2018 (6) TMI 1866 - HC - Income Tax

Assessment sustained: Commissioner (Appeals) found payments to Canadian associate were arm's-length, supported by evidence of services received

HC upheld Commissioner (Appeals): payments by the taxpayer to its Canadian associate were treated as arm's-length and justified. The HC found that whether ... Payments made by the assessee to its Canadian associate - allegation of colourable way of diverting profits - HELD THAT:- Whether any services were received by an assessee from an entity against the price paid by such assessee to the relevant entity, is essentially a question of fact. As evident from the order of the Commissioner (Appeals) passed that similar objections of the TPO had not found favour with the Commissioner (Appeals) in respect of other assessment years and the orders of the Commissioner (Appeals) were upheld by the Appellate Tribunal and by this Court. If one were to delve into the basis of the order passed by the Commissioner (A), it would be evident that the Commissioner adopted the reasoning found in previous orders on the similar issue passed by the Appellate Tribunal. Appellate Tribunal questioned the basis of the opinion rendered by the TPO that such services were rendered uniformly to all associate concerns by the concerned associate of the assessee in the present case. Appellate Tribunal found that the TPO had not rendered a finding that such services were rendered by the entity to all associates without obtaining any payment therefor. The Appellate Tribunal had also reasoned that since the TPO found that some services had been rendered, payments to the relevant entity were justified. Since the same issue had been dealt with in previous orders of the Appellate Tribunal and of this Court, Commissioner (Appeals) in this case was justified in disregarding the opinion of the TPO on which the order of assessment was founded and finding that there was an arm’s length transaction between the assessee and its Canadian associate warranting payment by the assessee to the Canadian associate. No substantial question of law. No question of law was raised; the Revenue contended the Commissioner (Appeals) erred in allowing deductions despite the Transfer Pricing Officer (TPO) finding payments to a Canadian associate were 'a colourable way of diverting profits.' The Appellate Tribunal upheld the Commissioner (Appeals). Whether services were received in return for the payments is 'essentially a question of fact.' The Commissioner (Appeals) relied on earlier orders of the Appellate Tribunal addressing identical objections and concluded that the TPO had not shown the associate rendered services to all group entities without remuneration. The Appellate Tribunal also noted the TPO had found that some services were rendered, which justified payments. On that factual and precedential basis, the Commissioner (Appeals) was justified in disregarding the TPO's opinion and finding an 'arm's length transaction' between the assessee and its Canadian associate. The appeals were dismissed and no order as to costs was made.