METRO TUNNELING GROUP, MUMBAI V. JT CIT 17(3), MUMBAI

ITA 564/MUM/2015

• Counselvise Citation: 56419914 RSA 2015
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: F V IRANI
• Keywords: Transfer pricing; International transaction
• Section: 92C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE HONBLE S/ SHRI D. MANMOHAN , VICE - PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ./ I.T.A (TP) NO. 564 / MUM/ 201 5 ( / ASSESSMENT YEAR: 200 9 - 10 ) METRO TUNNELING GROUP, C/O WALKER CHAND L OK AND CO LLP, 16 TH FLOOR, TOWER II, INDIABULLS FINANCE CENTRE, S B MARG, ELEPHINSTONE (W), MUMBAI - 400013 / VS. JOINT COMMISSION ER OF INCOME TAX - 17(3), ROOM NO. 614 , 6TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./ PAN/GIRNO.: AAAAM8269Q / APPELLANT BY : S HRI F V IRANI / RESPONDENT BY : SHRI N K CHAND / DATE OF HEARING : 13 .4.2015 / DATE OF PRONOUNCEMENT : 26 . 6 .2015 / O R D E R PER B.R.BA SKARAN, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 03 - 12 - 2014 PASSED BY LD CIT(A) - 57, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2009 - 10. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ALP ADJUSTMENT OF RS.14.98 CRORES MADE BY DETERMINING THE ALP OF HEAD OFFICE OVERHEADS AT NIL. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE IS A JOINT VENTURE UNDERTAKING CONSISTING OF FIVE PE R S ONS VIZ., M/S LARSON & TOUBRO , IRCON, M/S SHIMIZU CORPORATION, M/S SAMSUNG CORPORATION AND I.T.A. (TP) NO. 564/ MUM/201 5 2 M/S DYWIDAG INTERNATIONAL AND IT WA S ASSESSED IN THE STATUS OF AOP. OUT OF THE FIVE MEMBERS, M/S LARSON & TOUBRO AND M/S IRCON ARE INDIAN ENTITIES AND THE OTHER THREE ARE FOREIGN ENTITIES. I T WAS FORMED FOR THE PURPOSE OF EXECUTING A CONTRACT AWARDED BY DELHI METRO RAIL CORPORATION FOR THE DESIGN AND CONSTRUCTION OF A TUNNEL BETWEEN GREEN PARK AND SAKET STATION OF DELHI. THE ASSESSEE REPORTED FOLLOWING INTERNATIONAL TRANSACTIONS DURING THE YE AR UNDER CONSIDERATION: - (A) PURCHASE OF ASSETS AND SPARE PARTS - RS.2.28 CRORES (CUP METHOD) (B) REIMBURSEMENT OF DIRECT EXPENSES - RS.3.56 CRORES (CPM METHOD) (C) HEAD OFFICE OVERHEADS - R S.14.98 CRORES (CPM METHOD) IT WAS SUBMITTED THAT THE ASSESSEE DID NOT HAVE REQUIRED INFRASTRUCTURE AND ASSETS TO EXECUTE THE PROJECT UNDERTAKEN BY IT AND HENCE ALL THE MEMBERS OF AOP HAVE CONTRIBUTED ASSETS AND SPARE PARTS; INCURRE D EXPENSES ON BEHALF OF THE ASSESSEE. ALL THESE EXPENSES INCLUDING THE COST OF ASSETS AND SPARE PARTS HAVE BEEN REIMBURSED BY THE ASSESSEE. THE TRANSACTIONS ENTERED WITH THE THREE FOREIGN ENTITIES HAVE BEEN REPORTED AS INTERNATIONAL TRANSACTIONS IN THE T .P. STUDY. 3. THE TPO ACCEPTED THE ALP OF TRANSACTIONS RELATING TO PURCHASE OF ASSETS AND SPARE PARTS AND REIMBURSEMENT OF DIRECT EXPENSES. HOWEVER, HE DID NOT ACCEPT THE TRANSACTIONS RELATING TO REIMBURSEMENT OF HEAD OFFICE OVERHEADS AND ACCORDING LY DETERMINED THE ALP OF THE SAME AS NIL. ACCORDINGLY THE ENTIRE AMOUNT OF RS.14.98 CRORES CLAIMED BY THE ASSESSEE WAS ADDED BY THE AO. THE SAID ADDITION WAS ALSO CONFIRMED BY THE LD CIT(A) AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE FACTS RELATING TO THE CLAIM OF HEAD OFFICE OVERHEA D EXPENSES NEEDS FURTHER ELABORATION. THE THREE FOREIGN ENTITIES VIZ., M/S DYWIDAG INTERNATIONAL, M/S SAMSUNG CORPORATION AND M/S SHIMIZU CORPORATION HAD I.T.A. (TP) NO. 564/ MUM/201 5 3 PROFIT SHARING RATIO OF 29%, 26% AND 9.5% RESPE CTIVELY IN THE JOINT VENTURE PROJECT (JV). AS PER THE MOU ENTERED BETWEEN THE MEMBERS OF THE JOINT VENTURE, THE COST OF ASSETS AND SPARE PARTS SUPPLIED TO THE ASSESSEE BY THE MEMBERS AND THE AMOUNT OF DIRECT EXPENSES INCURRED BY THEM ON BEHALF OF THE ASSE SSEE SHALL BE REIMBURSED BY THE ASSESSEE. SINCE THE MEMBERS OF THE JV SHALL BE UTILIZING THEIR RESPECTIVE INFRASTRUCTURE AND PARAPHERNALIA WHILE RENDERING THE SERVICES RELATING TO SUPPLY OF ASSETS & SPARE PARTS AND INCURRING OF DIRECT EXPENSES, THE MOU PR OVIDED THAT THE MEMBERS ARE ENTITLED TO CHARGE INDIRECT EXPENSES NAMED HEAD OFFICE OVERHEAD S ON THE BASIS OF THE OVERHEAD ABSORPTION RATE CERTIFICATE ISSUED BY THE THEIR RESPECTIVE AUDITORS, SUBJECT TO A N UPPER C AP OF 8.5% OF THE REVENUE (GROSS RECEIPT S OF THE ASSESSEE) ATTRIBUTABLE TO THE SHARE OF THE RESPECTIVE MEMBER. THE ASSESSEE HAS OFFERED FOLLOWING EXPLANATIONS TO SUBSTANTIATE THIS CLAIM: - SINCE THE ASSESSEE DOES NOT HAVE OWN INFRASTRUCTURE, MEMBERS OF THE ASSESSEE JV ARE REQUIRED TO CARRY OUT SEVERAL TASKS FOR AND ON BEHALF OF THE ASSESSEE SUCH AS (I) CO - ORDINATION OF IMPORTS, (II) NEGOTIATION AND FOLLOW UPS WITH VENDORS AND SERVICE PROVIDERS, (III) LIAISON WITH BANKS AND (IV) OTHER ADMINISTRATIVE AND SUPPORT ETC. ACCORDINGLY IT WAS MUTUALLY A GREED BETWEEN THE MEMBERS OF THE ASSESSEE THAT GENERAL OVERHEADS INCURRED BY THE RESPECTIVE HEAD OFFICES OF THE MEMBERS WOULD BE CHARGED TO THE ASSESSEE AS PER THE AGREED FORMULA. 