AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 642
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....es, (AE.s), that the value of IT.s was more than Rs. 50 crores. He made a reference to Transfer Pricing Officer(TPO) to determine the Arm's Length Price (ALP)of the IT.s.During the TP proceedings, the TPO found that the assessee had entered into following IT.s S.No. Nature of International Transactions A.Y. 2011-12 Amount (Rs.) Segment 1. Purchase of Goods for Resale 996,329/- 2. Sale of Goods 45,982,164/- 3. Global Account Management Service (Amt. Receivable) 643,318/- 4. Global Account Management Service (Amt. Payable) 12,288,416/- 5. Maintenance & Technical Services 49,831,419/- Availed Distribution And Support Service Segment 6. Maintenance Services provided 83,215,751/- 7. Rendering of Advisory services in connection with marketing of products (Commission) 21,704,295/- 8. Allocation of Management 229,122,265/- 9. Allocation of Training Fees 15,349,345/- 10. Reimbursement of Expense Receivable 162,586,415/- 11. Reimbursement of Expense Pa....
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....e adjustment only with respect to balance amount of 22% of Rs. 22.91 crores i.e. Rs. 5.04 crores, that the TPO had failed to appreciate the fact that the management fee was for bundle of services and the value of benefits assessee received was much higher than the payments made as management fees, that against the total management fees of Rs. 12.91 crores the benefit accrued to the assessee was to be Rs. 64.22 crores on account of guarantee support and support in global procurement, that the order of the DRP for the AY. 2010 -11 was not efficacious for the year under consideration, that the TPO had erred in applying the CUP method, that he had wrongly treated some of the services provided by the AE to the assessee says shareholder's activities. 3.1. The DRP observed that the assessee had not filed any break up of fee charged by the AE against the different type of services claimed to have been rendered by AE, that during the TP proceedings the TPO had specifically raised the issue of breakup of price charged, that the assessee had furnished the break up vide its letter dated 14/1/2015, that same was not giving complete picture, that the assessee was a distributor of Cisco produc....
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...., that the assessee has failed to prove that facts of the year under consideration were different from the facts for the earlier year, that the order of the DRP for the last assessment year was very much relevant to decide the issue on hand, that the assessee had neither justified the markup of 10% charged by the AE over and above its cost nor had it shown that the cost incurred by the AE were in fact in respect of services actually rendered, that the transaction of Rs. 21 crores, in the overall profitability in respect of turnover of Rs. 400 crores, was too small to arrive at any conclusion, that it attempted to aggregate the meagre AE transaction with the substantial non-AE transaction and to apply the TNM method was not in accordance with the law, that the TPO had rightly rejected the method, that intra group services had to be benchmarked separately, that the TPO had rightly applied the CUP method, that the evidences produced by the assessee indicated that some incidental benefit might have been accrued to it, that an Indian company could not charge the AE for some incidental benefit that the AE might derive out of the activities performed, that the TPO had been quite liberal i....
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....e assessee was to be rendered services by its AE under ten different heads, that the assessee had availed certain services from its AE as per the agreement and had made payment accordingly, that the AE had similar type of agreements with other entities of the group, that the allocation key used for charging management fee to various entities of the group by the AE was turnover of an entity vis-a-vis turnover of the entire Asia- Pacific group for the year under consideration. We are of the opinion that the basic issue to be decided in the matter before us is as to whether the payment made by the assessee under the head management service should be allowed or not. It is a fact, assessee had, during the year under consideration, not availed services under the heads (i)Corporate communication & brand management services,(ii)Human resources services and(iii)Sales and marketing services. It is also a fact that as per the agreement the assessee was entitled to avail all the services. We find that similar issue has been deliberated upon and decided by the Hon'ble Bombay High Court in the case of Merck Ltd.(supra). In that matter the assessee had entered into an agreement with its AE.s to p....
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....vices and the respondent-assessee could avail of all or any one of these twelve areas listed out in the agreement as and when the need arose. We find the agreement is similar to a retainer agreement. Consequently, the finding of the Assessing Officer attributing nil value to nine of the services listed in the agreement which were not availed of by the respondent-assessee in the present facts was not justified. Moreover, not adopting one of the mandatorily prescribed methods to determine the arm's length price in respect of fees for technical services payable by the respondent-assessee to its associated enterprise, makes the entire transfer pricing agreement unsustainable in law. (e) In view of the above, the finding of fact arrived at by the Tribunal that Rs. 1.57 crores paid by it to its associated enterprises is in respect of its right to avail and the obligation of the associated enterprises to provide technical assistance in any of the twelve services listed out in the technical know-how agreement entered into between the respondent-assessee with its associated enterprises is not shown to be perverse. The view taken by the Tribunal in the present facts is a possible view." ....
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....g for general costs incurred and its components were not produced for verification, that it was not proved that the assessee had really benefited out of the services of the regional team, that no one would pay any amount without knowing the actual basis and also the actual allocation figures in a third-party situation, that the assessee had its own client/server system, that total allocation could not be accepted to be India specific. He held that adjustment had to be made in the TP order. Accordingly, he made an adjustment of Rs. 4.50 crores (50% of Rs. 9.01 crores)." 2.8. It is not denied by the TPO/DRP that expenses incurred by ACNielsen Corporation were not allocated to all the group entities on the basis of revenue. The assessee had made a claim that ACNielsen Asia Pacific has prepared a master file to determine an arm's length mark-up to be charged for the intra-group services. Both the authorities has not commented upon the said evidence and alleged errors, if any, of the method approved by the Group. In short, the assessee had proved with documentary evidences that charges paid by the assessee were at arm's length and that other arm's length entity was prepared....
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....Transfer Pricing Officer has no say in the matter. As held by the Supreme Court in S. A. Builders Ltd. v. CIT (Appeals) [2007] 289 ITR 26 (SC) the Revenue cannot justifiably claim to place itself in the arm chair of businessman or in the position of the board of directors and assume the role to decide how much is the reasonable expenditure having regard to the circumstances of the case. 22. Even rule 10B(1)(a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of rule 10B. Whether or not to enter into the transaction is for the assessee to decide........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 Transfer Pricing Officer to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is exp....