIONS CITED AS EVIDENCE OF `REASONABLENESS ARE BETWEEN THE ASSOCIATED ENTERPRISES AND HENCE CONTROLLED TRANSACTIONS. WHEN THE L EGISLAT URE SPECIFICA LLY PROVIDED FOR CONSIDERING TRANSACTION S ONLY BETWEEN NON - ASSOCIATED ENTERPRISES, IT IS AB SOLUTELY UNWARRANTED TO CONSIDER ANY TRANSACTION BETWEEN TWO ASSOCIATED ENTERPRISES FOR DETERMINING THE ALP UNDER RULE 10AB. WE, THEREFORE, JETTISON THE CONTENTION ADVANCED ON BEHALF OF THE ASSESSEE IN THIS REGARD AND HOLD THAT THE TRANSACTIONS BETWEEN TW O RELATED ENTERPRISES CAN NOT BE CONSTRUED AT ALP ON THE BASIS OF REASONABLENESS OF THE AMOUNT PER SE . C. TNM M ETHOD 8.1. DURING THE COURSE OF THE HEARING BEFORE THE TPO, THE ASSESSEE PUT FORTH A WITHOUT PREJUDICE ARGUMENT OF ADOPTING THE TNMM AS MOST A PPROPRIATE METHOD FOR SHOWING THE SDT ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 21 AT ALP. THE ASSESSEE DID THIS EXERCISE BY AGGREGATING THE SDT WITH OTHER INTERNATIONAL / SPECIFIED TRANSACTIONS , WHICH APPROACH CAME TO BE ABROGATED BY THE TPO BY HOLDING THAT THE PAYMENT FOR THE ` ADMINISTRATIVE SERVI CE CHARGES COULD NOT BE AGGREGAT ED WITH ALL OTHER TRANSACTIONS. THE LD. AR RE - EMPHASIZED THE SAME ARGUMENT BEFORE THE TRIBUNAL. 8.2. SECTION 92(1) OF THE ACT PROVIDES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REG ARD TO THE ARMS LENGTH PRICE. SECTION 92C(1) PROVIDES FOR THE COMPUTATION OF THE ALP AND MANDATES TO FOLLOW ONE OF THE PRESCRIBED METHODS AS THE MOST APPROPRIATE METHOD, WHICH, INTER ALIA, INCLUDE THE TNM METHOD, AS HAS BEEN APPLIED BY THE ASSESSEE ON WI THOUT PREJUDICE BASIS ON AGGREGATE BASIS AND GOT SNUBBED AT THE HANDS OF THE TPO. THE MECHANISM FOR DETERMINATION OF THE ALP UNDER THE TNMM HAS BEEN PROVIDED IN RULE 10B(1)(E) OF THE RULES. THE TERM TRANSACTION HAS BEEN DEFINED IN RULE 10A(D) AS INCLUDIN G A NUMBER OF CLOSELY LINKED TRANSACTIONS . IT, THEREFORE, BOILS DOWN THAT THE TERM TRANSACTION ALSO INCLUDES A PLURAL OF TRANSACTIONS. HOWEVER, THE CAVEAT IS THAT IN ORDER TO COVER PLURAL OF TRANSACTIONS WITHIN THE TERM TRANSACTION UNDER RULE 10A(D ), IT IS SINE QUA NON ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 22 THAT SUCH NUMBER OF TRANSACTIONS MUST BE CLOSELY LINKED. IF THEY ARE NOT CLOSELY LINKED, THEN THERE CAN BE NO QUESTION OF THEIR AGGREGATION FOR THE PURPOSE OF DETERMIN ING THE ALP UNDER THE RULES. 