TaxTMI 
TaxTMI 
2018 (5) TMI 2144
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....nagement and other administrative Services received by the Appellant by considering the ALP as NIL without followed any prescribed transfer pricing methods as per Income Tax Act, 1961; 1.2. The DRP and the learned TPO/AO erred in rejecting the transfer pricing documentation undertaken by the Appellant to satisfy the arm's length criteria with respect to the management and support Services received; 1.3. The DRP and the learned TPO/AO erred in concluding that the services received by the Appellant from the AE are in the nature of stewardship and shareholder services leading to direct benefit to the AE and no proximate benefit to the Appellant; 1.4. Without prejudice to the above The DRP though accepted that certain benefits did accrue to the Appellant but failed to provide any relief; 1.5. The learned TPO erred in completely disregarding the benefits received by the Appellant, thus failed to appreciate the commercial wisdom/ expediency of the Appellant; 1.6. The DRP and the learned TPO/AO failed to appreciate the fact that the administrative services were rendered by the AE at loss, which indicates that the transaction is inherently at arm's length and also mi....
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....is noted that the services rendered by the AE is in the form of Intra-Group services. The issue came up for the examination in the TP proceeding for the AY 2011-12 by the TPO concerned and after due deliberation of the facts and relevant legal precedence and practices in the international transfer pricing, the TPO has differentiated the transaction from the TNMM analysis and treated the services as stewardship services rendered by the AE for maintenance for overall control over the Group. With this above observation, the TPO has treated the arm's length price of the above services at NIL for the Assessment Year 2012-13. It may also be mentioned that the assessee did not benchmark the services in an independent manner and failed to provide any comparable cost that it may have to incur if it procure such services from any independent source. The Ld. DRP while adjudicating assessee's petition for the AY 2011-12 has upheld the decision of the TPO. The nature of services being the same and to maintain judicial continuity, the undersigned hereby treated the arm's length price of the management services at NIL. Accordingly, adjustment of Rs. 68,81,619/- is to be made under the ....
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....mote the entity as a whole. Though the direct and ostensibly visible benefit to the assessee by availing such services is not clear from the data furnished, yet, it may be reasonably assumed that the assessee did garner some nominal benefits by availing such services in form of trouble shooting at times to resolve certain issues. There is no objective way in which use of services can be measured and as is the commercial practice even in market factors driven situation, the costs are shared in accordance with some objective criterion, including sales revenues and number of employees. Similar issues have been dealt with in various issues before the ITAT in Dresser Rand India P Ltd (47 SOT 423 [Mumbai] 2012), Knorr Bremse India P Limited (ITA no. 5097/Del/2011 - Asstt. Yr: 2007-08). Hon'ble Delhi High Court had the occasion to elucidate the issue in EKL Appliances ([2012] 24 Taxmann.com 199 Delhi/ 345 ITR 241 Delhi), specific findings in para 22 of the orderare - '22. Even Rule 10B(1)(a) does not authorize disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditu....
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...., technical assistance in relation to certain products being provided by AE (the expertise of which was not available with assessee) and other ancillary functions like IT management for which the assessee did not have requisite staff to perform functions. The services were necessary for the assessee to function efficiently and stay relevant in terms of cost competency, fix day to day IT related issues , etc. The assessee made detailed submissions regarding management services to substantiate the benefit received from it vide its submissions dated 13.1.2015. The assesseeeven demonstrated the cost incurred for rendering management services by the AE and the losses incurred by AE for the years ending 2010 and 2011 thereon, thereby proving that despite the recovery of management fees from the assessee , the AE had only incurred losses. We find that the assessee had clearly demonstrated the necessity of paying the management fees to its AE in detail together with the various benefits derived by it and for this purpose, it had also produced the entire exchange of emails on the impugned issue. We also find that the assessee had met each and every aspect of the objections raised in the sai....
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....nt the necessity of AE rendering the managerial services to the assessee and its group companies is justified. Once the same is justified, there is no harm in making payment for those services. We hold that the ld TPO ought not to have determined the ALP of the management charges at Rs Nil by stating that the same need not be incurred by the assessee on the grounds of commercial expediency. This, in our considered opinion, would be beyond the jurisdictional powers of the ld TPO. The duty of the ld TPO would be to determine the ALP of a particular transaction and he cannot get into the propriety of the transaction while determining the ALP. We find that the ld DRP observed that though the direct and ostensible visible benefit to the assessee by availing such services is not clear from the data furnished, yet, it may be reasonably assumed that the assessee did garner some nominal benefits by availing such services in the form of trouble shooting at times to resolve certain issues. This goes to prove that the ld DRP had also agreed to the benefits derived by the assessee out of the services rendered by the AE for which management fees is paid by the assessee. We find that the assessee....
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....." [brackets provided by us] 16.1. We also find that the co-ordinate bench of this tribunal in the case of DCIT vs Bata India Ltd reported in (2016) 69 taxmann.com 120 (Kolkata Trib) dated 6.4.2016 had considered the decisions of Hon'ble Delhi High Court in the case of CIT vs EKL Appliances Ltd (2012) 345 ITR 241 (Del) ; CIT vs Cushman & Wakefield (India) (P) Ltd (2014) 367 ITR 730 (Del) and co-ordinate bench of Mumbai Tribunal in the case of Dresser Rand India (P) Ltd vsAddl CIT (2011) 47 SOT 423 (Mum) and applied the principles emanating out of those judgements and applied the same to the facts of the case in Bata India Ltd. In the said case (i.e Bata India Ltd supra) it was observed as under:- 27. The Hon'ble High Court of Delhi in the case of CIT v. EKL Appliances Ltd.[2012] 345 ITR 241/24 taxmann.com 199/209 Taxman 200 as well as CIT v. Cushman & Wakefield (India) (P.)Ltd.[2014] 367 ITR 730/46 taxmann.com 317 (Delhi), rendered similar ruling as was rendered in the case of Dresser-Rand India (P.) Ltd. (supra).In the case of Cushman & Wakefield India (P.) Ltd. (supra), the Hon'ble Delhi High Court observed that whether a third party - in an uncontrolled transaction....
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....ed in order to meet specific need of the Assessee for such services, the economic and commercial benefits derived by the Assessee of intragroup services. 16.2. We also find that in the recent decision of the Hon'ble Delhi High Court in the case of Knorr-Bremse India (P) Ltd vs ACIT reported in (2016) 380 ITR 307 (Del) wherein the relevant head notes is reproduced hereinbelow :- Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/Adjustments - General) - Assessment year 2007-08 - Whether answer to issue whether a transaction is at an arm's length price or not is not dependent on whether transaction results in an increase in assessee's profit; mere failure to establish that transactions resulted in a profit does not indicate that they were not at an arm's length price and even if profit is established, it does not necessarily follow that transaction was at an arm's length price - Held, yes [Para 21] We find that this judgement had approved the earlier decision of Hon'ble Delhi High Court in the case of Cushman and Wakefield (India) (P) Ltd supra and also the decision of EKL Appliances sup....