UPS JETAIR EXPRESS PRIVATE LIMITED, MUMBAI V. ACIT - 11(1)(2), MUMBAI

ITA 6318/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9145 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 23-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Assessee Lawyers: BIPIN DODHIA
• Keywords: Business income; Transfer pricing; International transaction; Revised return; TDS
• Section: 92C; 37(1); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J , BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY , JM & SHRI M.BALAGANESH, AM ITA NO. 6318 /MUM/201 7 ( ASSESSMENT YEAR : 2013 - 14 ) SA NO.252/MUM/2019 (ARISING OUT OF ITA NO.6318/MUM/2017) ( ASSESSMENT YEAR :2013 - 14 ) M /S. UPS JETAIR EXPRESS PRIVATE LIMITED (FORMERLY KNOWN AS JETAIR EXPRESS PRIVATE LIMITED) 6 - A, SHYAM OFF JVLR, MAJAS VILLAGE JOGESHWARI (EAST) MUMBAI 400020 VS. ASSISTANT COMMISSIONER OF INCOME TAX 11(1)(2) AAYKAR BHAVAN MUMBAI - 400060 PAN/GIR NO. AAA CU4322N (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI BIPIN DODHIA REVENUE BY SHRI KUMAR PADMAPANI BORA DATE OF HEARING 20 / 09 /2019 DATE OF PRONOUNCEMENT 27 / 09 /2019 / O R D E R PER M. BALAGANESH (A.M) : ITA NO.6318/MUM/201 7 THIS APPEAL IN ITA NO.6318/MUM/2017 FOR A.Y.2013 - 14 PREFERRED BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER PASSED BY THE ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 2 ASSESSING OFFICER DATED 31/07/2017 U/S.143(3) R.W.S.144C(1) OF THE INCOME TAX ACT, HEREINAFTER REFERRED TO AS ACT, PURSUANT TO THE DIRECTIONS OF THE LD. DISPUTE RESOLUTION PANEL (DRP IN SHORT) U/S.144C(5) OF THE ACT DATED 25/04/2017 FOR THE A.Y.2013 - 14. 2. THE GROUND NOS. 1.2 TO 1.3 RAISED BY THE ASSESSEE IS WITH REGARD TO TRANSFER PRICING ADJUSTMENT MADE BY THE LD. TPO IN R ESPECT OF TECHNICAL KNOWHOW FEES OF RS.10,21,00,004/ - PAID BY THE ASSESSEE TO ITS AE. 3. THE BRIEF FACTS OF THIS APPEAL ARE THAT UPS WAS FOUNDED IN 1907 IN UNITED STALES OF AMERICA ('USA'). IT IS THE LARGEST PACKAGE DELIVERY COMPANY IN THE WORLD AND CONTI NUES TO DEVELOP THE FRONTIERS OF LOGISTICS, SUPPLY CHAIN MANAGEMENT AND E - COMMERCE BY COMBINING THE FLO W OF GOODS, INFORMATION AND FUNDS. THE PRIMARY BUSINESS OF UPS IS TO PROVIDE DOOR - TO - DOOR TIME - DEFINITE AND GUARANTEED DELIVER Y SERVICES TO MORE THAN 220 COUNTRIES AND TERRITORIES ACROSS THE GLOBE. EVERY DAY , UPS DELIVERS 16.3 MILLION PACKAGES TO 8.8 MILLION CUSTOMERS IN MORE THAN 220 COUNTRIES AND TERRITORIES AROUND THE WORLD . EACH PACKAGE PASSES THROUGH THE UPS NETWORK, WHICH HAS BEEN CAREFULLY ENGINEERE D TO PROVIDE SPEED, RELIABILITY AND EFFICIENCY. 3.1 . DURING THE F.Y.2012 - 13 RELEVANT TO A.Y 2013 - 14, UNITED EXPRESS PVT. LTD., (UEPL) WAS 60:40 A JOINT VENTURE ENTITY BETWEEN TWO INDEPENDENT COMPANIES I.E. UPS INTERNATIONAL FORWARDIN G INC, USA AND JET AIR PRIVATE LTD., INDIA. THE ASSESSEE IS ENGAGED IN PROVIDING EXPRESS DELIVERY SERVICES FOR THE INTERNATIONAL DELIVERY OF DOCUMENTS / PARCELS AND PACKAGES. THE L IST OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AE ARE AS UNDER: - ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 3 SR NO NO NO. NATURE OF INTERNATIONAL TRANSACTIONS AMOUNT (IN INR) 1 PURCHASE OF ROUTER, PRINTER, ETC. FROM UPS WWF 5,488,901 2 PAYMENT OF TECHNICAL ASSISTANCE FEES TO UPSAI 102,100,004 3 PAYMENT OF FORWARDING FEE TO UPS WWF 1,459,659,120 4 RECEIPT OF DEL IVERY COMPENSATION FROM UPS WWF IN RESPECT OF IMPORT PREPAID CONSIGNMENTS 312,124,363 5 RECEIPT OF PICK UP COMPENSATION FROM UPS WWF IN RESPECT OF EXPORT COLLECT CONSIGNMENTS 303,399,056 6 RECEIPT OF ADDITIONAL COMPENSATION FOR IMPORT AND EXPORT CONSIGNM E N T S 16,000,000 7 PAYMENT OF AMOUNT COLLECTED ON BEHALF OF UPS WWF 3,856,166 8 REIMBURSEMENT OF EXPENSES TO UPS WWF 34,407,320 9 REIMBURSEMENT OF EXPENSES TO UPSCO 17,067,063 10 RECOVERY OF EXPENSES FROM UPS WWF 129,547,256 3.2. IT HAS BEEN MENTIONED IN THE TP STUDY REPORT THAT UNITED JETAIR EXPRESS PVT. LTD ( UJEL ) IS ENGAGED IN PROVIDING LOCAL TRANSPORTATION SERVICES FOR THE INTERNATIONAL INBOUND OR OUTBOUND DELIVERY OF DOCUMENTS / PARCELS AND PACKAGES (I.E. COURIER SERVICES). SOPHISTICATED TECHNOLOG Y AND TECHNICAL INFORMATION IS CRUCIAL FOR SURVIVAL IN COURIER INDUSTRY. UJEL HAS THEREFORE , ENTERED INTO A 'TECHNOLOGY LICENSE AGREEMENT' WITH UNITED PARCEL SERVICES OF AMERICA INC. ( UPSAI ) , WHEREIN UPSAI GRANTS UJEL , AN EXCLUSIVE RIGHT TO USE THE TECHNI CAL INFORMATION IN INDIA. 3.3. UPSAI PROVIDES UJEL WITH THE LICENSE TO USE TECHNICAL INFORMATION, APPLICATION PROGRAMS, DATA COMMUNICATION, INFORMATION TECHNOLOGY SYSTEMS, ETC, IN INDIA. THE INFORMATION TECHNOLOGY, TECHNICAL INFORMATION, APPLICATIONS, E TC. RECEIVED FROM UPSAI INCLUDES INTERNATIONAL KEY ENTRY SYSTEM (FLEXIBLE DATA CAPTURE (FDC) / INTERNATIONAL TOTAL TRACKING SYSTEM (ITTS), DELIVERY INFORMATION ACQUISITION DEVICE ('DIAD'), INTERNATIONAL SHIPMENT PROCESSING SYSTEM (ISPS), PICK UP/ DELIVERY SCANNING SOFTWARE APPLICATION CALLED UPS TUNDRA, ETC. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 4 3.4. UJEL UTILIZES THESE ADVANCED MANAGEMENT TECHNIQUES AND TECHNOLOGY KNOW - HOW IN ITS DAY TO DAY BUSINESS ACTIVITIES. THE IT SYSTEMS / APPLICATIONS PROVIDED BY UPSAI NOT ONLY HELPS IN REAL TIME TRAC KING OF SHIPMENTS BUT ALSO ENABLES VISIBILITY TO T HE CUSTOMERS ON THE MOVEMENT OF GOODS AND PROVIDES THE TI MELY DELIVERY CONFIRMATION FOR T HE SHIPMENTS. THE ADVANCED TRACKING SYSTEMS AVAILED HAS ALLOWED UJEL AS WELL THE CUSTOMERS TO TRACK THE PACKAGE IN MI NUTE BY MINUTE STATUS. CUSTOMERS COULD SEE THE LATEST STATUS OF THEIR DOCUMENTS AND PACKAGES AND BE REST ASSURED OF THEIR DELIVERY. THE VEHICLE MONITORING TECHNOLOGY HAS HELPED UJEL TO KEEP AN ACCURATE TRACK OF THE PICK - UP / DELIVERY PERSONS AND THEREBY OF THE SHIPMENTS THAT ARE BEING TRANSPORTED. 