TaxTMI 
TaxTMI 
2018 (10) TMI 1982
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....om Associated Enterprises ("AEs") and thereby resulting in the enhancement of returned income of the Assessee by Rs.10,692,707/-. 3) That the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO has not recorded any reasons in the assessment order based on which he reached the conclusion that it was "expedient and necessary" to refer the matter to the Ld. TPO for computation of the arm's length price, as is required under section 92CA(1) of the 'Income Tax Act, 1961 ("Act"). 4) The Ld. AO / Ld. TPO/ Ld. DRP erred on facts and in law determining the ALP of the Assessee's international transactions pertaining to payment of intra group services/management fee as NIL against the sum of Rs.10,692,707/- incurred by the Assessee and in doing so have grossly erred in the following manner 4.1 The Ld. AO/Ld. TPO/ Ld. DRP erred in facts and in law in holding that neither the Assessee has received any service and/ or benefit in lieu of the payment made by it for services availed nor was there was any need for such services/ payments; 4.2 The Ld. AO/Ld. TPO/ Ld. DRP erred in facts and in law by arbitrarily rejecting the Transactional Net Margin Met....
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....ilters 50,840,054 Royalty 10,127,454 Management fee paid / project fee 10,692,716 Erection Charges received 138,151 Reimbursement of expenses paid 10,288,161 Reimbursement of expenses received CUP NA 531,880 NA NA Commission received TNMM OP/Sales 2,337,475 1.12% 2.70% Reimbursement of expenses paid TNMM OP/Sales 769,505 1.12% 2.70% Provision of Engineering Design Services TNMM OP/OC 21,057,318 119.85% 15.15% 4. For benchmarking the international transactions during the year under assessment, the taxpayer has adopted segmental approach for its manufacturing, trading and service transaction by using Transactional Net Margin Method (TNMM) as Most Appropriate Method (MAM) and found its international transactions including management fees transaction at arm's length. The ld. TPO accepted all the international transactions entered into by the taxpayer during the year under assessment at arm's length except transaction qua payment of management fee/intra-group services. The ld. TPO also not accepted the taxpayer's approach aggregating all the international transitions for benchmarking and sought to analyze services trans....
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....re incidental in the nature due to long association; that the taxpayer did not file any evidence to support its claim that the services were actually provided; that under uncontrolled circumstances, any independent enterprise having skilled and sufficiently trained manpower would not have willingly paid for such services to the third party; that payment for liaison services allegedly provided by AE are not at ALP nor the taxpayer has conducted FAR analysis with regard to the alleged services nor carried out any cost benefit analysis at the time of requisitioning the so called services. 10. It is the case of the taxpayer that it had received support services from its AE as per agreement at the fee equivalent to a prorata share of the defined pools of expenses provided or procured by the taxpayer on cost plus markup of 6% viz. (a) administrative coordination services, planning & strategy and training; and (b) conduct market research. 11. Ld. AR for the taxpayer challenging the impugned order contended that in case of administrative coordination services, planning and strategy and training received by the taxpayer, these services have been provided by the AE for new customer tenders....
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.... order to resolve various issues. 15. The ld. TPO held that the taxpayer has not proved as to how these services were useful and that the services appeared to be very generic in nature and are in the nature of shareholder services nor any cost benefit analysis provided by the taxpayer. 16. When we examine the reasons given by ld. TPO for declining the contentions of the taxpayer for rendering such services by the AE and taking benefit therefrom by the taxpayer in the light of the fact that its intra-group charges are merely 1.39% of the total turnover which has been increased five times within last five years and the taxpayer is a subsidiary of Donaldson Company Inc., USA, its AE, and is into manufacturing and marketing of air filtration systems, etc., without these services 5 times increase is not possible. Moreover, all the services are being rendered as per agreement of 2004 and since then facts have not been changed. Merely because of the fact that the payment on account of management fee / intra-group services is increasing every year, the case of the taxpayer cannot be falsified as it is to be seen in the light of the fact that if payment of services has been increasing the....