DCIT, New Delhi V. M/s. Arkadin Confer India Pvt. Ltd., Noida

ITA 6037/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8600 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 06-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B RAMANJANEYULU
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92E

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO. 6037/DEL/2015 ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE- 3(1), NEW DELHI. VS ARKADIN CONFER INDIA PVT. LTD., B-106, SECTOR -2, NOIDA. PAN: AABCD 9889L APP ELLANT RESPONDENT ASSESSEE BY SH. B. RAMANJANEYULU, SR. DR REVENUE BY SH. SUDHIR KUMAR DASH, CA & SH. AKASH KUMAR, C.A. ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 10/08/2015 IN APPEAL N O. 361/14-15 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-1, NEW DELHI (LD. CIT(A)), FOR ASSESSMENT YEAR 2011-12, IN THE CASE OF M/S ARKADINCONFER INDIA PRIVATE LIMITED (THE ASSESSEE ), REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING EFFECTIVE GROUND:- 1. WHETHER THE LD CIT(A) HAS ERRED IN LAW IN DELE TING ADDITION OF RS.7,05,54,285/- MADE BY THE A.O. ON ACCOUNT OF A LP. DATE OF HEARING 09.01.2020 DATE OF PRONOUNCEMENT 20.01.2020 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SUBSIDIARY OF ARKADIN SA, FRANCE AND IS MAINLY ENGAGED IN THE BUS INESS OF GLOBAL COLLABORATION SERVICE OF COMPLETE RANGE OF REMOTE S OLUTIONS FROM AUDIO, WEB AND VIDEOCONFERENCING TO UNIFIED COMMUNICATIONS . FOR THE ASSESSMENT YEAR 2011-12 IT HAD FILED ITS RETURN OF INCOME ON 23/11/2011 DECLARING NIL INCOME AFTER SETTING OFF THE BROUGHT FORWARD LOSSES TO THE TUNE OF RS.85,25,735/-AND BOOK PROFIT OF RS.56,65,5 60/-, WHICH IT HAD REVISED ON 17/5/2012 AT THE SAME INCOME. ASSESSEE H AD, HOWEVER, PAID THE TAXES ON THE BOOK PROFITS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LEA RNED ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY ENTERED I NTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES (AES) TO THE TUNE OF RS.7,05,54,285/-AS SUBMITTED IN REPORT UNDER SECTIO N 92E OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) IN FORM NO. 3CE B. LEARNED ASSESSING OFFICER SOUGHT INFORMATION FROM THE ASSESSEE ON AS MANY AS 10 POINTS AND THE ASSESSMENT ORDER REVEALS THAT THE ASSESSEE HAD FURNISHED ALL SUCH INFORMATION AS REQUIRED BY THE LEARNED ASSESSI NG OFFICER. LEARNED ASSESSING OFFICER DID NOT THINK IT FIT TO ACCEPT TH E EXPLANATION OFFERED BY THE ASSESSEE FOR THE FOLLOWING REASONS:- I) THERE IS NO EVIDENCE THAT THE