TaxTMI 
TaxTMI 
2019 (5) TMI 178
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....f most appropriate method and search for comparable uncontrolled transaction to compute arm's length price as prescribed by Indian Transfer Pricing Regulations, thereby violating the provisions of Section 92C(3) of the Act. - in not taking cognizance of the submissions made by the appellant covering substantive documentary evidences demonstrating the receipt of management services and benefits derived therefrom. - in rejecting the benchmarking analysis conducted by the appellant by considering the overseas AE as the tested party. The Appellant prays that the transfer pricing adjustment pertaining to Management Service Fee be deleted. 3. The issue raised in the present appeal is against transfer pricing adjustment made in the hands of assessee by treating arm's length value of international transactions pertaining to payment of management service fees at Nil. 4. Briefly, in the facts of the case, the assessee had furnished the return of income declaring Nil income. The assessee was a domestic company engaged in the distribution of cutting and drilling tools, especially tungsten carbide tools. The assessee was importing finished goods i.e. cutting....
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....solution Panel (DRP), which were rejected and the Assessing Officer passed final assessment order by making an upward adjustment of Rs. 1.05 crores, against which the assessee is in appeal. 5. The learned Authorized Representative for the assessee pointed out that the assessee was engaged in two activities i.e. import of tools from its associated enterprises, which were sold in the domestic market and it also paid management service fees to its associated enterprise i.e. Sandvik AB. The transaction of import of tools has been accepted to be at arm's length price, however, the payment of management service fees of Rs. 1.05 crores to associated enterprise has not been accepted. The TPO was of the view that since no benefit arose to the assessee and also because of reason that Sandvik AB could not be the tested party, the arm's length price was taken at Nil. Then the learned Authorized Representative for the assessee took us through the order of DRP, wherein from page 11 onwards after referring to the list of services, the DRP talks of the benefit test and points out that in para 2.3.6 that no documents were filed by the assessee in support of its claim for receipt of manag....
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....tive for the Revenue placed heavy reliance on the observations of DRP at pages 11 to 17 of order. He further pointed out that in the absence of any services being received by assessee and further, no benefit arising to the assessee, there is no merit in the claim of assessee and orders of authorities below needs to be upheld. 7. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is against transfer pricing adjustment made in the hands of assessee by treating the payment of management services to associated enterprise at Nil. Briefly, in the facts of the case, the assessee's main activity of operation was import of cutting and drilling tools from its associated enterprise and selling the same in domestic market. The said international transaction has been accepted to be at arm's length price in the hands of assessee. In addition, the assessee had also paid management service fees to associated enterprise i.e. Sandvik AB. The first plea of assessee before us is that there is no merit in the orders of authorities below in applying the benefit test and holding that the transaction is not at arm's length price and by adopt....
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....rative management techniques and it was desirable that the assessee benefits from such specialized knowledge. Under the definition clause, 'Providing Parties' are defined to be all or some of the Sandvik companies, which provide management services. In other words, the agreement though executed by Sandvik AB with the assessee but the services shall be provided by the providing parties, which includes associates of Sandvik AB from time to time. The scope of services is clearly defined in clause 2 of the agreement and clause 3 deals with payment terms. It may be mentioned that the said agreement is in place in 2005 and it was put to the learned Authorized Representative for the assessee as to what was the fate of transfer pricing adjustment, if any in earlier years. The learned Authorized Representative for the assessee replied that in all the other years, the said issue became academic as because of technical aspects, the assessment orders passed by the Assessing Officer / TPO had been annulled. The assessee had explained before the TPO that the said service fees consisted of cost pertaining to services within ambit of marketing management, general administration, human resources an....