TaxTMI 
TaxTMI 
2017 (12) TMI 1636
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....he business of distribution of mobile handsets and accessories and also provides after sales services to its customers by undertaking warranty and non-warranty claim processing for various brands. Brightpoint group is engaged in the business of distribution of wireless voice and data products and a supplier of outsourced services worldwide. The assessee filed its return of income on 29.11.2012 showing total income of Rs. 3,51,38,534/-. The Assessing Officer referred the matter to the TPO to determine the arm's length price u/s 92CA(3) in respect of the international transactions entered into by the assessee. 2.1 The TPO, during the course of TP assessment proceedings, observed that the assessee has reported the following international transactions :- Nature of the transaction Method Value (Rs.) Sale of mobile handsets TNMM using Operating profit as a PLI Operating cost 105,33,54,438 Receipt of IT & software maintenance services 5,32,21,360 Receipt of management support services 4,49,25,556 Purchase of hardware 30,91,862 Provision of services 30,77,244 Payment of interest on external commercial borrowing CUP 40,22,969 ....
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....nel ("DRP") have erred in not accepting economic analysis of the Appellant, for determination of the arm's length price ('ALP') in connection with the impugned international transaction pertaining to payment of management support services. 4. The Ld. TPO/ Hon'ble DRP have grossly erred in rejecting the combined transaction approach of benchmarking adopted by the Appellant in its transfer pricing documentation analysis, and by rejecting Transactional Net Margin Method ('TNMM') as the most appropriate method ('MAM') for determining the arms' length price ('ALP') of payment for business service charges paid to its associated enterprises ('AEs') in accordance with the Act, Income Tax Rules, 1962 ('Rules') and the generally accepted OECD guidelines. 5. The Ld. TPO/ Hon'ble DRP erred in not appreciating that the receipt of various business services are closely linked to the overall business activities of the Appellant and erred in analyzing the transaction separately for the determination of ALP. 6. That the Ld. TPO/ Hon'ble DRP erred in not conducting the analysis of selecting the MAM as presc....
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....licable provisions of the Act and the Rules. 14. The Ld. TPO/ Hon'ble DRP erred in questioning the commercial rationale of the legitimate business expenses incurred by the taxpayer and not restricting the scope of assessment under section 92CA to determining the arm's length price of the international transaction by adopting one of the prescribed methods only. 15. The finding of the Hon'ble DRP that the payment may be alternatively disallowed under Section 37(1) is erroneous and contrary to the finding that the commercial expediency has not been doubted by Ld. TPO & AO. 16. The Ld. TPO/ Hon'ble DRP erred in disregarding the documentary evidence submitted by the Appellant and questioning the need and actual receipt of services by the Appellant. 17. The Ld. TPO/ Hon'ble DRP erred in disregarding the documentary evidence submitted by the Appellant and concluding that no benefit has been received by the Appellant by receipt of impugned services without appreciating that the same is irrelevant for the computation of arm's length price. 18. The Ld. TPO/ Hon'ble DRP erred in facts and in law by concluding the followi....
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....ricing guidelines at para 3.9 and 3.11 recognize that if certain transactions are closely linked then they can be benchmarked together. He submitted that the basis of separate analysis for export commission, royalty and model fee is completely perverse and does not relate to the facts of this case. There is no export commission, royalty and model fee paid in the present case. In absence of such transaction the very basis of rejection of TNMM is illusory and the same should have been accepted. He submitted that the TNMM has been adopted for five transaction using the combined transaction approach as these activities are closely linked to the main activity i.e. sale and distribution of handsets in a highly competitive market and after sales services, which are of technical nature. Further, the basis adopted in the TP report for adopting TNMM has not been rebutted. The TPO has failed to indicate any reasons for rejection of TNMM as the most appropriate method. Referring to the decision of the Tribunal in the case of Avery Dennison (India) (P.) Ltd. v. Asstt. CIT [2016] 65 taxmann.com 188 (Delhi - Trib.), he submitted that the Tribunal in the said decision has held that a single transa....
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.... by the assessee does not satisfy the need test and fail to demonstrate that services were actually received. He submitted that the TPO has rendered contradictory findings i.e. on one hand he has disputed the receipt of services and on the other hand he has stated that services received are incidental and duplicative. He submitted that since the assessee has made TDS on payments to its AEs, the same indicates that services were actually received for which payment was made. Further, the assessee had filed voluminous documents to substantiate that the services have in-fact been rendered. Referring to page 301 of the Paper Book (Volume - I) he submitted that independent auditor's certificate given to BP Australia proves that services have been rendered by the AE and received by the assessee. Referring to pages 212 to 235 of the Paper Book (Volume - I), he submitted that the invoices show that employee cost has been shared and taxes have been deducted by the assessee. Referring to pages 240 to 300 of the Paper Book (Volume - I), he drew the attention of the Bench to the sample email correspondence. Referring to page 685 of the Paper Book (Volume - I), he drew the attention of the B....
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....services on call as IGS ought to be considered for determining the arm's length price and cannot be rejected as merely shareholder services. BEPS report in-fact supports the case of the assessee for determining arm's length price using TNMM. He accordingly submitted that the grounds raised by the assessee should be allowed. 17.1 The remaining other grounds were not pressed by the ld. counsel for the assessee being general/argumentative/supportive in nature for which ld. DR has no objection. Accordingly, these grounds are dismissed as not pressed. 18. Ld. DR on the other hand strongly relied on the order of the Assessing Officer/TPO/DRP and submitted that the Revenue authorities have correctly appreciated the facts and passed the order by making an upward adjustment of Rs. 4,49,25,556/- and, therefore, the same should be upheld. In his alternate contention, he submitted that he has no objection if the matter is restored to the file of the Assessing Officer/TPO for adjudication of the issues afresh in the light of the various decisions relied on by the ld. counsel for the assessee. 19. We have considered the rival arguments made by both the sides and perused the orde....