TaxTMI 
TaxTMI 
2021 (9) TMI 1243
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....e case, Ld. CIT(A) was justified in law in holding that the TPO has re-characterized the inter group services transaction? 3. Whether on the facts and circumstances of the case, Ld. CIT(A) was justified in law in not appreciating that TPO has not disallowed the intra group services merely on the issue of non-substantiation of commercial expediency by the assessee but on several factors? 4. Whether on the facts and circumstances of the case, Ld. CIT(A) was justified in law to exclude the reimbursement payment from the operating cost not appreciating the fact that these reimbursement payment would attract withholding tax u/s 195 of the Income Tax Act? 5. The appellant craves to leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of the appeal. 3. Grounds of appeal Numbers.1 to 3 filed by the Revenue relate to the adjustment on account of payment for intra group services to AE. 4. Facts of the case, in brief, are that Assessee Company is a Management Consulting subsidiary of Global Information Services Leader EDS. It provides Consultancy Services in the manufacturing industry to a diverse, multinational ent....
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....e company. However, it is not possible lo quantify the value of services availed by appellant in the absence of any independent third party documentation. Therefore, TPO is directed to grant 50% of the adjustment claimed by appellant on account of intra group services availed by the Appellant." 5. Aggrieved with such Order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 6. The Ld. D.R. heavily relied on the Order of the A.O. 7. The Learned Counsel for the Assessee, on the other hand, submitted that the A.O. has made the adjustment of Rs. 5,32,51,014/- on account of payment of Intra Group Services to A.E. He submitted that the Ld. CIT(A) directed the TPO to grant 50% of the adjustment on account of Intra Group Services and accordingly an amount of Rs. 2,66,25,507/- was sustained and balance amount was deleted. He submitted that the assessee had filed an appeal against the order of the Ld. CIT(A) sustaining the 50% disallowance and the Tribunal vide order dated 25.02.2020 in ITA.Nos.7722 & 7723/Del./2017 has deleted the addition of Rs. 2,16,66,25,507/- sustained by the Ld. CIT(A). He submitted that since the Tribunal has already decided this issue and passed....
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.... been structured by them using the method applied by tax payer in so far these are consistent with the methods described under Chapter II and III. Only in exceptional cases tax Admn. should disregard the actual transactions or substitute other transactions for them. Restructuring of legitimate business transactions would be a wholly arbitrary exercise the inequity of which could be compounded by double transaction created where the other tax administration does not share the same views as to how the transaction should be structured. For this proposition, we draw support from the judgment of the Hon'ble jurisdictional High Court of Delhi in the case of EKL appliances 344 ITR 241. 13. In the same judgment, the Hon'ble High Court observed that "The character of transaction may derive from relationship between the parties rather than be determined by normal commercial conditions as may have been structured by the tax payer to avoid or minimize tax. The significance of the aforesaid guidelines lies in the fact that they recognise that barring exceptional cases, the tax administration should not disregard the actual transaction or substitute other trans....
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....he lower authorities to disregard such direct evidences. 19. In so far as the payment relating to management services provided by ATK Australia is concerned, we find that the same has been dismissed by lower authorities on flimsy grounds. We find that the allocation in respect of services provided by Shri John Yoshimura Regional head of offices is on the basis of time spent by him in relation to ATKBO. In our considered opinion, this allocation is logical and sound on the facts of the case. There are email evidences wherein it has been mentioned that Shri John Yoshimura was responsible for advising on various performances/review of Indian partners. Moreover, specific dates of physical presence of Shri John Yoshimura in India are exhibited at pages 1417, 1419 and 1420 of the paper book. 20. Considering the cost allocation chart exhibited elsewhere supported by evidences placed as exhibits in the paper book, we do not find any merit in the transfer pricing adjustments made by DRP/TP/Assessing Officer on this count and the same is directed to be deleted. 8. Since the facts of the impugned assessment year are identical to the facts of the case decided by the ....
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..... The TPO by relying on various decisions held that reimbursement of payment incurred for rendering services would be part and parcel in the process of rendering services and would fall within the scope of expenditure for services. He, therefore, held that the expenditure incurred by the assessee amounting to Rs. 78,90,448/- are required to be considered for applying mark-up and consequently for the purpose of computing the arm's length price. The A.O. accordingly made addition of Rs. 61,08,740/- being adjustment of the price shown by the tax-payer under section 92CA as per the following calculation : 9.4. In appeal, the Ld. CIT(A) partly deleted by accepting four comparables of TPO and three comparables of the assessee and accordingly, adjustment of Rs. 38,13,886/- was deleted by the Ld. CIT(A) and balance adjustment of Rs. 22,94,854/- was confirmed. 9.5. Aggrieved with such Order of the Ld. CIT(A) in giving part relief to the assessee, the Revenue is in appeal before the Tribunal. 9.6. The Ld. D.R. heavily relied on the Order of the A.O./TPO. 10. Learned Counsel for the Assessee, on the other hand, submitted that against the part-sustenance by the Ld. CIT(A), the asse....
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....ng any direct or proximate benefit to either of the parties. It is also imperative to note that the Appellant is not in the business of providing these kind of facility/ administration services (such as arranging for travelling, boarding, lodging, etc). Accordingly, no value adding activity is undertaken by the Appellant for its AEs while incurring these expenses and therefore only a cost to cost recovery of the same is sought from the AEs. In other words, a profit mark-up is not warranted on these expenses. 1.6. These out of pocket expenses are essentially in the nature of pass through costs that do not warrant a profit mark-up. This stance of the Appellant is also supported by the OECD Guidelines which state the following : 1.7. When an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying the cost plus method that the return or mark-up is appropriate for the performance of an agency function rather than for the performance of the services themselves. In such a case, it may not be appropriate to determine arm's length pricing as a mark-up on the cost of the services but rather on the costs of t....
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....854/- was confirmed. We find against the part sustenance by the Ld. CIT(A) the assessee filed an appeal before the Tribunal and the Tribunal vide ITA.No.7722 & 7723/Del./2017 Order Dated 25.02.2020 for the A.Ys. 2009-2010 and 2010-2011 restored the issue to the file of A.O./TPO with a direction to verify the analysis done by them in subsequent years and find-out as to whether this company is functionally similar or dissimilar to that of the assessee company and decide the issue as per fact and law by observing as under : "20.10. We have considered the rival arguments made by both the sides and perused the material available on record. We have also considered the various decisions cited before us. We find the ld. Counsel for the assessee is basically challenging the inclusion of the three companies, namely, WAPCOS Ltd. (Seg.); Antrix Corporation Ltd.; and Edserv Softsystems Ltd. from the list of comparables. So far as Antrix Corporation Ltd. and WAPCOS Ltd. (Seg.) are concerned, both these companies are Government of India Undertakings. While Antrix Corporation Ltd., is under the administrative control of the Department of Space and is the commercial arm of Indian Space Res....
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....IT(A) was justified in law to delete the additions made by the TPO and hold that the payment made for intra group services was for commercial expediency? 2. Whether on the facts and circumstances of the case, Ld. CIT(A) was justified in law in holding that the TPO has re-characterized the inter group services transaction? 3. Whether on the facts and circumstances of the case, Ld. CIT(A) was justified in law in not appreciating that TPO has not disallowed the intra group services merely on the issue of non-substantiation of commercial expediency by the assessee but on several factors? 4. Whether on the facts and circumstances of the case, Ld. CIT(A) was justified in law to exclude the reimbursement payment from the operating cost not appreciating the fact that these reimbursement payment would attract withholding tax u/s 195 of the Income Tax Act? 5. The appellant craves to leave to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of the appeal. 14.1. Ground Nos.1 to 3 of the appeal raised by the Revenue relates to adjustment of payment made for intra group services to AE. 14.2. After hearing both the ....