TaxTMI 
TaxTMI 
2021 (1) TMI 410
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....g Arms Length Price (ALP) adjustment amounting to Rs. 1,33,76,590 made to group service fees paid by the assessee to its Associate Enterprises (AEs). 3. The brief facts of the case are as follow: The assessee is a company. It is engaged in the business of manufacturing and services. For the assessment year 2013-14, the return of income was filed on 30.11.2011 declaring total income of Rs. 27,19,08,550. The assessment was taken up for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. During the course of scrutiny assessment, the matter was referred to the Transfer Pricing Officer (TPO) for determining the ALP of the international transactions entered by the assessee with its AEs. 4. The TPO vide order dated 25.10.2016 passed....
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.... paid by determining the most appropriate method and comparability analysis. 7. The learned Departmental Representative also agreed that the issue in question is squarely covered by the order of the Tribunal in assessee's own case for assessment year 2012- 2013 (supra), and accordingly submitted that similar view may be taken for this assessment year also. 8. We have heard rival submissions and perused the material on record. The Tribunal in assessee's own case for assessment year 2012-2013 (supra) had directed to do afresh transfer pricing analysis and determine the ALP of international transactions with regard to group service fees paid by the assessee to its AEs. The relevant finding of the Tribunal reads as follow:- "17. ....
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....rnational transaction shall also be determined having regard to the arm's length price. (2) Where in an international transaction [or specified domestic transaction], two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm's length price of such benefit, service or facility, as the case may be. 20. According to above....
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.... a businessman. Therefore in this regard we are of view that assessee has to substantiate that these services are required by it. We note that assessee has entered into Intra Group Service agreement with AE, which is placed at page 467 of paper book Volume II. This goes to prove that services were required by assessee. 22. Hon'ble Delhi High Court in case of Cushman Wakefield Limited reported in 46 taxmann.com 317 has held that: "34. The Court first notes that the authority of the TPO is to conduct a transfer pricing analysis to determine the ALP and not to determine whether there is a service or not from which the assessee benefits. That aspect of the exercise is left to the AO. This distinction was made clear by the ITAT....
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....sion to take benefit of expertise of Dresser Rand US, but also beyond the powers of the Assessing Officer. We do not approve this approach of the revenue authorities. We have further noticed that the Transfer Pricing Officer has made several observations to the effect that, as evident from the analysis of financial performance, the assessee did not benefit, in terms of financial results, from these services. This analysis is also completely irrelevant, because whether a particular expense on services received actually benefits an Assessee in monetary terms or not even a consideration for its being allowed as a deduction in computation of income, and, by no stretch of logic, it can have any role in determining arm's length price of that ....
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.... (P.) Ltd. v. Asstt. CIT [IT Appeal No. 352 (Bang.) of 2009, dated 20- 10- 2010] held that the assessee has to establish before the Transfer Pricing Officer that the payments made were commensurate to the volume and quality service and that such costs are comparable. When commensurate benefit against the payment of services is not derived, then the Transfer Pricing Officer is justified in making an adjustment under the arm's length price." 24. Placing reliance upon aforestated decisions, we are of considered opinion that for these services, assessee has to demonstrate and satisfy Evidence Test or rendition test and benefit test, as envisaged u/s 92(2) of the Act, and that, services provided by AE are neither duplicative nor sha....