TaxTMI 
TaxTMI 
2021 (8) TMI 66
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....t offers a range of life insurance products to its customers which includes whole life, endowment, money back, unit linked products, pension and term policies. In Form 3CEB, the assessee reported international transaction i.e., transaction with an Associate Enterprise (AE) in the form of receiving technical, administrative and training support services for which the assessee has paid a sum of Rs. 4,06,89,430/- as fees towards services received. The transaction is in the nature of intra group services. In its TP study, the assessee has given the following summary of the international transaction, which is to the effect that the assessee received technical, administrative and training support services from AE ING Insurance Asia Pacific (INGAP). It was the actual costs incurred by INGAP in rendering the services were reimbursed by the assessee and that INGAP did not charge any mark up on such services. These services rendered by INGAP are specialized in nature and provided to all the ING Group companies in the Asia Pacific region on a centralized basis. These centralized services assist the ING Group Companies, including the assessee in their regular operation and administration of th....
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.... any services from the erstwhile AE. The AO was therefore of the view that the assessee failed to discharge its onus of providing evidence of receipt of services. 7. On appeal by the assessee, the CIT(A) confirmed the order of the AO incorporating the adjustments suggested by the TPO by treating the value of services received as Nil and making an addition of a sum of Rs. 4,06,89,430/- paid by the assessee to its AE for intra group services as assessee's income. The CIT(A) in upholding the order of the TPO observed as follows: "3.3 Further, observed that none of the benefits mentioned above are tangible or real. A mere facade has been raised to give an impression that some vital benefit has passed to the taxpayer which I not the case. Related parties are quite likely to give a form that will give an impression that a real service is being rendered by one to another but the necessity to look beyond the wheel is recognized across tax jurisdiction. In the above circumstances the payment of service fee is only an arrangement to change the tax base without any economic substance in the transaction. He further even discussed the relevant OECD guidelines in order to support his find....
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....e authorities. 9. We have given a very careful consideration to the rival submissions. At the outset we observe in the case of Dresser Rand India (P.) Ltd. v. Addl. CIT [2011] 47 SOT 423/13 taxmann.com 82 (Mum.), the Hon'ble Mumbai Tribunal had an occasion to examine as to what is the approach that has to be adopted for determining ALP in the case of cost contribution agreement which is akin to the arrangement in the present case between the Assessee and its parent company. The assessee in case of Dresser Rand India (P.) Ltd. (supra) entered into a 'cost contribution agreement' with its parent company pursuant to which it paid a sum of Rs. 10.55 crores as its share of the costs. The TPO, AO & DRP disallowed the expenditure on the ground that the ALP was 'Nil' as no real services had been availed by the assessee and the arrangement was not genuine. On further appeal by the Assessee, the Tribunal held as follows: "8. We find that the basic reason of the Transfer Pricing Officer's determination of ALP of the services received under cost contribution arrangement as 'NIL' is his perception that the assessee did not need these services at all, as the as....
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....#39;s length price of these services received under cost contribution agreement. It hardly needs to be emphasized that even cost contribution arrangement should be consistent with arm's length principle, which, in plain words, requires that assessee's share of overall contribution to the costs is consistent with benefits expected to be received, as an independent enterprise would have assigned to the contribution in hypothetically similar situation..." 10. The Hon'ble High Court of Delhi in the case of CIT v. EKL Appliances Ltd. [2012] 209 Taxman 200/24 taxmann.com 199/345 ITR 241 as well ell as CIT v. Cushman & Wakefield India (P.) Ltd. [2014] 367 ITR 730/46 taxmann.com 317 (Delhi) rendered similar ruling as was rendered in the case of Dresser Rand India (P.) Ltd. (supra). In the case of Cushman & Wakefield India (P.) Ltd. (supra), the Hon'ble Delhi High Court observed that whether a third party - in an uncontrolled transaction with the Taxpayer would have charged amounts lower, equal to or greater than the amounts claimed by the AEs, has to perforce be tested under the various methods prescribed under the Indian TP provisions. Further, the Hon'ble High Court ....
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....thus involve:-- (i) Identification of the cost incurred by the group entity in providing intra group services to the related party. Understanding the basis for allocation of cost to various related parties i.e., nature of allocation keys. (ii) Whether intra group services will require reimbursement of expenditure along with markup. (iii) Identification of arm's length price of markup for rendering of services. 13. Question as to whether intra group services are duplication of services for which the AE has already paid in addition to what is paid by way of allocation is also to be looked into. If the AE charges a mark-up for the services rendered, than the ALP of such mark-up will have to be determined. 14. The assessee has in the present case filed material before the TPO to demonstrate the nature of services rendered. In the paper book filed before us the index of the paper book gives a description of the service. We are of the view that the above description alone would not suffice. As we have already seen the TPO had specifically called upon the assessee to give details of the services rendered and how the same were utilized by the assessee and its relevance for th....
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....n 44 begins with a non-obstante clause and overrides the other provisions of the Act IT(TP)A No. 1296 & 1297/Bang/2016, ITA Nos. 838 & 840/Bang/2019 as mentioned therein including section 14A. We are not convinced with the submission of Mr. Ajit Sharma that section 14A would be applicable in respect of the Respondent. Section 14A does not have independent legs to stand on. Section 14A inter alia begins with the words "for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred.........". The chapter in question is chapter IV. This chapter also contains the provisions relating to computation of profits and gains of business or profession. Section 44 specifically excludes the provisions of the Act relating to computation of income, inter alia, those contained in "Section 28 to 43B". Thus, the exclusion would take within its sweep section 14A which is an exemption for deductions as allowable under the Act, as provided under section 28 to 43B. Further, section 44 is a special provision applicable in the cases of insurance companies and applies, notwithstanding anything to the contrary contained in the provisions of....