SERVICES HAVE ACTUAL LY BEEN PROVIDED. THE ASSESSEE COMPANY HAS FAILED MISERABLY TO DEMONSTRATE THE NEED FOR THESE SERVICES AS ALSO THE RECEIPT OF THE SAME. II) THERE IS NO BASIS / EVIDENCE FOR REVENUE CLAIMED TO HAVE BEEN GENERATED FROM THE ALLEGED SERVICES. III) THE ASSESSEE COMPANY HAS FAILED TO ESTABLISH ANY DI RECT NEXUS, WHATSOEVER, OF ANY KIND, WHICH MAY HELP ITS CASE OF HAVING 3 RECEIVED THE BUSINESS FROM ITS AE AS A RESULT OF SE RVICES PROVIDED BY THE AE. IV) THE ASSESSEE COMPANY HAS FAILED TO ESTABLISH THAT I TS ASSOCIATED ENTERPRISES HAVE SPECIFICALLY DEDICATED SERVICE CEN TRES FOR THE ASSESSEE COMPANY. THE AE WAS NOT PROHIBITED FROM RE NDERING SERVICES TO THIRD PARTIES AS WELL. V) MOREOVER, IT IS NOT DISPUTED THAT THE ACTIVITIES FO R WHICH IT IS PAYING, ARE ALSO PERFORMED BY ITSELF. UNDER THE OEC D GUIDELINES, NO INTRA-GROUP SERVICE SHOULD BE FOUND FOR ACTIVITI ES UNDERTAKEN BY ONE GROUND MEMBER THAT MERELY DUPLICATE A SERVIC E THAT ANOTHER GROUP MEMBER IS PERFORMING FOR ITSELF, OR T HAT IS BEING PERFORMED FOR SUCH OTHER GROUP MEMBER BY A THIRD PA RTY. MOREOVER, EVEN IF IT IS PRESUMED WITHOUT CONCEDING THAT BUSINESS EXIGENCIES DO PERMIT THIRD PARTY INVOLVEME NT IN SPITE OF ITS OWN ENDEAVOUR, IN NO CASE IS THERE IS SCOPE FOR DUPLICITY OF SERVICES. MOREOVER, THE COST OF SUCH SERVICES, IF A NY, WOULD NEED TO BE IDENTIFIED TO PROVE THAT IT HAS NO OVERPAID I TS AE THAN WHAT WOULD HAVE BEEN PAID UNDER ARMS LENGTH CIRCUMSTANC ES. 4. LEARNED ASSESSING OFFICER, THEREFORE, HELD THAT THE ASSESSEE COMPANY COULD NOT SHOW THAT THERE WAS IN FACT RECEI PT OF SERVICES, THE PAYMENT COMMENSURATE WITH THE BENEFIT AND SUCH PAYM ENTS BENEFITED THE ASSESSEE DIRECTLY AND TANGIBLY. LEARNED ASSESSI NG OFFICER THEREFORE, REACHED A CONCLUSION THAT THE ASSESSEE FAILED TO SU BSTANTIATE AS TO WHEN AND HOW THE VARIOUS SERVICES WERE REQUISITIONED FRO M THE AES, WHETHER THE SERVICES WERE ACTUALLY NEEDED BY IT, WHETHER TH E SAME WERE ACTUALLY RECEIVED BY IT BY PRODUCING CONTEMPORANEOUS DOCUMEN TARY EVIDENCE, AT THE TIME OF ENTERING INTO THE AGREEMENT OR AT THE T IME OF AVAILING THE SERVICES, IF REALLYAVAILED, WHAT BENCHMARKING ANALY SIS WAS DONE, WHAT COST BENEFIT ANALYSIS WAS DONE PARTICULARLY WHEN A USER PAYMENT WAS MADE BY IT TO THE AES AND THEREFORE, DETERMINED TH E ARMS-LENGTH PRICE 4 OF THE INTERNATIONAL TRANSACTION AT NIL AND ADDED T HE SUM OF RS.7,05,54,285/-TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED BY SUCH A FINDING, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). LD. CIT(A) ON