5. WE NOTICE THAT THE FORMULA AGREED BETWEEN THE PARTIES IS THAT EACH OF THE MEMBERS WOULD COMPUTE THE PERCENTAGE OF OVERHEAD EXPENSES INCURRED BY THE HEAD OFFICE OVER THE SALES REVENUE REPORTED BY HEAD OFFICE. THE RATE SO ARRIVED AT WOULD BE APPLIED ON THE REVENUE ATTRIBUTABLE TO THE SHARE OF EACH OF THE MEMBER, SUBJECT TO A MAXIMUM OF 8.5%. SINCE THE PERCENTAGE OF OVER HEADS OVER THE REVENUE COULD BE COMPUTED ONLY AT THE END OF THE YEAR, THE MEMBERS HAVE RECOVERED THE INDIRECT EXPENSES FROM THE ASSESSEE ON SOME BASIS AND UPON THE RECEIPT OF THE AUDITORS CERTIFICATE THE EXCESS/SHORTAGE WAS ADJUSTED. THE ASSESSEE HAS I.T.A. (TP) NO. 564/ MUM/201 5 4 EXPLAINED THE AMOUNT CHARGED AS HEAD OFFICER OVERHEADS BY THE FOREIGN MEMBERS BY WAY OF FOLLOWING TABLE: - NAME OF MEMBERS SHARE IN JV OVERHEADS ALLOWED TO BE CHARGED AS PER JV AGREEMENT (8.5% OF REVENUE) % OF HO OVERHEAD ACTUALLY CHARGED OVERHEADS ACTUALLY CHARGED IN BOOKS ARM/S LENGTH PRICE TP ADJ.IN RETURN OF INCOME DYWIDAG INTERNATIONAL GMBH 29% 82,329,705 7.04% 68,188,367 60,342,830 7,845,537 SAMSUNG CORPORATION (SAMSUNG) 26% 73,812,840 7.30% 63,392, 203 63,392,203 - SHIMIZU CORPORATION (SHIMIZU) 9.5% 26,970 , 076 8.23 % 26,113,377 26,113,377 - TOTAL 183,112,621 157 ,693,947 149,848,410 7,845,537 A PERUSAL OF THE ABOVE SAID TABLE WOULD SHOW THAT THE AMOUNT OF HEAD OFFICE OVERHEADS RECOVERED BY M/ S DYWIDAG FROM THE ASSESSEE WAS RS.6.81 CRORES, BUT THE AMOUNT TO BE REIMBURSED AS PER THE AUDITORS CERTIFICATE ACTUALLY WORKED OUT TO RS.6.03 CRORES. HENCE THE ASSESSEE ITSELF DISALLOWED A SUM OF 0.78 CRORES IN ITS RETURN OF INCOME. AT THE TIME OF ARGU MENT, THE LD A.R CONTENDED THAT THE DISALLOWANCE OF 0.78 CRORES MADE BY THE ASSESSEE WOULD PROVE THE ALP OF THE TRANSACTIONS, WHICH WE ARE NOT ABLE TO ACCEPT. AS STATED EARLIER, THE AMOUNT RECOVERED BY M/S DYWIDAG ON AN ADHOC BASIS EXCEEDED THE AGREED LIM ITS AND HENCE THE DIFFERENCE WAS ADDED., I.E., IT WAS A SIMPLE CASE OF REVERSAL OF EXCESS COLLECTION AND NOT A CASE OF DISALLOWANCE OF AMOUNT WHICH IS IN EXCESS OF ALP. 6. THE TPO, HOWEVER, REJECTED TH E CLAIM OF HEAD OFFICE OVERHEADS FOR THE FOLLOWIN G REASONS: - (A) THERE IS NO OBJECTIVE BASIS ON WHICH THE HEAD OFFICE OVERHEADS UP TO 8.5% COULD BE ALLOCATED TO THE ASSESSEE. (B) THE FOREIGN MEMBERS HAVE RAISED DEBIT NOTES UPON THE ASSESSEE IN RESPECT OF HEAD OFFICER OVERHEADS, WHICH IN TURN ARE I.T.A. (TP) NO. 564/ MUM/201 5 5 BASED UPON THE CERTIFICATE ISSUED BY THE AUDITORS. HENCE THE MEMBERS ARE CHARGING THE OVERHEADS IN AN ARBITRARY MANNER WITHOUT ANY SOUND OBJECTIVE ANALYSIS OF THE EXPENSES. T HE OVERHEADS ARE EXPENSES INCURRED IN COMMON, WHICH COULD NOT BE IDENTIFIED TO ANY SPE CIFIC JOB OR UNIT. (C) THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THE MEMBERS HAVE RENDERED SERVICES WHICH COULD VALIDATE THE REIMBURSEMENT OF OVERHEAD CHARGES. EVEN IF THE MEMBERS HAVE PROVIDED SERVICES, THE QUANTUM OF EXPENDITURE WOULD NOT BE TO THE EXTENT OF RS.14.98 CRORES. FURTHER THE BENEFIT OF THE EXPENDITURE WOULD BE AVAILABLE TO ALL MEMBERS OF THE GROUP. (D) THE ASSESSEE HAS NOT SHOWN AS TO HOW SUCH SERVICES WOULD BE VALUED BY AN INDEPENDENT ENTITY DEALING IN SIMILAR CIRCUMSTANCES. (E) F ROM THE TRANSFER PRICING POINT OF VIEW, ACTIVITIES CONDUCTED BY A PARENT COMPANY, EVEN IF WITH THE HELP OF FOREIGN GROUP ENTITIES, ARE NOT ALWAYS SUCH THAT A CHARGE SHOULD BE MADE TO THE ASSESSEE. THIS IS BECAUSE THEY MIGHT BE PERFORMED FOR THE BENEFIT OF THE PARENT COMPANY IN ITS ROLE AS SHARE HOLDER, RATHER THAN TO PROVIDE VALUE TO THE SUBSIDIARIES. (F) THE ASSESSEE DID NOT ADDUCE ANY PRIMARY EVIDENCE TO SHOW THAT THE PAYMENT MADE IS ONLY TO THE EXTENT OF BENEFIT DERIVED BY IT OR TO THE EXTENT THAT IS CHARGED BETWEEN INDEPENDENT PARTIES DEALING AT ARMS LENGTH. THOUGH THE NATURE OF SERVICES PROVIDED BY THE HEAD OFFICE OF THE MEMBERS OF JV WAS DESCRIBED, YET NO EVIDENCE WAS FURNISHED TO SUPPORT THE SAID CLAIM. (G) UNDER ARMS LENGTH CONDITION, THE PAY MENT IS NOT ONLY A FUNCTION OF SERVICE PROVIDERS WILLINGNESS TO RECEIVE CERTAIN PRICE BUT ALSO A FUNCTION OF SERVICE RECIPIENTS WILLINGNESS TO PAY. THIS ASPECT