TaxTMI 
TaxTMI 
2023 (1) TMI 1113
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....ons entered into by the Appellant with its Associated Enterprise ("AE") in respect of "receipt of advisory services" is not at an arm's length and in thereby holding that the ALP thereof is only Rs.31,72,140/- as against the amount of Rs. 3,66,88,446/- paid by the Appellant and determined to be the ALP thereof. 1:2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject the value of international transactions pertaining to "receipt of advisory services" is Rs. 3,66,88,446/-, and the CIT(A) ought to have held as such. 1:3 Without prejudice to the aforesaid, and on the facts and circumstances of the case and on the law prevailing on the subject the transaction vis-a-vis "advisory services" should also be aggregated under "manufacturing activity" (alongwith aggregating other international transactions being receipt of research and development services and purchase of raw materials) while determining the ALP of the international transactions of the Appellant. 1:4 The Appellant submits that the AO / TPO be directed to delete the transfer pricing adjustment vis-a-vis the receipt of advisory services and to re-compu....
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....ces, payment of maintenance charges for software license and paid/received reimbursement; involving varying sums, respectively. The Assessing Officer, therefore, made section 92CA(1) reference to the Transfer Pricing Officer "TPO" for determining arm's length price "ALP" thereof. 5. It emerges from a perusal of TPO's order dated 10.01.2013 that so far as the sole issue before us involving arm's length price adjustment relating to "Receipt of Advisory Services" is concerned, the assessee had paid Rs.3,66,82,446/- to its spanish associated enterprise M/s. Grupo Antolin Irausa. The TPO's order makes it clear that the assessee's transfer pricing report (Form 3CEB) had claimed that the recipient AE hereinabove charged "a portion of total expenditure incurred on account of these techno commercial services to its group companies. The said amount is increased by supplementary 5% profit margin. Usually this charging is based on the turnover as budgeted by the group companies at the start of the year". It had further benchmarked the foregoing transaction in "Receipt of Advisory Segment" by using the comparable uncontrolled price "CUP" method thereby declaring that "as per the information av....
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....009-10 before us. And that the TPO had rejected the assessee's CUP in the impugned assessment year as per para 18 page 12 therein. He thereafter choose to aggregate the assessee's three transactions involving "Receipt of Advisory Services", "Payment of Telephone Charges" and "Receipt of R&D" in manufacturing with Profit Level Indicator "PLI" as "OP/OR". Mr. Yadav could hardly dispute that the TPO's order in para 36 page 18 initially arrived at transfer pricing adjustment of Rs.27,58,88,444/- by using the Transactional Net Margin Method "TNMM" only. This adjustment figure fail to inspire the TPO's confidence. He observed that this sum turned out to be much more than the assessee's gross value of transaction in both manufacturing as well as computation aided design "CAD" segment (supra). We find that the learned TPO went further to compute the impugned nil arm's length price of assessee's advisory services by once again following CUP method only. 9. We note that TPO's detailed discussion from 41 onwards considered the assessee's service agreement dated 02.10.2003 comprising various stipulations involving definition in "i to ix" clauses regarding administrative support services vis-a....
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....ne arm's length price at Nil without going into merits of rendition of services by the assessee to associated enterprises. The TPO in the final analysis has only commented that since unadjusted margins of assessee are (-) 11.56% and that of comparables are at 6.39%, hence TNMM analysis used for benchmarking was not correct and further held the advisory services were not at arm's length price and hence, taken at Nil. We find no merit in the stand of TPO in this regard, which has been upheld by DRP. In any case, we have already allowed the claim of adjustment to be made on account of extraordinary cost to be reduced while arriving at operating margins of assessee and the same would work out to 7.13%." 11. Mr. Yadav sought to draw distinction in A.Y. 2008-09 vis-a-vis A.Y. 2009-10 on the ground that although the assessee therein had proved receipt of services in the said former assessment year but it could not demonstrate the actual benefits flowing therefrom whereas the facts in the instant latter assessment year raise the dispute of actual rendering of services itself. He pinpointed the fact that the assessee has not filed any evidence in support of its "Advisory Services"....
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.... certain email exchanges between the assessee and the Indian entity, whose copies have been placed in the paper book. Pages 231 to 234 demonstrate e-mail exchanges between the assessee and the Indian entity discussing the stiffness of HDL's with Expanded foam having an acceptable strength. The assessee informing the Indian entity that the test was conducted and it was eventually found that fogging as per Tata specs was OK but for GM specs was not OK. Pages 240 and 241 are again e-mail exchanges between the assessee and Indian entity concerning with the running trials of materials AB 4235/50 and AB NS by the Indian entity on its Plant. The assessee responded by stating that it wants an urgent feedback for this issue as the samples were sent in mail and there was no feedback till November, by specifically mentioning that "this situation is absolutely unacceptable". To this, the Indian entity responded that it took trial on the above adhesive which is giving good bonding but was facing air gap in the package tray packet area. They requested the assessee for further input. Pages 242 to 243 deal with the Indian entity communicating to the assessee that they have got Canon G-300 series P....
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....ity in connection with the IT services, discussing about difference in the information under SAP system and the report by which the Indian entity was questioned and called upon to change the information in SAP and report in uniform manner. Pages 270 and 271 again deal with e- mail exchanges between Indian entity and assessee. The Indian entity attached monthly cost reduction plan duly updated for May 2009 for information of the assessee. The assessee required it to submit all information in new format which was attached in the e- mail. Similar is the position regarding other e-mail exchanges placed on record. 5.4. With the above understanding of the nature of services, we now proceed to determine the taxability of the amount under the Act, which encompasses consideration, inter alia, for managerial, consultancy or technical services. The term `manage' in the context of business, connotes administering and supervising the affairs of a business, encompassing Planning, Execution and Performance evaluation. Ex consequenti, the term `Managerial services' contemplate services in connection with administration and supervision of the business, starting with establishing proper managemen....