CWT INDIA P.LTD, MUMBAI V. ASST CIT CIR 9(2)(2), MUMBAI

ITA 5996/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7341 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2014-2015
• Appeal Filed On: 22-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Wholly owned subsidiary; Commercial expediency; Set aside
• Section: 92C; 143(3); 234B; 10B; 144

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL K BENCH MUMB AI BEFORE SHRI G. S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5996/MUM/2018 (ASSESSMENT YEAR 2014-15 ) M/S CWT INDIA PVT. LTD. UNIT NO.2, RAHEJA CENTRE, GROUND FLOOR, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI-400021 PAN: AAACI7084H VS. ACIT CIRCLE- 9(2)(2) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020. APPELLANT RESPONDE NT ITA NO. 4972/MUM/2017 (ASSESSMENT YEAR 2013-14 ) M/S CWT INDIA PVT. LTD. UNIT NO.2, RAHEJA CENTRE, GROUND FLOOR, FREE PRESS JOURNAL MARG, NARIMAN POINT, MUMBAI-400021 PAN: AAACI7084H VS. ACIT CIRCLE- 9(2)(2) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI- 400020. APPELLANT RESPONDE NT APPELLANT BY : SHRI MUKESH BUTANI WITH SHRI SHREYASH SHAH (AR) RESPONDENT BY : SHRI ANAND MOHAN (DR) DATE OF HEARING : 18.06.2019 DATE OF PRONOUNCEMEN T : 25.07.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE TWO APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER UNDER SECTION 143(3) R. W.S 144C(13) PASSED IN PURSUANCE OF DIRECTION OF LD. DISPUTE RESOLUTION PANEL-1(WZ), [THE LD. DRP], MUMBAI DATED 12.05.2017 AND 06.08.2018 FOR AS SESSMENT YEAR 2013-14 & 2014-15 RESPECTIVELY. THE ASSESSEE HAS RA ISED CERTAIN COMMON ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 2 GROUNDS OF APPEAL, THEREFORE, BOTH THE APPEALS WERE CLUBBED, HEARD AND ARE DECIDED BY A CONSOLIDATED ORDER FOR THE SAKE OF BREVITY. WITH THE CONSENT OF PARTIES, THE APPEAL FOR THE ASSESSMENT Y EAR 2014-15 WAS TREATED AS LEAD CASE. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ORDERS PASSED BY THE AO / TRANSFER PRICING OFFICER (TPO') AND DIRECTIONS IS SUED BY THE DISPUTE RESOLUTION PANEL (DRP') ARE NOT IN ACCORDANCE WITH LAW AND IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND IN VIOLATION OF THE PRINCIPLE OF EQUITY AND NATURAL JUSTICE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE DIRECTIONS ISSUED BY THE DRP DATED AUGUST 6, 2018, ARE BAD IN LAW AND ARE IN VIOLATION OF SECTION 144C(6) OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE AO HAS ERRED IN ASSESSING THE INCOME OF THE APPELLANT UNDER NORMAL PROVISIONS OF THE ACT AT INR 658,511,620 AS AGAINST THE RETURNED INCOME OF INR 3 55,931,140. TRANSFER PRICING ADJUSTMENT 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE AO/TPO/DRP WHILE MAKING AN ADJUSTMENT OF INR 302,580,485 IN RESPECT OF INTERNATIONAL TRANSACTION FOR RECEIPT OF TECHNICAL ASSISTANCE FROM THE ASSOCI ATED ENTERPRISE (AE') DURING THE RELEVANT ASSESSMENT YEAR, ERRED IN FOLLOWING: 4.1 REJECTING THE ECONOMIC ANALYSIS AND METHODOLOGY ADOPTED BY THE APPELLANT, BEING TRANSACTIONAL NET MARGIN METHOD (' TNMM'), AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE INTERNATION AL TRANSACTION PERTAINING TO PAYMENTS TO AE FOR RECEIPT OF TECHNICAL ASSISTAN CE 4.2 DETERMINING THE ARM'S LENGTH PRICE ('ALP') AS N IL WITHOUT PROPER APPLICATION OF ANY TRANSFER PRICING METHOD PRESCRIB ED UNDER SECTION 92C OF THE ACT READ WITH RULE 10B OF THE INCOME TAX RULES, 196 2 ('THE RULES') 4.3 DISREGARDING THE SUBMISSIONS AND THE BACK-UP DO CUMENTARY EVIDENCE I INFORMATION PLACED ON RECORD BY THE APPELLANT TO SU BSTANTIATE THE