2023 (6) TMI 206

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....9. 2. The brief facts of the case are as follows: - The assessee is a private limited company engaged in three distinct operations/ activities, i.e. manufacturing activity, trading activity and back office support services. For AY 2018-19 return of income was filed on 27.11.2018 disclosing income of Rs.15,27,45,340/-. The assessment was selected for scrutiny and notice under Section 143(2) of the Act was issued on 23.09.2019. During the course of scrutiny assessment the case was referred to the Transfer Pricing Officer (TPO) to determine the arm's length price (ALP) of the international transactions undertaken by the assessee with its Associated Enterprises (AEs). The TPO, vide his order dated 30.07.2021 passed under Section 92CA(....

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....ning to manufacturing segment Rs. 2,15,82,177 Costs pertaining to trading segment Rs. 53,35,793 6. The assessee in the manufacturing segment earned margin of 11.95% applying OP/OR as the profit level indicator ("PLI") after including the IT and management support charges in the cost base. The assessee adopted transaction net margin method ("TNMM") as the most appropriate method ("MAM") and conducted search for independent companies which yielded a set of 22 comparable companies with 35^th to 65^th percentile range of 2.72% to 5.69%. Since the margin of the assessee in the manufacturing segment at 11.95% was higher than the 65^th percentile range, the transactions of the assessee with the AE were treated to be at arm's length....

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....;s length price of the IT and management support charges as 'Nil' and made downward adjustment of Rs.2,69,17,970/- towards Management Fees. 9. The DRP, vide its directions dated 21.06.2022, disposed off the objections of the assessee. The DRP upheld the TP adjustment made by the TPO and confirmed the addition towards IT and management support charges. The DRP, however, provided relief with respect to the addition made by the CPC while processing the return of income under Section 143(1) of the Act. 10. Aggrieved, the assessee has raised this issue before the Tribunal. The assessee has filed paper books comprising of 637 pages. It was submitted that the assessee was in receipt of services from its AEs and the payment made under....

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....was justified in arriving at ALP of 'IT and management support' charges as 'Nil'. 12. We have heard the rival contentions and perused the material on record. The assessee claims that it receives IT support from its AE Brady USA. The assessee explains the nature of various services received by it from the AE. In similar fashion assessee claims that it received management support services from its AE, namely Brady Singapore. For the relevant assessment year the payments made under the IT support services to Brady USA is Rs.1,65,75,789/- and management support service fees paid to Brady Singapore was Rs.1,03,42,181/- totalling to Rs. 2,69,17,960/-. Copy of the agreement for IT support services entered between the assessee and Brady USA is p....