TaxTMI 
TaxTMI 
2021 (10) TMI 610
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....,97,828 holding that the Appellant's international transaction pertaining to provision of sourcing support services to its Associated Enterprises ('AEs') does not satisfy the arm's length principle envisaged under the Act and in doing so, the Ld. TPO/the Ld. DRP have grossly erred in: 2.1 concluding the incorrect functional profile of the Appellant, thereby wrongly characterizing as a trader and not as a service provider; 2.2 concluding that the Appellant has developed human resource and supply chain intangible for its AEs; 2.3 concluding that the Appellant is engaged in maximizing location savings for its AEs. 3. On the facts & circumstances of the case and in law, the Ld. TPO/Ld DRP have erred in disregarding the benchmarking approach adopted by the Appellant in its TP Documentation and including the Free on Board ('FOB') cost of the goods sourced directly by the AEs from the third party vendors in the cost base of the Appellant, for the purpose of computing the arm's length profit margin of the Appellant. 4. On the facts & circumstances of the case and in law, the Ld. TPO/Ld.DRP have erred in considering th....
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....claim management etc. 6. During the year under consideration, the appellant has entered into the following international transactions: S. No. Nature of transaction Method Value of transaction (in Rs.) 1. Provision of sourcing support services TNMM 919225248 2. Receipt of shared accounting services 601559 3. Services provided to IKEA Foundation in relation to coordination activities TNMM 34194382 4. Reimbursement of expenses received/ receivable 5004999 5. Reimbursement of expenses paid /payable TNMM 6809652 7. We have carefully perused the order of the TPO. We find that the TPO has proceeded on the premise that the business model of the appellant is akin to that of a trader and on this premise, the TPO formed a belief that the assessee's compensation model must include Free on Board [FOB] value of goods sourced from India and following the strong belief, the TPO selected comparables identifying traders as comparables. The search yielded the following result: 1 Shoppers Stop Ltd. 959.4 1052.2 1101.7 30262.8 33897 37864.6 ....
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....s is carried out basis guidelines and parameters provided by AE i.e. "The IKEA Way on Purchasing Home Furnishing Products" (IWAY). IWAY has been laid down by the AE, adhering to which all entities within the group conduct their business. AEs have also laid down specific guidelines (written document termed as I-START) which stipulates the procedure which is required to be followed by every sourcing entity within the group for identification, selection and starting up of suppliers. OBTAINING OFFERS IKEA Services obtains price quotations, delivery and other contractual terms for the suppliers located in India. IKEA Services then submits this information to the relevant purchasing company, who alone has the authority to conclude purchase agreements with suppliers. IKEA Services does not have the right to negotiate with suppliers or to make any decisions in regard to purchasing the goods. PLACING OF ORDERS AND QUALITY CONTROL When a purchasing contract has been successfully concluded between a purchasing company (AE) and a supplier, orders are generated electronically up to the maximum amount of products as included in the purchasing contract....
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....#39;s retail entities on its own account. In other words, the assessee does not bear any risk associated with carrying/owing/maintaining stock of inventory. 13. In our considered view, the glaring fallacy in the approach of the TPO lies on the fact that he has adopted FOB cost of goods procured from India by the AEs through the assessee as cost base. In our considered view, this approach of the TPO is in complete disregard to the functional profile of the assessee. The assessee operates in a limited risk environment providing routine support services to group entities and accordingly, entitled to be remunerated based on assured return. 14. The Hon'ble High Court of Delhi in the case of Li and Fung India Ltd. ITA No. 306 of 2012 has considered a similar quarrel. The most relevant part of the judgment is extracted hereinbelow: "39...This Court is of opinion that to apply the TNMM, the assessee's net profit margin realized from international transactions had to be calculated only with reference to cost incurred by it, and not by any other entity, either third party vendors or the AE. Textually, and within the bounds of the text must the AO/TPO operate, Rule 10B(....