ORDER :

A short point that arises for consideration in these writ petitions is whether the respondent Assessing Officer was justified in passing the impugned orders dated 6.3.2017 before passing a Draft Assessment Order under section 143(3) read with Section 92CA (4) and Section 144C (1) of the Income Tax Act, 1961.

2. Earlier by an order dated 24.8.2016, the Income Tax Appellate Tribunal had allowed the appeal filed by the respondent in I.T.A. Nos. 952/Mds of 2015 and I.T.A.No740/Mds 2016 for the Assessment Years years 2010-11 and 2011-12 with the following observations :-

“7. We have heard both the parties and perused the material on record. The main issue for consideration is whether the CUP method to be followed or TNMM to be followed to determind the ALP of assessee's case. This was considered by the Tribunal in the case of M/s Knorr Bremsc India Pvt. Ltd. Vs. ACIT vide order dated 31.10.2012, wherein held that:-

“9. The appellant has also assailed the addition made on account of international transactions (Rs.1,52,07,206/- towards professional consultancy and Rs.1,40,56,800/- towards management fee for support services), by determining Nil value as the ALP. The TPO found that these services provided by the AE are very general in nature and such a support is expected from AU even without payment of any such charge. The assessee argued that the authorities below are stated to have acted beyond their jurisdiction in touching upon the commercial expediency of the transactions. The DRP, however, has found that Emails brought on record merely justify presence of Ms.Rita Ricken as team leader of sales logistics, which is only an effort to justify her presence. She in fact is safeguarding group interest shareholder interest. The TPO has analysed each service and benefit received by assessee in detail. No cost allocation key has been furnished to the DRP either which confirmed the addition made for both such services claimed by the assessee.

9.1.The appellant's contention that TPO is no authority to judge the allowability of the business expenditure is a correct proposition of law in view of the decision rendered by the Hon'ble Delhi High Court in its order dated 29th March 2012 in the case of EKL Appliances Ltd., (ITA Nos.1068/2011 & 1070/2011). The Hon'ble High Court in para judgment has ruled as under:-

“Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then makes suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grouns which have been given by the TPO is not contemplated or authorized.”

9.2. After hearing the parties with reference to material on record, we find that the authorities below have not conclusively held that the assessee could not enter into such a transaction nor had they disallowed the same by holding that such an expenditure is not assessee's business expenditure. The DRP as well as the authorities below have merely elucidated that the payments are reimbursement in respect of Ms.Rita Ricken and other personnel's case to serve the interest