M/s. Tata Bluescope Steel Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 847/PUN/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3338 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-01-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU; NANDITA KANCHAN
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction
• Section: 92C; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , ! ' , # $ BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO. 847/PUN/2015 #& ' (' / ASSESSMENT YEAR : 2010-11 M/S. TATA BLUESCOPE STEEL LTD. THE METROPOLITAN, 4 TH FLOOR, FINAL PLOT NO. 27, SURVEY NO. 21, WAKDEWADI, SHIVAJI NAGAR, PUNE- 411 005 PAN : AACCB5628E ....... / APPELLANT & / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7, PUNE. / RESPONDENT ASSESSEE BY : SHRI YOGESH A. THAR WITH SHRI MAHENDRA KULKARNI REVENUE BY : SMT. NIRUPAMA KOTRU & SMT. NANDITA KANCHAN / DATE OF HEARING : 26.11.2018 / DATE OF PRONOUNCEMENT : 15.02.2019 ) / ORDER PER VIKAS AWASTHY, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ASS ESSMENT ORDER DATED 26.03.2015 PASSED U/S.143(3) R.W.S. 144C(1) OF THE INC OME TAX ACT, 1961 (HEREAFTER REFERRED TO AS THE ACT). 2 ITA NO. 847/PUN/2015 A.Y.2010-11 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE: THE ASSESSEE COMPANY IS A JOINT VENTURE BETWEEN TATA STEE L LTD, INDIA AND BLUESCOPE STEEL ASIA HOLDING PTE. LIMITED, AUSTRALIA. THE ASS ESSEE IS ENGAGED IN MANUFACTURING AND SALE OF PRE-ENGINEERING BUILDIN GS (PEBS), COATED STEEL PRODUCTS, STEEL BUILDING SOLUTIONS ETC. THE AS SESSEE IS PRIMARILY OPERATES IN SAARC REGION. DURING THE PERIOD RELEVANT TO T HE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE ENTERED INTO VARIOUS IN TERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AES). THE TW O INTERNATIONAL TRANSACTIONS WITH AES WHICH ARE SUBJECT MATTER OF APPEAL ARE AS U NDER: THE TRANSFER PRICING OFFICER (TPO) ISSUED SHOW CAUSE NOTIC E TO THE ASSESSEE IN RESPECT OF PAYMENT TOWARDS TECHNICAL ASSISTA NCE FEES RS.14,300,000/- AND PAYMENT FOR PROJECT MANAGEMENT AND OTHER SERVICES RS.1,54,78,224/-. THE ASSESSEE FURNISHED VARIOUS DOCUMENTS TO SHOW THE SERVICES RECEIVED BY THE ASSESSEE FROM ITS AES. HOWEVER, TPO CO NCLUDED THAT DOCUMENTATION PROVIDED BY THE ASSESSEE DOES NOT PROVE THE SERVICES RENDERED. THE TPO DETERMINED THE ARMS LENGTH PRICE (A LP) OF THE ABOVE SAID TWO TRANSACTIONS AS NIL. ON THE BASIS OF ORDER OF TP O, THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER MAKING UPWARD ADJU STMENT OF RS.2,99,08,224/-. 3. AGGRIEVED BY THE ADDITIONS PROPOSED BY TPO, THE ASSE SSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE DR P VIDE NAME OF THE COMPANY DESCRIPTION AMOUNT BIEC INTERNATIONAL INC. PAYMENT OF TECHNICAL ASSISTANCE FEES 14,300,000 BLUESCOPE STEEL LTD. AUSTRALIA RECEIPT OF PROJECT MANAGEMENT SERVICES 3,391,555 3 ITA NO. 847/PUN/2015 A.Y.2010-11 DIRECTIONS DATED 26.12.2014 REJECTED THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE ADJUSTMENT MADE BY THE TPO ON ACCOUNT OF B OTH THE ABOVE SAID SERVICES. IN LINE WITH THE DIRECTIONS OF THE DRP, THE ASSESSING OFFIC ER MADE ADDITION OF RS.2,99,08,224/- GERMINATING FROM TRANSFER PRICING A DJUSTMENT, HENCE, THE PRESENT APPEAL BY ASSESSEE. 