Transfer pricing adjustment on intra-group support services deleted where contemporaneous records proved actual receipt and business necessity.

Upward transfer pricing adjustment for intra-group support services was held unsustainable where the assessee produced agreements, time sheets, debit notes and other contemporaneous records showing actual receipt of services, cost allocation with mark-up, and business necessity. The assessee's dependence on the associated enterprise for procurement, sales, compliance, financial and tax support, together with evidence that the services were not duplicative and enabled operations, supported deletion of the adjustment. Following similar facts in an earlier year, the coordinate bench had also deleted a comparable adjustment. The adjustment was directed to be deleted in favour of the assessee.

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Issues: Whether the upward transfer pricing adjustment of Rs. 1,79,11,717 on account of support services received from the associated enterprise was justified.

Analysis: The assessee showed that it had no employees on its payroll and was functionally dependent on the associated enterprise for day-to-day business support, including procurement and sale support, compliance assistance, financial and tax-related support, and other incidental services. The record included agreements, time sheets, debit notes, and documentary evidence showing actual rendering of services and cost allocation with mark-up. The material also supported that the services were not duplicative and that the assessee's business operations and turnover were enabled by such support. In the assessee's own earlier year, on similar facts, the coordinate bench had deleted a comparable adjustment for management support services.

Conclusion: The adjustment was not sustainable and was directed to be deleted in favour of the assessee.

Ratio Decidendi: Where intra-group services are evidenced by agreements and contemporaneous documents showing actual receipt and business necessity, a transfer pricing adjustment cannot be sustained merely on a general assertion that the services were not proved or were duplicative.

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