A REAPPRAISAL OF THE ENTIRE MATERIAL BEFORE HIM RECORDED THAT INITIALLY THE ASSESSEE WAS HAVING 60 PORTS AND WAS PROVIDING SERVICES TO THE CUSTOMERS WITH THE HELP O F LOCAL EQUIPMENTS RESULTING IN INCURRING LOSSES; THAT, THEREFORE, IT CAME INTO CONTACT WITH THE FRENCH COMPANY CALLED ARKADIN SA WHICH HAD PRESENCE WORLD OVER AND HAD ESTABLISHED ITSELF AS FOREMOST COMMUNICATION SE RVICE PROVIDER AND SUBSEQUENTLY, ASSESSEE HAD BECOME A SUBSIDIARY OF A RKADIN SA; THAT ONCE THE ASSESSEE HAD BECOME SUBSIDIARY OF ARKADIN SA, T HE ASSESSEE GOT BUSINESS FROM ALL THE SUBSIDIARIES OF ARKADIN SPREA D WORLD OVER AND ALSO CAME INTO CONTACT WITH THE TELECOMMUNICATION SERVIC E PROVIDER LIKE ORANGE, TATA COMMUNICATIONS, VERIZON BUSINESS SERVI CE, RELIANCE COMMUNICATIONS ETC; THAT THE ASSESSEE ALSO RECEIVED BRIDGE EQUIPMENT FROM THE PARENT COMPANY AND SOFTWARE AND HARDWARE F OR PROVIDING WORLD-CLASS SERVICES TO THE CUSTOMERS; THAT BY VIRT UE OF SAID COLLABORATION THE ASSESSEE HAS GOTTEN MORE THAN 3000 PORTS AND HA S GOT CUSTOMER LIST ALL OVER THE WORLD; THAT WITH THE HELP OF HOLDING C OMPANY ASSESSEE COMPANYS REVENUE HAS INCREASED MANIFOLD AND THE CO MPANY HAS BECOME PROFITABLE; THAT THE PAYMENTS MADE TO THE HO LDING COMPANY FOR MANAGERIAL SERVICES, LEASE RENTAL FOR THE EQUIPMENT SUPPLIED AND ROYALTY FOR USE OF TRADEMARK ARE BASED ON THE AGREEMENTS EN TERED INTO BY THE ASSESSEE WITH THE HOLDING COMPANY AND WHOLLY AND EX CLUSIVELY FOR THE BUSINESS OF THE ASSESSEES COMPANY; THAT THESE PAYM ENTS WERE MADE 5 THROUGH BANKING CHANNELS AFTER DEDUCTING THE APPLIC ABLE TAXES; AND THAT, THEREFORE, THE GENUINENESS OF THESE PAYMENTS CANNOT BE DOUBTED. 6. LD. CIT(A) FURTHER FOUND THAT OUT OF RS.7,05,54, 285/-ADDED BY THE LEARNED ASSESSING OFFICER, THE PAYMENTS OF RS.1,14, 44,038/-MADE TOWARDS ITFS AND RS.14,00,598/-TOWARDS IT SERVICES MADE TO ARKADIN SA, FRANCE WERE ALSO INCLUDED; WHEREAS THESE PAYMENTS W ERE MADE FURTHER UTILISING INTERNATIONAL TOLL-FREE SERVICE AND INTER NATIONAL TOLL SERVICES. SUCH AN ADDITION OF RS.7,05,54,285/-ALSO INCLUDES A SUM OF RS.1,17,38,993/- WHICH IS IN FACT INCOME AND ANOTHER SUM OF RS. 3,34 ,75,286/-WHICH WAS IN FACT REIMBURSEMENT AND NOT CLAIMED AS EXPENSE IN TH E P&L ACCOUNT. AS A MATTER OF FACT, LD. CIT(A) FOUND THAT THE REIMBURSE MENTS WERE THE PAYMENTS MADE BY THE ASSESSEE TO RELIANCE FOR ITFS SERVICES ON BEHALF OF THE ARKADIN SA AND THESE PAYMENTS WERE MADE TO RELI ANCE FOR THE ITFS SERVICES UTILISED BY THE ASSOCIATED ENTERPRISE AND REIMBURSEMENT BY THEM TO THE ASSESSEE. 7. LD. CIT(A) FURTHER FOUND THAT THE MANAGERIAL REM UNERATION TO ARKADIN WAS PAID ACCORDING TO THE FORMULA P% OF CT WHERE P REPRESENTS THE PERCENTAGE, CT REPRESENT THE CONSOLIDATED ENTRY TURNOVER EXCLUDING VAT AND OTHER TAXES OF THE CUSTOMER; THAT THE ROYAL TY PAID TOWARDS USE OF TRADEMARK OF THE HOLDING COMPANY WAS THROUGH THE AG REEMENT DATED 22/2/2008 IN TERMS OF WHICH A LICENCE WAS GRANTED T O THE ASSESSEE FOR USING THE TRADEMARK AND THE ASSESSEE HAD TO PAY 1% ROYALTY TO THE LICENSE OR ON THE NET SALES. CONSIDERING ALL THESE ASPECTS, LD. CIT(A) REACHED A CONCLUSION THAT THE FINDINGS OF THE LEARN ED ASSESSING OFFICER IN RESPECT OF THE PAYMENTS STATING THAT THOSE PAYMENTS WERE WITHOUT ANY BUSINESS PURPOSE AND WITHOUT ANY COMMENSURATEBENEFI T TO THE ASSESSEE 6 ARE NOT BASED ON ANY COGENT MATERIAL AND WITHOUT BR INGING ANY ADVERSE MATERIAL ON RECORD AND, THEREFORE, THE OBSERVATIONS MADE BY THE LEARNED ASSESSING OFFICER WERE WITHOUT ANY BASIS AND THE DI SALLOWANCE OF THE PAYMENT TO THE ARKADIN SA, FRANCE FOR THE SERVICES PROVIDED IS NOT JUSTIFIED. LD. CIT(A), ACCORDINGLY, DELETED THE ADD ITION. REVENUE IS, THEREFORE, BEFORE US IN THIS APPEAL. 8. LD. DR PLACED HEAVY RELIANCE ON THE ASSESSMENT O RDER AND SUBMITTED THAT IT IS UNLIKELY THAT THE ASSESSEE SHO ULD HAVE ENTERED INTO AN AGREEMENT WITHOUT CARRYING OUT ANY COST BENEFIT ANA LYSIS; THAT THE SERVICES MENTIONED BY THE ASSESSEE ARE MORE IN THE NATURE OF SHAREHOLDER SERVICES AS THEY WERE MEANT TO ENSURE T HAT THE OVERALL POLICIES/PROCEDURE OF THE TAXPAYER WERE IN CONSONAN CE WITH THE GLOBAL UAE POLICIES/PROCEDURE; THAT NO DOCUMENTARY EVIDENC E WAS PRODUCED BEFORE THE ASSESSING OFFICER TO SATISFY THE BENEFIT AND RENDITION TEST; AND THAT THE LD. CIT(A) IS NOT JUSTIFIED IN LOOKING INT O THE PAPERS SUBMITTED BY THE ASSESSEE BEHIND THE BACK OF THE LEARNED ASSESSI NG OFFICER. LD. DR FURTHER SUBMITTED THAT ABSOLUTELY THERE IS NO MATER IAL TO SHOW THAT THE ASSESSEE COMPANY WAS IN FACT INVADED THE IMPUGNED S ERVICES FROM THE ASSOCIATED ENTERPRISES (AES) OR THAT IN FACT SUCH SERVICES WERE RENDERED RESULTING IN THE DIRECT BENEFIT TO THE ASSESSEE. FO R THESE REASONS, HE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) SUFFERS PERVERSITY AND DESERVES TO BE REVERSED. 9. PER CONTRA, LD. AR DREW OUR ATTENTION TO PARAGRA PH NO. 5.2 OF THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER CLEARL Y EXTRACTED THE RESPONSE OF THE ASSESSEE TO ALL THE POINTS RAISED B Y THE LEARNED ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THIS CLEARLY EST ABLISHES THAT THE 7 ASSESSEE SUBMITTED ALL THE RELEVANT DOCUMENTS BEFOR E THE ASSESSING OFFICER, BUT THE ASSESSING OFFICER FAILED TO APPREC IATE THEM IN THEIR PROPER PERSPECTIVE. HE FURTHER SUBMITTED THAT EVEN ACCORDI NG TO THE LEARNED ASSESSING OFFICER THE VALUE OF INTERNATIONAL TRANSA CTION INVOLVED IN THIS MATTER EXCEEDS 5 CRORES AND IN TERMS OF THE INSTRUC TION NO. 3/2003, DATED 20/5/2003 ISSUED BY THE CBDT, WHERE THE AGGRE GATE VALUE OF THE INTERNATIONAL TRANSACTION EXCEEDS RS. 5 CRORES, THE CASE SHOULD BE PICKED UP FOR SCRUTINY AND REFERENCE UNDER SECTION 92CA OF THE ACT BE MADE TO THE LD. TPO. HIS FURTHER SUBMISSION IS THAT ANY ADJ USTMENT IN RESPECT OF THE ARMS LENGTH PRICE OF AN INTERNATIONAL TRANSACT ION MADE IN VIOLATION OF THIS INSTRUCTION IS BAD UNDER LAW IN VIEW OF THE DE CISION OF THE HONBLE APEX COURT IN THE CASE OF LD. PCIT VS. M/S SG ASIA HOLDINGS (INDIA) PRIVATE LIMITED IN CIVIL APPEAL NO. 6144 OF 2019 BY ORDER D ATED 13/08/2018. HE FURTHER SUBMITTED THAT IN RESPECT OF THE SUBSEQUENT YEARS WHERE THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT TOOK PLA CE, THE MATTER WAS REFERRED TO THE LD. TRANSFER PRICING OFFICER IN CON SONANCE WITH LAW, AND NO ADVERSE VIEW WAS TAKEN BY THE LD. TPO ON THIS IN TERNATIONAL TRANSACTION. 10. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. THERE IS NO DISPUTE ON THE FAC TS RECORDED BY THE LD. CIT(A) TO THE EFFECT THAT ORIGINALLY THE ASSESSEE W AS HAVING 60 PORTS AND WAS PROVIDING SERVICES TO THE CUSTOMERS WITH THE HE LP OF LOCAL EQUIPMENT; THAT THE SAID BUSINESS WAS NOT FOUND REM UNERATIVE AND WAS INCURRING LOSSES; THAT IN SUCH SITUATION THE ASSESS EE CAME INTO CONTACT WITH THE FRENCH COMPANY, NAMELY, ARKADIN SA WHICH H AS PRESENCE ALL OVER THE WORLD AND HAS ESTABLISHED ITSELF AS A LEAD ER IN COMMUNICATION 8 SERVICE TO THE CUSTOMERS; THAT SUBSEQUENTLY THE ASS ESSEE HAD BECOME A SUBSIDIARY OF ARKADIN SA; AND THAT ONCE THE ASSESSE E HAD BECOME THE SUBSIDIARY OF ARKADIN SA, IT SECURED BUSINESS FOR A LL THE SUBSIDIARIES OF ARKADIN SA SPREAD ALL OVER THE WORLD RESULTING IN T HE ASSESSEE ACQUIRING MORE THAN 3000 PORTS AND A LONG LIST OF CUSTOMERS A LL OVER THE WORLD AND ITS REVENUE IS INCREASING BY LEAPS AND BOUNDS. LD. DR DOES NOT CONTROVERT THESE FACTS. 11. DURING THE YEAR THE ASSESSEE MADE CERTAIN PAYME NTS TO ITS ASSOCIATED ENTERPRISES (AES), AND THE LEARNED ASS ESSING OFFICER ESTIMATED THE SAME TO BE TO THE TUNE OF RS.7,05,54, 285/-. ON VERIFICATION OF THE RECORD, LD. CIT(A) FOUND THAT THIS AMOUNT IN CLUDES A SUM OF RS.1,17,38,993/-WHICH IS NOT AN EXPENSE BUT IN FACT AN INCOME. LD. CIT(A) FURTHER FOUND THAT AN AMOUNT OF RS. 3,34,75,286/-IS NOT CLAIMED BY THE ASSESSEE IN ITS P&L ACCOUNT AND IS ONLY THE AMOUNT OF REIMBURSEMENT WHICH THE ASSESSEE INCURRED TOWARDS PAYMENTS TO REL IANCE FOR THE ITFS SERVICES, BUT UTILISED BY THE ASSOCIATED ENTERPRISE S (AES) AND THEREFORE SUCH SUM WAS REIMBURSED BY THE AES. AS A MATTER OF FACT, THESE TWO AMOUNTS WERE NOT TO BE INCLUDED IN THE DISALLOWED E XPENSES. THIS CONCLUSION OF THE LD. CIT(A) ALSO COULD NOT BE CONT ROVERTED BY THE LD. DR. 12. IT IS, THEREFORE, CLEAR THAT IT IS THE BALANCE AMOUNT THAT WAS AVAILABLE AFTER DEDUCTING THE ABOVE TWO AMOUNTS REP RESENTING THE INCOME AND THE REIMBURSEMENT, THAT ALONE REFLECTS T HE SERVICE CHARGES PAID BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES (AES). ACCORDING TO THE ASSESSEE, ALL THESE AMOUNTS WERE PAID PURSUANT TO THE AGREEMENTS AND THE SERVICES COVERED BY THESE AMOUNTS WERE INFA CT UTILISED BY THE ASSESSEE TO SERVE ITS OWN CLIENTS; THAT WITHOUT AVA ILING SUCH SERVICES FROM 9 ARKADIN SA, THE ASSESSEE WOULD NOT BE IN A POSITION TO PROVIDE ANY SERVICES TO ITS CUSTOMERS; THAT IT IS ONLY BASING O N SUCH SERVICES AS RECEIVED FROM THE ARKADIN SA THE ASSESSEE WAS ABLE TO PROVIDE ITS SERVICES TO THE CUSTOMERS LOCALLY AND WORLDWIDE TO EARN THE REVENUE, WHICH THEY HAVE DECLARED IN THE COMPUTATION OF INCO ME. THE CONTENTION OF THE ASSESSEE ALTHOUGH HAS BEEN THAT THE FRENCH C OMPANY ENJOYED CONCESSIONAL CHARGES ON BALKAR CONSUMPTION IN RESPE CT OF UTILISATION OF THE COMMUNICATION LINES AND FACILITIES OBTAINED FRO M THE CUSTODIANS OF THE LINES SUCH AS ORANGE, RELIANCE COMMUNICATION, T ATA COMMUNICATIONS, VERIZON BUSINESS SERVICE AND SOME O THERS AND IT WAS SO EXPLAINED TO THE LEARNED ASSESSING OFFICER WHEN A S PECIFIC QUERY RAISED. FURTHER CASE OF THE ASSESSEE HAS BEEN THAT THE TRAD EMARK COMPRISING OF THE INTELLECTUAL PROPERTIES OF ARKADIN SA FRANCE WA S UTILISED, AND ALL THE SUBSIDIARIES OF ARKADIN SA FRANCE UTILISED THE TRAD EMARK OF ARKADIN TO ADVANCE AND PROMOTE THEIR BUSINESS INTERESTS; THAT THE TRADEMARK AS USED IN THE SALE OF SERVICES TO THE CUSTOMERS WAS T HE PROPERTY OF ARKADIN SA, FRANCE AND SO THE ASSESSEE NOT ONLY DID THE BUS INESS ON THAT PLATFORM BUT ALSO HAD A GREAT DEAL OF BUSINESS FALLING TO IT FROM OTHER SUBSIDIARIES OF THE ARKADINAS A COMPANY SPREAD ALL OVER THE WORL D; THAT ON ITS OWN THE ASSESSEE HAD NEITHER THE SOFTWARE NOR THE ABILITY O R CAPACITY OR THE KNOW- HOW FOR ARRANGING AND PROVIDING SERVICES TO ITS CLI ENTS AND IT IS ONLY BECAUSE OF ITS COLLABORATION WITH THE ARKADIN SA, F RANCE, THE ASSESSEE WAS ABLE TO GET NOT ONLY THE EQUIPMENT BUT ALSO THE KNOW-HOW AND EVEN THE CLIENTELE FOR RENDERING ALL THE SERVICES. 13. SPECIFIC CONTENTION OF THE ASSESSEE ALL THROUGH IS THAT THE SERVICES AVAILED OF BY THE ASSESSEE FROM ITS ASSOCIATED ENTE RPRISES (AES) WERE 10 MOSTLY INTANGIBLE AND INCAPABLE OF DOCUMENTATION IN RESPECT OF COMPANY ADVISORY AND TECHNICAL HELP WITH THE STAFF OF ARKAD IN SA, FRANCE USED TO PROVIDE ON A CONTINUOUS BASIS; THAT THE ONLY TANGIB LE ITEM AVAILABLE WITH THE ASSESSEE TO PROVE THE CONDUCT OF BUSINESS BY PR OVIDING SERVICES TO ASSOCIATION OF ARKADIN SA, FRANCE WAS THE POSSESSIO N WITH IT OF THE SPECTACLE BRIDGE AND THE ASSOCIATED EQUIPMENT AND T HE TECHNICAL KNOWHOW AVAILED OF FOR OPERATING THE SAME; AND THAT THE ENTIRE BUSINESS HAS BEEN UNDERTAKEN AND CARRIED OUT IN THE NAME OF ARKADIN SA, FRANCE BY UTILISING INVARIABLY THE TRADEMARK IN ALL THE BI LLS. OUR SPECIFIC ATTENTION IS BROUGHT TO THE EXPLANATION OFFERED BY THE ASSESS EE BEFORE THE LD. CIT(A) AND FORMING PART OF THE IMPUGNED ORDER WHERE IN THE NEED FOR AVAILING THE SERVICES AND THE CONSEQUENT PAYMENT FO R SUCH SERVICES WAS ENUMERATED. 14. LD. CIT(A) CONSIDERED ALL THESE CONTENTIONS IN DETAIL. INSOFAR AS THE PAYMENT IS CONCERNED, IT WAS DONE THROUGH BANKING C HANNELS AND INSOFAR AS THE PURPOSE OF PAYMENT IS CONCERNED IT IS WELL S UPPORTED BY THE AGREEMENTS BETWEEN THE ASSESSEE AND THE HOLDING COM PANY, WHICH PROVES THAT SUCH PURPOSE WAS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE COMPANY. ON A CONSIDERATION OF THE SUB MISSIONS MADE ON BEHALF OF THE ASSESSEE, WE ARE OF THE CONSIDERED OP INION THAT THE PAYMENTS WERE MADE FOR BUSINESS PURPOSE AND THE REV ENUES EARNED AND DECLARED BY THE ASSESSEE SHOW THE PROPORTION OF BEN EFIT, BECAUSE THE ASSESSEE TRAVELLED FROM LOSSES TO PROFIT AFTER THEI R COLLABORATION WITH THE ARKADIN SA, FRANCE. 15. PROOF OF PUTTING IS IN THE EATING. THE TRAVEL O F ASSESSEE FROM LOSSES TO PROFITS PURSUANT TO THE COLLABORATION WITH THE A RKADIN SA, FRANCE IS 11 EVIDENT. ITS ACQUISITION OF NOT ONLY THE EQUIPMENT BUT ALSO THE TECHNICAL KNOWHOW CANNOT BE PRESUMED TO BE WITHOUT ANY COST. AS RIGHTLY POINTED OUT BY THE LD. CIT(A), THE FINDINGS OF THE ASSESSIN G OFFICER THAT THE PAYMENTS