HAS NOT BEEN ADDRESSED BY THE ASSESSEE. (H) THE ASSESSEE HAS NOT GIVEN BIFURCATION AND NATU RE OF SERVICES RENDERED BY THE AES UNDER VARIOUS HEADS WITHIN THE OVERHEAD COSTS AND ALSO DID NOT SUBMIT THE AMOUNTS PAID IN RESPECT OF EACH OF SUCH SERVICES PROVIDED BY THE AE. (I) THE ASSESSEE DID NOT SHOW THE UTILITY OF SERVICES RENDERED AND QUANTIFIC ATION OF THE SAME IN AN ARMS LENGTH CONDITION. HENCE THE CHARGES ARE NOT LINKED TO ACTUAL SERVICE. I.T.A. (TP) NO. 564/ MUM/201 5 6 THE TPO HAS SUMMARIZED HIS VIEW POINT ON THIS ISSUE AS UNDER: - FIRST OF ALL, THE ASSESSEE HAS TO PROVE THAT THE SERVICES ARE RENDERED. THE ASSESSEE DID NOT PROVE THE SAME SUBSTANTIALLY. THE SECOND ASPECT OF INTRA GROUP SERVICES IS THE QUANTIFICATION OF SUCH SERVICES IN TERMS OF ACTUAL EXPENDITURE INCURRED AND COMMENSURATE BENEFITS DERIVED THERE FROM. THIS ASPECT IS ALSO NOT ADEQUATELY PROVED BY THE ASSES SEE. EVEN IF WE ASSUME THAT THE ABOVE SERVICES ARE INCURRED, THE QUANTUM OF SUCH SERVICES WOULD NOT BE TO THE EXTENT OF RS.14.98 CRORES. MOREOVER, WHEN THE EXPENDITURE IS INCURRED FOR THE BENEFIT OF THE GROUP AS A WHOLE, NO CHARGING OF SUCH EXPENDITURE IS REQUIRED AS SUCH EXPENDITURE IS NOT INCURRED IN CONNECTION WITH ANY INDIVIDUAL MEMBER OF THE GROUP AND THE BENEFIT OF SUCH EXPENDITURE WOULD BE AVAILABLE TO ALL MEMBERS OF THE GROUP. ACCORDINGLY THE TPO DE TERMINED THE ALP OF HEAD OFFICE OVERHEADS AT NIL AND HENCE THE ENTIRE PAYMENT OF RS.14.98 CRORES WAS TREATED AS AN ADJUSTMENT U/S 92CA OF THE ACT. 7. THE LD CIT(A) CONFIRMED THE ADDITION WITH THE FOLLOWING OBSERVATIONS: - 3.4 I HAVE CONSIDERED THE FACTS OF THE CASE, OBSERVATIONS OF THE TPO/AO IN THE ORDERS 92CA(3)/143(3) OF THE I.T. ACT. THE CONTENTIONS / SUBMISSIONS OF THE APPELLANT AS ABOVE ARE BEING DISCUSSED AND DECIDED AS UNDER: I ) THE APPELLANT I N I TS SUBMISSION HAS STATED THAT THE ALLOCATION OF OVERHEADS WAS CARRIED OUT BY WAS WELL - DOCUMENTED SCIE NTIFIC, SYSTEMATIC AND TRANSPARENT MANNER AS PER CERTIFICATES ISSUED BY THE AUDITOR. A COPY OF THESE CERTIFICATES HAS BEEN PRODUCED DURING THE APPELLATE PROCEEDINGS. ON PERUSAL OF THE COMPUTATION OF OVERHEADS IN THE CASE OF SAMSUNG CORPORATION IT IS NOTED THAT THE RATE HAS BEEN APPLIED @ 7.30% FOR ALLOCATION OF THE OVERHEAD EXPENSES. THIS HAS BEEN CALCULATED BY TAKING A PERCENTAGE OF SELLING AND ADMINISTRATIVE EXPENSES FOR THE YEAR ENDED 31.12.2008. HERE IT WOULD BE RELEVANT TO MENTION THAT THE APPELLANT'S ACCOUNTING YEAR IS FROM 1ST APRIL TO 31ST MARCH, 2008 WHILE ACCOUNTING YEAR OF SAMSUNG CORPORATION IS CALENDAR YEAR 2008 . THUS THE SAME IS OVERLAPPING AND HENCE COMPARISON OF RESULTS OF I.T.A. (TP) NO. 564/ MUM/201 5 7 THE CASES HAVING TWO DIFFERENT ACCOUNTING YEARS WILL NOT BE CORRECT. T HIS VIEW HAS BEEN UPHELD BY HON'BLE I TAT PUNE BENCH IN THE CASE OF HONEYWELL AUTOMATION INDIA LTD (IN ITA NO . 4 / PN/08 ORDER DATED 10/2/2009). ALSO IN THE CASE OF WEL L WIN INDUSTRY LTD, THE HON'BLE ITAT PUNE UPHELD THE TPO'S VIEW THAT DIFFERENT ACCOUNTING YEA R DATA CANNOT BE USED. IN VIEW OF THESE JUDICIAL PRONOUNCEMENTS THE CONTENTION OF THE APPELLANT IS REJECTED. II ) FURTHER IT IS NOTED THAT IN THE CASE OF SAMSUNG CORPORATION SELLING AND ADMINISTRATIVE EXPENSES AND INTEREST EXPENSES ONLY BEEN CONSIDERED TO AR RIVE THE PERCENTAGE OF 7.30% WHILE IN THE CASE OF DYWIDAG INTERNATIONAL GMBH GENERAL OVERHEADS INCLUDE PERSONAL EXPENSES, DESIGN CALCULATION AND ACQUISITION EXPENSES, LEGAL CONSULTING AND AUDIT FEES, RENT AND LEASE EXPENSES, OFFICE OPERATING EXPENSES, TRAV ELLING EXPENSES, EXPENSES FOR RAW MATERIALS AND ENGINEERING MATERIALS, TECHNICAL EQUIPMENTS, INSURANCE FINANCIAL EXPENSES, ADVERTISEMENT AND REPRESENTATION COST, FEES / TAXES AND OTHERS. THUS IT MAY BE NOTED THAT THERE IS NO SIMILARITY IN THE EXPENSES INCLUD ED UNDER THE HEAD INDIRECT EXPENSES IN THESE TWO COMPANIES AND HENCE THE CALCULATION OF PERCENTAGE OF INDIRECT COST TO SALES CANNOT BE SAID TO BE UNDER THE SAME BASE. THUS THE CALCULATION SUBMITTED BY THE APPELLANT IS DEFECTIVE AND HENCE THE SAME CANNOT BE RELIED UPON. III ) FURTHER IN THE CASE OF SHIMIZU CORPORATION IT IS NOTED THAT THE NET INDIRECT EXPENSES INCLUDE SELLING GENERAL AND ADMINISTRATIVE EXPENSES AND ALSO NON OPERATING EXPENSES. IT IS AGAIN DIFFERENT FROM THE ABOVE MENTIONED TWO COMPANIES. IT WOUL D BE RELEVANT HERE TO MENTION THAT THE AUDITORS OF THESE THREE COMPANIES ARE NOT SAME AND HENCE THEY HAVE ADOPTED A DIFFERENT APPROACH IN WORKING OUT THE PERCENTAGE OF INDIRECT COSTS WHICH HAVE