TaxTMI 
TaxTMI 
2022 (4) TMI 391
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....d on the provisions of Chapter X of the Act and have further erred in fact and in law in not providing any reasons to show that the conditions mentioned in clauses (a) to (d) of Section 92C(3) of the Act were satisfied before making an adjustment to the income of the Appellant. 2. Transfer pricing adjustment in respect of availing of management Services of rs. 86,69,501 2.1 determining the arm's length price of international transaction pertaining to payment of management services fees by the Appellant to its Associated Enterprise (AE) as Rs. 54,25,697 against Rs. 1,40,95,198 as determined by Appellant: 2.2 holding that the Appellant failed to furnish adequate evidences to demonstrate that the services were actually rendered by the AE; 2.3 questioning the commercial expediency for availing such services and failed to appreciate the jurisprudence that the Ld. TPO cannot go beyond his powers in questioning commercial decision of the Appellant. 2.4 not applying any method prescribed by the Rules, to determine the arm's length price of the intra group services i.e. management services and failed to appreciate that the Appellant in its transf....
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....icing study report maintained as per Section 92D of the Act read with Rule 10D of the Rules used for determining the arm's length price of the international transaction of the Appellant; 4.4 violating the principle of "Rule of Consistency" while making the adjustment to the international transaction of provision of software development services and provision of marketing support service; 4.5 not allowing the variation/reduction of 5 percent while determining the arm's length price as envisaged under the proviso to Section 92C(2) of the Act. 5. Others. On the facts and in the circumstances of the case, the ld. AO erred in initiating penalty proceedings under Section 271(1)(c) of the Act on the premise that the Appellant has concealed/furnished inaccurate particulars of income, without appreciating the fact that adjustment made is not in accordance with the law. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable the ld. AO to decide this appeal according to law." 2. Ground No.1 raised by the assessee is general....
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....ces, the taxpayer, resulted in any economic or commercial value to enhance its commercial position. The expected benefit must be sufficiently direct and substantial so that an independent recipient, in similar circumstances, would be prepared to pay for it. If no benefit has been provided (or was expected to be provided), the service cannot be charged for. d) First of all, the taxpayer has to prove that the services are rendered. The second aspect of intra group services is the quantification of such services in terms of actual expenditure incurred and commensurate benefits derived there from. To conform to the arm's length principle, the costs of intra group services can only be charged for where the recipient of the services expected, at the time the relevant activities were undertaken, to derive a benefit from those activities. The expected benefit must be sufficiently direct and substantial so that an independent recipient, in similar circumstances, would be prepared to pay for it. e) Would the entity for whom the activity is being performed either have been willing to pay for the activity if performed by an arm's length entity or have performed the ac....
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....de is commensurate with the benefit that is derived or expected to be derived when parties deal with each other at arm's length, the arm's length price of such payment for intra group services would be treated as either Rs. Nil or to the extent it is shown that the benefit actually derived from such payment. 7. The payment for any services are being treated at arm's length only when it is proved substantially by the taxpayer that such service were actually received and further proving that such received services have benefited it. In the present case, the assessee could not produce any information in support of its claim. The assessee further has not demonstrated the receipt of services and tangible benefit derived from such a services. Since the assessee has failed to prove the receipt of above mentioned services and tangible benefit derived from such a services, the ALP of transactions related to said services treated NIL and adjustment thereof is proposed. 8. In the first appeal, the ld. CIT(A) observed as under: "2.16.30 In view of the above, the ALP of the Sage licenses and support is determined at 14.492, as against 34,095.46 paid by the Appellant. ....
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....aid by the Appellant. 9. We have heard the rival contentions and perused the record. In similar circumstances on identical facts, this Tribunal in assessee"s own case for A.Y. 2009-10 reversed the order of DRP and directed the AO to accept the value of management services as claimed by the assessee. Similarly, this Tribunal in A.Y. 2010-11 also taking into consideration the findings of Tribunal in A.Y. 2009-10 allowed ground No 3 raised therein and directed the AO to accept the value of management services as claimed by the assessee by reversing the order of DRP vide order dated 29-01-2020. The relevant portion in ITA No. 623/PUN/2015 for A.Y. 2010-11 is reproduced here-in-below : "12. Ground No. 3 raised by the assessee challenging the action of DRP in confirming the transfer pricing adjustment in respect of management services of Rs. 1,27,37,577/-. "13. Heard both parties and perused the material available on record. We find the issue raised in ground No. 3 is similar to the issue raised by the assessee in ground No. 3 for A.Y. 2009-10 in assessee"s own case. On perusal of the same we find the transfer pricing adjustment was made basing on same identical fact....
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.... no services were provided and in determining the arm's length price at Nil. 17. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. 18. We have heard the rival contentions and perused the record. The issue which arises vide ground of appeal No.3 is against arm's length price of transaction of payment for managerial services availed from associated enterprise. The agreement which has been entered into by assessee with its associated enterprise was w.e.f. 01.04.2006. The assessee is availing managerial services under the same agreement from year to year. In assessment year 2007-08, no issue in this regard was raised; in assessment year 2008-09, the TPO accepted the arm's length price but the Assessing Officer held that the said payment was not to be allowed under section 37(1) of the Act. The DRP deleted the addition, against which no appeal has been filed by the Revenue. In assessment year 2009-10 i.e. instant assessment year, no disallowance has been made by Assessing Officer under section 37(1) of the Act, but the TPO had held the arm's length price at Nil. The TPO in final analysis holds th....