WERE MADE WITHOUT ANY BUSINESS PURPOSE AND WITHOUT ANY COMMENSURATE BENEFIT TO THE ASSESSEE ARE NOT BASED ON ANY COGENT MATERIAL AND WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD. WE ARE IN AGREEMENT WITH THE LD. CIT(A) IN HIS FINDINGS THAT THE ASSESSING OFFICER FAILED TO SPECIFY HOW THE PAYMENTS MADE BY THE ASSE SSEE WERE NOT IN COMMENSURATE WITH THE SERVICES OBTAINED BY THE ASSE SSEE AND SUCH FINDINGS ARE WITHOUT ANY BASIS. THE VERY FACT OF TH E ASSESSING OFFICER DISALLOWING THE INCOME AND THE REIMBURSEMENT WHICH DOES NOT PASS THROUGH THE P&L ACCOUNT WHILE DISALLOWING THE EXPEN SES SHOWS THAT THE DISALLOWANCE WAS MADE BY THE LEARNED ASSESSING OFFI CER WITHOUT ANY PROPER VERIFICATION OF THE MATERIAL FACTS AVAILABLE ON RECORD. 16. APART FROM THIS, WE FIND STRENGTH IN THE SUBMIS SION OF THE LD. AR THAT INASMUCH AS THE LEARNED ASSESSING OFFICER NOTI CED THAT THE VALUE OF THE INTERNATIONAL TRANSACTION EXCEEDS RS. 5 CRORES, PURSUANT TO THE INSTRUCTION NO. 3/2003, DATED 20/5/2003, THE MATTER SHOULD HAVE BEEN REFERRED TO THE LD. TRANSFER PRICING OFFICER FOR DE TERMINATION OF THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTI ON, AND FOR NOT DOING SO THE ADJUSTMENT ON ACCOUNT OF ALP CANNOT BE SUSTAINE D. IN THE CASE OF M/S SG ASIA HOLDINGS (INDIA) PRIVATE LIMITED (SUPRA) TH E TRIBUNAL HELD THAT THE TRANSFER PRICING ADJUSTMENT MADE BY THE LEARNED ASS ESSING OFFICER WAS CONTRARY TO THE MANDATORY INSTRUCTIONS ISSUED BY CB DT IN ITS INSTRUCTION NO. 3/2003 DATED 20/5/2003 AND SUCH A FINDING WAS A FFIRMED BY THE HONBLE HIGH COURT. WHEN THE REVENUE PREFERRED APPE AL, HONBLE 12 SUPREME COURT WHILE REFERRING TO THE INSTRUCTION NO . 3/2003 HELD THAT IN VIEW OF THE GUIDELINES ISSUED BY THE CBDT INSTRUCTI ON NO. 3/2003, THE TRIBUNAL WAS RIGHT IN OBSERVING THAT BY NOT MAKING REFERENCE TO LD. TPO, THE ASSESSING OFFICER HAD BREACHED THE MANDATORY IN STRUCTIONS ISSUED BY THE CBDT AND DECLINED TO FIND THE CONCLUSION SO ARR IVED BY THE TRIBUNAL TO BE INCORRECT. 17. VIEWING FROM ANY ANGLE, WE FIND THAT THE IMPUGN ED ORDER DOES NOT SUFFER ANY ILLEGALITY OR IRREGULARITY AND DOES NOT INVITE ANY INTERFERENCE IN THIS APPEAL. WE ACCORDINGLY FIND THE GROUNDS OF APP EAL AS DEVOID OF MERITS AND THE APPEAL IS LIABLE TO BE DISMISSED. WE ORDER ACCORDINGLY. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2020. SD/- SD/- (R.K. PANDA) (K. NARASIMHA CHAR Y) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20/01/2020 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI