TaxTMI 
TaxTMI 
2010 (10) TMI 184
X X X X Extracts X X X X
X X X X Extracts X X X X
....passed adopting the order of the Transfer Pricing Officer (TPO) passed u/s 92CA of the Income-tax Act 1961. 3. The assessee is an Indian company and wholly owned subsidiary of Gemplus SA, France. Gemplus is a multi national engaged in providing smart card solution for telecommunication industry, financial services and other e-business segments. The assessee company in India is functioning under the regional headquarters of the mother firm at Singapore, mentioned as Gemplus Singapore. 4. The assessee company has filed its return of income for the impugned assessment year for Rs. 81,95,150/-. The return was initially processed u/s 143(1). Subsequently, the case was selected for scrutiny and notice was issued u/s 143(2). As the assessee comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to Rs. 1,44,98,000/-, the TPO found that the payment was not justified. She found that the total management services paid by the assessee company works out to Rs. 1,44,98,000/-. It is less than 5% of either the cost or sales. She observed that that comparables identified by the assessee company have not paid any management service fees. The Transactional Net Margin Method (TNMM) analysis made by the assessee company cannot be accepted for the purpose of ALP. Therefore, the claim for the payment of service charges has been rejected by the TPO u/s 92C(3). 9. In the hearing taken before the TPO, the assessee has elaborately explained why the payment of fee for management services was justified in the present case. As per the agreement, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....associate. The TPO had the same view on the contention raised by the assessee to justify the payment of Rs. 26,09,784/- against legal support. 10. Summing up the observations, the TPO concluded that the assessee company has not derived any specific benefit from the management services stated to be advanced by Gemplus Singapore and this is more so because the assessee company in India has already incurred separate head-wise expenses for professional and consultancy services. The TPO held that if at all any benefit is accrued as a result of the services said to be rendered by the Gemplus Singapore, the benefit was accrued to the Gemplus Singapore group as a whole and exclusively to the individual company Gemplus India. 11. On the basis of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee company. He has drawn our attention to various materials placed before us in the form of paper book, which contained the details of services rendered by the Gemplus Singapore in terms of the agreement entered into by the assessee company. In the light of the materials available on record, he submitted that the payment for services were made exclusively for the purposes of business carried on by it in India and, therefore, there is no reason or rhyme in treating the said amount outside the normal parameters of ALP. 16. The learned CA explained that the PLI opted by the assessee company is justified in the nature of business carried on by it and the TPO has gone wrong in holding that the payment of service charges to Gemplus Sing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gapore for different country centers on a mutual agreed basis and not on the basis of actual services rendered. 19. She also pointed out that the service agreement was entered into by the assessee company with its Singapore Associate even before the beginning of the relevant previous year and, therefore, it was not possible, at the time of entering into an agreement, to contemplate the nature and volume of services to be rendered and to workout the modalities of compensating the same. She, therefore, submitted that the appeal filed by the assessee devoid of merits. 20. We heard both sides in detail and also perused the records of the case including the paper book filed by the assessee company running in to 390 pages. The necessary facts o....