4. THE ASSESSEE IN APPEAL HAS RAISED FOLLOWING GROUNDS/AD DITIONAL GROUNDS CHALLENGING THE ASSESSMENT ORDER: GROUND I: DISALLOWANCE ON ACCOUNT OF TRANSFER PRICI NG ADJUSTMENT IN RELATION TO TECHNICAL ASSISTANCE FEES : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. DISPUTE RESOLUTION PANEL ('DRP') AND THE LD.AO (FOLLOWING T HE DIRECTIONS OF THE DRP) ERRED IN ADDING A SUM OF RS. 14,430,000/- ON ACCOUNT OF TECHNICAL FEES PAID TO BIEC INTERNATIONAL INC ('BIEC OR THE AE') F OR PROVIDING TECHNICAL ASSISTANCE TO THE APPELLANT VIDE TECHNICAL ASSISTAN CE AGREEMENT DATED FEBRUARY 15, 2006 ON THE ALLEGED GROUND THAT IT IS NOT AT ARM'S LENGTH PRICE AS PER THE PROVISIONS OF CHAPTER X OF THE ACT. GROUND II: DISALLOWANCE ON ACCOUNT OF TRANSFER PRIC ING ADJUSTMENT IN RELATION TO PROJECT MANAGEMENT FEES: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTIONS OF THE DR P) ERRED IN ADDING A SUM OF RS.3,391,555/-ON ACCOUNT OF PROJECT MANAGEMENT F EES PAID TO BLUE SCOPE STEEL LTD., AUSTRALIA ('BSL OR THE AE') FOR P ROVIDING PROJECT MANAGEMENT SERVICES TO THE APPELLANT ON THE ALLEGED GROUND THAT IT IS NOT AT ARM'S LENGTH PRICE AS PER THE PROVISIONS OF CHAP TER X OF THE ACT. WITHOUT PREJUDICE TO GROUND NO. I & II: GROUND NO III: ARM'S LENGTH PRICE CANNOT BE DETERMI NED AT NIL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP AND THE LD. AO (FOLLOWING THE DIRECTIONS OF THE DRP ) ERRED IN DETERMINING THE ARM'S LENGTH PRICE FOR THE AFORESAID TRANSACTIO NS AT NIL. GROUND NO. IV: GENERAL THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND, TO ALT ER AND/ OR TO DELETE ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. ADDITIONAL GROUNDS :- WITHOUT PREJUDICE TO GROUND NO. II: ADDITIONAL GROUND NO. V: MISTAKE IN THE AMOUNT OF DISALLOWANCE, NOT RECTIFIED IN THE FINAL ORDER: 4 ITA NO. 847/PUN/2015 A.Y.2010-11 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO BE DIRECTED TO FOLLOW THE DIRECTIONS OF THE HON'BLE DISPUTE RESOLUTION PANEL, GIVEN IN PARA 8 AGAINST OBJECTION NO.2, TO MAKE THE ADJUSTMENTS ONLY IN RESPECT OF AMOUNT DETERMINED U/S.154 OF THE INCOME TAX ACT, 1956 ('THE ACT') ON DISPOSAL OF RECTIFICATION APPLICATION OF T HE APPELLANT INSTEAD OF CONSIDERING THE AMOUNT OF RS.1,54,78,224 AS PER THE DRAFT ASSESSMENT ORDER. WITHOUT PREJUDICE TO GROUND NO. II: ADDITIONAL GROUND NO. VI: ADOPTING INCORRECT VALUE OF PROJECT MANAGEMENT FEES: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. AO BE DIRECTED TO MAKE THE ADJUSTMENT WITH REGARDS TO PROJECT MANAGEMENT FEES ON THE VALUE AS REPORTED BY THE APPELLANT I.E. RS.33,91,555 INSTEAD OF RS.1,54,78,224. 