BEEN SUBSEQUENTLY ALLOCATED TO THE APPELLANT COMPANY. IN VIEW OF THESE FACTS THE CONTENTION OF THE APPELLANT THAT ALLOCATION OF OVERHEADS WAS CARRIED OUT IN A SCIENTIFIC AND SYSTEMATIC MANNER IS NOT FACTUALLY CORRECT AND HENCE THIS CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE. IV ) THE APPELLANT IN ITS SUBMISSIONS HAS A DMITTED THAT BY ITS NATURE THE OVERHEAD EXPENSES CANNOT BE DIRECTLY RELATED TO SPECIFIC AC TIVITIES/ IN C OM E AS THEY ARE GENERAL IN NATURE. THIS SUPPORTS THE OBSERVATION OF THE TPO THAT THE EXPENSES CANNOT BE IDENTIFIED TO ANY SPECIFIC JOB OR UNIT V ) THE APPELL ANT CONTENDED THAT THE SERVICES WERE ACTUALLY RENDERED WHICH IS SUPPORTED BY THE EXPENSES MENTIONED IN THE I.T.A. (TP) NO. 564/ MUM/201 5 8 CERTIFICATE OF THE AUDITOR. IN THIS REGARD IT IS MENTIONED THAT THERE IS NO MENTION OF ANY SERVICES HAVE ACTUALLY BEEN R E NDERED BY THE AES. THE AUDIT OR CERTIFICATE IS WITH REFERENCE TO THE FORMULA OF CALCULATION OF THE INDIRECT COST TO BE ALLOCATED TO THE APPELLANT AS DISCUSSED IN PRECEDING PARAGRAPHS. THIS CONTENTION OF THE APPELLANT IS THEREFORE NOT ACCEPTABLE . VI ) THE APPELLANT CONTENDED THAT THE NATUR E OF EXPENSES CLEARLY SHOWS THAT THE EXPENSES ARE OPERATIONAL EXPENSES AND NOT FOR THE BENEFIT OF THE MEMBER AS ITS SHAREHOLDER. THIS CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE SINCE AS DISCUSSED ABOVE, IN THE AUD ITORS CERTIFICATE THERE IS NO SUCH OBSER VATION. FURTHER THE NATURE OF EXPENSES MENTIONED IN 3 CERTIFICATES OF THE AUDITORS OF THE AES HAS DIFFERENT NOMENCLATURE AND HENCE THE CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE. VII ) THE APPELLANT CONTENDED THAT IN EARLIER YEAR THE OVERHEAD COSTS HAVE BE EN EXAMINED AND SAME WAS FOUND TO BE AT ARM'S LENGTH PRICE. THIS CONTENTION OF THE APPELLANT IS NOT CORRECT SINCE NO SUCH DISCUSSION IS AVAILABLE IN THE ORDER OF THE ASSESSING OFFICER AND ALSO SINC E THE Q UANTUM OF INT ERNATIONAL TRANSACTION WAS NEGLIGIBLE. VIII ) THE APPELLANT HAS ALSO RELIED UPON THE DECISION OF THE CIT(A) IN THE CASE OF METRO CIVIL CONTRACTORS. IN THIS REGARD IT IS MENTIONED THAT THE FACTS OF THE TWO CA S ES A R E DIFFERENT PARTICULARLY WITH REFERENCE TO AUDITORS CERTIFICATES AS DISCUSSED ABOVE. IX ) IN VIEW OF THE ABOVE FACTS AND THE LEGAL POSITION AS DISCUSSED, ADJUSTMENT MADE BY THE TPO/AO IS UPHELD. X ) ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED AGGRIEVED BY THE ORDER OF LD CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 8. THE MAIN CONTENTIONS OF THE LD A.R ARE THAT (A) THE ASSESSEE HAS DULY BENCH MARKED ITS INTERNATIONAL TRANSACTION WITH REGARD TO HEAD OFFICER OVERHEAD CHARGES AGAINST THE CERTIFICATE ISSUED BY THE AUDITORS. THE ASSESSEE HAS ADOPTED COST PLUS METHOD FOR DETERMINI NG THE ALP. BUT THE REIMBURSEMENTS HAVE BEEN MADE ON ACTUAL BASIS, WITHOUT ANY MARKUP. THE ASSESSEE ITSELF HAS DISALLOWED A SUM OF 0.78 CRORES OUT OF THE REIMBURSEMENTS. I.T.A. (TP) NO. 564/ MUM/201 5 9 (HOWEVER THE NATURE OF THE SAID DISALLOWANCE IS DISCUSSED BY US IN PARAGRAPH 5 SUPRA .) . (B) THE ASSESSEE HAS BENCH MARKED THIS TRANSACTION WITH THE CERTIFICATE ISSUED BY THE AUDITORS. (C ) THE IDENTICAL REIMBURSEMENT MADE IN THE IMMEDIATELY PRECEDING YEAR HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. (D ) THE FOREIGN ENTITIES ARE BOUND T O INCUR INDIRECT EXPENSES WHEN THEY ARE SUPPLYING ASSETS & SPARES AND FURTHER WHEN THEY ARE INCURRING INDIRECT EXPENSES. (E ) THE IDENTICAL DISALLOWANCE MADE IN THE CASE OF ANOTHER COMPANY NAMED M/S INTERNATIONAL METRO CIVIL CONTRACTORS (WHEREIN THE PRESE NT MEMBERS OF THE ASSESSEE ARE ALSO THE MEMBERS WITH IDENTICAL PROFIT SHARING RATIO) HAS BEEN DELETED BY THE CO - ORDINATE BENCH OF TRIBUNAL, VIDE ITS ORDER DATED 26.9.2014 PASSED IN ITA NO. 8160/MUM/2010. (F ) THE TPO WAS NOT JUSTIFIED IN DISALLOWING THE ENTIRE EXPENDITURE BY DETERMINING THE ALP AS NIL. 9. WITH REGARD TO THE OBSERVATION MADE BY THE TPO THAT THE FOREIGN ENTITIES SHOULD NOT HAVE ALLOCATED ANY INDIRECT EXPENSES AT ALL TO THE ASSESSEE , THE LD A.R SUBMITTED THAT IT IS NOT IN THE DOMAIN OF T HE TPO TO EXAMINE THE PRUDENCE OF THE ASSESSEE OR NECESSITY TO INCUR EXPENDITURE. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWING CASE LAW: - (A) M/S THYSSEN KRUPP INDUSTRIES VS. ACIT (ITA 7032/M/2011 DT. 20.11.2012) (B) S.C ENVIRO AGRO INDIA LTD VS . DCIT (ITA NO.2057 & 2058/MUM/2009 DATED 07.11.2012) (C) KIRBY BUILDING SYSTEMS VS. ADDL CIT (ITA NO.1651/HYD/2010 DT. 18.7.2014) 10. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE IS EXCLUSIVELY RELYING UPON THE CERTIFICATE GIVEN BY THE AUD ITORS TO SUBSTANTIATE THE CLAIM OF INDIRECT EXPENSES (HEAD OFFICE OVERHEADS) REIMBURSED TO THE AES. HE SUBMITTE D THAT THE LD CIT(A) HAS POINTED OUT IN CLEAR TERMS THAT THE AUDITORS OF EACH OF AES HAVE ADOPTED DIFFERENT I.T.A. (TP) NO. 564/ MUM/201 5 10 CRITERIA TO DETERMINE THE INDIRECT EXPENSES AND HENCE, THERE IS NO UNIFORMITY IN THEIR APPROACH. FURTHER, THE AUDITORS CERTIFICATE PERTAINED TO THE CALENDAR YEAR 2008 FOR M/S SAMSUNG CORPORATION AND M/S DYWIDAG INTERNATIONAL, WHERE AS THE CERTIFICATE GIVEN IN THE CASE OF M/S SHIMIZU CORPO RATION PERTAINS TO THE FINANCIAL YEAR 2007 - 08. HE SUBMITTED THAT THE YEAR UNDER CONSIDERATION IS 1.4.2008 TO 31.3.2009 AND HENCE THE SAID CERTIFICATES DO NOT PERTAIN TO THE PERIOD UNDER CONSIDERATION. EVEN OTHERWISE, ONE OF THE AUDITORS, I.E., THE AUDITOR OF M/S SAMSUNG CORPORATION, HAS QUALIFIED THE CERTIFICATE BY STATING THAT NOTHING HAS COME TO THEIR ATTENTION THAT CAUSES TO BELIEVE THAT THE RATIO IS NOT PRESENTED FAIRLY IN ALL MATERIAL ASPECTS. FURTHER THEY HAVE STATED THAT THE CERTIFICATE (MENTIONED AS LETTER) IS INTENDED SOLELY FOR THE INFORMATION AND USE OF THE BOARD OF DIRECTORS AND THE MANAGEMENT AND SHOULD NOT BE USED FOR ANY OTHER PURPOSE. HE FURTHER SUBMITTED THAT THE PERCENTAGE OF OVERHEADS OVER THE SALES HAS BEEN ESTIMATED BY THE AUDITORS A ND THE SAME DOES NOT PROVE THE NATURE OF SERVICES RENDERED BY THE AES TO THE ASSESSEE. HE FURTHER SUBMITTED THAT THE AES HAVE NOT FURNISHED THEIR RESPECTIVE FINANCIAL STATEMENTS OR THE BREAK - UP DETAILS OF OVERHEADS CHARGED BY THEM. FURTHER, THE AUDITORS H AVE INCLUDED SELLING EXPENSES AS PART OF HEAD OFFICER OVERHEADS, WHEREAS THE SAME IS NOTHING TO DO WITH THE SERVICES PROVIDED BY THEM TO THE ASSESSEE. 11. THE LD D.R FURTHER SUBMITTED THAT THE INITIAL BURDEN TO UNDERTAKE TRANSFER PRICING STUDY LIES UPO N THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS CLAIMED T O HAVE ADOPTED COST PLUS METHOD FOR REIMBURSING EXPENSES, BUT THE AES HAVE RAISED DEBIT NOTES UPON THE ASSESSEE ON ESTIMATED BASIS. FURTHER, THE ASSESSEE HAS NOT COMPARE D THE SAME WITH ANY INDEP ENDENT COMPARABLES IN ITS T . P STUDY. HENCE THE ASSESSEE HAS NOT PROVED THAT THE HEAD OFFICER OVERHEADS REIMBURSED BY IT TO ITS AES ARE AT ARMS LENGTH. HENCE THE METHODOLOGY ADOPTED BY THE ASSESSEE CANN OT BE CONSIDERED TO BE COST PLUS METHOD. HE SUBMITTE D THAT THE ALLOCATION OF I.T.A. (TP) NO. 564/ MUM/201 5 11 EXPENSES SHOULD HAVE BEEN ON THE BASIS OF FUNCTIONS PERFORMED OR SERVICES PROVIDED BY THE AES TO THE ASSESSEE AND THE SAME SHOULD HAVE BEEN BENCH MARKED WITH OTHER INDEPENDENT COMPARABLES, I.E., WHAT ANY OTHER INDEPENDENT PARTY WOU LD HAVE CHARGED HAD IT PROVIDED SAME KIND OF SERVICES TO THE ASSESSEE. SINCE THE ASSESSEE HAS FAILED TO DO SO AND SINCE THE ASSESSEE HAS FAILED TO FURNISH ANY OTHER DETAILS, THE TPO HAD NO OTHER OPTION BUT TO DETERMINE THE ALP AS NIL. HE FURTHER SUBMITTE D THAT THE HONBLE ITAT HAS NOT CONSIDERED ALL THE ABOVE SAID FACTORS IN THE CASE OF M/S INTERNATIONAL METRO CIVIL CONTRACTORS AND HENCE THE SAME CANNOT BE RELIED UPON BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THIS BENCH OF TRIBUNAL ALSO NEED NOT FOLLOW THE DECISION RENDERED BY THE CO - ORDINATE BENCH IN VIEW OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF DISTRIBUTORS (BARODA) PVT LTD VS. UNION OF INDIA (1985 AIR 1585), WHEREIN THE HONBLE SUPREME COURT HAS OBSERVED AS UNDER: - THE DOCTRI NE OF STARE DECISIS SHOULD NOT DETER THE COU RT FROM OVERRULING AN EARLIER DECISION, IF IT IS SATISFIED THAT SUCH DECISION IS MANIFESTLY WRONG OR PROCEEDS UPON A MISTAKEN ASSUMPTION IN REGARD TO THE EXISTENCE OR CONTINUANCE OF A STATUTORY PROVISION OR IS CO NTRARY TO ANOTHER DECISION OF THE COURT. THE LD D.R FURTHER PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S CUSHMAN AND WAKEFIELD (INDIA) (P.) LTD. ((2014) 367 ITR 730(DELHI) AND SUBMITTED THAT THE HONBLE DELH I HIGH COURT HAS EXPRESSED THE VIEW, AT PARA 29, THAT WHETHER A PARTY, IN AN UNCONTROLLED TRANSACTION WITH THE ASSESSEE WOULD HAVE CHARGED AMOUNTS LOWER, EQUAL TO OR GREATER THAN THE AMOUNTS CLAIMED BY AES HAS TO PERFORCE TO BE TESTED UNDER VARIOUS METHO DS PRESCRIBED IN SEC. 92C OF THE ACT. THE LD D.R, ACCORDINGLY, SUBMITTED THAT THE ASSESSEE HAS FAILED TO ASCERTAIN ALP OF THE HEAD OVERHEADS REIMBURSED BY THE ASSESSEE IN AN UNCONTROLLED SITUATION AND HENCE THE TAX AUTHORITIES ARE JUSTIFIED IN DETERMINING THE ALP AS NIL. I.T.A. (TP) NO. 564/ MUM/201 5 12 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WITH REGARD TO THE COMMENT OF THE TPO THAT THERE WAS NO NECESSITY FOR THE AES TO CHARGE HEAD OFFICE OVERHEADS TO THE ASSESSEE, WE AGREE WITH THE CONTENTIONS OF LD A.R TH AT THE TPO IS NOT ENTITLED TO COMMENT UPON THE PRUDENCE OF THE ASSESSEE OR THE NECESSITY TO INCUR THE EXPENSES. THE SAID VIEW IS ALSO SUPPORTED BY THE VARIOUS DECISIONS RELIED UPON BY THE ASSESSEE. WE FURTHER NOTICE THAT THE HONBLE DELHI HIGH COURT HAS ALSO EXPRESSED THE SAME VIEW IN THE CASE OF CIT V/S CUSHMAN AND WAKEFIELD (INDIA) (P.) LTD. (SUPRA), WHICH WAS RELIED UPON BY LD D.R. 13. NOW THE QUESTION THAT IS CONTESTED BEFORE US IS WHETHER THE TAX AUTHORITIES ARE JUSTIFIED IN DETERMINING THE ALP O F THE HEAD OFFICE OVERHEADS AS NIL. THE LD A.R CONTENDED THAT THE TPO, HAVING ACCEPTED THAT THE AES HAVE INCURRED DIRECT EXPENSES, SHOULD NOT HAVE REJECTED THE CLAIM OF ALLOCATION OF INDIRECT EXPENSES, I.E., ACCORDING TO LD A.R, THE SUPPLY OF ASSETS & S PARES AND INCURRING OF DIRECT EXPENSES ARE POSSIBLE ONLY IF THE AES MAINTAIN PROPER ESTABLISHMENT AND INFRASTRUC TURE AND HENCE IT IS ESSENTIAL TO ALLOCATE A PORTION OF INDIRECT EXPENSES TO THE ASSESSEE, WHEN THE DIRECT EXPENSES INCURRED AND/OR OTHER SERVIC ES ARE RENDERED. IN OUR VIEW, THERE IS SOME MERIT IN THE SAID CONTENTIONS. 14. HOWEVER, WE HAVE NOTICED THAT THE AES HAVE ADOPTED THE METHODOLOGY TO ASCERTAIN THE INDIRECT EXPENSES AS A PERCENTAGE OF THE REVENUE, I.E., THE PROPORTION OF INDIRECT EXPEN SES INCURRED BY THE HEAD OFFICER OVER THE REVENUE EARNED BY IT. IT WAS AGREED BETWEEN THE MEMBERS OF ASSESSEE AOP THAT THE SAID PERCENTAGE SHOULD NOT EXCEED 8.5%. HOWEVER, THE TAX AUTHORITIES HAVE POINTED OUT THAT THE SAID PERCENTAGE HAS BEEN ASCERTAINE D FOR CALENDAR YEAR 2008 IN TWO CASES AND THE FINANCIAL YEAR 2007 - 08 IN ONE CASE, WHERE AS THE FINANCIAL YEAR UNDER CONSIDERATION IS 2008 - 09. THUS, THERE IS MISMATCH OF THE PERIOD AND THE I.T.A. (TP) NO. 564/ MUM/201 5 13 SAME VINDICATES THE STAND OF THE REVENUE THAT THE AES HAVE CHARGED THE ASSESSEE ON ESTIMATED BASIS AND NOT ON ACTUAL BASIS. 15. AT THE SAME TIME, THERE IS ALSO SOME MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE AES HAVE TO NECESSARILY INCUR INDIRECT EXPENSES OR HEAD OFFICE OVERHEADS IN ORDER TO SUPPLY ASSETS & SPARES AND TO INCUR DIRECT EXPENSES. THIS IS FOR THE REASON THAT THE AES HAVE TO MAINTAIN INFRASTRUCTURE, ESTABLISHMENT AND OTHER PARAPHERNALIA IN ORDER TO SUPPLY ASSETS & SPARES AND TO INCUR DIRECT EXPENSES. WE HAVE NOTICED THAT THE TPO HAS EXPRESSED T HE VIEW THAT THE ASSESSEE DID NOT SPECIFY THE NATURE OF SERVICES THAT WERE PROVIDED FOR BY THE AES WHICH WOULD ENABLE THEM TO RAISE DEBIT NOTES AGAINST THE ASSESSEE FOR HEAD OFFICE OVERHEADS. SINCE THE AES HAVE GOT ESTABLISHED INFRASTRUCTURE AND OTHER PAR APHERNALIA AND SINCE THE EXPENSES THEREON ARE INCURRED IN COMMON TO ALL THE PROJECTS UNDERTAKEN BY THEM, IN OUR VIEW, IT HAS TO BE UNDERSTOOD THAT THE OVERHEADS HAVE BEEN INCURRED FOR ALL THE PROJECTS AND HENCE IT WOULD BE DIFFICULT TO LINK A PARTICULAR EX PENDITURE TO ANY PARTICULAR PROJECT. FOR EXAMPLE, IF THE AE HAS HIRED A BUILDING ON RENT AND OPERATES FROM THERE, THEN THE RENT EXPENDITURE CANNOT BE IDENTIFIED WITH ANY PARTICULAR PROJECT AND HENCE IT IS NECESSARY TO ALLOCATE THEM ON SOME EQUITABLE BASIS . HENCE, IT IS DIFFICULT TO LINK THE OVERHEAD EXPENSES SO ALLOCATED TO ANY PARTICULAR SERVICE THAT WAS PROVIDED BY THE AE. 16. HOWEVER, IN OUR VIEW, THE BASIS OF ALLOCATION WOULD MATTER HERE. THE MEMBERS OF THE ASSESSEE AOP HAS DECIDED TO ALLOCAT E THE HEAD OFFICE OVER HEAD CHARGES ON THE BASIS OF THEIR RESPECTIVE PROPORTION OF OVER HEADS TO THEIR RESPECTIVE REVENUE. WE ARE NOT ABLE TO UNDERSTAND THE RATIONALE BEHIND THE SAME. WE SHALL CONSIDER THE PROPOSITION ADOPTED BY THE MEMBERS OF AOP WITH A N EXAMPLE. LET US PRESUME THAT FIVE PERSONS ARE MEMBERS OF A JOINT VENTURE. THE QUANTUM OF ASSETS & SPARES SUPPLIED AND DIRECT EXPENSES INCURRED ARE TAKEN AS UNDER: - I.T.A. (TP) NO. 564/ MUM/201 5 14 PARTICULARS A B C D E ASSETS & SPARES SUPPLIED 10,00,000 5,00,000 2,00,000 1,00,000 0 DIRECT EXPENSES INCURRED ON BEHALF OF JV 10,00,000 5,00,000 2,00,000 1,00,000 0 TURNOVER OF RESPECTIVE COMPANIES. 