NEED AND ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 3 BENEFITS RECEIVED AND THEREBY, ALLEGING THAT THE SE RVICES WERE NOT ACTUALLY RECEIVED BY THE APPELLANT AND NO BENEFIT WAS DERIVE D BY THE APPELLANT 4.4 NOT SHARING THE RELEVANT MATERIAL I INFORMATION RELIED UPON WHILE DETERMINING THE ARM'S LENGTH PRICE 4.5 QUESTIONING THE COMMERCIAL EXPEDIENCY I WISDOM OF THE APPELLANT FOR INCURRING OF EXPENDITURE IN RESPECT OF RECEIPT OF T ECHNICAL ASSISTANCE AND PLACING RELIANCE ON THE RULING OF DELOITTE CONSULTI NG INDIA PVT. LTD. (22 TAXMANN.COM 107) 4.6 NOT ACKNOWLEDGING THE FACT THAT THE SERVICES WE RE ACTUALLY RECEIVED BY THE APPELLANT 4.7 DISREGARDING THE DOCUMENTARY EVIDENCE SUBMITTED BY THE APPELLANT IN THE NATURE OF COST ALLOCATION, DETAILS OF ALLOCATION KE YS AND BIFURCATION OF THE COST FOR EACH CATEGORY OF SERVICES RECEIVED 4.8 ARBITRARILY RELYING ON THE DRP DIRECTIONS OF AY 2011-12 IN APPELLANT'S OWN CASE, WITHOUT PROPER EXAMINATION OF THE FACTS A ND CIRCUMSTANCES OF A Y 2014-15 AND CONCLUDING THAT THE MATERIAL PLACED ON THE RECORD BY THE APPELLANT IN THE INSTANT A Y IS SIMILAR TO THE DOCUMENTARY EV IDENCES SUBMITTED IN THE PREVIOUS AY WITHOUT PROPER EXAMINATION OTHER GROUNDS: 5. THAT THE LEARNED AO HAS ERRED ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW, IN LEVYING THE INTEREST UNDER SECTION 234B OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY SATISFACTORY REASONS FOR THE SAME 6. THAT AO/DRP HAS GROSSLY ERRED ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND IN LAW BY INITIATING THE PENALTY PROCEEDINGS UNDER SEC TION 271 (1 )(C) READ WITH SECTION 274 OF THE ACT AND STATING THAT THE APPELLA NT HAS FURNISHED INACCURATE PARTICULARS OF INCOME LEADING TO CONCEALMENT OF INC OME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRAVELLING AND TOURISM, FILED ITS RETUR N OF INCOME ON 27.11.2013 DECLARING TOTAL INCOME OF RS. 34,75,34,3 20/-. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED FORM NO.3C EB REPORTING INTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERP RISES (AE) ON ACCOUNT ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 4 OF FEES PAID FOR TECHNICAL SERVICES OF RS. 27,56,68 ,318/-. THE ASSESSING OFFICER MADE REFERENCE TO THE TRANSFER PRICING OFFI CER (TPO) FOR COMPUTATION OF ARMS LENGTH PRICE (ALP). THE TPO WHI LE PASSING THE ORDER UNDER SECTION 92CA(3) AND SUGGESTED THE UPWAR D ADJUSTMENT OF RS. 27,56,68,318/-. ON RECEIPT OF ORDER OF TPO, THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER UNDER SECTION 144 C(1) DATED 28.11.2016. THE ASSESSEE FILED OBJECTION BEFORE THE LD. DRP CHALLENGING THE ADDITION/UPWARD ADJUSTMENT SUGGESTED BY TPO. TH E LD. DRP AFTER HEARING THE ASSESSEE REJECTED THE OBJECTION AND UPH ELD THE UPWARD ADJUSTMENT/ADDITION SUGGESTED BY LD. DRP VIDE ITS O RDER DATED 29.03.2017. CONSEQUENT, IN PURSUANCE OF DIRECTION O F LD. DRP, THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) DATED 12.05.2017. 3. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. T HE LD. AR OF THE ASSESSEE SUBMITS THAT THE TRANSFER PRICING ADDITION MADE BY TPO AND UPHELD BY LD. DRP IN BENCH MARKING SERVICES RENDERE D BY FOREIGN AES AT NIL AND BY FOLLOWING CUP METHOD. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT SIMILAR GROUNDS OF APPEAL AS RAISED IN BOTH THE APPEALS THAT APPEAL FOR ASSESSMENT YEAR 2013-14 AND 2014-15 ARE IDENTICAL AND THE TRIBUNAL IN APPEAL FOR ASSESSMENT YEAR 2012-13 IN I TA NO. ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 5 1404/MUM/2017 HAS RESTORED THE ISSUE TO THE FILE OF ASSESSING OFFICER/TPO FOR LIMITED PURPOSE OF VERIFICATION AS TO WHETHER THE MARGIN OF TESTED PARTIES IS AT ALP TO THE MARGIN OF THE CO MPARABLE COMPANIES. THE LD. AR OF THE ASSESSEE FURTHER SUBMITS THAT FOR THE AY 2013-14, THE DRP FOLLOWED THE ORDER OF DRP FOR AY 2012-13 AND IN AY 2014-15 FOLLOWED THE ORDER OF DRP FOR AY 2011-12. THE LD. A R FOR THE ASSESSEE SUBMITS THAT IN APPEAL FOR AY 201-12 AND 2012-13 TH E ISSUE WAS RESTORED FOR LIMITED PURPOSE ONLY, THEREFORE FOR THE YEAR UN DER CONSIDERATION THE SAME ORDER MAY BE FOLLOWED. 4. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE (DR) FOR THE REVENUE SUPPORTED THE ORDER OF THE AUTHORITIES BELO W. THE LD. DR FURTHER SUBMITS THAT IN AY 2011-12 AND 2012-13 THE CONTENTI ON OF THE ASSESSEE WAS THAT THE ALLOCATION KEY APPLIED BY THE AE TO AL LOCATE COST OF SERVICES PROVIDED BY THE AE IS ONE OF THE ACCEPTED METHODS A ND SAME CANNOT BE REJECTED WITHOUT REBUTTAL. THIS ASSESSEE HAS NOT TA KEN SUCH PLEA FOR THE YEARS UNDER CONSIDERATION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. GROUNDS NO . 1 TO 3 ARE GENERAL AND NEEDS NO SPECIFIC ADJUDICATION. GROUND NO. 4 RE LATES TO TRANSFER PRICING ADJUSTMENT. WE HAVE NOTED THAT FOR AY 2011- 12 AND 2012-13 THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS RAISED IN THE APPEALS UNDER CONSIDERATION. THE LD. DRP WHILE CONSIDERING THE OBJECTION FOR AY ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 6 2013-14, FOLLOWED THE ORDER OF DRP FOR AY 2012-13 A ND IN AY 2014-15 FOLLOWED THE ORDER OF DRP FOR AY 2011-12. THE COOR DINATE BENCH OF TRIBUNAL IN APPEAL FOR AY 2012-13 IN ITA 1404/MUM/2 017 AFTER CONSIDERING THE CONTENTIONS OF THE REPRESENTATIVE O F ASSESSEE AND LD. DR FOR THE REVENUE PASSED THE FOLLOWING ORDER. FOR APP RECIATION OF FACT THE SUBMISSIONS OF THE PARTIES AND THE FINDING OF THE T RIBUNAL IS EXTRACTED BELOW: 11. VIDE GROUND NO. 4 TO 4.7 THE ASSESSEE HAS CH ALLENGED THE ACTION OF AO IN MAKING ADDITION OF RS. 28,25,18,009/- ON A CCOUNT OF TRANSFER PRICING ADJUSTMENT IN PURSUANCE OF DIRECTION DATED 25.11.2016 PASSED BY THE LD. DRP U/S 144C(5) OF THE ACT. THE GENERAL CONTENTION OF THE PARTIES IN THE PRESENT APPEAL ARE SIMILAR TO THE CO NTENTIONS OF THE PARTIES RAISED IN THE ASSESSEES APPEAL FOR THE A.Y . 2009-10 AND 2010- 11 DISCUSSED ABOVE. DURING THE PREVIOUS YEAR RELEVA NT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE EN TERED INTO DIFFERENT AGREEMENT WITH ITS AES FOR AVAILING THE SERVICES RE LATING TO ACCOUNT MANAGEMENT, SOLUTIONS, SALES AND MARKETING, FINANCE AND TREASURY, HUMAN RESOURCE SERVICES, INDUSTRIAL RELATION AND OT HER SERVICES AS THE PARTY MAY AGREE. DURING THE YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE AVAILED THE AFORESAID S ERVICES FROM CWT, SINGAPORE IN TERMS OF THE AGREEMENT ENTERED WITH TH E CWT, SINGAPORE. 12. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE RELEVANT YEAR, THE ASSESSEE HAD PAID RS. 28,25, 18,009/- TO CWT, SINGAPORE. THE LD. COUNSEL FURTHER SUBMITTED THAT I T IS NOT THE CASE OF THE REVENUE THAT THIS AMOUNT WAS NOT PAID BY THE AS SESSEE TO ITS AE. THE LD. COUNSEL FURTHER POINTED OUT THAT THE ASSESS EE HAS FILED THE DETAILS OF NATURE OF SERVICE AND DETAILS OF BENEFIT S RECEIVED FROM THE AE AND ALSO NEED FOR SERVICES IN DIFFERENT FIELDS OF O PERATIONAL ACTIVITIES IN ORDER TO DEMONSTRATE THE ARMS LENGTH PRICE. THE AS SESSEE HAS ALSO FURNISHED THE TP STUDY REPORT BENCHMARKING THE TRAN SACTION BY USING TRANSACTION NET MARGIN METHOD (TNMM) AND SELECTING THE AE AS A TESTED PARTY. AS PER THE TP REPORT, THE MARGIN OF T HE