3.5. IN ADDITION TO ABOVE, UPSAI PROVIDES U JEL WITH VARIOUS STANDARD PRACTICE MANUALS, WORK - METHODS AND PROCEDURES, PACKAGING TECHNIQUES, TERMINAL LAYOUT PLANS, SORTING EQUIPMENT LAYOUT AND SPECIFICATIONS, ETC . THESE PRACTICE MANUALS GUIDE UJEL WITH ESSENTIAL METHODS OF DELIVERY AND PICKUP THUS HELPING IT TO INCREASE ITS SKILLS AND PROVIDE QUALITY SERVICE TO EVERY CUSTOMER . UPSAI ALSO ASSISTS UJEL IN MAINTAINING AND DEVELOPING CUSTOMER NETWORK WHICH HELPS UJEL IN DEVELOPING ITS BUSINESS AND ENHANCING REVENUES. 3.6. FOR THE SERVICES PROVIDED BY UPSAI UNDER THE ABOVE AGREEMENT, UJEL IS REQUIRED TO PAY A 'TECHNICAL KNOW - HOW FEES' AT A RATE EQUAL TO TWO PERCENT OF GROSS EXPORT REVENUE, SUBJECT TO A MAXIMUM OF FIFT Y PERCENT OF NET PROFIT BEFORE TAX. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 5 3.7. THE ASSESSEE FILED COPY OF TECHNOLOGY LICENSE AGREEMENT BETWEEN ASSESSEE (LICENSEE) AND UPSAI , WHEREIN UPSAI GRANTED LICENSOR AN EXCLUSIVE RIGHT TO USE THE TECHNICAL INFORMATION AND SYSTEMS IN INDIA. THE RELEVAN T PORTION OF THE SAID TECHNOLOGY LICENSE AGREEMENT ARE EXTRACTED BELOW: - WHEREAS, THE LICENSOR SHALL PROVIDE THE LICENSEE TECHNICAL INFORMATION, WITH APPLICATION PROGRAMS, DATA COMMUNICATION, TECHNICAL SUPPORT, USER TRAINING AND OTHER INFORMATION TECH NOLOGY LICENSOR SHALL PROVIDE SUCH TECHNICAL ASSISTANCE, SKILLS AND OTHER EXPERTISE WITHIN AND OUTSIDE THE TERRITORY AS SPECIFIED BELOW: SUCH ASSISTANCE SHALL RELATE TO THE FOLLOWING: (A) OUTSIDE THE TERRITORY, ASSISTANCE RELATING TO WORK METHODS AND PR OCEDURES, TERMINAL LAYOUT PLANS, SORTING EQUIPMENT LAYOUT AND SPECIFICATIONS, SAFETY AND SECURITY METHODS, MEDICAL STANDARDS AND PROCEDURES, WORK MEASUREMENT AND OPERATIONS CONTROL, CUSTOMER SERVICE PROCEDURES, PERSONNEL FORMS AND PROCEDURES, AUTOMOTIVE MA INTENANCE SYSTEMS AND PROCEDURES, FINANCING AND ACCOUNTING SYSTEMS. (B) OUTSIDE THE TERRITORY, ASSISTANCE RELATING TO DEVELOPING AND MAINTAINING A CUSTOMER NETWORK IN THE TERRITORY; (C) WITHIN THE TERRITORY, ASSISTANCE RELATING TO MAINTENANCE BY LICENSE OF ITS BUILDINGS, FACILITIES, MACHINERY AND EQUIPMENT; (D) OUTSIDE THE TERRITORY, ASSISTANCE RELATING TO FORECASTING AND SCHEDULING BY LICENSE OF SALES AND PRODUCTION AND RELATED CALCULATION OF COSTS; (E) RESEARCH AND ANALYSIS OF CUSTOMER NEEDS IN ORDER TO E NSURE APPROPRIATE APPLICATION OF TECHNOLOGY WHICH WILL RESPOND TO THESE NEEDS; (J) TRAINING OF MANAGERIAL, SUPERVISORY AND TECHNICAL PERSONNEL; AND (G) ASSISTANCE WITH PLANNING AND IMPLEMENTATION BY LICENSEE OF COST SAVING PROJECTS . ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 6 3.8. THE ASSESSEE VI DE LETTER DATED 08/09/2016 FURTHER SUBMITTED BEFORE THE LD. TPO AS UNDER: - FOR THE SERVICES PROVIDED BY UPSAI UNDER THE ABOVE AGREEMENT, UJEL IS REQUIRED TO PAY A 'TECHNICAL KNOW - HOW FEES' AT A RATE EQUAL TO TWO PERCENT OF GROSS EXPORT REVENUE, SUBJECT TO A MAXIMUM OF FIFTY PERCENT OF NET PROFIT BEFORE TAX. WHILE COMPUTING THE PAYMENT OF TECHNICAL KNOW - HOW FEES AS PER SAID AGREEMENT FOR THE YEAR UNDER CONSIDERATION, INADVERTENTLY EXCESS AMOUNT OF INR 26,105,627 WAS CHARGED BY UPSAI. UJEL HAS REVERSED THIS EXCESS AMOUNT OF TECHNICAL KNOW - HOW FEE DURING THE YEAR ENDED 31 MARCH 2014 (FY 2013 - 14). THE SAID EXCESS AMOUNT OF INR 26,105,627 WAS OFFERED TO TAX IN FY 2012 - 13 VIDE A REVISED RETURN OF INCOME AND THE CORRECT AMOUNT WAS REPORTED VIDE REVISED ACCOUNTANT' S REPORT. THE CALCULATION OF THE TECHNICAL KNOW - HOW FEES FOR FY 2012 - 13 IS AS UNDER: PARTICULARS AMOUNT (IN INR) GROSS EXPORT REVENUE 5105,000,193 2 PERCENT OF GROSS EXPORT REVENUE (A) 102,100,004 NET PROFIT BEFORE TAX AND BEFORE TECHNICAL KNO W - HOW FEES 256,411,261 50% OF NET PRO FIT BEFORE TAX (B) 128,205,631 PAYMENT OF TECHNICAL KNOW - HOW FEES - A OR B WHICHEVER IS LESS 102,100,004 SUMMARIZED BELOW ARE SOME OF THE KEY POINTS WHICH DEMONSTRATES NEEDS, RECEIPTS AND BENEFITS DERIVED B Y UJEL FROM PAYMENT OF TECHNICAL KNOW - HOW FEES TO UPSAI. NEED T EST 1.3. EXPRESS DELIVERY COMPANIES ACTUALLY COMPETE WITH TIME AND HENCE USE OF INFORMATION TECHNOLOGY IS CRUCIAL FOR COMPANIES IN THIS INDUSTRY TO EFFICIENTLY MANAGE ITS BUSINESS AND MAINT AIN ITS COMPETITIVENESS IN THE INDUSTRY. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 7 UPSAI, BASED IN USA AND AN AFFILIATE COMPANY OF THE UPS GROUP PLAYS AN IMPORTANT ROLE IN THE EXPRESS COURIER BUSINESS OF THE GROUP. UPSAI IS WELL ESTABLISHED IN THE BUSINESS OF INTERNATIONAL INTEGRATED TRANSPORTATI ON SERVICES AND POSSESSED ADVANCE MANAGEMENT TECHNIQUE, TECHNOLOGY AND KNOW - HOW RELATING TO INTERNATIONAL INTEGRATED TRANSPORTATION SERVICES, INCLUDING TECHNICAL INFORMATION AND OTHER MATERIALS. SOME OF THE ACCOLADES / AWARDS RECEIVED BY UPS FOR ITS ADVANC ED TECHNOLOGY ARE: TAG (TECHNOLOGY ASSOCIATION OF 'GEORGIA) EXCALIBUR AWARD, 2013 INFORMATIONWEEK'S 2013 LISTING OF THE TOP 500 INNOVATIVE COMPANIES THE 2013 COMPUTERWORLD PREMIER WO IT LEADERS - JUAN PEREZ, VICE PRESIDENT FORINFORMATION SE RVICES, UPS INFORMATIONWEEK 500: #8 OVERALL MOST INNOVATIVE, 2012 THE INFOWORLD 2012 TECHNOLOGY LEADERSHIP AWARDS - LAYNGLYN CAPERS, VICE PRESIDENT FOR INFORMATION SERVICES, UPS ENTERPRISE CIO FORUM: TRANSFORMATIONAL CIO LEADERSHIP AWARD, 20/2 - DAVE BARNES . THE WEBSITE EXTRACT EVIDENCING THE SAME IS ATTACHED AS ANNEXURE 2. 