10 CRORES 5 CRORES 2 CRORES 1 CRORE 20 CRORES % OF OVER HEADS OVER THE TURNOVER OF RS.2 CRORES EACH 6% 8% 10% 12% 6% NOW LET US EXAMINE THE HYPOTHETICAL SITUATION GIVEN IN THE TABLE ABOVE. LET US PRESUME THAT IN THIS EXAMPLE ALSO, THE MEMBERS HAVE AGREED TO CHARGE OVERHEADS UPTO 8.5% OF THEIR RESPECTIVE ALLOCABLE TURNOVER. LET US FURTHER ASSUME THAT THE TURNOVER OF THE JV IS 10 C RORES AND THE PROFIT SHARING RATIO IS EQUAL. IN THIS SITUATION, THE MEMBERS OF JV WOULD BE CHARGING THE HEAD OFFICE OVER HEADS AS UNDER: - HEAD OFFICE OVERHEADS A B C D E ALLOCATED AS PER % OF T.O 60,00,000 40,00,000 20,00,000 12,00,000 1,20,00,000 UPPE R CEILING @ 8.5% OF T.O 17,00,000 17,00,000 17,00,000 17,00,000 17,00,000 ACCORDINGLY, EACH OF THE MEMBERS OF JV WOULD BE CHARGING RS.17.00 LAKHS UPON THE JOINT VENTURE. IF WE EXAMINE THE FIRST TABLE GIVEN IN THE EXAMPLE, WE MAY NOTICE THAT E HAS NOT PROVIDED ANY SERVICE TO THE JV, BUT STILL IT WOULD BE CHARGING RS.17.00 LAKHS UPON THE JV. THE VALUE OF I.T.A. (TP) NO. 564/ MUM/201 5 15 SERVICES PROVIDED BY A ARE TEN TIMES OF D, FIVE TIMES OF C AND TWO TIMES OF B, BUT STILL ALL THE FOUR PERSONS WOULD BE CHARGING RS.17.00 LAKHS EACH . T HUS IT IS SEEN THAT THE QUANTUM OF HEAD OFFICER OVERHEADS CHARGED BY EACH OF THE MEMBERS IS DISPROPORTIONATE TO THE VALUE OF SERVICES RENDERED BY EACH OF THEM. THIS EXAMPLE HIGHLIGHTS THE FALLACY IN THE APPROACH ADOPTED BY THE ASSESSEE AND ITS MEMBERS. HENCE CHARGING OF HEAD OFFICE OVERHEADS AS A PERCENTAGE OF THEIR RESPECTIVE TURNOVER , IN OUR VIEW, MAY GIVE MISLEADING RESULT. A PERUSAL OF THE ABOVE SAID EXAMPLE WOULD ALSO SHOW THAT THE INDIRECT EXPENSES CHARGED SHOULD DEPEND UPON VALUE OF SERVICES (VA LUE OF ASSETS & SPARES + VALUE OF INDIRECT EXPENSES INCURRED) THAT IS PROVIDED. THIS IS ONE ASPECT OF THE ISSUE UNDER CONSIDERATION. 17. ANOTHER ISSUE IS WITH REGARD TO THE DETERMINATION OF ALP OF THE TRANSACTION. THIS ASPECT HAS BEEN DISCUSSED AT L ENGTH BY THE HONBLE DELHI HIGH COURT I N THE CASE OF CIT V/S CUSHMAN AND WAKEFIELD (INDIA) (P.) LTD. (SUPRA). THE ASSESSEE THEREIN HAD REIMBURSED CERTAIN COSTS AND EXPENSES TO ITS AES NAMED CWS AND CWHK FOR CERTAIN COORDINATION AND LIAISON WORKS. THE TPO DISALLOWED THE SAME. THE LD CIT(A) UPHELD THE SAID DISALLOWANCE. HOWEVER, THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE REVENUE PREFERRED APPEAL CHALLENGING THE ORDER PASSED BY THE TRIBUNAL. T HE HONBLE HIGH COURT HAS DEALT WITH THIS MA TTER AS UNDER : 29. THE ARGUMENT IN THIS CASE IS THAT THE ASSESSEE ONLY PAID FOR THE COST INCURRED, WHILE AN UNCONTROLLED TRANSACTION WOULD INVOLVE AN ADDITIONAL ELEMENT OF PROFIT, THUS LEADING TO A GREATER CLAIM FOR REIMBURSEMENT. IF TRUE, THIS WOULD NO DOUBT PLACE THIS TRANSACTION WITHIN SECTION 92(3). HOWEVER THIS CANNOT BE THE CASE. UNDOUBTEDLY CERTAIN AMOUNTS WERE CHARGED BY THE AES AS REIMBURSEMENT FOR ACTUAL COSTS INCURRED. NEVERTHELESS, WHETHER A THIRD PARTY - IN AN UNCONTROLLED TRANSACTION WITH TH E 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 DET ERMINED, IS WHETHER AN INDEPE NDENT I.T.A. (TP) NO. 564/ MUM/201 5 16 ENTITY - FOR THE SAME LIA S I ONING AND CLIENT INTERACTION SERVICES AS WERE PROVIDED BY CWS AND CWHK - CHARGES AN AMOUNT LESS THAN OR EQUAL TO OR MORE THAN SGD 74,330/ - AND SGD 281,265/ - . AN INDEPENDENT ENTITY WOULD QUITE P OSSIBLY 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 THE COST INCURRED BY THOSE ENTITIES WOULD BE THE SAME AS THE AES IN THIS CASE. IT MAY BE GREATER (IN WHICH CASE SECTI ON 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 FROM THE FACT THAT CWS AND CWHK HAVE ONLY ASKED FOR REIMBURSEMENT OF COST. THIS BEING A TRANSACTION BETWEEN RELATED PARTIES, WHETHER THAT COST ITSELF IS INFLATED OR NOT ONLY IS A MATTER TO BE TESTED UNDER A COMPREHENSIVE TRANSFER PRICING ANALYSIS. THE ASSESSEE DID NOT BENCHMARK THESE COSTS IN ITS TRANSFER PRICING STUDY. NEITHER WAS ANY TRANSFER PRICING STUDY CONDUCTED BY THE TPO, WHO, CRUCIALLY, DID NOT SAY THAT THE ALP 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, B UT DID NOT CONCERN ITSELF WITH A TRANSFER PRICING ANALYSIS AS CONTEMPLATED UNDER SECTION 92; TO THE CONTRARY, IT ACCEPTED THE ASSESSEE'S STATED RETURN (ABSENT ANY BENCHMARKING) AS THE TRUE AND CORRECT VALUE UNDER AN IMPLICIT (AND INCORRECT) UNDERSTANDING O F SECTION 92(3). 1 8. VIDE PARAS 36 AND 37, THE HONBLE HIGH COURT HAS FURTHER OBSERVED AS UNDER: 36. IN THIS CASE, THE ISSUE IS WHETHER AN INDEPENDENT ENTITY WOULD HAVE PAID FOR SUCH SERVICES . IMPORTANTLY, IN REACHING THIS CONCLUSION, NEITHER THE REVE NUE, NOR THIS COURT, MUST QUESTION THE COMMERCIAL WISDOM OF THE ASSESSEE, OR REPLACE ITS OWN ASSESSMENT OF THE COMMERCIAL VIABILITY OF THE TRANSACTION. THE SERVICES RENDERED BY CWS AND CWHK IN THIS CASE CONCERN LIAISING AND CLIENT INTERACTION WITH IBM ON B EHALF OF THE ASSESSEE - ACTIVITIES FOR WHICH, ACCORDING TO THE ASSESSEE'S CLAIM - INTERACTION WITH IBM'S REGIONAL OFFICES IN SINGAPORE AND THE UNITED STATES WAS NECESSARY. THESE SERVICES CANNOT - AS THE ITAT CORRECTLY SURMISED - BE DUPLICATED IN INDIA INSO FAR AS THEY REQUIRE INTERACTION ABROAD. 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 SECOND - GUESSED BY THE REVENUE. I.T.A. (TP) NO. 564/ MUM/201 5 17 37. AT THIS POINT, IT IS NOTEWORTHY THAT THE CIRCUMSTANCE THAT THE ASSESSEE HAD MARKET RESEARCH FACILITIES IN INDIA DOES NOT CORRESPOND TO THE PERFORMANCE OF SERVICES ABROAD, ESPECIALLY IN RELATION TO CLIENT INTERACTION SERVICES LOCATED OUTSIDE INDIA - ALBEIT FOR ULTIMATELY SOU RCING THEM INTO THE INDIAN MARKET. THE E - MAILS CONSIDERED BY THE ITAT FROM MR. BRAGANZA AND MR. CHOUDHARY SO FAR AS THEY DEAL WITH SPECIFIC INTERACTION WITH IBM BY THOSE PERSONS, AND RELATE IT TO BENEFITS OBTAINED BY THE ASSESSEE, PROVIDE A SUFFICIENT BASI S TO HOLD THAT BENEFIT ACCRUED TO THE ASSESSEE. HOWEVER, THIS DETERMINATION REMAINS UNCLEAR AND INCHOATE. THE DEVIL HERE LIES IN THE DETAILS. THE DETAILS OF THE SPECIFIC ACTIVITIES FOR WHICH COST WAS INCURRED BY BOTH CWS AND CWHK (FOR THE ACTIVITIES OF MR. BRAGANZA AND MR. CHOUDHARY), AND THE ATTENDANT BENEFIT TO THE ASSESSEE, HAVE NOT BEEN CONSIDERED TILL DATE. THIS MUST BE PROVIDED, IN ADDITION TO A CONSIDERATION OF THE ALP VIS - - VIS THE TOTAL COST CLAIMED BY THESE AES. TO THIS EXTENT, FOR THE CONSIDERATI ON OF ALP IN RESPECT OF THESE TRANSACTIONS, THE MATTER IS REMANDED BACK TO THE FILE OF THE CONCERNED AO, FOR AN ALP ASSESSMENT BY THE TPO, FOLLOWED BY THE AO'S ASSESSMENT ORDER IN ACCORDANCE WITH LAW. 19 . IN THE INSTANT CASE ALSO , IN OUR VIEW, THE ASSE SSEE HAS NOT CONDUCTED ANY TRANSFER PRICING STUDY WITH REGARD TO THE HEAD OFFICER OVER HEADS. THE CONTENTION OF THE LD A.R THAT THE ASSESSEE HAS BENCH MARKED THE TRANSACTION WITH THE CERTIFICATES ISSUED BY THE AUDITORS , IN OUR VIEW, IS NOT ACCEPTABLE FOR REASONS POINTED BY LD D.R AS WELL AS DISCUSSED BELOW . IN THE T.P STUDY, AS OBSERVED BY HONBLE DELHI HIGH COURT IN THE ABOVE CITED CASE, WHAT IS REQUIRED TO BE SEEN IS WHETHER ANY OTHER INDEPENDENT ENTITY WOULD HAVE CHARGED OR THE INDEPENDENT ENTITY RECEI VING THE SERVICES WOULD HAVE PAID TO THE EXTENT THAT WERE CHARGED BY THE AES. ADMITTEDLY, THIS KIND OF STUDY HAS NOT BEEN CARRIED OUT BY THE ASSESSEE. IN OUR VIEW, THE LD D.R HAS CORRECTLY SUBMITTED THAT THE PRIMARY RESPONSIBILITY TO BENCH MARK THE TRAN SACTIONS WITH COMPARABLE CASES IN ORDER TO VALIDATE ITS INTERNATIONAL TRANSACTIONS LIES UPON THE ASSESSEE. IN THIS CASE, THE ASSESSEE WAS UNDER THE IMPRESSION THAT THE CERTIFICATE ISSUED BY THE AUDITORS WOULD SATISFY THE TESTS OF TRANSFER PRICING STUDY. WE HAVE EARLIER I.T.A. (TP) NO. 564/ MUM/201 5 18 NOTICED THAT THE CERTIFICATE ISSUED BY THE AUDITORS CANNOT BE TAKEN SUPPORT OF FOR THE REASONS THAT (A) THEY PERTAIN TO DIFFERENT ACCOUNTING PERIODS, (B) THERE IS NO STANDARDIZATION OF TYPES OF OVERHEADS THAT IS REQUIRED TO BE CONSIDERED. (C) THEY HAVE GIVEN CERTIFICATES WITH QUALIFICATIONS. IN ANY CASE, THE CERTIFICATE ISSUED BY THE AUDITORS ONLY SPELL OUT THE PERCENTAGE OF OVERHEADS OVER THE REVENUE AND HENCE IT IS ONLY A FACTUAL ASPECT OF INTERNAL FIGURES. IN TRANSFER PRICING STUDY, WHAT IS REQUIRED TO BE DONE IS TO VALIDATE THE SAID CLAIM WITH AN EXTERNAL COMPARABLE. 20 . AS IN THE CASE THAT WAS CONSIDERED BY THE HONBLE DELHI HIGH COURT (SUPRA) , IN THIS CASE ALSO, THE TPO HAS DISALLOWED THE ENTIRE CLAIM AND ACCORDINGLY HELD THE ALP AS NIL, I.E., HE HAS ALSO NOT DETERMINED THE ALP OF THE TRANSACTIONS IN ACCORDANCE WITH THE TRANSFER PRICING PROVISIONS. HENCE WE ARE OF THE VIEW THAT THE ISSUE UNDER CONSIDERATION REQUIRES FRESH EXAMINATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF L D CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO/TPO FOR FRESH CONSIDERATION BY TAKING INTO ACCOUNT THE DISCUSSIONS MADE SUPRA. 21 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26TH JUNE, 2015 . 26TH JUNE, 2015 SD SD ( . / D. MANMOHAN ) ( . . , / B.R. BASKARAN ) / VICE - PRESIDENT / ACCOUNTANT MEMBER MUMBAI : 26TH JUNE, 2015 . . . ./ SRL , SR. PS I.T.A. (TP) NO. 564/ MUM/201 5 19 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. 6. , , / DR, ITA T, MUMBAI CONCERNED / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI