TaxTMI 
TaxTMI 
2021 (2) TMI 833
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.... year under appeal, the assessee paid Rs. 2,24,50,358/- towards Regional Management Charges to its Associated Enterprises(in short 'AE'). The assessee furnished necessary documents before the Transfer Pricing Officer to substantiate the services provided by the AE. However, the TPO without properly appreciating the documentary evidence concluded that the assessee has failed to provide documents in support of various services availed and determined the Arm's Length Price (ALP) of Regional Management Services at nil, thereby making adjustment of Rs. 2,24,50,358/-. The assessee filed objection before the DRP against the adjustment made by TPO. The DRP vide directions dated 01/12/2016 rejected objections raised by the assessee against determination of Nil ALP in respect of Regional Management Services. While deciding the issue against the assessee, the DRP category observed that in the previous year also, the assessee has failed to establish that services were rendered and it has also failed to establish the actual benefits from the services and the market value of such services, if any. The DRP for rejected the contentions of the assessee in the impugned year relied on the....
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....rket value of such services, if any. It has further failed to demonstrate the incurrence of cost by the AE as well as its allocation among the various group entities. In view of the reasons given in the order for A.Y. 2011-12 in the case of the assessee, quoted above, the action of the TPO in determining ALP of Regional Management Services at Rs. nil is upheld." 6. In assessment year 2011-12, the assessee carried the issue in appeal before the Tribunal in ITA No. 1049/Mum/2016 (Supra). The Co-ordinate Bench after considering the facts and various judgments deleted the adjustment. The relevant extract of the finding of the Tribunal are reproduced herein below:- "9. We shall first deal with the assessee's claim that supporting documentary evidence clearly establishing rendering of regional management services by the AE was duly placed on record in the course of the proceedings before the lower authorities, viz. (i) copy of regional management services "agreement", dated 23.11.2010 executed between the assessee and its AE i.e. Henkel AG & Company KGaA; (ii) details of regional management charges; and (iii). copies of "debit notes" raised on the assessee by its AE towar....
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....f the proceedings before the lower authorities. In fact, the assessee had also placed on record the complete details of the payments made by the assessee to its AE for provision of regional management services. Cost benefit analysis of regional management cost (RMC) pertaining to a range of regional services rendered by the AE within the group, viz.(i) regional planning and guiding services; (ii) regional marketing services; (iii) regional supply and chain operational support services; and (iv) regional safety, health and environment support compliance services, therein explaining the benefits derived by the assessee from the services rendered by the AE were also filed by the assessee before the lower authorities in order to drive home its claim of having received the aforesaid services along with benefit derived therefrom. In the backdrop of the aforesaid documentary evidence, we are unable to comprehend as to how the AO/TPO had concluded that the assessee had failed to furnish the requisite documentary evidence which would substantiate rendering of regional management services by the AE, viz. Henkel AG & Company, KGaA to the assessee during the year under consideration. In our co....
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....A by the TPO at Rs. Nil i.e. without following any one of the prescribed methods contemplated in Sec. 92C(1) of the Act, as against that determined by the assessee at Rs. 2,61,63,288/- by adopting TNMM as the most appropriate method. In fact, our aforesaid view that the TPO is divested of his jurisdiction in benchmarking the international transactions of an assessee at nil or in an ad hoc manner without following any one of the prescribed methods is fortified by the judgments of the Hon'ble High Court of Bombay viz. (i) CIT Vs. Merck Limited. (ITA No. 272 of 2014), dated 08.08.2016; (ii) CIT Vs. Lever India Exports Limited (ITA No. 1306, 1307 and 1349 of 2014), dated 23.01.2017; (iii) CIT Vs. Johnson & Johnson Ltd. (ITA No. 1030 of 2014), dated 07.03.2017; and (iv) CIT vs. Kodak India Pvt. Ltd.(ITA No. 15 of 2014), dated 11.07.2016. As observed by the Hon'ble High Court of Bombay in the aforementioned cases, the TPO is not permitted to determine the ALP of the International transactions without following any one of the methods prescribed under Sec. 92C(1) of the Act. Accordingly, in the backdrop of our aforesaid observations we are unable to sustain the determination of the....