TaxTMI 
TaxTMI 
2020 (1) TMI 1187
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....red by the Appellant with the its Associated Enterprises ('AEs') were not at arm's length; Reference made to the Transfer Pricing Officer 3. erred in not appreciating the fact that reference made by the learned AO to the learned TPO is not in accordance with the provisions of Section 92CA(1) of the Act; 4. erred in summarily rejecting the fact/contention that none of the conditions set out in Section 92C(3) of the Act are satisfied in the instant case and therefore, it is incorrect to disregard the transfer pricing analysis carried out by the Appellant and to re-determine the arm's length price; Disregarding the Benefit Test Documentation 5. erred in disregarding the submission and documentary evidences/emails correspondences filed by the Appellant to substantiate the receipt of intragroup services from its AE and holding that the Appellant has failed to demonstrate that it has received the said services; 6. erred in not appreciating the fact that benefit test is not a condition for benchmarking the international transaction with AE; 7. erred in not appreciating the commercial rational/expediency of the ....
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....market research services across a wide range of industries. During FY 2010-11 the Assessee reported the following international transactions with its associated enterprises ('AEs'): Sr.No. Description of transaction Amount (INR) 1 Provision of market research services 2,23,97,202 2 Availing of market research Services 1,21,10,247 3 Provision of market research services - data analysis & modelling 5,71,19,515 4 Provision of help desk Services 3,41,18,934 5 Payment towards allocation of operational expenses 3,91,71,499 6 Reimbursement of expenses 73,69,977 7 Recovery of expenses 66,71,055 The TPO has made an adjustment amounting to INR 3,91,71,499 towards intra-group service charges paid by the Assessee to its AEs. 5. Intra-group services: 5.1 The Millward Brown Group ('MB Group') and its network entities have set up a global and various regional units, for centralized services, which are leveraged by agencies around the world. These centralized services help not only in achieving economies of scale in operations but also ensures that consistent business practices are deployed all over th....
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....n of the group 5.5 The Assessee has used the Transaction Net Margin Method ('TNMM') to benchmark its above mentioned international transaction. Assessment Proceedings: 6.1 During the course of the transfer pricing assessment proceedings, the Assessee was asked to submit documentary evidences that showed that the intra-group services had actually been rendered to the Assessee and a benefit had been derived therefrom. 6.2 The Assessee vide its submissions dated 17 January 2015 and 22 January 2015 furnished various information/documents so as to substantiate the cost allocated by the AEs. A summary of the above submissions has been tabulated below :- Services Submission dated 17 January, 2015 Submission dated 22 January, 2015 Marketing and client communication Write up on the nature of services, need for availing such services and benefits derived therefrom. Write up on the nature of services. support services *A copy of an email welcoming a new member to a client project, which was aimed to improve the experience of clients and employees at Millward Brown. *A cop....
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.... *A copy of an email from Global IT team to the entire group inviting suggestions/ feedback on reporting formats of Cognos. (Kindly refer Appendix 9 of Annexure E) *A copy of an email from Global finance solutions team to Group CFO's inviting their suggestions to make the Maconomy portal work more effectively. (Kindly refer Appendix 10 of Annexure E) *A copy of an email and presentation from Regional Head introducing the new IT organization to the APAC region.(Kindly refer Appendix 11 of Annexure E) Operating Management support services *Write up on the nature of services, need for availing such services and benefits derived therefrom. *A copy of an email on neuroscience tracking system. *A training presentation on the Essentials of Management conducted for Millward Brown employees. *Write up on the nature of services. *A training presentation on the Essentials of Management conducted for Millward Brown employees. (Kindly refer Appendix 1 2 of Annexure E) &....
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....s on 7 December 2015 wherein the learned TPO rejected the additional evidence filed by the Assessee on similar grounds as those contained in the TP order. 6.7 Thereafter, the Assessee furnished before DRP, its submission to the remand report on 17 December 2015." 5. The DRP dealt with the objection regarding considering the ALP of international transaction relating to allocation of costs toward operational expenses to be nil under :- "7.3.1. It is seen that the assessee entered into International Transaction with two of its AEs i.e. (a) MB Singapore (Regional HUB) for Rs. 1.6 cr. and (b) MB Inc USA for Rs. 2.31 cr. As per the TPO, the assessee failed to benchmark the transactions properly. We have perused the submissions made before the TPO and the additional evidences produced during the course of proceedings before DRP and the remand report. The TPO in his remand report intimated that the assessee has not provided the details of the precise activities conducted by the AEs for the benefit of the assessee. Similarly the cost applicable to such activities conducted by the AEs for the benefit of the assessee, have not been provided. Instead, in TPO's view, a broad-....
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....ty is not acceptable, b) During the course of proceedings, assessee has not furnished any documentary evidence in support of similarly of functions between AE and the comparables in overseas jurisdiction. Thus, assessee has not established the functional similarly between the AE and the comparables selected for benchmarking, c) Such benchmarking analysis undertaken by the assessee did not provide any data with regard to the accept/reject matrix, the type and number of filters used and the qualitative of the functions performed by the comparables. d) During the proceedings, the assessee has failed to furnish the reliable data with respect to benchmarking done by assessee. 7. The DRP dealt with these objections as under :- "7.5.2 As far as the assessee's prayer of considering the AEs as tested parties is concerned, we do not agree with the assessee's approach. For considering an entity as a tested party, it may be worthwhile to peruse para no 5.3.3.1 of UN Transfer Pricing Manual, which is as under: The tested party normally should be the less complex party to the controlled transaction and should be the party in respect of whic....
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....bove assessee is in appeal before us. We have heard both the counsel and perused the records. Learned counsel of the assessee submitted that the Transfer Pricing officer has determined the arms length price of the international transaction in this case to be nil, without applying any method whatsoever. He submitted that assessee has submitted voluminous document showing the services however they have been summarily dismissed on the ground that the benefit accruing to the assessee has not been established. The learned counsel of the assessee submitted that this approach is not at all sustainable. He referred to the decision of honourable jurisdictional High Court in this regard for the proposition that it is not for the Transfer Pricing officer to apply the benefit test under section 37(1) of the I.T. Act, but the same is for the assessing officer. We find that the ratio from the above honourable during High Court decision is quite clear. Hence admittedly the Transfer Pricing officer has exceeded his jurisdiction. Hence the Transfer Pricing officer's proposition that the documents submitted by the assessee do not provide the benefit obtained by the assessee and hence they have t....
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....s with its AE, he may with the previous approval of the authority concerned make a reference to the Transfer Pricing Officer under section 92CA(1) of the Act to compute the arm's length price of the international transaction by applying any of the methods prescribed under section 92C of the Act. After receiving such a reference from the Assessing Officer, the Transfer Pricing Officer is required to determine the arm's length price of the international transaction as per the provisions contained under section 92C and 92CA of the Act read with relevant rules. Thus, as could be seen from the reading of the aforesaid provisions, the duty of the Transfer Pricing Officer is restricted only to the determination of arm's length price of an international transaction between two related parties by applying any of the methods prescribed under section 92C of the Act r/w rule 10B of the Rules. Thus, there is no provision under the Act empowering the Transfer Pricing Officer to determine the arm's length price on estimation basis (which in this case is nil), that too, by entertaining doubts with regard to the business expediency of the payment and in the process stepping into the....