5. SHRI YOGESH A. THAR APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UND ER APPEAL, THE ASSESSEE WAS IN THE PROCESS OF SETTING UP A NEW MANUFAC TURING FACILITY AT JAMSHEDPUR FOR COATED STEEL. THE ASSESSEE RECEIVED TECH NICAL ASSISTANCE SERVICES AND PROJECT MANAGEMENT SERVICES FROM ITS AES FO R WHICH THE ASSESSEE PAID FEE RS.1,44,300,000/- AND RS.33,91,555/-, RESPE CTIVELY. THE ASSESSEE CAPITALIZED THE PAYMENTS MADE FOR BOTH THE ABO VE SERVICES AND DID NOT CLAIM THE SAME AS EXPENDITURE IN THE P & L ACCOUNT. NO DEPRECIATION WAS CLAIMED BY THE ASSESSEE EITHER IN THE ASSESSMENT YE AR 2010-11 AS THE PROJECT WAS STILL UNDER CONSTRUCTION. THE ASSESSEE FURNISH ED THE CERTIFICATE FROM AES CERTIFYING THAT THE CHARGES FOR PROVIDING TECHNIC AL ASSISTANCE SERVICES AND PROJECT MANAGEMENT SERVICES CHARGED FROM THE ASSESSEE ARE AT PAR WITH THE CHARGE FROM THIRD PARTY, FOR SIMILAR SERVICES. THE TPO REJECTED THE ASSESSEES CLAIM PRIMARILY ON THE GROUND THAT THE A SSESSEE HAS FAILED TO PRODUCE NECESSARY DOCUMENTS TO SHOW THAT THE SERVICE S HAVE BEEN INDEED RENDERED. 5.1 THE LD. AR FURTHER SUBMITTED THAT DURING THE COURSE O F PROCEEDINGS BEFORE THE TPO, ASSESSEE HAD SUBMITTED VARIOUS DOCUMENTS TO S HOW THAT THE 5 ITA NO. 847/PUN/2015 A.Y.2010-11 SERVICES HAVE BEEN RECEIVED AND THE DOCUMENTS PRODUCE D BY THE ASSESSEE INCLUDED: I) AGREEMENT FOR TECHNICAL ASSISTANCE SERVICES; II) E-MAILS, COMMUNICATIONS EVIDENCING RECEIPT OF TECHNICAL ASSISTANCE AS WELL AS PROJECT MANAGEMENT SERVICES; III) CERTIFICATE ISSUED BY AE CERTIFYING THAT TECHNICAL ASSISTAN CE AS WELL AS PROJECT MANAGEMENT SERVICES WERE PROVIDED; IV) AFFIDAVIT FROM AE CONFIRMING THAT THE PRICES ARE COMPARAB LE TO THOSE CHARGED TO THIRD PARTIES; V) WRITE UP ON VARIOUS BENEFITS RECEIVED BY THE ASSESSEE AS A RESULT OF THESE SERVICES AVAILED FROM AES. THE LD. AR POINTED THAT ALL THE ABOVE SAID DOCUMENTS AR E PART OF THE PAPER BOOK FILED BEFORE THE TRIBUNAL. THE LD.AR HAS DRAWN OUR ATTENTION TO THE OBSERVATIONS OF TPO IN PARA 6.4 OF THE ORDER PASSED U/S.92CA(3) OF THE ACT. THE LD. AR POINTED THAT TPO HAS NOT RAISED ANY DOUB T OVER THE AUTHENTICITY OF THE DOCUMENTS FURNISHED BY THE ASSESSEE. 5.2 THE LD. AR FURTHER CONTENDED THAT PROVISIONS OF CHAPT ER X OF THE ACT ARE ONLY COMPUTATIONAL PROVISION AND DOES NOT CONTAIN CH ARGING SECTIONS. THEY ONLY COMPUTE INCOME/ ALLOWANCE OF EXPENSES HAVING REGARD TO THE ALP. SINCE NO EXPENDITURE HAS BEEN CLAIMED BY THE ASSESSEE, T RANSACTION UNDER DISPUTE DOES NOT COME UNDER THE PURVIEW OF CHAPTER X O F THE ACT. TO SUPPORT HIS CONTENTIONS, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) VODAFONE INDIA SERVICES (P.) LTD. VS. UNION OF I NDIA, REPORTED AS 381 ITR 1 (BOM.) II) S.G. ASIA HOLDINGS (INDIA) (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, TRANSFER PRICING-II(7), MUMBAI, 54 TAXM ANN.COM 376 ( BOMBAY) III) ATC TELECOM TOWER CORPORATION (P.) LTD. VS. DE PUTY COMMISSIONER OF INCOME TAX, 154 ITD 95 (MUMBAI-TRIB.) 6 ITA NO. 847/PUN/2015 A.Y.2010-11 IV) EQUINOX BUSINESS PARKS (P.) LTD. VS. UNION OF I NDIA, 55 TAXMANN.COM 222 ( BOMBAY) 5.3 THE LD. AR RAISING ALTERNATE CONTENTION SUBMITTED THAT WHERE EXPENDITURE IS IN THE CAPITAL FIELD, IT DOES NOT GIVE RISE TO A NY INCOME IN ITSELF. THEREFORE, NO ADJUSTMENT CAN BE MADE FOR THE DIFFER ENCE BETWEEN DECLARED VALUE AND ALP OF SUCH INTERNATIONAL TRANSACTION. IN OTHER WORDS, TRANSFER PRICING PROVISIONS DO NOT APPLY TO CAPITAL ACCOUN T TRANSACTIONS. THE TRIBUNAL IN THE CASE OF HONDA MOTORCYCLE & SCOOTERS IND IA PVT. LTD. VS. ACIT, IN ITA NO.1379/DEL/2011 DATED 13.04.2015 HELD THAT THE DEPRECIATION ON SUCH ASSETS BEING A REVENUE OFFSHOOT OF T HE CAPITAL TRANSACTION WILL BE REQUIRED TO BE RECOMPUTED ON THE BAS IS OF VALUE OF FIXED ASSETS DETERMINING ALP APPLYING THE MOST APPROPRIATE ME THOD UNDER CHAPTER X. 5.4 THE LD. AR FURTHER CONTENTED THAT THE AUTHORITIES B ELOW HAVE REJECTED THE TRANSACTIONS AT THE OUTSET WITHOUT ASCERTAINING THE ALP AS PER METHOD PRESCRIBED U/S. 92C OF THE ACT DISALLOWING THE PAYMENTS W ITHOUT APPLYING ANY OF THE PRESCRIBED METHOD IS AN ACTION WHICH IS COMPLE TELY DEHORS THE PROVISIONS OF CHAPTER X AND THEREFORE, THE SAME CANNOT B E SUSTAINED. TO BUTTRESS HIS ARGUMENT, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIO NS: I) CIT VS. JHONSON & JHONSON LTD. REPORTED AS 80 TA XMANN.COM 269 (BOMBAY) II) LEVER INDIA EXPORTS LTD. VS. ACIT REPORTED AS 4 3 TAXMANN.COM 427 (MUMBAI-TRIB.) III) ASST. COMMISSIONER OF INCOME TAX VS. KOCH CHEM ICAL TECHNOLOGY GROUP (INDIA) LTD. REPORTED AS 64 TAXMANN.COM 464 7 ITA NO. 847/PUN/2015 A.Y.2010-11 5.5 IN RESPECT OF ADDITIONAL GROUNDS RAISED BY THE ASSESS EE, THE LD. AR SUBMITTED THAT WHILE MAKING TRANSFER PRICING ADJUSTMENT IN RELATION TO PROJECT MANAGEMENT SERVICES, THE TPO AND THE ASSESSING OFFICER INADVERTENTLY RECORDED THE TRANSACTION AT RS.1,54,78,224 /- INSTEAD OF RS.33,91,555/-AS CLAIMED BY THE ASSESSEE. THE ASSESSEE FILED RECTIFICATION APPLICATION U/S.154 OF THE ACT ON 19.03.2014 BEFORE THE TPO TO RECTIFY THE SAID MISTAKE, APPARENT FROM RECORD. THE ASSESSEE AGAIN FILED REMINDER LETTER DATED 31.01.2018 REQUESTING THE TPO TO DECIDE THE RECTIFIC ATION APPLICATION FILED BY THE ASSESSEE. THE TPO VIDE ORDER DATED 28.02.2018 REJECTED THE ASSESSEES REQUEST FOR RECTIFICATION BY STATING THAT THE ASSESSEE IS SEEKING REVIEW. THE TPO FURTHER REFUSED TO INTERFERE AS THE ISSUE WAS SUBJECT MATTER OF APPEAL BEFORE THE TRIBUNAL. A BARE PERUSAL OF THE CHART AT PAGE NO.2 OF THE ORDER DATED 29.01.2014 PASSED BY THE TPO WOULD SHOW TH AT THE RECEIPT OF PROJECT MANAGEMENT SERVICES AMOUNT IS RS.33,91,555/-. THE SAID CHART HAS BEEN TAKEN FROM TP AUDIT REPORT. WHEREAS, THE AMOUNT D ISALLOWED BY THE TPO IS RS.1,54,78,224/-. THE MISTAKE IN MENTIONING THE WRONG AMOUNT OF PROJECT MANAGEMENT FEE IS GLARING. THE TPO HAS ERRED IN Q UANTIFYING THE PROJECT MANAGEMENT FEES WHILE DISALLOWING THE AMOUNT AS IS CLEARLY EVIDENT FROM RECORDS. THE LD. AR CONTENDED THAT NECESSARY DIRECT ION MAY BE GIVEN TO THE TPO TO RECTIFY THE MISTAKE WHICH IS APPARENT FROM RECORDS. 6. ON THE OTHER HAND, SMT. NIRUPAMA KOTRU REPRESENTING T HE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE T HE SERVICES RENDERED BY THE AES. BARRING AGREEMENT, CERTIFICATE FROM AES AND E -MAILS, NO OTHER DOCUMENT WAS FURNISHED BY THE ASSESSEE TO SUBSTANTIATE THAT THE SERVICES WERE INDEED RENDERED BY THE AES TO THE ASSESSEE. THE LD. DR CONTENTED THAT AS PER RULE 10D OF THE INCOME TAX APPELLATE RULES, 1962, T HE ASSESSEE WAS 8 ITA NO. 847/PUN/2015 A.Y.2010-11 REQUIRED TO FURNISH INFORMATION AND DOCUMENTS. HOWEVER, NO SUCH DOCUMENTATION WAS MAINTAINED BY THE ASSESSEE WITH RESPE CT TO THE INTERNATIONAL TRANSACTIONS. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE AND UPHOLDING THE IMPUGNED ORDER. 6.1 THE LD. DR ASSERTED THAT THOUGH IN THE ASSESSMENT Y EAR UNDER APPEAL, NO DEDUCTION HAS BEEN CLAIMED BY THE ASSESSEE. THE ASSE SSEE WILL EVENTUALLY CLAIM DEDUCTION IN THE FORM OF DEPRECIATION IN THE SUBSEQUENT YEAR W HEN THE PROJECT OF THE ASSESSEE WOULD BECOME OPERATIONAL. THEREFORE, TR ANSFER PRICING ADJUSTMENTS ARE REQUIRED TO BE MADE IN THE YEAR IN WHIC H THE ALLEGED SERVICES ARE CLAIMED TO HAVE BEEN RECEIVED. IN SUPPORT O F HER SUBMISSIONS, THE LD. DR PLACED RELIANCE ON THE DECISION IN THE CASE OF EA TON TECHNOLOGIES (P.) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, REPORTED IN 32 TAXMANN.COM 103 (PUNE-TRIB.). SINCE THE ASSESSEE FAILED TO PROVE THE BENEFIT RECEIVED FROM THE SERVICES OR THE RENDERING OF SERVICES, T HE SAME WERE VALUED AT NIL. 7. CONTROVERTING THE SUBMISSIONS ADVANCED BY DR, THE LD. AR SUBMITTED THAT A BARE PERUSAL OF THE PROVISIONS OF SECTION 92 OF T HE ACT WOULD MAKE IT CLEAR THAT THEY APPLY TO ALLOWABILITY OF ANY EXPENDITURE AR ISING FROM INTERNATIONAL TRANSACTION ON THE BASIS OF ALP. DEPRECIATION IS IN THE NATURE OF ALLOWANCE AND NOT EXPENDITURE. THEREFORE, IT DOES NOT FALL WITHIN THE PURVIEW OF EXPLANATION TO SECTION 92(1) OF THE ACT. TO SUPP ORT HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) NECTER BEVERAGE (P.) LTD. VS. DCIT REPORTED AS 314 ITR 314 (SC). II) SPECIAL BENCH DECISION IN THE CASE OF SHRI VISH NU ANANT MAHAJAN VS. ACIT, IN ITA NO.3002/AHD/2009, (SB)(AHD.) DECIED ON 25.05.2012. III) HOSHANG D. NANAVATI VS. ACIT REPORTED AS 16 IT R (T) 614) (MUM.) 9 ITA NO. 847/PUN/2015 A.Y.2010-11 8. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVE S OF THE RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. WE HAVE ALSO CONSIDERED THE VARIOUS DOCUMENTS AND DECISIONS ON WHICH BOTH THE SIDES HAVE PLACED RELIANCE WHILE MAKING SUBMISSIONS. THE ASSESSEE DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL HA S PURPORTEDLY RECEIVED TECHNICAL ASSISTANCE AND PROJECT MANAGEMENT SE RVICES FROM ITS AES I.E. BIEC INTERNATIONAL INC. AND BLUESCOPE STEEL LTD. AUSTRA LIA, RESPECTIVELY. FOR THE AFORESAID SERVICES, THE ASSESSEE HAS PAID FEE TO ITS AES. A PERUSAL OF TPOS ORDER AND DIRECTIONS OF THE DRP REVEAL THAT THE C OST OF AFORESAID SERVICES HAVE BEEN CONSIDERED AT NIL BY THE TPO AS TH E ASSESSEE HAS FAILED TO FURNISH NECESSARY DOCUMENTS SUBSTANTIATING RENDERING OF SERVICES. THE LD. AR POINTED THAT THE ASSESSEE HAD PRODUCED VARIOUS D OCUMENTS WHICH INTER ALIA INCLUDES AGREEMENT, E-MAILS COMMUNICATIONS EVIDENCIN G RECEIPT OF TECHNICAL ASSISTANCE AND PROJECT MANAGEMENT SERVICES, CE RTIFICATE FROM THE AES CERTIFYING RENDERING OF SERVICES, ETC. THE TPO AFTER CO NSIDERING THE SAME HAS NOT RAISED ANY DOUBT OVER THE AUTHENTICITY OF THE D OCUMENTS. HOWEVER, ONE REASON FOR REJECTING THE DOCUMENTS IS THAT THE DOC UMENT FURNISHED ARE NOT IN ACCORDANCE WITH THE LIST OF DOCUMENTS SPECIFIED UNDE R RULE 10D OF THE I.T RULES AND HENCE, THE VALUE OF TRANSACTION WAS CO NSIDERED AS NIL. WE DO NOT CONCUR WITH THE OBSERVATIONS OF THE AUTHORITIES B ELOW IN REJECTING THE DOCUMENTS FURNISHED BY THE ASSESSEE TO SUBSTANTIATE RE NDERING OF SERVICES. RULE 10D(1) DOES NOT LIMIT THE DOCUMENTS SPECIFIED THEREIN TO SUBSTANTIATE INTERNATIONAL TRANSACTION AND THE PRICING OF THE SAME. CLA USE (M) OF SECTION 10D(1) IS RESIDUARY CLAUSE WHICH GIVES LIBERTY TO THE ASSESSEE TO FURNISH ANY INFORMATION, DATA OR DOCUMENTS RELATING ASSOCIATE ENTERPR ISES WHICH MAY BE RELEVANT FOR DETERMINING ALP. THE PROVISION OF SECTION 9 2C LAYS DOWN THE PROCEDURE FOR DETERMINING ALP. THE TPO WHILE DETERMINING AL P/TRANSACTION 10 ITA NO. 847/PUN/2015 A.Y.2010-11 HAS GOT LIMITED JURISDICTION TO ASCERTAIN THE ALP OF THE TR ANSACTION. THE TPO CANNOT SIT IN JUDGMENT TO ASCERTAIN WHETHER SERVICES AR E INDEED REQUIRED BY THE ASSESSEE OR NOT. IT IS BEYOND THE SCOPE OF TPOS JURISDICTION TO COMMENT ON THE REQUIREMENT OF THE SERVICES BY THE ASSESSEE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. EKL APPLIANCES LTD. REPORTE D AS 345 ITR 241 HAS HELD: ..IT IS NOT NECESSARY FOR THE ASSESSEE TO SHOW TH AT ANY LEGITIMATE EXPENDITURE INCURRED BY HIM WAS ALSO INCURRED OUT O F NECESSITY. IT IS ALSO NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY EXPENDI TURE INCURRED BY HIM FOR THE PURPOSE OF BUSINESS CARRIED ON BY HIM HAS ACTUA LLY RESULTED IN PROFIT OR INCOME EITHER IN THE SAME YEAR OR IN ANY OF THE SUB SEQUENT YEARS. THE ONLY CONDITION IS THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NOTHIN G ELSE.. 9. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF THYSSE N KRUPP INDUSTRIES INDIA (P.) LTD. VS. ACIT, REPORTED AS 55 SOT 49 7 FOLLOWING THE RATIO LAID DOWN IN CIT VS. EKL APPLIANCES LTD. (SUPRA.) HELD TH AT JURISDICTION OF TPO IS LIMITED TO DETERMINE THE ALP OF THE TRANSACTION S UNDER THE METHODS PROVIDED UNDER THE ACT. SIMILAR VIEW HAS BEEN TA KEN BY THE TRIBUNAL IN VARIOUS OTHER CASES. THE TPO CANNOT STEP INTO THE SHOES OF THE ASSESSEE TO ASCERTAIN THE NEED FOR THE SERVICES. 10. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT CLAIMED THE EXPENDITURE TOWARD PAYMENTS OF TECHNICAL ASSISTANCE FEES AND PROJECT MANAGEMENT FEES. THE ASSESSEE HAS CAPITALIZED THE SAME A S THE PROJECT WAS NOT COMPLETE IN THE PERIOD RELEVANT TO THE ASSESSMENT Y EAR UNDER APPEAL. THE CAPITAL TRANSACTIONS ARE OUTSIDE THE PURVIEW OF TRAN SFER PRICING MECHANISM. HAVING OBSERVED THAT, THERE IS NO DENYING THE FACT THAT IN THE SUBSEQUENT YEARS THE ASSESSEE WOULD BE CLAIMING DEPRECIATION O N THE COST OF CAPITAL ASSET WHICH WOULD INCLUDE PAYMENT OF FEES FOR TECHN ICAL ASSISTANCE 11 ITA NO. 847/PUN/2015 A.Y.2010-11 AND PROJECT MANAGEMENT. THEREFORE, DETERMINATION OF ALP OF SUCH SERVICES IN THE YEAR OF PAYMENT OF SUCH FEES WOULD BE RELEVANT. 11. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF HONDA MOTORCYCLE & SCOOTERS INDIA PVT. LTD. VS. ACIT (SUPRA.) HAS HELD THAT DE TERMINING OF ALP IN RESPECT OF PURCHASE OF FIXED ASSETS IS NECESSITATED AS IN THE SUBSEQUENT YEARS THE VALUE OF TRANSACTIONS WILL HAVE BEARING WHEN DE PRECIATION IS CLAIMED. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL IS T HE SAID CASE IS REPRODUCED AS UNDER: 15.3 IF THERE IS AN INTERNATIONAL TRANSACTION WHICH IN I TSELF GIVES RISE TO INCOME THAT IS CHARGEABLE TO TAX, THEN ITS ALP SHALL CONSTITUTE A BASIS FOR MAKING OF ADDITION ON ACCOUNT OF DIFFEREN CE BETWEEN THE ASSIGNED VALUE AND ALP OF SUCH INTERNATIONAL TRANSA CTION AS PER THE RELEVANT PROVISIONS. BUT IF THERE IS AN INTERNATION AL TRANSACTION IN THE CAPITAL FIELD, WHICH DOES NOT OTHERWISE GIVE RISE T O ANY INCOME IN ITSELF, THEN EVEN THOUGH ITS ALP MAY BE COMPUTED IN CONSONA NCE WITH THE PROVISIONS, BUT NO ADJUSTMENT CAN BE MADE FOR THE D IFFERENCE BETWEEN THE DECLARED VALUE AND THE ALP OF SUCH INTERNATIONA L TRANSACTION. AT THE SAME TIME, IT DOES NOT MEAN THAT THE COMPUTATION OF THE ALP OF SUCH AN INTERNATIONAL TRANSACTION IN THE CAPITAL FIELD IS J UST A RITUAL AND SHOULD NOT BE EMBARKED UPON. IN FACT, SUCH A COMPUTATION I S NECESSARY BECAUSE OF THE IMPACT OF SUCH A TRANSACTION OF CAPI TAL NATURE ON THE TRANSACTIONS OF ITS REVENUE OFFSHOOTS. IN OUR PRESE NT CONTEXT, THE INTERNATIONAL TRANSACTION OF PURCHASE OF FIXED ASSE TS IS REQUIRED TO BE BENCHMARKED AS PER THE MOST APPROPRIATE METHOD. THE APPLICATION OF THE ALP, IF REQUIRED, WILL GIVE RISE TO THE RECOMPU TATION OF THE REVISED VALUE OF THE PURCHASE OF FIXED ASSETS. SUCH AN INCR EASE IN THE VALUE OF THE ITA NO.1379/DEL/2011 FIXED ASSETS, BEING A CAPI TAL TRANSACTION IN ITSELF, WILL NOT GIVE RISE TO ANY ADDITION TOWARDS TRANSFER PRICING ADJUSTMENT, BUT THE DEPRECIATION ON SUCH ASSETS, BE ING A REVENUE OFFSHOOT OF THE CAPITAL TRANSACTION, WILL BE REQUIR ED TO BE RECOMPUTED ON SUCH REVISED VALUE. 12. THUS, IN VIEW OF THE FACT THAT THE TPO IN THE INSTANT CASE AT THE OUTSET HAD DETERMINED THE SERVICES I.E. TECHNICAL ASSISTANCE AND P ROJECT MANAGEMENT SERVICES AT NIL WITHOUT DETERMINING ALP OF TH E TRANSACTIONS, HENCE, WE DEEM IT APPROPRIATE TO RESTORE THE GROUND NO .1 AND 2 OF THE APPEAL BACK TO THE FILE OF TPO/ASSESSING OFFICER TO ASCERTA IN THE ALP OF THE TRANSACTIONS BY ADOPTING MOST APPROPRIATE METHOD PRESC RIBED UNDER THE 12 ITA NO. 847/PUN/2015 A.Y.2010-11 ACT. THE ASSESSEE IS GRANTED LIBERTY TO FURNISH NECESSA RY DOCUMENTS TO FURTHER SUBSTANTIATE RENDERING OF TECHNICAL ASSISTANCE AND PROJECT MANAGEMENT SERVICES BY AES TO THE ASSESSEE. THE ASSES SEE IS FURTHER DIRECTED TO FURNISH THE DETAILS OF COMPARABLE SERVICES REND ERED BY THE AES TO THIRD PARTIES. THE TPO/ASSESSING OFFICER WHILE RECONSIDERING T HE ISSUE SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE , IN ACCORDANCE WITH LAW. ACCORDINGLY, GROUND NO.1 AND 2 RAISED IN THE APPEAL BY ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 13. IN GROUND NO.3 OF THE APPEAL, THE ASSESSEE HAS RAISE D ALTERNATE PLEA TO GROUND NO.1 AND 2. IN PRINCIPLE, WE HAVE ALLOWED THE GROUN D NO. 1 & 2 OF THE APPEAL AND HAVE RESTORED THE SAME TO THE FILE OF ASS ESSING OFFICER/TPO TO DETERMINE ALP OF INTERNATIONAL TRANSACTIONS UNDER DISP UTE, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. CONSEQUENTLY, THE GROUND NO.3 HAS BECAME ACADEMIC AND HENCE IS NOT DELIBERATED UPON. 14. GROUND NO. 4 IS GENERAL IN NATURE AND HENCE, REQUIRES NO ADJUDICATION. 15. IN ADDITIONAL GROUNDS OF APPEAL MARKED AS GROUND NO. V AND VI, THE ASSESSEE HAS ASSAILED THAT THE RECTIFICATION HAS NOT BEEN CARRIED OUT BY THE TPO WITH RESPECT TO THE AMOUNT OF FEES PAID FOR PROJECT MANAGEMENT SERVICES. THE LD. AR HAS DRAWN OUR ATTENTION TO THE TABLE AT PAGE 2 OF THE ORDER PASSED BY TPO. A PERUSAL OF THE SAME SHOWS THAT AGAINST PROJECT MANAGEMENT SERVICES AMOUNT MENTIONED IS RS.33,91,555/-, T HE TPO HAS MADE UPWARD ADJUSTMENT OF RS.1,54,78,224/- IN RESPECT OF P ROJECT MANAGEMENT FEES CONSIDERING IT AS NIL. IT IS NOT EMANATIN G FROM THE ORDERS AS FROM WHERE THE TPO HAS PICKED THE FIGURE OF RS.1,54,78,22 4/-. AS PER THE 13 ITA NO. 847/PUN/2015 A.Y.2010-11 CONTENTIONS OF THE LD. AR THE TABLE AT PAGE 2 OF ORDER B Y TPO IS FROM TP AUDIT REPORT. THE TPO/ ASSESSING OFFICER IS DIRECTED TO LOO K IN TO THE DISCREPANCIES OF THE AMOUNT MENTIONED IN TABLE AT PAGE 2 AND ADJUSTMENT PROPOSED BY THE TPO QUA PROJECT MANAGEMENT SERVICES AND RECTIFY THE MISTAKE, IF ANY. ACCORDINGLY, ADDITIONAL GROUNDS OF APPEAL RAISE D BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED ON FRIDAY, THE 15 TH DAY OF FEBRUARY, 2019. SD/- SD/- ( . / D. KARUNAKARA RAO ) ( ! ' /VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; !' / DATED : 15 TH FEBRUARY, 2019. SB ) * +#,-! .!(, / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-13, PUNE. 4. THE PR. CIT-5, PUNE. 5. %&' () , * () , +,- , / DR, ITAT, B BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // *2 / BY ORDER, 3 (- / PRIVATE SECRETARY * () , / ITAT, PUNE. 14 ITA NO. 847/PUN/2015 A.Y.2010-11 DATE 1 DRAFT DICTATED ON 11.02.2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 12.02.2019 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER