INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - Payment made to AE towards its technical services - TPO determined nil ALP by applying 'benefit test' and 'commercial expediency test' without considering evidences furnished by assessee

Assessee claimed deduction of payment made to its AE towards technical services and project management services. TPO determined ALP thereof at nil by applying 'benefit test' and 'commercial expediency test'. Assessee challenged this on the ground of TPO not having considered evidences furnished by assessee. Held: It was beyond jurisdiction of TPO to benchmark the transactions by applying 'benefit test' and 'commercial expediency test'. Rather his jurisdiction was limited to determine ALP of transactions with the standpoint of a businessman and not by sitting on the chair of businessman. Moreover, in the instant case, assessee brought on record plethora of evidence for availing of technical services and payment made for technical services received on the basis of USD 1600 per man-month on actual time spent by the relevant personnel, copy of technical services agreement between the assessee and the Huawei, China and also brought on record invoices filed on sample basis for availing technical services, but all these documents were not been examined by TPO. Even before applying benefit test and commercial expediency test TPO had not provided opportunity of being heard to assessee. Therefore, issue was remanded to TPO to decide afresh by examining all the evidences brought on record by assessee.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2012-13 & 2013-14

INCOME TAX ACT, 1961

Section 37(1)

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