TaxTMI 
TaxTMI 
2021 (1) TMI 437
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....") amounting to INR 1,85,76,691 on account of payment of Group Service Fee and towards commission by the Appellant to its Associated Enterprises ("AEs"). 2. The learned AO/learned TPO/Hon'ble DRP erred in rejecting the TP documentation maintained by the Appellant by invoking provisions of subsection (3) of 92C of the Act. Thereby, disregarding the economic analysis performed by the Appellant in the Transfer Pricing documentation to justify the arm's length nature of the international transaction pertaining to payment of Group Services Fees and towards commission to its AE. 3. The learned AU/learned TPO/Hon'ble DRP erred in considering the arm's length price to be "Nil" with respect to the payments made by the Appellant towards the Group Services received from its AEs. 4. The learned AU/learned TPO/Hon'ble DRP erred in selecting Comparable Uncontrolled Price Method ("CUP") as the most appropriate method in determining the arm's length price of payment towards Group Service Fee to its AE despite the learned TPO not following the provisions prescribed in clause (a) of the sub-rule (1) of Rule lOB of the Rules for determination of ALP ....
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....e DRP to allow credit for Tax Deducted at Source. 13. The learned AO/learned TPO/Hon'ble DRP erred in levying interest under Section 234A & 234C of the Income-tax Act, 1961. The appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of this appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided." Brief facts of the case are as under: 2. Assessee is a company and filed its return of income for year under consideration, declaring total income of Rs. 37,28,19,120/-. Subsequently, notice under section 143(2) and 142(1) of the Act was issued to assessee. In response to statutory notices, representative of assessee appeared before Ld.AO and filed requisite details as called for. 3. Ld.AO observed that, assessee is engaged in business of manufacturing of machinery and equipments. On verification of financial statements filed by assessee, Ld.AO noted that assessee had international transaction exceeding Rs. 15 crores, and therefore, reference was made to the tr....
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....r payment for similar services to an uncontrolled party. Ld.TPO thus submitted that, assessee was not able to prove by way of any documentary/evidence of tangible benefit received on account of alleged services. He was of the opinion that, general write-up on alleged benefits submitted by assessee do not constitute credible evidence for justification or quantification of the services rendered. 8. Ld.TPO thus held that, assessee failed to prove the arms length nature of the payment of technical and management costs amounting to Rs. 1,82,19,866/- paid to AE. He thus treated the cost paid as 'nil' due to inadequacies of assessee's argument. Ld.AO subsequently while passing draft assessment order observed that assessee debited a sum of Rs. 4,13,721/- towards provision of commission. It was noted by Ld.AO that, it was an estimated liability on adhoc basis, which cannot be allowed as expenditure under section 37(1) of the Act. He also noted that, assessee should have deducted TDS under section 40(a)(ia) of the Act. 9. Aggrieved by proposed additions, assessee raised objections before DRP. 10. DRP in regards to intragroup services observed as under: "i) Page 61 and 64 of....
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....as been allowed by Ld.TPO are similar to the cost allocation in respect of managerial services disputed by Ld.TPO. He submitted that identical evidences were filed for both these segments to establish that services were received from AE. 15. Ld.CIT.DR submitted that the issue may be remanded to authorities below for verification of the fact in the light of evidences filed by assessee. 16. We have perused submissions advanced by both sides in light of records placed before us. 17. Grounds from 1-10 relate to payment made to AE in view of intragroup services received by assessee. 18. It is observed that Ld.TPO determined ALP at NIL by applying CUP, vis-à-vis, ALP determined by assessee at aggregate level by using TNMM. Ld.TPO held that assessee did not obtain any benefit out of such services and that such services provided by AE were not required, as, assessee failed to provide evidence regarding receipt of services, alleged to be rendered by AE, necessitating any payment. It is observed that, Ld.TPO thus held that, as there is no benefit from services for which payments has been made, he determined ALP of international transaction at Nil, without carrying out any ....
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....cted to be received from the arrangement. * Transfer price of cost or expenses allocated or apportioned to such enterprise or contributed by such enterprise shall be determined having regard to Arm's length price of such benefit, service or facility received by the enterprise. In order to satisfy arm's length price participant's contributions must be consistent with what an independent enterprise would have agreed to contribute under comparable circumstances considering the benefits it expects to derive from the agreement. 21. We direct Ld.TPO to judge the requirement of services from viewpoint of assessee as 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....
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....;s length price of that service. When evaluating the arm's length price of a service, it is wholly irrelevant as to whether the assessee benefits from it or not; the real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. Similarly, whether the AE gave the same services to the assessee in the preceding years without any consideration or not is also irrelevant. The AE may have given the same service on gratuitous basis in the earlier period, but that does not mean that arm's length price of these services is 'nil'. The authorities below have been swayed by the considerations which are not at all relevant in the context of determining the arm's length price of the costs incurred by the assessee in cost contribution arrangement. We have also noted that the stand of the revenue authorities in this case is that no services were rendered by the AE at all, and that since there is No. evidence of services having been rendered at all, the arm's length price of these services is 'nil'." 23. Another aspect that was made clear by coordinate bench of this Tribuna....