TaxTMI 
TaxTMI 
2020 (3) TMI 212
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.... distribution, marketing and selling of Beer. It is stated that this Group created its presence in India in the year 2002 through the assessee. Thereafter, the Group made various acquisitions of local operational and non-operational breweries in India including the Indian subsidiary of the Foster's Group. The acquired breweries were later merged / de-merged into the assessee company. Following the process of various business acquisitions, the assessee had entered into a Technology Transfer Agreement (TTA) with SABMiller Management (IN) B.V. with the sole object of obtaining the technical knowhow and to support the technical needs for brewing and manufacturing of beer during the initial years of its operations in India. As per the terms of TTA, the assessee was supposed to receive technical knowhow in the form of methods, procedure, process, formulae, specifications, including technical and engineering specification, recipes, trade secrets, technology manuals, technical information which enables the assessee to brewing and manufacturing beer. Over a period of time, the assessee acquired various breweries in India and upgraded its facilities in accordance with the business strategy i....
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....as to justify the benefits derived by it and also has to furnish the cost base of the cost on which mark-up was charged by the AE. To prove the benefit test, the Transfer Pricing Officer called upon the assessee to furnish the following details:- i) Whether the services were requested for; ii) When and how they were rendered by the A.E; iii) Copy of the written agreement; and iv) At what rate the services are available in local market. 4. Further, he called upon the assessee to furnish real time server data to substantiate the receipt of services. As observed by the Assessing Officer, the assessee vide submissions dated 11th November 2014 and 19th January 2015, explained the nature of service received and the benefits derived therefrom. Further, the assessee submitted, copies of e-mail correspondences, group presentations, cost center reports, margin variance analysis, etc. to prove the cost allocation and receipt of service. Further, the assessee also furnished a certificate from an independent auditor certifying the basis of allocation of cost and appropriate allocation keys. After considering the submissions of the assessee, the Assessing O....
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....s. He submitted, as per the group transfer pricing policy, cost had been allocated on a reasonable basis, such as, time spent, head count, number of users, etc., and chargeable to the assessee on full cost plus mark-up basis, however, ultimately no mark up was charged. He submitted, in the course of proceedings before the Transfer Pricing Officer, the assessee had submitted that supporting documents / evidences to demonstrate that management group services have actually been rendered as well as received. Further, he submitted, the assessee has also demonstrated that availing group services have resulted in benefits accruing to the assessee and the cost allocation methodology adopted by the group is genuine, scientific, logical and reasonable and has been audited and certified by an independent Accountant. He submitted, while making such payment to the group, the assessee has also deducted tax at source under section 195 of the Act. The learned Authorised Representative submitted, the services provided by the Group including broad guidelines on ways of working to ensure standard approaches for functions at operational level with the aim of achieving optimal efficiency. The learned A....
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....by the assessee. Further, he submitted, the services received by the assessee have resulted in benefit. He submitted, the assessee did not opt for availing the services from a third party as the processes and services are unique to SABMiller Group and confidentiality has to be maintained. He submitted, the services are essential for smooth running of the business. In case, the assessee would have availed such services from a third party, it would have to pay more and more over the third party very likely may not have the specialized knowledge in comparison to the quality of services rendered by the Group. Thus, he submitted, in the given circumstances, the amount paid by the assessee should be considered to be at arm's length. Without prejudice, he submitted, while computing arm's length price the Transfer Pricing Officer cannot question the commercial wisdom of the assessee and must restrict him to determine the arm's length price of the transaction. He submitted, it is totally irrelevant on the part of the Transfer Pricing Officer to examine whether the assessee benefits from such services or not. Finally, the learned Authorised Representative submitted, in case of as....
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....rovided to any AE. Therefore, the Transfer Pricing Officer has no alternative but to ascertain the benefit derived from the entire arrangement entered into by the assessee as well as the actual services received from the AE. He submitted, unless the receipt of service as well as benefit accruing is ascertained, the Transfer Pricing Officer cannot determine the arm's length price vis-a-vis an independent enterprise. Therefore, it would be wrong to say that the Transfer Pricing Officer cannot enter into the arena of actual receipt of service or the benefit derived therefrom. In support of such contention, he relied upon the decision of the Hon'ble Delhi High Court in Sony Ericson Mobile Communications India Pvt. Ltd. v/s CIT, [2015] 55 taxmann.com 240 (Del.). The learned Departmental Representative submitted, merely because the assessee and the AE have entered into an agreement and the payments have been made in terms of the agreement, it cannot debar the Transfer Pricing Officer from making adjustment on the basis of Transfer Pricing provisions. He submitted, though, it may be a fact that the assessee has furnished voluminous details relating to intra group services, however, bo....
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.... length price as he will be unable to do so. In support of such contention, the learned Departmental Representative relied upon the following decisions:- i) Sony Ericsson Mobile Communications India Pvt. Ltd. v/s CIT, [2015] 55 taxmann.com 240 (Del.); ii) CIT v/s Cushman and Wakefield India Pvt. Ltd., [2014] 46 taxmann.com 317 (Del.); iii) Deloitte Consulting India Pvt. Ltd. v/s DCIT, [2012] 22 taxmann.com 107 (Mum.); and iv) Fosroc Chemicals India Pvt. Ltd. v/s DCIT, [2015] 58 taxmann.com 85 (Bang.) (Trib.). 8. We have considered rival submissions in the light of the decisions relied upon and perused the material on record. The fact culled out from record would reveal that the assessee has entered into a group service agreement (GSA) with SABMiller Management (IN) B.V., for availing certain services. As could be seen from the aforesaid agreement, a copy of which is placed in the paper book, companies of the group availed such services relating to financial consulting, improved personnel strategy, business advisory services, corporate affairs, marketing, technical consulting, computer advisory services and data processing and intellectual prop....
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....rm of correspondence, notes, e-mails, invoice raised, etc., to prove not only the actual rendition of service, but also the benefit derived. In fact, before us, the assessee in the written note has enumerated the exact nature of services rendered in terms of the agreement as well as the benefit derived with reference to the documentary evidence filed before the Transfer Pricing Officer. For better appreciation, we think it appropriate to reproduce the same hereunder:- Description of services Description of the document Benefits derived by SABMiller India Paper book Reference Financial Consulting Presentation outlining Group approach for financial capability assessment and improvement planning. The document provides a detailed plan to assess the abilities of the finance team in India and how to improve what the team can achieve in the future. Provides SABMiller India with the templates to be used for capturing and calculating the capability level of the team. The provision of templates means SABMiller India does not have to incur time and resource to create them. The templates have supported Finance team development in India as they make commercial decisions.....
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....spects in India. 871-896 For other supporting evidences, please refer submissions dated 11th November 2014 and 19th January 2015 (enclosed as Item 8 and 10 of the Paper book at Page no.394 and 554 respectively) Technical Consulting The water risk assessment is a critical part of brewing beers. In this regard, the Group facilitates frequent assessments and reviews of SABMiller India‟s breweries of vulnerabilities and helps in developing specific concrete action plans for each prioritized risk. The attachments include: * A presentation from a water risk assessment workshop for the HBL Brewery. The purpose was to share and confirm top water risks identified for the brewery and develop a mitigation plan * A list of key stakeholders who would be affected by the risks identified. * The water risk assessment tool (excel workbook) which provides a very detailed assessment of the water risks exposure to SABMiller India. Water is a critical issue as it is linked to a wide range of environmental, business and social aspects of a region. The problems related to water availability, quality and reputation represent a significant risk to SABMiller India's business....
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....ces, please refer submissions dated 11th November 2014 and 19th January 2015 (enclosed as Item 8 and 10 of the Paper book at Page no.394 and 554 respectively) Business Advisory Services An engineering note on environmental and health issues with respect to paint coatings which are used to protect steel structures. Supports SABMiller India business in securing the inputs that are needed while building and provides guidance on energy and climate security by improving the management of internal resources. 1381-1392 For other supporting evidences, please refer submissions dated 11th November 2014 and 19th January 2015 (enclosed as Item 8 and 10 of the Paper book at Page no.394 and 554 respectively) 10. Further, it is noticed, under the computer advisory and data services specific applications are designed to meet the needs of functions within the business and ultimately rely on the infrastructure set-up by global information system. Based on the needs of the assessee and other Indian group companies, access to these applications is granted under the GSA to the identified users. The applications which were recommended to the assessee are as under:- Application Servi....
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....d documents as defined by ISO9001. It is a secure system for the technical department 11. It is further relevant to observe, the assessee had furnished documentary evidences before us which clearly demonstrate that in the course of proceedings before the Transfer Pricing Officer, the assessee had not only furnished the details of services rendered under the GSA, but the break-up and quantification of such expenditure with specific allocation keys. In contrast to the details/information furnished by the assessee, including the independent benchmarking done in the transfer pricing study report by following an approved method, on a perusal of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer, it is very much clear that the Transfer Pricing Officer has not done any independent benchmarking as per the mandate of section 92C r/w rule 10B even after rejecting the transfer pricing analysis of the assessee under TNMM. Further, the finding of the Transfer Pricing Officer is not only ambiguous, but contradictory as, though, he himself has stated that copy of e-mails and reports filed before him show that some services have been rendered, however, in the same....
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....ncome either in the same year or in any of the subsequent years. The burden is initially on the assessee to determine the arm's length price. When the assessee determines the arm's length price following one of the methods, the Transfer Pricing Officer has to determine the arm's length price by following any one of the methods if he does not agree with the benchmarking of the assessee. In the aforesaid decision, the Hon'ble High Court has also taken note of the decision rendered the Hon'ble Punjab & Haryana High Court in Cushman and Wakefield India Pvt. Ltd. (supra). The Co-ordinate Bench in Merck Ltd. (supra), after analyzing the facts held that if the material on record show that the assessee in terms of the agreement was entitled to received a package of services and in fact such services were received, just because the services were too general in the perception of the Transfer Pricing Officer or just because the assessee did not avail them from outside agency, cannot be a reason to hold that services were not rendered at all. The Bench held that when it is established that under the agreement, the assessee had right to receive services as and when required and rece....
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.... approached the AAR seeking ruling on various issues relating to the nature and character of services rendered under the GSA. After analyzing the terms and conditions of the erstwhile TTA and the present GSA as well as various evidences available on record, the AAR found that there is not much difference between the nature of services provided under the TTA and GSA. The AAR has observed that SABMiller management (IN) B.V., (the AE), is providing specialized services to fulfill the exclusive needs of the Indian companies for manufacture of beer under its brand name and not offering a standard service for general use. The AAR has observed that the AE is providing technical consulting and setting-up/up gradation of the manufacturing facilities and brewing/manufacture of beer as also procurement of raw material and identifying markets, etc., which are the core activities of the AE and its Indian companies. The AAR has also observed that while providing technical services, the AE has provided such service through human intervention by training the personnel of Indian Companies through various programs, models and by allowing online access to secret information. The AAR has observed that....
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.... receivable by the Applicant from Indian Companies for "Computer Advisory and Data Processing Services" is also chargeable to tax as "Royalty" under the DTAA between India and the Netherlands." 16. Thus, from the aforesaid ruling of the AAR, it becomes absolutely clear that not only the AE has rendered services to the assessee under GSA, but the assessee is also in receipt of such services and has also benefited by such services. In fact, it has been submitted by the learned Authorised Representative that while making payment towards intra group services, the assessee has also deducted tax at source under section 195 of the Act. Thus, all these facts clearly go to prove that the assessee, indeed, has received certain specified services from the AE and payments have been made in consideration of such services. Therefore, the services rendered by the AE to the assessee certainly have some value attached to it which requires benchmarking under any of the methods prescribed under the statute. It is manifest, though, Transfer Pricing Officer accepts that some services have been rendered, however, he has made a general observation that such services do not have any value and has proce....
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....back to the Assessing Officer to verify and examine the relevant record and then to decide the issue as per law. He submitted, while giving effect to the aforesaid direction of the Tribunal, the Assessing Officer has allowed assessee's claim in assessment year 2007-08, vide order dated 30th December 2016. Further, he submitted, in assessee's own case for the assessment year 2013-14, after obtaining the remand report from the Assessing Officer the DRP has allowed assessee's claim regarding discount given to the distributors. Thus, he submitted, the addition made has to be deleted. Further, in support of his contention that the discount given to the distributor is an allowable expenditure, the learned Authorised Representative relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Intervet India Pvt. Ltd., [2014] 364 ITR 238 (Bom.). 20. The learned Departmental Representative submitted, since the relevant facts relating to the existence of a discount scheme and other relevant materials have to be brought on record and examined, consistent with the view taken by the Tribunal in assessment years 2007-08, 2008-09 and 2009-10, the issue may be restored back t....
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....proceedings, the Assessing Officer noticed that the assessee has debited an amount of Rs. 19,07,53,069, to the Profit & Loss Account towards commission on sales. After calling for necessary details and examining them, the Assessing Officer observed that the assessee has not furnished requisite details showing deduction of tax at source. Further, he observed that as per assessee's submissions, the commission of Rs. 19,07,53,069, includes accruals at the yearend amounting to Rs. 2,30,66,201. Being of the view that the amount of Rs. 2,30,66,201, being a commission on sales is subject to deduction of tax at source, which the assessee has not done, the Assessing Officer disallowed the amount under section 40(a)(ia) of the Act. 24. The DRP also sustained the disallowance made by the Assessing Officer. 25. The learned Authorised Representative submitted, in the subsequent years, the assessee has duly deducted and deposited the applicable TDS upon receipt of invoice from the agents. Thus, he requested for restoration of the issue to the Assessing Officer for verification and necessary adjudication. 26. The learned Departmental Representative has no objection for restoration of the....
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....e appeals filed by the assessee. On a perusal of the relevant orders passed by the Tribunal for the assessment years 2007-08, 2008-09 and 2009-10 in assessee's own case, as placed in the paper book, we find that identical disallowance made by the Assessing Officer in the preceding assessment years have been deleted. Facts being identical, following the consistent view of the Co-ordinate Bench in assessee's own case for the assessment years 2007-08, 2008-09 and 2009-10, we uphold the decision of learned DRP on the issue. This ground is dismissed. 34. In grounds no.2 and 3, the Revenue has challenged the deletion of disallowance of tax deducted on interest expenditure incurred in foreign currency amounting to Rs. 78,03,184. 35. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee has debited an amount of Rs. 11,53,60,052, to the Profit & Loss Account towards interest on external commercial borrowings (ECB). Further, from the audit report he found that the auditor has clarified that the aforesaid amount includes withheld tax of Rs. 78,03,184. Being of the view that the tax withheld cannot be claimed as expenditure, the Assessing Off....