8.3. IN ONE SENSE, CLOSELY LINKED TR ANSACTIONS MEAN SIMILAR OR ALIKE TRANSACTIONS OF PURCHASE OR SALE ETC. OF GOODS OR SERVICES. TO PUT IT SIMPLY, IF THERE ARE SEVERAL TRANSACTIONS OF, SAY, PURCHASE OF SIMILAR GOODS OR GOODS WITH MINOR VARIATIONS, THEN INSTEAD OF FINDING THE ALP OF SUCH TRAN SACTIONS INDIVIDUALLY , IT SATISFIES THE PRESCRIPTION OF CLOSELY LINKED TRANSACTIONS IF THESE ARE COMBINED AND BEN CHMARKED IN AN AGGREGATE MANNER . HOWEVER, WHERE THE TRANSACTIONS ARE OF DI VERSE NATURE, THEY WOULD JUSTIFY AGGREGATION ONLY IF INTER - RELATED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN KNORR - BREMSE INDIA P. LTD. VS. ACIT (2016) 380 ITR 307 (P&H) HAS DEALT WITH THREE CIRCUMSTANCES IN WHICH THE AGGREGATION IS PERMISSIBLE. FIRST, IN CASE OF A PACKAGE DEAL WHERE EACH ITEM IS NOT SEPARATELY VALUED BUT ALL ARE GIVEN A COMPOSITE PRICE, THESE ARE TO BE TAKEN AS ONE INTERNATIONAL TRANSACTION. TWO, WHERE A NUMBER OF TRANSACTIONS ARE PRICED DIFFERENTLY BUT ON THE UNDERSTANDING THAT THE PRICING WAS DEPENDENT UPON THE ASSESSEE ACCEPTING ALL ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 23 OF THEM TOGETHER (I.E. EITHER TAKE ALL OR LEAVE ALL), THEN ALSO THEY SHOULD BE VIEWED AS ONE TRANSACTION. BUT IT WILL BE ON THE ASSESSEE TO PROVE THAT ALTHOUGH EACH IS PRICED SEPARATELY, BUT THEY WE RE PROVIDED UNDER ONE COMPOSITE AGREEMENT. THREE, WHERE EACH COMPONENT WAS PRICED DIFFERENTLY , BUT THEY ARE INEXTRICABLY LINKED IN SUCH A WAY THAT ONE CANNOT SURVIVE WITHOUT THE OTHER. THE HONBLE HIGH COURT HELD THAT M ERELY BECAUSE PURCHASE OF GOODS AND ACCEPTANCE OF SERVICES LEAD S TO MANUFACTURE OF FINAL PRODUCT, IT DOES NOT F OLLOW THAT THEY ARE DEPENDENT TRANSACTIONS REQUIRING AGGREGATION . WE FIND THAT THE EX TANT CASE IS NOT COVERED ANY OF THE THREE SITUATIONS. THE HONBLE DELHI HIGH COURT IN MAGNETI MARELLI POWERTRAIN INDIA PVT. LTD. VS. DCIT (2016) 389 ITR 469 (DELHI) HELD THAT ROYALTY AND TECHNICAL ASSISTANCE FEE DID NOT FORM PART OF A COMPOSITE TRANSACTION AND HAVE TO BE TREATED AS TWO SEPARATE TRANSACTIONS FOR COMPUTING ARMS LENGTH PRICE. 8. 4. ON AN EXAMIN ATION OF THE NATURE OF THE SDT OF PAYMENT OF SERVICE CHARGES BY AS SESSEE TO TACO, IT TURNS OUT THAT THE SAME IS ENTIRELY DIFFERENT AND NOT AT ALL INTER - RELATED WITH OTHER TRANSACTIONS THAT THE ASSESSEE AGGREGATED WITH . IT IS JUST ELEMENTARY THAT INTRA - GROUP SERVICES CANNOT BE CLUBBED WITH ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 24 THE MANUFACTURING OR TRADING TR ANSACTIONS UNDERTAKEN BY THE ASSESSEE JUSTIFYING AGGREGATION. WE, THEREFORE, HOLD THAT THE TPO WAS JUSTIFIED IN REPELLING THE ASSESSEES AGGREGATION APPROACH UNDER THE TNMM. 9 . HAVING FOUND THAT THE MECHANISM APPLIED EITHER BY THE ASSESSEE OR THE TPO UNDE R ALL THE THREE METHODS IS IMPROPER , W E ARE LEFT WITH NOTHING TO ADJUDICATE UPON. THE TRIBUNAL, BEING AN ADJUDICATING AND NOT AN ORIGINAL AUTHORITY, CANNOT USURP THE POWER OF THE AO/TPO AND ITSELF UNDERTAKE THE ALP DETERMINATION IN THE PECULIAR CIRCUMSTANC ES AS ARE INSTANTLY OBTAINING . IN SUCH A CASE, WE ARE LEFT WITH NO OPTION BUT TO SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO/ TPO FOR RE - DETERMIN ING THE ALP OF THE SDT AFRESH AS PER LAW AFTER AFFORDING OPPORTUNITY OF HEAR ING T O THE ASSESSEE. WE ORDER ACCORDINGLY. IT IS MADE PATENT THAT IN THE FRESH DETERMINATION, IT WOULD BE OPEN TO THE TPO TO CH O OSE ANY OF THE PRESCRIBED METHODS AS THE MOST APPROPRIATE METHOD TO BE APPLIED IN THE PREVAILING CIRCUMSTANCES FOR RE - DETERMINING THE ALP . I T IS HEREBY CLARIFIED THAT WE HAVE NOT TOTALLY RULED OUT THE APPLICATION OF THE CUP UNDER RULE 10B(1)(A) OR OTHER METHOD UNDER RULE 10AB OR THE TNMM UNDER RULE 10B(1)(E) ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 25 BUT REJECTED THE APPLICATION - OF THE CUP METHOD ONLY BECAUSE THE ASSESSEE WRON GLY APPLIED IT BY CHOOSING FUNCTIONALLY DIFFERENT COMPANIES AND THAT TOO FROM FOREIGN JURISDICTIONS; OF `ANY OTHER METHOD BECAUSE THE TPO WRONGLY HELD THAT NO SERVICES WERE AVAILED AND THE ASSESSEE ALSO WRONGLY CONTENTED FOR ACCEPTING THE TRANSACTION AT A LP ONLY ON THE STRENGTH OF `REASONABLENESS OF EXPENDITURE AS PER THE MANDATE OF SECTION 40A(2) OF THE ACT; AND OF THE TNMM BECAUSE OF THE AGGREGATION APPROACH ADOPTED BY THE ASSESSEE. TO PUT IT SIMPLY, S UCH THREE METHODS, INTER ALIA, ARE ALSO OPEN BEFORE THE TPO IN THE FRESH PROCEEDINGS TO CHOOSE FROM PROVIDED THE FLAWS IN THEIR APPLICATION, AS DISCUSSED ABOVE , ARE REMOVED AND THEY ARE CORRECTLY APPLIED AS PER THEIR RESPECTIVE PRESCRIPTION S . NEEDLESS TO SAY, THE ASSESSEE WILL BE AT LIBERTY TO LEAD ANY FR ESH EVIDENCE IN SUPPORT OF ITS CASE IN SUCH FRESH PROCEEDINGS. 1 0 . IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY , 202 1 . SD/ - SD/ - ( S.S. VISWANETHRA RAVI ) ( R.S.SYAL ) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 31 ST MAY , 2021 GCVSR ITA NO. 2986 /PUN/20 17 ADIENT INDIA PVT. LTD. 26 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE DRP - 3, MUMBAI 4. THE CIT (IT/TP) , PUNE 5. , , / DR C , ITAT, PUNE 6. / GUARD FILE / BY ORDER, / / TRUE C O PY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 27 - 0 5 - 202 1 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 31 - 0 5 - 202 1 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE TH E SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE G OES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *