TaxTMI 
TaxTMI 
2020 (2) TMI 503
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....DRP, this Group operates globally in four segments i.e., Civil Aerospace, Defence Aerospace, Marine and Energy. It is stated that the Group Marine Division is one of the Global Leaders in Power Propulsion and Motion Control Systems. During the year under consideration, the assessee entered into various international transactions with its overseas AEs. One amongst them being provision of Application Engineering Service. During the proceedings under section 92CA(1) of the Act, the Transfer Pricing Officer, on a perusal of the transfer pricing study report filed by the assessee, found that the assessee has adopted Transactional Net Margin Method (TNMM) as the most appropriate method with Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator (PLI) to benchmark the transaction relating to the provision of Application Engineering Service worth Rs. 5,52,00,000. Further, he noticed that the assessee has selected four companies as comparables with updated arithmetic mean of 6.13% as against the margin shown by the assessee @ 7.98%. After perusing the transfer pricing study report, though, the Transfer Pricing Officer accepted the four comparables selected by the assessee, h....
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.... comparable. Further, she relied upon the decision of the Tribunal, Delhi Bench, in Bechtel India Pvt. Ltd. v/s DCIT, [2016] 66 taxmann. com 160 (Del.)(Trib.). 6. As regards Tata Consulting Engineers Ltd., the learned Authorised Representative submitted, this company cannot be treated as comparable as it renders fully integrated services from concept to commissioning. Whereas, the assessee merely renders designing and support service based on specific instructions provided by the AEs. The learned Authorised Representative submitted, for the aforesaid reason in assessee's own case in assessment year 2012-13, the Tribunal has rejected this company as a comparable. Further, she relied upon the decision of the Tribunal's decision in case of Bechtel India Pvt. Ltd. v/s DCIT (supra). 7. As regards Kitco Ltd., the learned Authorised Representative submitted, this company is into diversified business activities, as compared to the assessee which is merely rendering designing and support services based on specific instructions of the AEs. She submitted, as per the information contained in the annual report of the company, it is having ten divisions viz. Infrastructure, Tourism Aviation, U....
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.... the paper book, it is noticed that the company is engaged in providing consulting services in the areas of power, highway, bridges, engineering support services for bulk material handling and structural steel dealing. Thus, it is manifest, this company is not functionally similar to the assessee. Considering these facts this company has been excluded by the Tribunal while deciding assessee's appeal in Assessment Year 2102-13. In fact, identical view has been expressed by the Tribunal in Bechtel India Pvt. Ltd. (supra). Facts being identical, keeping in view the aforesaid decision of the Tribunal, we hold that this company cannot be treated as a comparable to the assessee. Accordingly, the Assessing Officer is directed to exclude this company. 11. The next company challenged before us is Tata Consulting Engineers Ltd. On a perusal of record, it is noticed that the company is not merely involved in engineering design activity. It is engaged in activities that extend from concept to commissioning. Whereas, the assessee renders designing and support service on the specific instruction of the AEs. It is further noticed that this company is into diversified activities, whereas, no seg....
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....ate fees. 15. Brief facts are, in the course of proceedings before him, the Transfer Pricing Officer noticed that the assessee has paid an amount of Rs. 5.38 crore to the AEs towards Intra Group Services. Noticing this, the Transfer Pricing Officer called upon the assessee to justify the arm's length nature of such payment. In reply, it was submitted that such Intra Group Services are rendered by other Group Companies to enable smooth and efficient operation of the business of the entire group, hence, directly or indirectly benefits the assessee. Explaining further, it was submitted, the nature of service covered in the said Intra Group Services are technical support, product strategy and of optimization services, product training, sharing of global reporting software, information technology support services, organization and human resources services, business management related services, etc. Further, it was submitted, the expenditure incurred towards such Intra Group Services have been charged to the assessee on a Cost Plus mark-up and are allocated based on the turnover of the assessee vis- a-vis total turnover of all Group companies. In support of its claim the assessee a....
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.... transaction, the Transfer Pricing Officer has to follow any one of the prescribed methods provided under the statute. She submitted, though, in his order the Transfer Pricing Officer has mentioned that he has used CUP method, however, he has not brought on record a single comparable, but, has made the disallowance on an ad-hoc basis. She submitted, in the earlier years also, though, the assessee had made payment of corporate fee, however, the Transfer Pricing Officer has never disturbed the arm's length price. There being no change in the facts compared to the earlier years, rule of consistency should prevail. The learned Authorised Representative submitted, even though learned DRP was convinced that the assessee has received Intra Group Services, still, a part of the addition has been sustained. She submitted, the determination of arm's length price of corporate fee both by the Transfer Pricing Officer and learned DRP is merely on conjecture and surmises and completely ad-hoc in nature. Therefore, the adjustment should be deleted. In support of such contention, the learned Authorised Representative relied upon the following decisions:- i) CIT v/s Merck Ltd., [2016] 389....
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....price of such payment at nil. On a perusal of the aforesaid order of the Transfer Pricing Officer, it is very much clear that he has mentioned that the arm's length price has to be determined by applying CUP method. However, factually, he has not done so. It is very much clear that the Transfer Pricing Officer has not brought even a single comparable to justify the applicability of CUP. Rather, it is evident, the Transfer Pricing Officer has determined the arm's length price at nil on the reasoning that the assessee has not received the service and has not proved the benefit test. Though, learned DRP has upheld the aforesaid decision of the Transfer Pricing Officer, however, accepting without prejudice submissions of the assessee, they have granted partial relief by holding that since the cost is charged back to the AEs with mark-up, no addition can be made if the payment and receipt are to the very same AE. Be that as it may, the issue before us is, whether the Transfer Pricing Officer can determine the arm's length price of an international transaction at nil without following any approved method and whether he can apply the benefit test. On a careful reading of the ....