Transfer pricing for intra-group services cannot be fixed at nil where documentary evidence proves actual receipt of services.

Contemporaneous documentary evidence of actual receipt and use of intra-group services prevented the arm's length price from being fixed at nil on a mere subjective view of benefit, and the transfer pricing adjustment was deleted. Once the services were accepted as rendered, the consequential disallowance under section 37(1) also could not survive and was deleted. On the refund issue, the claim for short grant of interest under section 244A required verification of the computation, and the Assessing Officer was directed to examine the claim and grant statutory interest in accordance with law.

---

---

Issues: (i) Whether the arm's length price of intra-group services could be determined at nil and the transfer pricing adjustment sustained; (ii) whether the disallowance under section 37(1) could survive once the services were accepted as rendered; (iii) whether the assessee was entitled to verification and grant of interest under section 244A.

Issue (i): Whether the arm's length price of intra-group services could be determined at nil and the transfer pricing adjustment sustained.

Analysis: The assessee had produced service agreements, allocation keys, cost workings, emails, presentations and independent audit material to evidence receipt and use of central corporate, global business unit and information technology services. The revenue did not bring cogent material to disprove rendition of services. Once receipt of services was demonstrated, the arm's length price could not be fixed at nil merely on a subjective view of benefit.

Conclusion: The transfer pricing adjustment for intra-group services was deleted for both assessment years, in favour of the assessee.

Issue (ii): Whether the disallowance under section 37(1) could survive once the services were accepted as rendered.

Analysis: The disallowance was consequential to the transfer pricing finding that no services had been availed. As that no longer survived after acceptance of actual receipt of services, the foundation for disallowance under section 37(1) ceased to exist.

Conclusion: The disallowance under section 37(1) was deleted, in favour of the assessee.

Issue (iii): Whether the assessee was entitled to verification and grant of interest under section 244A.

Analysis: The claim of short grant of refund interest required verification of computation and grant of statutory interest up to the date of actual refund, if any.

Conclusion: The Assessing Officer was directed to verify the computation and grant interest in accordance with law.

Final Conclusion: The appeals were accepted with deletion of the transfer pricing addition and the related disallowance, while the refund-interest claim was directed to be examined and granted as per law.

Ratio Decidendi: Where contemporaneous documentary evidence establishes actual receipt of intra-group services and the revenue fails to rebut that evidence, the arm's length price cannot be substituted at nil on a mere subjective perception of benefit; a consequential disallowance based solely on that rejected premise also cannot stand.

---