TESTED PARTY IS 7.5 ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 7 10%, WHEREAS THE ARMS LENGTH MARGIN OF THE COMPARA BLES SELECTED BY THE ASSESSEE IS 24.83%. SINCE, THE MARGIN OF TESTED PARTY IS LESS THAN THE MARGIN OF THE COMPARABLE COMPANIES, THE ASSESSE E HAS BENCHMARKED THE TRANSACTION AS ARMS LENGTH. THE LD . COUNSEL FURTHER POINTED OUT THAT THE ASSESSEE HAS ESTABLISHED THE G ENUINENESS OF THE EXPENDITURE AND ITS ALLOCATION AMONG VARIOUS GROUP ENTITIES BY FURNISHING CPA CERTIFICATE DULY ISSUED BY THE COMPE TENT PERSON. THE LD. COUNSEL FURTHER ARGUED THAT THE ANALYSIS OF THE TPO IS NOT BASED ON EVIDENCE ON RECORD AND IN ACCORDANCE WITH THE PROVI SIONS OF THE ACT. THE LD. TPO HAS WRONGLY COMPUTED THE ARMS LENGTH P RICE OF THE INTERNATIONAL TRANSACTION AT NIL. IN THE PRESENT CA SE, SINCE THE LD. TPO HAS WRONGLY APPLIED CUP METHOD THE LD. DRP OUGHT TO HAVE SET ASIDE THE ORDER PASSED BY THE LD. TPO. THE LD. COUNSEL FO R THE ASSESSEE RELYING ON THE DECISION OF THE PUNE BENCH OF THE TR IBUNAL IN THE CASE OF EMERSON CLIMATE TECHNOLOGIES (INDIA) LTD. VS. DCIT 2018 90 TAXMAN.COM 125 SUBMITTED THAT IN THE PRESENT CASE THE CUP METHOD CANNOT BE APPLIED AS MOST APPROPRIATE METHODS BECAUSE THE TRA NSACTION IS INTRA GROUP I.E. BETWEEN THE AES. THE LD TPO HAS NOT BROU GHT ON RECORD ANY COMPARABLE FOR APPLYING CUP METHODS FOR BENCHMARKIN G THE TRANSACTION. THE LD. COUNSEL FURTHER POINTED OUT TH AT THE ASSESSEE HAS FURNISHED APART FROM OTHER DETAILS, THE FINANCIAL O F THE COMPARABLES INCLUDING THE DESCRIPTION OF SERVICES PROVIDED BY T HE SEVEN COMPARABLES SELECTED BY THE ASSESSEE IN ITS TP STUDY REPORT AVA ILABLE AT PAGE NO. 805 TO 807 OF THE PAPER BOOK. 13. ON THE OTHER HAND, THE LD. DR RELYING ON THE ORDER PASSED BY THE AO IN TERMS OF THE DIRECTIONS ISSUED BY THE LD. DRP SUBMITTED THAT THE LD. TPO BY APPLYING CUP RIGHTLY CONSIDERED THE ARM S LENGTH PRICE AT NIL AS THE SERVICES RENDERED BY THE AE HAS NOT SUBS TANTIALLY BENEFITTED TO THE ASSESSEE BEING THE AE. THE LD. DR PLACING RE LIANCE ON THE ORDER OF THE ITAT, MUMBAI IN THE CASE OF DELOITTE CONSULTING INDIA PVT. LTD. 22 TAXMANN.COM 107, HELD THAT AN UNCONTROLLED COMPARABLE COMPANY WOULD NOT INCUR SUCH EXPENDITURE, THEREFORE THE ARM S LENGTH PRICE IS RIGHTLY DETERMINED AT NIL. THE LD. DR FURTHER POINT ED OUT THAT THE TP STUDY OF THE ASSESSEE HAS ONLY ESTABLISHED THE ARMS LENGTH PRICE OF THE MARKUP CHARGE BY THE AE WITHOUT DEMONSTRATING THE N EED OF SUCH SERVICES. THE LD. DR FURTHER POINTED OUT THAT THE T P STUDY REPORT HAS ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 8 BEEN PREPARED BY USING MULTIPLE YEAR DATA, HENCE TH E ARMS LENGTH PRICE DETERMINED BY THE ASSESSEE IS NOT ACCEPTABLE. THE L D. DR FURTHER POINTED OUT THAT THE RANGES OF THE SEVEN COMPARABLE S ARE FROM 4.56% TO 44.98%, AVERAGE OF WHICH COMES TO 24.83%. SINCE, TH E ASSESSEE HAS NOT PROVIDED THE MARGIN OF THE COMPARABLE PERTAINING TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE LD. TPO HAS RIGHTLY R EJECTED THE ARMS LENGTH PRICE DETERMINED BY THE ASSESSEE. THE LD. DR FURTHER SUBMITTED THAT THE COPY OF EMAILS, PRESENTATION AND TEMPLATES SUBMITTED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW HAVE NO EVIDE NTIARY VALUE. THE LD. DR FURTHER SUBMITTED THAT SINCE THE TPO HAS RIGHTLY HELD THE ARMS LENGTH PRICE AT NIL BY FOLLOWING THE APPROPRIATE ME THOD, THE LD. DRP HAS RIGHTLY AFFIRMED THE FINDINGS OF THE LD. TPO. T HEREFORE, THERE IS NO INFIRMITY IN THE IMPUGNED ORDER TO INTERFERE WITH. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD INCLUDING THE CASES REL IED UPON BY THE PARTIES IN THE LIGHT OF THE RIVAL CONTENTIONS OF TH E PARTIES. THE ASSESSEE COMPANY WAS A JOINT VENTURE OF 76:24 BETWEEN CARLSO N WAGONLIT TRAVELS (CWT) AND AFL LTD. IN THE YEAR 2008, THE ASSESSEE C OMPANY SEIZED TO BE A JOINT VENTURE AND BECAME 100% SUBSIDIARY OF CWT H OLDINGS N V. POST EXIT OF AFL, THERE WAS NEED TO PROVIDE OPERATIONAL STRATEGIC AND ADVISORY SUPPORT TO THE ASSESSEE COMPANY TO ENSURE THAT THE ASSESSEE IS BENEFITTED BY THE PROCESSES FOLLOWED BY CWT GROUP O F COMPANY WORLDWIDE. THE SAID SERVICES WERE PROVIDED BY THE A ES FOR WHICH THE ASSESEEE ENTERED INTO AGREEMENT WITH ITS AE CWT, SI NGAPORE. THE AIM OF PROVIDING SERVICES TO THE ASSESSEE WAS TO ACHIEV E THE OBJECTIVE OF DEVELOPMENT OF ITS BUSINESS IN THE INDIAN MARKET, I MPLEMENTATION OF COST EFFECTIVE PROCESS, IMPROVEMENT OF FINANCIAL PE RFORMANCE, ESTABLISHING ROBUST CONTROL, ESTABLISHING BEST IN C LASS HR PRACTICES, DEVELOP STRONG GLOBAL CUSTOMER BUSINESS AND ESTABLI SHED ITS IDENTITY IN THE INDIAN MARKET. 15. IN ORDER TO DEMONSTRATE THE JUSTIFICATION OF BENEFITS DERIVED BY THE ASSESSEE FROM THE SERVICES RENDERED BY ITS AE, THE ASSESSEE HAS PLACED ON RECORD, THE DETAILS OF THE SERVICES AVAILED, DET AILS OF BENEFIT DERIVED AND THE FUNCTIONS PERFORMED BY THE ASSESSEE. AS PER THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSEE PLACED ON R ECORD THE COPIES OF E-MAIL, CORRESPONDENCES, TEMPLATES AND PRESENTATION TO ESTABLISH THAT ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 9 BY AVAILING THE SERVICES FROM THE AES THE ASSESSEE COULD PERFORM ITS FUNCTION EFFECTIVELY IN THE FIELDS OF REGIONAL SALE S AND MARKETING, OPERATION MANAGEMENT, FINANCE AND TREASURY, HUMAN R ESOURCES, INFORMATION TECHNOLOGY AND INFORMATION DELIVERY SYS TEM. THE ASSESSEE HAS FURTHER SUBMITTED THAT DETAILS OF BENEFIT DERIV ED FROM THE AE WHICH INCLUDES: A) REGIONAL SALES AND MARKETING AS PER THE DETAILS F URNISHED BY THE ASSESSEE, CWT INDIA WAS BENEFITTED FROM THE SUP PORT PROVIDED BY CWT SINGAPORE IN GENERATING NEW BUSINESS OPPORTUNIT IES AND OTHER ENGAGEMENTS WITH ITS NEW CLIENTS. FURTHER, CWT INDI A RECEIVED REGULAR ASSISTANCE FROM ITS AE ON MAKING PRICING INSTRUCTIO NS TO THE PROSPECTIVE CLIENTS. B) OPERATION MANAGEMENT THE SERVICES RENDERED BY THE AE BENEFITTED THE ASSESSEE IN IMPLEMENTATION OF NEW SY STEM MODULES AND SOLUTIONS IN INDIA IMPROVING BUSINESS EFFICIENCY IN TERMS OF WEB SECURITY, FLEXIBLE CENTRAL MANAGEMENT AND POWERFUL LOGGING. C) FINANCE AND TREASURY CWT INDIA RECEIVED ASSISTANC E IN PREPARING ANNUAL BUDGETS, KEY PERFORMANCE INDICATOR S,, MEASURES TO REDUCE COST, UPDATION OF TEMPLATES SUCH AS INVOICE ENSURING CONSISTENCY WITH GROUP STANDARDS. D) HUMAN RESOURCES CWT INDIA ALSO RECEIVED ACCESS TO THE NEWLY LAUNCHED POLICY APPLICATION FOR ALL THE EMPLOYEES E NABLING CONDUCIVE WORKING CULTURE. FURTHER, ASSISTANCE WAS RECEIVED I N RELATION TO THE COMPENSATION SETTING AS PER MARKET STANDARDS AND ON REPLACEMENT OF VARIOUS POSITIONS. E) INFORMATION TECHNOLOGY AND INFORMATION DELIVERY SYS TEM CWT INDIA FURTHER RECEIVED BENEFITS FROM THE SUPPORT PR OVIDED BY AE IN RELATION TO MIGRATION ON A NEW SOFTWARE PLATFORM AL ONG WITH SPECIFIC INSTRUCTIONS ON THE INSTALLATION. 16. THUS, THE ASSESSEE HAS PRODUCED THE DOCUMENTAR Y EVIDENCE TO DEMONSTRATE THAT IT HAS AVAILED SERVICES IN THE AFO RESAID FIELDS. THE ASSESSEE HAS FURTHER ESTABLISHED THE NEEDS FOR SERV ICES IN THE DIFFERENT FIELDS DISCUSSED ABOVE. AS PER THE SETTLED LAW, IT IS THE ASSESSEE, WHO HAS TO DECIDE AS TO HOW THE BUSINESS AFFAIRS ARE TO BE ARRANGED. ACCORDINGLY, THE TPO CANNOT QUESTION ON THE COMMERC IAL EXPEDIENCY OF THE ASSESSEE. THE EVIDENCE ON RECORD PRIMA FACIE SH OWS THAT THE ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 10 ASSESSEE HAS AVAILED THE SERVICES AFORESAID IN ORDE R TO CARRY ON ITS OPERATIONS WHICH ARE HIGHLY TECHNICAL IN NATURE. TH E CASE LAW RELIED UPON BY THE LD. DR IS DISTINGUISHABLE ON THE FACTS. HENCE, IN THE LIGHT OF THE AFORESAID DISCUSSION, WE DO NOT FIND MERIT I N THE CONTENTION OF THE LD. DR. 17. IN THE CASE OF AWB INDIA PVT. LTD. (2014) 50 TAXMAN.COM 323 (DEL), THE DELHI TRIBUNAL OF ITAT HAS HELD THAT IN THE ABSENCE OF PRE- REQUISITES FOR APPLICATION OF CUP METHOD IT IS NOT OPEN FOR THE TPO TO REJECT THE TNMM ADOPTED BY THE ASSESSEE. THE RELEVA NT PARAS OF THE ORDER READ AS UNDER:- 15. ONE OF THE VERY BASIC PRE CONDITION FOR USE OF CUP METHOD IS AVAILABILITY OF THE PRICE OF THE SAME PRODUCT AND S ERVICE IN UNCONTROLLED CONDITIONS. IT IS ON THIS BASIS THAT A LP OF THE PRODUCT OR SERVICE CAN BE ASCERTAINED. IT CANNOT BE A HYPOTHET ICAL OR IMAGINARY VALUE BUT A REAL VALUE ON WHICH SIMILAR TRANSACTION S HAVE TAKEN PLACE. COMING TO THE FACTS OF THIS CASE, THE APPLIC ATION OF CUP IS DEPENDENT ON THE MARKET VALUE OF THE ARRANGEMENTS U NDER WHICH THE PRESENT PAYMENTS HAVE BEEN MADE. UNLESS THE TPO CAN IDENTIFY A COMPARABLE UNCONTROLLED CASE IN WHICH SUCH SERVIC ES, HOWSOEVER TOKEN OR IRRELEVANT SERVICES AS HE MAY CONSIDER THE SE SERVICES TO BE, ARE RENDERED AND FIND OUT CONSIDERATION FOR THE SAM E, THE CUP METHOD CANNOT HAVE ANY APPLICATION. HIS PERCEPTION THAT THESE SERVICES ARE WORTHLESS IS OF NO RELEVANCE. IT IS NO T HIS JOB TO DECIDE WHETHER A BUSINESS ENTERPRISE SHOULD HAVE INCURRED A PARTICULAR EXPENSE OR NOT. A BUSINESS ENTERPRISE INCURS THE EX PENDITURE ON THE BASIS OF WHAT IS COMMERCIALLY EXPEDIENT AND WHAT IS NOT COMMERCIALLY EXPEDIENT. AS HELD BY HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT V. EKL APPLIANCES LTD. [2012] 34 5 ITR 241/209 TAXMAN 200/24 TAXMANN.COM 199 (DELHI), 'EVEN RULE 1 0B(1)(A) DOES NOT AUTHORIZE DISALLOWANCE OF ANY EXPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESS EE TO HAVE INCURRED THE SAME'. 16. THE VERY FOUNDATION OF THE ACTION OF THE TPO IS THUS DEVOID OF LEGALLY SUSTAINABLE MERITS. THERE IS NO DISPUTE THA T THE IMPUGNED PAYMENTS ARE MADE UNDER AN ARRANGEMENT WITH THE AE TO PROVIDE CERTAIN SERVICES. IT IS NOT EVEN THE TPO'S CASE THA T THE PAYMENTS FOR THESE SERVICES WERE NOT MADE FOR SPECIFIC SERVICES UNDER THE CONTRACT BUT HE IS OF THE VIEW THAT EITHER THE SERVICES WERE USELESS OR THERE WAS NO EVIDENCE OF ACTUAL SERVICES HAVING BEEN REND ERED. AS FOR THE SERVICES BEING USELESS, AS WE HAVE NOTED ABOVE, IT IS A CALL TAKEN BY ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 11 THE ASSESSEE WHETHER THE SERVICES ARE COMMERCIALLY EXPEDIENT OR NOT AND ALL THAT THE TPO CAN SEE IS AT WHAT PRICE SIMIL AR SERVICES, WHATEVER BE THE WORTH OF SUCH SERVICES, ARE ACTUALL Y RENDERED IN THE UNCONTROLLED CONDITIONS. 17. AS FOR THE EVIDENCE FOR EACH OF THE SERVICE STA TED IN THE AGREEMENT, IT IS NOT EVEN NECESSARY THAT EACH OF TH E SERVICE, WHICH IS SPECIFICALLY STATED IN THE AGREEMENT, IS RENDERE D IN EVERY FINANCIAL PERIOD. THE ACTUAL USE OF SERVICES DEPENDS ON WHETH ER OR NOT USE OF SUCH SERVICES WAS WARRANTED BY THE BUSINESS SITUATI ONS WHEREAS PAYMENTS UNDER CONTRACTS ARE MADE FOR ALL SUCH SERV ICES AS THE USER MAY REQUIRE DURING THE PERIOD COVERED. AS LONG AS A GREEMENT IS NOT FOUND TO BE A SHAM AGREEMENT, THE VALUE OF THE SERV ICES COVERED UNDER THE AGREEMENT CANNOT BE TAKEN AS 'NIL' JUST B ECAUSE THESE SERVICES WERE NOT ACTUALLY REQUIRED BY THE ASSESSEE . IN ANY CASE, HAVING PERUSED THE MATERIAL ON RECORD, WE ARE SATIS FIED THAT THE SERVICES WERE ACTUALLY RENDERED UNDER THE AGREEMENT AND THESE SERVICES DID JUSTIFY THE IMPUGNED PAYMENTS. 18. WE ARE ALSO OF THE CONSIDERED VIEW THAT IN THE ABSENCE OF PREREQUISITES FOR APPLICATION OF CUP METHOD BEING A BSENT IN THE PRESENT CASE, IT WAS NOT OPEN TO THE TPO TO DISREGA RD THE TNMM EMPLOYED BY THE ASSESSEE. NO DEFECTS HAVE BEEN POIN TED OUT IN APPLICATION OR RELEVANCE OF TNMM IN THIS CASE. UNDE R THESE CIRCUMSTANCES, THE TPO'S IMPUGNED ACTION CANNOT MEE T OUR JUDICIAL APPROVAL. 18. THE ASSESSEE HAS SUBMITTED THE COPIES OF THE AGREEMENTS ENTERED WITH CWT, SINGAPORE. THE ALLOCATION KEY APPLIED BY THE AE TO ALLOCATE COST OF SERVICES PROVIDED BY THE AE IS ONE OF THE A CCEPTED METHODS AND THE SAME CANNOT BE REJECTED WITHOUT REBUTTING THE S AME. THE ASSESSEE HAS TAKEN CWT, SINGAPORE (AE) AS TESTED PARTY AND P OINTED OUT THAT THE COST OF SERVICES IS AT ARMS LENGTH PRICE DETERMINE D BY ADOPTING TNMM. THE ASSESSEE HAS FURTHER TAKEN THE COMPARABLES KEEP ING IN VIEW THE SIMILAR BUSINESS MODELS. 19. IN THE CASE OF EMERSON CLIMATE TECHNOLOGY IND IA LTD. VS. DCIT (2018) 90 TAXMAN.COM 125 (PUNE TRIBUNAL), THE PUNE BENCH OF THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF AO/T PO FOR A LIMITED PURPOSE OF VERIFYING THAT WHETHER THE MARGIN SHOWN BY THE TESTED PARTY IS AT ARMS LENGTH TO THE MARGIN OF THE COMPARABLES SELECTED BY THE ASSESSEE. IN THE SAID CASE, THE TPO REJECTED THE FI NANCIALS OF THE COMPARABLE ON THE GROUND THAT THE ASSESSEE HAS FAIL ED TO DEMONSTRATE THAT THE AES WERE CAPABLE OF PROVIDING ANY VALUABLE SERVICES AND DETERMINED THE ARMS LENGTH AT NIL. IN THE PRESENT CASE, THE ASSESSEE ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 12 HAS FILED THE DETAILS RELEVANT TO COMPUTE THE COST ALLOCATION DULY CERTIFIED THE CPA, SINGAPORE. THE SAID DETAILS CANN OT BE REJECTED SUMMARILY WITHOUT POINTING OUT ANY INFIRMITY. SINCE , THE AE HAS PROVIDED THE SERVICES AFORESAID TO THE ASSESSEE. TH E ASSESSEE HAS SELECTED AS TESTED PARTY WHICH IS IN CONSONANCE WIT H OECD GUIDELINES AND UNITED NATIONS PRACTICAL MANUAL. THE ASSESSEE HAS FURTHER DEMONSTRATED THAT THE FUNCTIONAL ANALYSIS OF THE CO NTROLLED TRANSACTION IS IN ACCORDANCE WITH RULE 10B OF THE INCOME TAX RU LES. THE ASSESSEE HAS ALSO DEMONSTRATED AS TO WHY THE FOREIGN AE SHOU LD BE SELECTED AS TESTED PARTY IN ITS TP STUDY. UNDER THESE CIRCUMSTA NCES, WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE ASSESSEE HAS RIGHTLY SELECTED ITS AE AS TESTED PARTY FOR BEN CHMARKING THE TRANSACTION. THE ASSESSEE HAS SUBMITTED THAT IT HAS SUBMITTED THE COMPLETE FINANCIALS OF COMPARABLE SELECTED FOR BENC HMARKING THE TRANSACTIONS. TO IDENTIFY THE COMPANIES COMPARABLE TO CWT SINGAPORE, THE ASSESSEE HAS USED ONE SOURCE ONE SOURCE GLOBAL BUSINESS BROWSER (INTERNATIONAL DATA BASE) CONTAINING BUSIN ESS INFORMATION ON 20 MILLION LARGE AND MEDIUM SIZE COMPANIES IN THE W ORLD. IN THE AFORESAID BACKDROP, THERE IS NO JUSTIFICATION OF RE JECTING TNMM METHOD ADOPTED BY THE ASSESSEE. WE THEREFORE, HOLD THAT TH E ASSESSEE HAS RIGHTLY APPLIED TNMM AS THE MOST APPROPRIATE METHOD S WITHIN THE MEANING OF RULE 10B OF THE RULES. IN OUR CONSIDERED VIEW, THE LD. TPO HAS WRONGLY APPLIED CUP METHOD AND DETERMINED THE A RMS LENGTH PRICE AT NIL. AS HAS BEEN HELD IN THE CASE OF AWB INDIA P VT. LTD. (SUPRA) THE BASIC CONDITION FOR APPLYING CUP METHOD IS THE AVAI LABILITY OF PRICE OF THE SIMILAR PRODUCT AND SERVICE IN UNCONTROLLED CON DITIONS ON THE BASIS OF WHICH ARMS LENGTH PRICE UNDER CUP METHOD CAN BE DETERMINED. HENCE, IN THE LIGHT OF THE FACTS OF THE CASE AND TH E FINDINGS OF THE DELHI BENCH OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN THE SELECTION OF TNMM BY THE ASSESSEE FOR BENCHMARKING THE TRANSACTI ONS. WE HAVE ALREADY HELD THAT THE ASSESSEE HAS RIGHTLY SELECTED THE AE AS TESTED PARTY. THUS, THE INTERNATIONAL TRANSACTIONS OF PAYM ENT OF FEES FOR TECHNICAL ASSISTANCE SERVICES IS TO BE BENCHMARKED BY COMPARING THE MARGINS OF THE CWT, SINGAPORE (TESTED PARTY) WITH T HE MARGINS OF SEVEN ENTITIES SELECTED BY THE ASSESSEE AS COMPARABLES. T HE LD. COUNSEL HAS ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 13 FURTHER POINTED OUT THAT THE COMPARABLE COMPANIES A RE ENGAGED IN THE SIMILAR KIND OF SERVICES. 20. HENCE, WE FIND SUBSTANCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, SINCE THE TPO HAS NOT VERIFI ED THE MARGINS SHOWN BY THE ASSESSEE VIS--VIS THE COMPANIES SELEC TED BY THE ASSESSEE AS COMPARABLES, WE RESPECTFULLY FOLLOWING THE DECIS ION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF EMERSON CLIMAT E TECHNOLOGIES (INDIA) LTD (SUPRA), RESTORE THIS ISSUE TO THE FIL E OF AO/TPO FOR A LIMITED PURPOSE OF VERIFICATION AS TO WHETHER THE MARGIN OF THE TESTED PARTY IS AT ARMS LENGTH TO THE MARGINS OF THE COMPARABLE COMPA NIES. NEEDLESS TO SAY, THAT THE AUTHORITIES SHALL GIVE A REASONABLE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE DECIDING THE SAID ISSUE . 6. WE HAVE FURTHER SEEN THAT IN APPEAL FOR AY 2011-12 IN ITA NO. 1484/MUM/2016, THE COORDINATED BENCH OF TRIBUNAL PA SSED THE FOLLOWING ORDER: 5. GROUND NO. 4 TO 5.6 PERTAINING TO THE TRANSFE R PRICING ISSUE ARE IDENTICAL TO GROUND NO. 4 TO 4.7 OF THE ASSESSEES APPEAL FOR THE A.Y. 2012-13 AFORESAID. SINCE, THE ISSUE INVOLVED IN THE PRESENT CASE ARE IDENTICAL AND THERE IS NO MATERIAL CHANGE IN THE FA CTS OF THE PRESENT CASE, CONSISTENT WITH OUR FINDINGS IN THE ASSESSEE S CASE FOR THE A.Y. 2012-13 DISCUSSED ABOVE, WE RESTORE THE ISSUE FOR A LIMITED PURPOSE OF VERIFICATION OF MARGIN OF THE TESTED PARTY VIS--VI S MARGINS OF THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE AS TO WHETHER THE MARGIN OF THE TESTED PARTY IS AT ARMS LENGTH. 7. CONSIDERING THE ORDER OF THE TRIBUNAL IN APPEAL FOR AY 2011-12 & 2012- 13 ON IDENTICAL GROUNDS OF APPEAL, THE GROUNDS OF A PPEAL RAISED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS ALSO RE STORED TO THE FILE OF ASSESSING OFFICER/ TPO WITH THE SIMILAR DIRECTIONS AND THE PASS THE ORDER AFRESH IN ACCORDANCE WITH LAW. IN THE RESULT THE GR OUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSE. ITA NO. 5996 MUM 2018 & 4917 MUM 2017-M/S CWT INDIA PVT. LTD. 14 8. GROUND NO. 5 IS CONSEQUENTIAL. GROUND NO. 6 IS PREM ATURE AND NEED NO ADJUDICATION. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSE. ITA NO. 4972/MUM/2017 FOR AY 2013-14 BY ASSESSEE . 10. IN THIS APPEAL THE ASSESSEE HAS RAISED IDENTICAL G ROUND OF APPEAL AS RAISED IN APPEAL FOR AY 2014-15, WHICH WE HAVE REST ORED TO THE FILE OF AO/TPO, THEREFORE, CONSIDERING OUR FINDING ON IDENT ICAL GROUNDS OF APPEAL THIS APPEAL IS ALSO ALLOWED WITH SIMILAR DIR ECTIONS. 11. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25/07/2019. SD/- SD/- G.S.PANNU PAWAN SINGH VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 25.07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR K BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI