TaxTMI 
TaxTMI 
2022 (4) TMI 1012
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....method. - in not taking cognizance of the submission made by the Appellant covering substantive documentary evidences demonstrating the receipt of management services and benefits derived therefrom, - in challenging the commercial business needs and decisions of the Appellant with respect to availing the services from AE, - in disregarding the analysis conducted by the appellant under aggregation approach, while applying entity level TNMM as the most appreciate method for its Distribution activity, thereby ignoring the fact that the transaction of payment of Management Service Fee is inextricably linked with Applicant's Distribution activity, and - in determining the arm's length value of the transaction pertaining to payment of Management service fee as Nil without undertaking any analysis for selection of most appropriate method and search for comparable uncontrolled transaction to compute arm's length price as prescribed by Indian Transfer Pricing Regulations, thereby violating the provisions of Section 92C(3) of the Income-tax Act, 1961. The Appellant prays that the transfer pricing adjustment pertaining to Management Ser....
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....e case of M/s. Gemplus India Pvt. Ltd., (ITA No. 352/bang/2009) Under these circumstances, it is difficult to accept proposition of the assessee that the cost of the services rendered is at arm's length. In absence of all these details, I considered value of these service at NIL and accordingly there is an upward adjustment of Rs. 1,17,45,602/-. 06. Tested Party: Without prejudice to the upward adjustment as proposed in the order, issue of selecting Walter AG as a tested party was also considered independently. It was brought to the notice of the assessee that tested party should be least complex entity. Walter AG is having unique expertise in manufacturing and trading in tools for metalworking and machinery and tools for rock excavation, stainless steel, special alloys and resistance heating materials and process systems. Under these circumstances, Walter AG cannot be considered as Tested Party. Further, Walter AG is rendering Management services, while assessee company is receiving management services, therefore FAR of both the parties do not match. Therefore also selection of tested patty is not correct and not acceptable. The issue is dis....
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..... 3.2.3.7 In view of the above discussion, we see no infirmity in the action of the TPO in rejecting the benchmarking analysis of the assessee related to MSF, using Walter AG as the tested party, since Walter AG is not the least complex party and also because reliable data of Walter AG and the comaparables selected by the assessee are not available. Accordingly, the first issue raised by the assessee in this objection is rejected. 3.2.4.3 The nature of service to be rendered and the fees to be charged for the services have been laid out in the said MS.F. Agreement entered into by the assessee with Walter AG, effective from 1/1/2012. It is observed that in this agreement (Appendix 1 to Schedule 1 of this agreement), the services to be rendered are very general in nature, related to Produce Area and regional Management, financial, marketing, technical and quality management, human resource and administrative management techniques. The service fee to be charged has been stated by the assessee to be cost of service incurred by Walter AG plus a mark up of 4%, which is supported by the agreement vide Appendix 2. Similarly, the books and records related to costs....
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....to 367 is the agreement for MSF. Page No. 327 is the covering letter, page No. 333 to 335 is a Chart explaining the nature of services provided by the AE. The ld. AR also submitted that the TPO has not benchmarked the MSF services using any of the methods prescribed by the Act. Therefore, determination of value of MSF transaction at NIL is bad in law. For this proposition the ld. AR relied on the decision of Hon'ble ITAT in ITA No. 150/PUN/2017 for the A.Y. 2011-12 INA Bearings India Pvt. Ltd., 6. The ld. Departmental Representative (ld. DR) for the Revenue supported the order of the TPO and DRP. The ld. DR specifically invited our attention to the fact that the decision of Hon'ble ITAT in assessee's own case for A.Y. 2012-13 is distinguishable on facts. The ld. DR submitted that for A.Y. 2012-13, the assessee himself had made adjustments. The ld. DR also submitted that during the A.Y. 2013-14 the assessee has not submitted specific details called-for. The ld. DR specifically stated that as mentioned in the DRP's order, the annual report of the AE, evidence regarding cost incurred by the AE in providing management services, the formulae adopted for cost allocatio....
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....AE. 7.3. Once the question related to services have been answered, the second question is determination of ALP. The Hon'ble ITAT in assessee's own case for A.Y. 2012-13, in the identical facts and situations has held the transaction of payment of management services fee at ALP, following the earlier years decisions. The factual assertion could not be controverted by the ld. DR. 7.4. For relevant issue discussed by the Co-ordinate Bench in assessee's own case for the A.Y. 2012-13 is placed at page No. 221 of the paper book and the relevant portion being at para No. 9 to 10 reproduced herein below for ready reference: "9. We have heard both the sides and gone through the relevant material on record. It is seen from a copy of Management services Agreement between Sanedvik AB (the providing party) and the assessee(the receiving party), which is applicable to the year under consideration as well, that the term "Providing party" has been defined as 'all or some of the Sandvik companies which provide management services'. Thus, it is clear that the charges by Sandvik AB were not only for the services provided by it but also some other group companies inc....