1.4. UJEL UTILIZES ADVANCED MANAGEMENT TECHNIQUES AND TECHNOLOGY KNOW - HOW RECEIVED FROM UPSAI IN ITS DAY TO DAY BUSINESS ACTIVITIES - THESE TECHNIQUES/KNOW - HOW ENABLE UJEL TO RENDE R A COMPREHENSIVE LIST OF PACKAGE DELIVERY SERVICES TO ITS CUSTOMERS IN MORE CONVENIENT AND EFFICIENT MANNER. AN EXAMPLE OF CAPABILITY AVAILABLE ON ITS ONLINE SYSTEM IS THE REAL TIME TRACKING OF SHIPMENTS TO ENABLE VISIBILITY TO THE CUSTOMERS ON THE MOVEME NT OF GOODS AND PROVIDES DELIVERY CONFIRMATION FOR THE SHIPMENTS. THIS TECHNOLOGY NOT ONLY PERMITS UJEL TRACK THE SHIPMENTS BUT ALSO ALLOWS ALLIED FUNCTIONS SUCH AS RECORDING SHIPMENT LEVEL DETAILS AND REVENUE IN VARIOUS BILLING AND TRADE RECEIVABLE MODUL ES AND ELIMINATES SUBSTANTIAL MANUAL EFFORTS. IN VIEW OF THE ABOVE ATTRIBUTES, YOUR GOODSELF WOULD APPRECIATE THAT FOR CONSISTENT LONG TERM GROWTH IN REVENUE, CONSISTENT QUALITY SERVICE OFFERINGS, ETC. SOPHISTICATED TECHNOLOGY AND TECHNICAL INFORMATION IS CRUCIAL FOR UJEL FOR SURVIVAL IN EXPRESS DELIVERY INDUSTRY. TO UNDERSTAND THE IMPORTANCE OF TECHNOLOGY IN UJEL 'S BUSINESS, IT IS CRUCIAL TO NOTE THAT THE ASPECTS SUCH AS QUANTUM OF GOODS DELIVERED, TIME BOUND DELIVERY AND TRACKING OF LARGE SCALE MOVEMENT OF GOODS GLOBALLY NECESSITATES THE USE OF TECHNOLOGY AND TECHNICAL INFORMATION. IN VIEW OF THE ABOVE, UJEL SUBMITS THAT THE PAYMENT OF TECHNICAL KNOW - HOW FEES IS INEXTRICABLY LINKED AND IS WHOLLY NECESSARY FOR THE BUSINESS OF UJEL. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 8 RECEIPT AND BENEFIT TEST - 1.5. UPSAI PROVIDES THE TECHNICAL INFORMATION, SUPPORT, APPLICATION PROGRAMS DATA COMMUNICATION, USER TRAINING AND OTHER INFORMATION TECHNOLOGY TO UJEL . THE ILLUSTRATIVE LIST OF SAMPLES OF INFORMATION TECHNOLOGY, TECHNICAL INFORMATION, APPLICATION S, ETC. RECEIVED FROM UPSAI ALONG WITH SAMPLE USER MANUALS, USER GUIDES, ETC. EVIDENCING THE RECEIPT OF SUCH TECHNICAL KNOW - HOW SERVICES IS ATTACHED AS ANNEXURE 3 FOR YOUR REFERENCE. 1.6. UJEL UTILIZES THESE ADVANCED MANAGEMENT TECHNIQUES AND TECHNOLOG Y KNOW - HOW IN ITS DAY TO DAY BUSINESS ACTIVITIES. FOR INSTANCE, THE IT SYSTEMS / APPLICATIONS PROVIDED BY UPSAI VIA THE INTERNET (HTTP://WWW.UPS.COM/SHIPPINGDEMO/) ENABLE THE EXTERNAL CUSTOMERS TO PERFORM ONLINE SHIPPING, REAL TIME TRACKING OF SHIPMENTS, M ANAGE THEIR SCHEDULE FOR DELIVERIES, ENABLE CREATION OF ACCOUNTS FOR BILLING SHIPPING CHARGES AND SERVICES AND MANY MORE OTHER SERVICES. ONE CAN READ AT THE BOTTOM OF THE UPS WEBSITE THE FOLLOWING STATEMENT 'COPYRIGHT 1994 - 2016 UNITED PARCEL SERVICE OF A MERICA, INC. ALL RIGHTS RESERVED. '(WEBSITE EXTRACT ATTACHED AS ANNEXURE 4) 1.7. THE IT SYSTEMS / APPLICATIONS PROVIDED BY UPSAI NOT ONLY HELPS IN REAL TIME TRACKING OF SHIPMENTS BUT ALSO ENABLES VISIBILITY TO THE CUSTOMERS ON THE MOVEMENT OF GOODS AND PROVIDES THE TIMELY DELIVERY CONFIRMATION FOR THE SHIPMENTS. THE ADVANCED TRACKING SYSTEMS AVAILED HAS ALLOWED UJEL AS WELL THE CUSTOMERS TO TRACK THE PACKAGE IN MINUTE BY MINUTE STATUS. CUSTOMERS COULD SEE THE LATEST STATUS OF THEIR DOCUMENTS AND PACKAGE S AND BE REST ASSURED OF THEIR DELIVERY. THE VEHICLE MONITORING TECHNOLOGY HAS HELPED UJEL TO KEEP AN ACCURATE TRACK OF THE PICK - UP / DELIVERY PERSONS AND THEREBY OF THE SHIPMENTS THAT ARE BEING TRANSPORTED. WITH THE GLOBAL POSITIONING SYSTEMS (GPS) PLACED IN THE VEHICLES AND DEVICES, THE MOVEMENT OF PICK - UP / DELIVERY PERSONS COULD BE TRACKED TO THE LAST MINUTE AND IMPROVE THE TIME OF DELIVERING THE PACKAGE TO THE FINAL CUSTOMERS. THE USE OF SOFTWARE AND PROGRAMS HAS HELPED IMPROVE THE DELIVERY PROCESS OF UJEL AND ENABLE PROVIDING OF EXCELLENT SERVICES TO ITS CUSTOMERS. 1.8. UJEL RESPECTFULLY SUBMITS THAT THE TECHNOLOGIES HAVE REGULARLY BEEN UPGRADED TO PROVIDE MORE REAL TIME TRACKING INFORMATION, EXPANDABLE MEMORY, ETC. FOLLOWING ARE THE SAMPLE DOCUMEN TS AND INSTANCES (ATTACHED AS ANNEXURE 5) WHICH SUBSTANTIATES THAT UJEL HAS RECEIVED UPGRADED TECHNOLOGY DURING FY 2012 - 13: - DELIVERY INFORMATION ACQUISITION DEVICE ('DIAD') APPLICATION WAS UPGRADED FROM DIAD III TO DIAD IV WITH MANY ADDITIONAL BENE FITS AND ADVANTAGES. UPSAI THROUGH ITS REPRESENTATIVE ASSISTED UJEL IN THE WHOLE ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 9 PROCESS OF DEPLOYMENT AND IMPLEMENTATION OF DIAD IV. SAMPLE E - MAIL CORRESPONDENCES EVIDENCING THE SAME IS ATTACHED AS ANNEXURE 5A. - ONLINE DIAD SYSTEM / ON DEMAND SYSTE MS (ODS) WAS UPGRADED TTI NEW VERSION (V6.03.07) FROM OLD VERSION (V6.02.Q4) WITH A NEW USER REQUESTED FUNCTIONALITY. UPSAI THROUGH ITS REPRESENTATIVE ASSISTED UJEL IN THE WHOLE PROCESS OF IMPLEMENTATION INCLUDING RESOLVING QUERIES. SAMPLE E - MAIL CORRESPON DENCES AND OTHER RELEVANT DOCUMENTS EVIDENCING THE SAME ARE ATTACHED AS ANNEXURE 5B. - UPS TUNDRA SCAN & LINK WEB (UPS TSLE) WAS UPGRADED TO NEW VERSION WITH ADDITIONAL USER FRIENDLY FUNCTIONALITY. UPSAI THROUGH ITS REPRESENTATIVE PROVIDED RELEVANT TECHNI CAL TRAINING TO UJEL AND ASSISTED IN THE PROCESS OF IMPLEMENTATION. ATTACHED AS ANNEXURE 5C IS THE WEBINAR INVITE FOR TRAINING SESSIONS CONDUCTED IN RELATION TO UPS TSLE. DURING FY 2012 - 13 NEW TECHNOLOGY OF SCANNING HARDWARE REPLACEMENT PROJECT (SHARP) WA S IMPLEMENTED BY WEL WITH THE HELP OF UPSAI. SHARP IS A PROJECT FOR IMPLEMENTATION OF A WEARABLE SCANNING SYSTEM / DEVICE AT CENTRES /FACILITIES. 1.9. IN ADDITION TO ABOVE UPGRADED IT APPLICATIONS AND TECHNOLOGIES, UPSAI ALSO ASSISTED UJEL IN LAUNCHING A NEW SERVICE OFFERING - UPS WW PALLETIZE EXPRESS FREIGHT DURING FY 2012 - 13. IT IS A NEW PALLETIZED AIR FREIGHT SERVICE OFFERED TO CUSTOMER BY UJEL FROM FY 2012 - 13 ONWARDS AS AN EXTENSION OF SMALL PACKAGE. THIS SERVICE OFFERING TARGETS SMALL PACKAGE SHIPMENT S TO BE PALLETIZED. THIS ENABLES UJEL TO INCREASE ITS CUSTOMER BASE IN INDIA. ATTACHED AS ANNEXURE 6 IS A COPY OF A PRESENTATION GIVING AN OVERVIEW OF UPS WW PALLETIZE EXPRESS FREIGHT SERVICE FOR YOUR REFERENCE. 1.10. TECHNICAL ASSISTANCE HELPS UJEL IN DE VELOPING AND MAINTAINING CUSTOMER NETWORK, SAFETY AND SECURITY METHODS, OPERATION CONTROL, CUSTOMER SERVICE PROCEDURES, RESEARCH AND ANALYSIS OF CUSTOMER NEEDS, TRAINING OF PERSONNEL, BILLING AND ACCOUNTING ETC. IN ADDITION TO ABOVE, UPSAI PROVIDES UJEL W ITH VARIOUS STANDARD PRACTICE MANUALS, WORK METHODS AND PROCEDURES, PACKAGING TECHNIQUES, TERMINAL LAYOUT PLANS, SORTING EQUIPMENT LAYOUT AND SPECIFICATIONS, ETC. THESE PRACTICE MANUALS GUIDE UJEL WITH ESSENTIAL METHODS OF DELIVERY AND PICKUP THUS HELPING IT TO INCREASE ITS SKILLS AND PROVIDE QUALITY SERVICE TO EVERY CUSTOMER. SOME OF THE SAMPLE STANDARD PRACTICE MANUALS ARE ATTACHED AS ANNEXURE 7 . THE IT SYSTEMS, TECHNICAL INFORMATION, BEST PRACTICES, CUSTOMIZED FOR DOOR - TO - DOOR NATURE OF BUSINESS, ETC. A LSO HELP UJEL IN CONTROLLING THE COST OF DOING BUSINESS WHILE DELIVERING THE SHIPMENT ON TIME. ' ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 10 3.9. THE ASSESSEE CLAIMED THAT AS THE INTERNATIONAL TRANSACTION PAYMENT OF TECHNICAL KNOWHOW IS INEXTRICABLY LINKED TO ITS BUSINESS AND IS NECESSARY FOR ITS B USINESS , IT HAD CONSIDERED THE SAME WITH OTHER BUSINESS TRANSACTIONS AND CARRIED OUT THE BENCHMARKING ANALYSIS USING TRANSACTION NET MARGIN METHOD (TNMM). THE ASSESSEE WAS CHOSEN AS A TESTED PARTY IN THE TP STUDY REPORT WITH RESPECT TO INTERNATIONAL TRANSA CTIONS FOR THE PURPOSE OF ANALYSIS UNDER TNMM AS IT SEEMED TO BE LESS COMPLEX THAN ITS AES. THE ASSESSEE HAD ALSO STATED IN THE TP STUDY REPORT THAT ITS ACTIVITIES ARE LIMITED TO PROVISION OF COURIER SERVICES, WHEREAS AES ARE INVOLVED IN MORE COMPLEX FUNCT IONS SUCH AS DEVELOPING APPROPRIATE SOFTWARE AND INFORMATION SYSTEMS FOR VARIOUS EVIDENCES INCLUDING CONSIGNMENT TRACKING AND TRACING, INTERNAL ACCOUNTING ETC., MOREOVER, AES OWN VALUABLE INTANGIBLE ASSETS RESULTED TO THE IMPORT AND EXPORT CONSIGNMENT SER VICES WITHOUT PROFIT. ASSESSEE DOES NOT OWN ANY NON - ROUTINE INTANGIBLES AND DOES NOT HAVE ANY OTHER ATTRIBUTES THAT WOULD LEAD TO NON - ROUTINE PROFITS. FURTHER RELIABLE DATA OF ASSESSEE IS AVAILABLE THAT REQUIRES FEWEST AND MOST RELIABLE ADJUSTMENTS. CONSID ERING THE ABOVE FACTORS, THE ASSESSEE WAS SELECTED AS A TESTED PARTY FOR THE PURPOSE OF TNMM ANALYSIS. 3.10. THE ASSESSEE CONSIDERED NET PROFIT MARGIN (NPM) AS AN APPROPRIATE PROFIT LEVEL INDICATOR (PLI). THE ASSESSEE IN ITS ACCEPT REJECT MATRIX , ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 11 ELIMINAT ED COMPANIES FOR WHICH FINANCIAL DATA WAS EITHER NOT AVAILABLE OR AVAILABLE ONLY UPTO MARCH 2009 IN THE PROWESS DATA BASE ; ELIMINATED COMPANIES HAVING SALES LESS THAN RS. 1 CRORE IN THE LATEST YEAR FOR WHICH THE FINANCIAL DATA WAS AVAILABLE IN THE PROWESS DATA BASE; ELIMINATED COMPANIES THAT DID NOT DISCLOSE SEGMENTAL DATA; ELIMINATED COMPANIES WHOSE MANUFACTURING SALES WERE EQUAL TO OR GREATER THAN 75% OF THEIR TOTAL SALES IN THE LATEST YEAR FOR WHICH THE FINANCIAL DATA WAS AVAILABLE IN THE PROWESS DATA B ASE; ELIMINATED COMPANIES WHOSE TRADING SALES WERE EQUAL TO OR GREATER THAN 75% OF THEIR TOTAL SALES IN THE LA TEST YEAR FOR WHICH THE FINANCIAL DATA WAS AVAILABLE IN THE PROWESS DATA BASE AND ELIMINATED COMPANIES WHOSE SERVICES APPEARED TO BE DIFFERENT FRO M THAT OF ASSESSEE AND COMPANIES EXCLUDED FOR OTHER REASONS (BASED ON INFORMATION CONTAINED IN THE PROJECT PROFILE, DIRECTORS REPORT, AND OTHER INFORMATION APPEARED IN THE PROWESS DATA BASE). WITH ALL THESE FILTERS ULTIMATELY , THE ASSESSEE ARRIVED AT THRE E COMPARABLE COMPANIES FOR BENCHMARKING ITS TRANSACTIONS IN RESPECT OF TECHNICAL KNOWHOW FEE AS UNDER: - A . FIRST FLIGHT COURIERS LTD. B . ON DOT COURIERS AND CARGO LTD. C . OVERNIGHT EXPRESS LTD. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 12 3.11. THE ASSESSEE ALSO CONSIDERED TWO COMPARABLE COMPANIES FOR WHICH S EGMENTAL DATA WAS AVAILABLE IN PROWESS DATA BASE I.E. PATEL INTEGRATED LOGISTICS LTD., AND TRANSPORT CORPORATION OF INDIA LTD., 3.12. SIMILAR ANALYSIS WERE CARRIED OUT BY THE ASSESSEE USING CAPITALINE PLUS DATA BASE AND THE FINAL SET OF COMPARABLE COMPAN IES CHOSEN BY THE ASSESSEE FOR BENCHMARKING ITS TRANSACTIONS USING MULTIPLE YEAR DATA ARE AS UNDER: - SR. NO. COMPANY NAME FV 2010 - 11 FY 2011 - 12 FY 2012 - 13 WEIGHTED AVERAGE 1 BLAZEFLASH COURIERS PVT. LTD. 4.38 4.98 NA 4.69 2 FIRST FLIGHT COURIER S LTD ( - )5.93 1.08 NA ( - )2.43 3 ON - DOT COUR IERS & CARGO LTD 1.03 ( - )17.23 NA ( - )5.83 4 OVERNIGHT EX PRESS LTD. 1.46 2.08 NA 1.78 5 PATEL INTE GRATED LOGISTICS LTD. 1.67 3.23 3.70 2.82 6 PROFESSIONAL COURIERS NETWORK LTD ( - )22.98 ( - 2 6.31 ) NA ( - )24. 73 7 TRANSPORT CORPORATION OF INDIA LTD. 7.60 7.46 7.33 7.66 ARITHMET ICAL MEAN ( - 1.82 ) ( - )3.53 5.5 1 ( - )2.29 3.13. ON THE BASIS OF THE ABOVE, THE WEIGHTED AVERAGE NPM OF THE SEVEN PARTICULARLY COMPARABLE COMPANI ES RANGE FROM 24.73% TO 7.66% WITH ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 13 ARITHMETIC MEAN OF - 2.29%. THE ASSESSEE COMPUTED ITS MARGIN FOR THE YEAR UNDER 31/03/2013 AS UNDER: - PARTICULARS AMOUNT INCOME SERVICE INCOME 25,543 MISCELLANEOUS INCOME EXCESS PROVISION WRITTEN BACK 15 M ISCELLANEOUS RECEIPTS 8 ADDITIONAL COMPENSATION FOR IMPORT, EXPORT CONSIGNMENTS 160 TOTAL OPERATING INCOME (A) 25,726 EXPENDITURE FREIGHT HANDLING AND SERVICING COSTS 18,013 OTHER EXPENSES 3,760 EMPLOYEE BENEFIT EXPENSES 3,121 DEP RECIATION 173 TOTAL OPERATING EXPENSE (B) 25,068 NET OPERATING PROFIT (C = A - B) 658 NPM (C / A) 2.56% 3.14. ACCORDINGLY, IT CONCLUDED THAT ITS TRANSACTIONS FOR PA YMENT OF TECHNICAL KNOWHOW FEE ARE AT ARMS LENGTH. IN THE SAID TP STUDY REPORT, ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 14 TH E ASSESSEE ALSO DISCUSSED THE NEED FOR MAKING WORKING CAPITAL ADJUSTMENT IN RESPECT OF COMPARABLES AND RESERVE D ITS RIGHT TO UNDERTAKE SUCH ADJUSTMENT IF WARRANTED IN FUTURE. 3.15. THE LD. TPO HOWEVER , OBSERVED THAT THE ASSESSEE HAD NOT SUBMITTED ANY DOCU MENTS TO ESTABLISH RECEIPT OF THE SO CALLED TECHNOLOGY , TRAINING ETC., DURING THE YEAR. THE LD. TPO ALSO RECORDED A STATEMENT OF MR. STEPHEN RO S E DURING THE A.Y.2010 - 11 PROCEEDINGS. 3.16. THE LD. TPO OBSERVED IN HIS ORDER FOR REJECTING THE CONTENTIONS OF THE ASSESSEE AS UNDER: - I ) ASSESSEE HAS NOT SUBMITTED ANY DOCUMENTS TO ESTABLISH RECEIPT OF TECHNOLOGY , TRAINING ETC., II ) STATEMENTS RECORDED FROM THE EMPLOYEES OF ASSESSEE DURING A.Y.2010 - 11 PROCEEDINGS AND BASED ON CERTAIN CONSUMER COMPLIAN TS , THE LD. TPO CO NCLUDED THAT NO TECHNOLOGY WAS AVAILABLE OR TECHNOLOGY USED BY THE ASSESSEE WAS VERY OLD. III ) THE ASSESSEE FAILED THE BENEFIT AND NEED TEST S . IV ) THE TECHNICAL KNOWHOW FEES IS BASED ON 50% OF THE PROFIT BEFORE TAX. SUCH METHOD OF COMPUTATION WAS UNLIKELY TO BE AGR EED BY THE UNRELATED PARTIES. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 15 3.17. WITH THESE OBSERVATIONS, THE LD. TPO CONCLUDED THAT THE PAYMENT MADE BY THE ASSESSEE TO ITS AE WAS IN THE NATURE OF PROFIT DISTRIBUTION THOUGH DONE UNDER THE HEAD TECHNICAL KNOWHOW. ACCORDINGLY, THE A LP OF THE SAID TR ANSACTION ON PAYMENT OF TECHNICAL KNOWHOW TO UNITED PARCEL SERVICES OF AMERICA INC. (UPSAI) OF RS.10,21,00,004 WAS TREATED AT RS. NIL BY THE LD. TPO AND UPWARD ADJUSTMENT THEREON WAS MADE IN THE ASSESSMENT. 4 . THE LD. DRP OBSERVED THAT THE SAME ISSUE WAS THE SUBJECT MATTER OF DISPUTE IN A.Y.2010 - 11 IN ASSESSEES OWN CASE WHEREIN THIS ADJUSTMENT MADE BY THE LD. TPO WAS UPHELD BY THE LD. DRP. THE LD. DRP ALSO OBSERVED THAT EVEN IN THE IMMEDIATELY PRECEDING YEAR I.E. 2012 - 13, ALP ON PAYMENT OF TECHNICAL KNOWH OW WAS UPHELD TO BE AT RS. NIL. RESPECTFULLY FOLLOWING THE DECISIONS TAKEN FOR THE A.YRS 2010 - 11 AND 2012 - 13, THE LD. DRP UPHELD THE ACTION OF THE LD. TPO. 5 . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: - 1. GROUND NO. 1 - TRANSFER PRICING ADJUSTMENT IN RESPECT OF TECHNICAL KNOW - HOW FEES OF RS. 10,21,00,004 PAID BY APPELLANT TO ITS ASSOCIATED ENTERPRISE ('AE') 1.1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TRANSFER PRICING OFFICER ('TPO') / A SSESSING OFFICER ('AO') ERRED IN HOLDING, AND ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 16 THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') FURTHER ERRED IN DIRECTING, THAT THE ARM'S LENGTH PRICE IN RESPECT OF TECHNICAL KNOW - HOW FEES OF RS. 10,21,00,004 PAID BY THE APPELLANT TO ITS AE WAS 'NIL'. 1.2. O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO / AO ERRED AND THE HON'BLE DRP FURTHER ERRED IN NOT ACCEPTING THE COMPUTATION OF ARM'S LENGTH PRICE CARRIED OUT BY THE APPELLANT WHICH WAS IN ACCORDANCE WITH THE TRANSACTIONAL NET MARGIN METHOD PRESCRIBED UNDER SECTION 92C(1) OF THE INCOME - TAX ACT, 1961 ('THE ACT') READ WITH RULE 10B(L)(E) OF INCOME - TAX RULES,1962 ('THE RULES'). 1.3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO / AO ERRED AND THE HON'BLE DR P FURTHER ERRED IN MAKING CERTAIN OBSERVATIONS AND FINDINGS WHICH ARE BASED ON INCORRECT INTERPRETATION / UNDERSTANDING AND WITHOUT APPRECIATING THE INTRICACIES OF THE FACTS OF THE CASE. 6 . WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT THE LD. DR P HAD ME RELY FOLLOW ED THE DECISION TAKEN BY THEM IN A.Y.2010 - 11 AND 2012 - 13 IN ASSESSEES OWN CASE . AG AINST THE SAID ORDERS OF THE LD. DRP, ASSESSEE HAD PREFERRED APPEALS BEFORE US AND THE SAME ARE PENDING TO BE HEARD. WE FIND THAT THE APPEAL FOR A.Y.2013 - 14 ALONE WAS TAKEN UP FOR HEARING AS IT WAS A STAY GRANTED MATTER , ON OUT OF TURN BASIS. HENCE, THIS ISSUE THOUGH RECURRING IN NATURE, NEEDS TO BE ADJUDICATED FOR A.Y.2013 - 14. WE FIND THAT THE PRELIMINARY ISSUE THAT IS TO BE DECIDED IN THE INSTANT CASE IS WHETHER THE LD. TPO WAS JUSTIFIED IN DETERMINING THE ALP OF TECHNICAL KNOWHOW FEES AT RS. NIL WITHOUT FOLLOWING THE BENCHMARKING ANALYSIS PROVIDED IN ANY ONE OF THE PRESCRIBED METHODS AS PROVIDED IN THE STAT UTE READ WITH RELEVANT RULES THEREON. IN THIS REGARD , WE FIND THAT ASSESSEE HAD CARRIED OUT BENCHMARKING ANALYSIS BY APPLYING TNMM TO SUBSTANTIATE THAT THE TRANSACTION FOR PAYMENT OF TECHNICAL KNOWHOW FEES WAS INCLUDED WITH ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 17 ARMS LENGTH PRINCIPLE UNDER INDEPENDENT TRANSFER PRICING REGULATIONS. THE DETAILS OF BEN CHMARKING CARRIED OUT BY THE ASSESSEE HAVE BEEN EXPLAINED HEREINABOVE. THE LD. TPO HOWEVER, IGNORED THE BENCHMARKING ANALYSIS CARRIED OUT BY THE ASSESSEE AND DETERMINED THE ARMS LENGTH PRINCIPLE FOR PAYMENT OF TECHNICAL KNOWHOW FEES AT RS. NIL BY NOT FOLL OWING ANY OF THE METHODS PRESCRIBED U/S.92 C (1) OF THE ACT RE AD WITH RULE 10B OF THE RULES. RULE 10B OF INCOME TAX RULES, 1962 (FOR SHORT 'THE RULES'), PROVIDES THE MECHANISM FOR DETERMINATION OF ARM'S LENGTH PRICE UNDER THE AFORESAID METHODS PRESCRIBED UND ER SECTION 92C OF THE ACT. IF THE LD AO IN COURSE OF ASSESSMENT PROCEEDINGS FINDS THAT THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE, HE MAY WITH THE PREVIOUS APPROVAL OF THE AUTHO RITY CONCERNED MAKE A REFERENCE TO THE LD TPO UNDER SECTION 92CA(1) OF THE ACT TO COMPUTE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION BY APPLYING ANY OF THE METHODS PRESCRIBED UNDER SECTION 92C OF THE ACT. AFTER RECEIVING SUCH A REFERENCE FROM THE LD AO , THE LD TPO IS REQUIRED TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION AS PER THE PROVISIONS CONTAINED UNDER SECTION 92C AND 92CA OF THE ACT READ WITH RELEVANT RULES. THUS, AS COULD BE SEEN FROM THE READING OF THE AFORESAID PROVISIONS, THE DUTY OF THE LD TPO IS RESTR ICTED ONLY TO THE DETERMINATION OF ARM'S LENGTH PRICE OF AN INTERNATIONAL TRANSACTION BETWEEN TWO RELATED PARTIES BY APPLYING ANY OF THE METHODS PRESCRIBED UNDER SECTION 92C OF THE ACT R/W RULE 10B OF TH E ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 18 RULES. THUS, THERE IS NO PROVISION UNDER THE ACT EMPOWERING THE LD TPO TO DETERMINE THE ARM'S LENGTH PRICE ON ESTIMATION BASIS, THAT TOO, BY ENTERTAINING DOUBTS WITH REGARD TO THE BUSINESS EXPEDIENCY OF THE PAYMENT AND IN THE PROCESS STEPPING INTO THE SH OES OF THE LD AO FOR MAKING DISALLOWANCE UNDER SECTION 37(1) OF THE ACT. THIS, IN OUR CONSIDERED OPINION, IT IS NOT IN CONFORMITY WITH THE STATUTORY PROVISION, HENCE, UNACCEPTABLE. THE LD TPO IS DUTY BOU ND TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION BY ADOPTING ONE OF THE METHOD PRESCRIBED UNDER THE STATUTE AND CANNOT DEVIATE FROM THE RESTRICTIONS / CONDITIONS IMPOSED UNDER THE STATUTE. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S JOHNSON & JOHNSON LTD., ITA N O.1030/2014, DATED 7TH MARCH 2017, WHILE DEALING WITH IDENTICAL ISSUE OF DETERMINATION OF ARM'S LENGTH PRICE OF ROYALTY BY RESORTING TO ESTIMATION BY THE LD TPO HA D HELD AS UNDER: - '(D) WE FIND THAT THE IMPUGNED ORDER OF T HE TRIBUNAL UPHOLDING THE ORDER OF THE CIT(A) IN THE PRESENT FACTS CANNOT BE FOUND FAULT WITH. THE TPO IS MANDATED BY LAW TO DETERMINE THE ALP BY FOLLOWING ONE OF THE METHODS PRESCRIBED IN SECTION 92C OF THE ACT READ WITH RULE 10B OF THE INCOME TAX RULES. HOWEVER, THE AFORESAID EXERCISE OF DETERMINING THE ALP IN RESPECT OF THE ROYALTY PAYABLE FOR TECHNICAL KNOWHOW HAS NOT BEEN CARRIED OUT AS REQUIRED UNDER THE ACT. FURTHER, AS HELD BY THE CIT(A) AND UPHELD BY THE IMPUGNED ORDER OF THE TRIBUNAL, THE TPO HAS GIVEN NO REASONS JUSTIFYING THE TECHNICAL KNOW HOW ROYALTY PAID BY THE ASSESSING OFFICER TO ITS ASSOCIATED ENTERPRISE BEING RESTRICTED TO 1% INSTEAD OF 2%, AS CLAIMED BY THE RESPONDENT ASSESSEE. THIS DETERMINATION OF ALP OF TECHNICAL KNOW HOW ROYALTY BY TH E TPO WAS AD - HOC AND ARBITRARY AS HELD BY THE CIT(A) AND THE TRIBUNAL.' ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 19 6 .1. WE FIND THAT THE LD. TPO HAVING NOT DETERMINED THE ALP IN CONFORMITY WITH THE STATUTORY PROVISION AND IN THE PROCESS HAVING FAILED TO DEMONSTRATE THAT ALP SHOWN BY THE ASSESSEE I S INCORRECT, THE CONTENTIONS OF THE LD. DR TO RESTORE THE ISSUE TO THE FILE OF THE LD. TPO FOR FRESH DETERMINATION OF THE ALP , IS UNACCEPTABLE. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE HOLD THAT THERE IS NO PROVISION MADE IN THE STAT UTE EMPOWERIN G THE LD. TPO FOR DETERMINING THE ALP OF A PARTICULAR INTERNATIONAL TRANSACTION AT NIL WITHOUT RESORTING TO ANY METHODS PRESCRIBED. SINCE, THE RELIEF IS GRANTED TO THE ASSESSEE ON THE PRELIMINARY ISSUE OF THE LD. TPO NOT FOLLOWING THE PRESCRIBED METHODS A S PROVIDED IN THE STATUTE FOR DETERMINATION OF ALP, THE OTHER ARGUMENTS ADVANCED BY THE LD. AR AND THE LD. DR ON MERITS OF ALP ADJUSTMENT ARE LEFT OPEN AND NOT ADJUDICATED HEREIN. ACCORDINGLY, THE GROUND NOS.1.1 TO 1.3 RAISED BY THE ASSESSEE ARE ALLOWED. 7 . THE NEXT GROUND RAISED BY THE ASSESSEE IS CHALLENGING THE ACTION OF THE LD. DRP IN CONFIRMING THE TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.56,87,125/ - IN RELATION TO MARK UP OF RECOVERY OF EXPENSES BY THE ASSESSEE FROM ITS AES. 7.1 . THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE HAD MADE FOLLOWING PAYMENTS ON BEHALF OF ITS AE - UPS WWF: - ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 20 ( I ) RECOVERY OF CHARGES PAID TO AIRLINES - RS.8,10,70,026/ - ( II ) RECOVERY OF EXPENSES SUCH AS CAR LEASE ETC., - RS.4,84,77,230/ - ============== TOTAL RS.12,95,47,256/ - ============ 7.2 . UPS WWF IS PRIMARILY RESPONSIBLE FOR ALL THE STEPS NECESSARY TO ENSURE THE INTERNATIONAL DELIVERY OF PACKAGES FROM AIRPORT IN INDIA TO THE CONSIGNEE OUTSIDE INDIA. THIS WOULD INCLUDE SERVICES RELATED TO AIR FE ED, AIR TRANSPORT ETC., THE ASSESSEE SUBMITTED THAT THE ABOVE RECOVERY OF EXPENSES PRIMARILY RELATED TO FREIGHT AND RELATED CHARGES PAID BY THE ASSESSEE ON BEHALF OF UPSWWF IN CERTAIN CASES PURELY FOR ADMINISTRATIVE CONVENIENCE. THE ASSESSEE SUBMITTED TH AT IN THE INSTANCE OF RECOVERY OF EXPENSES, THERE IS NEITHER AN ELEMENT OF ANY PROVISION OF SERVICES NOR ANY INTENTION OF PROVIDING ANY DIRECT OR PROXIMATE BENEFIT TO EITHER OF THE PARTIES. THE ASSESSEE SUBMITTED THAT THESE EXPENSES WERE RECOVERED FROM THE AE ON COST TO COST BASIS. THE ASSESSEE SPECIFICALLY SUBMITTED THAT FREIGHT CHARGES PAID BY IT ON BEHALF OF ITS AE WERE TO INDEPENDENT THIRD PARTY ENTITIES PROVIDING SERVICES TO THE AE. HENCE, THE PAYMENT FOR EXPENSES IS ALWAYS INDEPENDENT AND UNRELATED AN D HENCE, THE QUESTION OF ELEMENT OF SERVICE NEVER EXISTS. IN VIEW OF THE ABOVE AND HAVING REGARD TO THE FACT THAT THE TRANSACTION WERE UNDERTAKEN ON COST TO COST BASIS, THE ASSESSEE PLEADED THAT THE ABOVE MENTIONED INTERNATIONAL TRANSACTION SHOULD BE CONSI DERED TO BE ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 21 AT ARMS LENGTH FROM AN INDIAN TRANSFER PRICING PERSPECTIVE. THE ASSESSEE ALSO SUBMITTED THE COPIES OF SAMPLE INVOICES OF RECOVERY OF EXPENSES IN THIS REGARD BEFORE THE LD. TPO. THE ASSESSEE FURTHER PLEADED ON WITHOUT PREJUDICE BASIS THAT COOR DINATION / LIASONING WITH AIRLINES IS AN ACTIVITY INCIDENTALLY TO ITS EXPORT PICK UP SERVICES FOR WHICH IT HAS ALREADY BEEN COMPENSATED AND THE INCIDENTAL COST , IF ANY , ARE CONSIDERED UNDER TNMM ANALYSIS. HENCE, THE ASSESSEE PLEADED THAT THERE CANNOT BE AN Y MARK UP ON RECOVERY OF EXPENSES. 7.3 . THE LD. TPO OBSERVED THAT IN THE BUSINESS MODEL OF THE ASSESSEE, THE ASSESSEE HAS A TIE UP WITH ITS AE WHEREIN IT TAKES CARE OF THE INDIA N LEG OF THE TRANSACTION AND THE AE TAKES CARE OF THE FOREIGN LEG OF THE TRANS ACTION PLUS TRANSIT PART. 7.4 . THE LD. TPO OBSERVED THAT THE FREIGHT IS RESPONSIBILITY OF THE ASSESSEE. HE WANTS ON TO OBSERVE THAT THE REMUNERATION STRUCTURE IS DEVISED TAKING INTO ACCOUNT THE FREIGHT ASPECT. ACCORDINGLY, WHEN THE ASSESSEE PERFORMS THIS JOB, WHICH IS REFLECTED IN THE COST THAT IT HAS TO INCUR FOR THE SAME, IT DESERVES A REMUNERATION FOR THE SAME. THE COST IS A PASS THROUGH ONE AND HENCE NOT TAKEN AS PART OF THE OPERATING PROFIT. BUT THE ASSESSEE NEEDS TO GET OPERATIONAL PROFIT ON THE SAME . SO, ACCORDINGLY, THE LD. TPO HAS ARRIVED AT THE ALP MARGIN OF 4.39 % ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 22 ON THE COST AND APPLIED ON THE RECOVERY OF EXPENSES AND MADE AN ADJUSTMENT TO ALP OF RS.56,87,125/ - TOWARDS MARK UP THEREON. THE LD. DRP BY PLACING RELIANCE ON THE ORDER PASSED IN ASSESS EES OWN CASE FOR THE A.Y.2011 - 12 AND THE A.Y.2012 - 13 UPHELD THE MARK - UP OF 4.39% ON RECOVERY OF EXPENSES MADE BY THE LD. TPO. 8 . AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 9 . WE HAVE HEARD RIVAL SUBMISSIONS. THE PRIMARY FACTS ARE THA T THE TRANSACTI ON BEING RECOVERY OF EXPENSES FROM AE BY THE ASSESSEE, IS NOT IN DISPUTE AND HENCE, THE SAME ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. IT IS NOT IN DISPUTE THAT THE ENTIRE TRANSACTION OF RECOVERY OF EXPENSES IS A PASS THROUGH TRANSACTION WHICH HAD BEEN CATEGORICALLY ACCEPTED BY THE LD. TPO IN HIS ORDER. ONCE, IT IS A PASS THROUGH TRANSACTION, IT IS ONLY A BALANCE SHEET ITEM FOR THE ASSESSEE. HENCE, THERE CANNOT BE ANY MARK - UP ON THE SAME. WE FIND THAT ASSESSEE ALSO REIMBURSES CERTAIN EXPENSES INCUR RED BY THE AE WITHOUT ANY MARK - UP. THESE FACTS ARE ALSO ACCEPTED CATEGORICALLY BY THE LD. TPO. WE HOLD THAT THERE CANNOT BE ANY MARK - UP ON INCOME SIDE OF THE TRANSACTION ALONE A S CONTEMPLATED BY THE LD. TPO. HENCE, THE ENTIRE ISSUE HEREIN IS ONLY ACADEMIC. WE FIND THAT THE CO - ORDINATE BENCH DECISION OF BANGALORE TRIBUNAL IN THE CASE OF TESCO HINDUSTAN SERVICE CENTRE PVT. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 23 LTD., VS. DCIT IN IT (TP)A NO.1317/BANG/2010 FOR A.Y.2006 - 07 DATED 26/05/2015 IN THE CONTEXT OF ALP ADJUSTMENT ON REIMBURSEMENT HAD HELD A S UNDER: - 29. WE HAVE ALREADY SEEN THAT THE ASSESSEE RECEIVED A SUM OF RS.2,32,47,077 FROM ITS AE AND THE SAME HAS BEEN SHOWN AS AN INTERNATIONAL TRANSACTION WITH AE BY THE ASSESSEE IN THE REPORT U/S.92CE OF THE ACT. ACCORDING TO THE TPO, THE ASSESSEE DID NOT GIVE ANY DETAILS WITH REGARD TO REIMBURSEMENT OF EXPENSES (RECEIVED) TO THE EXTENT OF RS. 2,32,47,077. ACCORDING TO THE TPO, THE ASSESSEE ONLY TOOK A STAND THAT THE TRANSFER PRICING PROVISIONS DO NOT PROVIDE ANY DETAILED GUIDELINES OR FRAMEWORK ON THE METHOD OF COMPUTATION OF ALP IN RESPECT OF REIMBURSEMENT. THE TPO THEREFORE CALLED UPON THE ASSESSEE VIDE LETTER DATED 22 - 07 - 2009, TO GIVE NATURE OF REIMBURSEMENT OF EXPENSES AND ALSO CLARIFY WHETHER SUCH EXPENSES ARE ROUTED THROUGH THE PROFIT AND TOSS AC COUNT, IF YES, TO SPECIFY THE HEAD(S) UNDER WHICH IT IS SHOWN, IF NO, SPECIFY AS TO WHY SUCH EXPENDITURE SHOULD NOT BE INCLUDED AS PART OF THE ASSESSEE'S OPERATING COST AND THUS FOR MARK - UP. ACCORDING TO THE TPO, THE ASSESSEE DID NOT OFFER ANY COMMENTS. TH EREFORE THE TPO PRESUMED THAT THE REIMBURSEMENT OF EXPENSES RECEIVED IS NOT ROUTED THROUGH PROFIT AND LOSS ACCOUNT AND THESE EXPENSES ARE INCURRED IN CONNECTION WITH RENDERING SOFTWARE DEVELOPMENT SERVICES. ACCORDING TO THE TPO, NO INDEPENDENT PARTY WOULD RENDER SUCH SERVICES WITHOUT ANY MARK UP. THE TPO THEREFORE ADDED THE REIMBURSEMENT OF EXPENSES (RECEIVED) OF RS. 2,32,47,077/ - TO THE OPERATING REVENUES AS WELL AS THE OPERATING COSTS FOR THE PURPOSE OF AGGREGATION OF TRANSACTIONS AND DETERMINING ARM'S LE NGTH PRICE UNDER TNMM. FURTHER THE TPO OBSERVED THAT THE REIMBURSEMENT OF EXPENSES PERTAINING TO EACH SEGMENT IS NOT AVAILABLE. HE PROCEEDED TO APPORTION THE EXPENSES BETWEEN THE SOFTWARE DEVELOPMENT AND ITES SEGMENTS IN THE RATIO OF SEGMENT TURNOVER (67.4 8% : 32.52%). THUS THE REIMBURSEMENT OF EXPENSES WERE ADDED TO THE REVENUES AND COSTS IN THE ABOVE RATIO I.E. RS. 1,56,87,128/ - IN THE SOFTWARE DEVELOPMENT SEGMENT AND RS. 75,59,948 IN THE ITES SEGMENT FOR COMPARABILITY ANALYSIS UNDER TNMM. 30. BEFORE DRP, THE ASSESSEE SUBMITTED THAT THE REIMBURSEMENT OF EXPENSE RECEIVED ARE NOTHING BUT EXPENSES INCURRED ON BEHALF OF RELATED PARTIES FOR ADMINISTRATIVE CONVENIENCE. THE ASSESSEE POINTED OUT THAT DURING THE PREVIOUS YEAR, IT HAD PAID EXPAT TAX FOR THE EMPLOYEE S DEPUTED ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 24 BY TESCO STORES LIMITED, UK (PARENT COMPANY) TO WORK AS PART OF VARIOUS PROJECTS CONDUCTED BY THE ASSESSEE. THE ASSESSEE ALSO PAID A CERTAIN AMOUNT AS INTEREST FOR THE DELAY IN THE PAYMENT OF TAX DEDUCTED AT SOURCE (TDS). ALL THESE EXPENSES WERE CROSS CHARGED BY THE ASSESSEE TO TESCO STORES LIMITED, UK WHO REIMBURSED THE SAME AT COST, WITHOUT ANY MARK UP. THE DETAILS OF EXPAT TAX AND INTEREST PAID ON DELAY IN THE PAYMENT OF TDS WERE ALSO PROVIDED AS GIVEN BELOW: - EXPAT TAX DETAILS FOR THE FINANCIA L YEAR 2005 - 2006 SI. NO. NAME OF THE EXPAT TAX (RS) INTEREST (RS) TOTAL INCOME TAX (RS) 1 TIM SEA 2,240,802 145.652 2,386,454 2 SANGENU PARK 2,101,111 136,572 2,237,683 3 HENRY KANG 23923LR 155,690 2.550.920 4 PHILIP GREENW OOD 4,806,569 312.247 5.118.996 5 USHIR BHATT 2,572.258 67,197 2.739.45 6 DAVID BRIGGS 3,911,924 254.275 4. 1 66. 1 99 7 PETER HANLON 1,654,880 107,567 1,762.447 8 ROGER MORGAN 1,360,427 88,428 1,448,855 9 SARAH MORGAN 878,93 5 57.131 936.066 TOTAL 21,922,137 1,424,939 23,347,076 31. THE LEDGER ENTRIES PERTAINING TO THE ABOVEMENTIONED TRANSACTIONS WERE PROVIDED AS APPENDIX 25A TO THE OBJECTIONS FILED BEFORE THE DRP. THE CHALLANS IN SUPPORT OF THE PAYMENT OF THE ABOV EMENTIONED EXPAT TAX AND THE INTEREST ON DELAYED PAYMENT OF TDS WERE ALSO PROVIDED AS ANNEXURE TO THE OBJECTIONS BEFORE THE DRP. SAMPLE INVOICE COPIES OF THE REIMBURSEMENTS RECEIVED WERE ALSO PROVIDED AS ANNEXURE TO THE OBJECTIONS FILED BEFORE THE DRP. 32. THE ASSESSEE ALSO PLACED RELIANCE ON CIRCULAR NO. 87 - 2R DATED 27 SEPTEMBER 1999 OF THE CANADA CUSTOMS AND REVENUE AGENCY WHEREIN IT HAS BEEN STATED THAT OFTEN THE PRICE THE RECIPIENT IS WILLING TO PAY FOR THE SERVICE DOES NOT EXCEED THE COST OF SUPPLY TO THE SERVICE SUPPLIER. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 25 '163. ARM'S LENGTH SERVICE SUPPLIERS WOULD USUALLY EXPECT TO RECOVER THEIR COSTS PLUS AN ELEMENT OF PROFIT. HOWEVER, IN DETERMINING AN ARM'S LENGTH CHARGE FOR SERVICE, ONE MUST ALSO TAKE INTO ACCOUNT THE ECONOMIC ALTERNATIVES AVAILABL E TO THE RECIPIENT OF THE SERVICE. OFTEN, THE PRICE THE RECIPIENT IS WILLING TO PAY FOR THE SERVICE DOES NOT EXCEED THE COST OF SUPPLY TO THE SERVICE SUPPLIER.' THE ABOVE HAS BEEN EXPLAINED BY MEANS OF AN EXAMPLE: 'FOR EXAMPLE, IN MANY CASES, THE SERVIC ES PROVIDED THROUGH INTRA - GROUP ARRANGEMENTS ARE ADMINISTRATIVE OR ANCILLARY IN NATURE, AND THE PARTICIPANTS WOULD ONLY HAVE BEEN PREPARED TO CENTRALIZE THE ACTIVITY IF THEY COULD SHARE IN THE COST SAVINGS. COST MAY REPRESENT AN ARM'S LENGTH CHARGE IN SUCH SITUATIONS. 164. DETERMINING WHETHER A MARK - UP IS APPROPRIATE AND, WHERE APPLICABLE, THE QUANTUM OF THE MARK - UP, REQUIRES CAREFUL CONSIDERATION OF FACTORS SUCH AS: - THE NATURE OF THE ACTIVITY; - THE SIGNIFICANCE OF THE ACTIVITY TO THE GROUP; - THE RELATI VE EFFICIENCY OF THE SERVICE SUPPLIER; AND - ANY ADVANTAGE THAT THE ACTIVITY CREATES FOR THE GROUP. FOR EXAMPLE, THE RELATIVE EFFICIENCY OF ARM'S LENGTH SERVICE SUPPLIERS MAY NOT BE COMPARABLE TO THE INTRA - GROUP SERVICES WHERE THE INTRA - GROUP SERVICES ORE OFFERED AS A CONVENIENCE TO THE GROUP AND NOT AS AN ORDINARY AND RECURRENT ACTIVITY.' '165. AS DISCUSSED IN PARAGRAPH 7.36 OF THE OECD GUIDELINES, IT IS IMPORTANT TO DISTINGUISH BETWEEN THE SITUATION OF A TAXPAYER WHO RENDERS SERVICES FOR THE OTHER MEMBERS OF A GROUP; AND A TAXPAYER WHO ACTS SOLELY AS AN AGENT ON BEHALF OF THE GROUP TO ACQUIRE SERVICES FROM AN ARM'S LENGTH PARTY. IN THE LATTER SITUATION, THE ARM'S LENGTH COMPENSATION WOULD BE LIMITED TO REWARDING THE AGENCY ROLE. IN SUCH A CASE, IT WOULD NO T BE APPROPRIATE TO DETERMINE AN ARM'S LENGTH CHARGE BY REFERRING TO A MARK - UP ON THE COST OF THE SERVICES ACQUIRED FROM AN ARM'S LENGTH PARTY. WHETHER A TAXPAYER IS PROVIDING A SERVICE OR MERELY ACTING AS AN AGENT ON BEHALF OF THE GROUP IS A QUESTION OF F ACT.' 33. THE DRP HOWEVER DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND HELD AS FOLLOWS: ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 26 'THE REASON WHY THE TPO HAS CONSIDERED A MARK UP IS THAT ARM'S LENGTH SERVICE SUPPLIERS WOULD USUALLY EXPECT TO RECOVER THEIR COTS PLUS ELEMENT OF PROFIT. THE REFORE, IN DETERMINING ARM'S LENGTH CHARGE FOR SERVICE ONE MUST ALSO TAKE INTO ACCOUNT THE ECONOMIC ALTERNATIVES AVAILABLE TO THE RECIPIENT OF THE SERVICE. WE AGREE WITH THE REASONING OF THE TPO.' 34. AGGRIEVED BY THE ORDER OF THE DRP, THE ASSESSEE HAS RAI SED GROUND NO.36 BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE THE DRP. THE LEARNED DR RELIED ON THE ORDER OF THE DRP. 35. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS OBSE RVED IN THE OECD COMMENTARIES REFERRED TO IN THE CIRCULAR OF THE CANADA CUSTOMS AND REVENUE AGENCY, IT IS IMPORTANT TO DISTINGUISH BETWEEN THE SITUATION OF A TAXPAYER WHO RENDERS SERVICES FOR THE OTHER MEMBERS OF A GROUP; AND A TAXPAYER WHO ACTS SOLELY AS AN AGENT ON BEHALF OF THE GROUP TO ACQUIRE SERVICES FROM AN ARM'S LENGTH PARTY. IN THE LATTER SITUATION, THE ARM'S LENGTH COMPENSATION WOULD BE LIMITED TO REWARDING THE AGENCY ROLE. IN SUCH A CASE, IT WOULD NOT BE APPROPRIATE TO DETERMINE AN ARM'S LENGTH C HARGE BY REFERRING TO A MARK - UP ON THE COST OF THE SERVICES ACQUIRED FROM AN ARM'S LENGTH PARTY. WHETHER A TAXPAYER IS PROVIDING A SERVICE OR MERELY ACTING AS AN AGENT ON BEHALF OF THE GROUP IS A QUESTION OF FACT. 36. IN THE PRESENT CASE, THE DETAILS GIVEN BEFORE THE DRP CLEARLY SHOWS THAT WHAT THE ASSESSEE RECEIVED AS REIMBURSEMENT FROM THE AE IS NOTHING BUT THE EXPAT TAX PAID AND INTEREST PAID ON DELAY IN THE PAYMENT OF TDS. THERE CAN BE NO ELEMENT OF SERVICE IN SUCH PAYMENT. THE TAXPAYER SHOULD BE CONSID ERED AS HAVING ACTED SOLELY AS AN AGENT ON BEHALF OF THE GROUP TO ACQUIRE SERVICES FROM AN ARM'S LENGTH PARTY. IN SUCH CASES, IT WOULD NOT BE APPROPRIATE TO DETERMINE AN ARM'S LENGTH CHARGE BY REFERRING TO A MARK - UP ON THE COST OF THE SERVICES ACQUIRED FRO M AN ARM'S LENGTH PARTY. WE THEREFORE HOLD THAT THE REIMBURSEMENT OF EXPENSES BE EXCLUDED FROM THE REVENUES AND COSTS IN THE RATIO I.E. RS. 1 ,56,87,128/ - IN THE SOFTWARE DEVELOPMENT SEGMENT AND RS. 75,59,948 IN THE ITES SEGMENT FOR COMPARABILITY ANALYSIS UN DER TNMM AS WAS DONE BY THE TPO AND DIRECT THE TPO TO COMPUTE THE ALP AFTER SUCH EXCLUSION. GROUND NO.36 IS ACCORDINGLY ALLOWED. 9 .1.RESPECTFULLY FOLLOWING THE SAID DECISION, WE DIRECT THE LD. AO/ TPO TO DELETE THE ALP ADJUSTMENT MADE ON RECO VERY OF EXPENS ES. THE OTHER ARGUMENTS MADE BY THE LD. AR AND DR ON INCLUSION / EXCLUSION OF COMPARABLES ARE NOT ADJUDICATED HEREIN AS THE RELIEF IS GRANTED ON ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 27 PRELIMI NARY ISSUE. ACCORDINGLY, THE G ROUND NO . 2.1 RAISED BY THE ASSESSEE IS ALLOWED. 10 . THE GROUND NO.3.1 RA ISED BY THE ASSESSEE IS WITH REGARD TO INCLUSION / EXCLUSION OF COMPARABLES. IN VIEW OF OUR DECISION IN GROUND NOS.1.1 TO 1.3 AND 2.1 ABOVE , THE ADJUDICATION OF THIS GROUND BECOMES INFRUCTUOUS. 11 . THE GROUND NO.4 RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE MADE U/S.40(A)(IA) OF THE ACT IN THE SUM OF RS.1,05,534/ - . IN VIEW OF THE SMALLNESS OF THE AMOUNT, THE LD. AR AT THE TIME OF HEARING STATED THAT THIS GROUND IS NOT PRESSED BY HIM. THE SAID STATEMENT IS RECKONED AS THE STATEMENT MADE FROM THE BAR AND ACCORDINGLY, THE GROUND NO.4 RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. S.A.NO.252/MUM/2019 12 . IN VIEW OF DISPOSAL OF THE MAIN APPEAL HERIEN , THE STAY PETITION PREFERRED BY THE ASSESSEE IN SA NO.252/MUM/2019 HAS BECOME INFRUCTUOUS. ITA NO. 6318/MUM/2017 & SA NO.252/MUM/2019 M/S. UP S EXPRESS PVT. LTD., 28 13 . I N THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE STAY PETITION OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 09 /201 9 SD/ - ( SAKTIJIT DEY ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 09 / 2019 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MU MBAI 6. GUARD FILE. //TRUE COPY//