TaxTMI 
TaxTMI 
2023 (9) TMI 1028
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder Section 143(3) read with section 144C (3) of the Act, was dismissed. 03. The assessee has raised several grounds but in substances assessee is contesting the adjustment of Arms length price of reimbursement of expenses upheld by the ld CIT (A) of Rs. 53744032/- on account of Marketing suoport services and Rs. 8431645/- on account of IT support services. 04. Fact shows that Assessee Company is engaged in the business of manufacturing of switch board power supplies and other computer peripherals. It filed its return of income on 29th September, 2008, declaring net loss of Rs.8,14,06,120/-. The return was picked up for scrutiny. 05. As the assessee has entered into various international transactions, reference was made under Section 92CA (1) of the Act for examination of Arm's Length Price of such international transactions. The learned Transfer Pricing Officer noted that assessee is engaged in manufacturing and export of Switch Mode, Switch Mode Power Supplies (SMPS) and sub-assemblies thereof. The products are in the category of electrical hardware. The international transactions in dispute are allocation of corporate expenses. In the transfer pricing documentation ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,01,52,158/-. The assessee itself has disallowed corporate expenses of Rs.2,63,06,348/- and accordingly, the resultant addition on transfer pricing adjustment is required to be made of only Rs.6,38,45,815/-. It was further found that assessee has debited capital issue expenditure of Rs.12,60,000/- which is capital in nature and therefore, same is disallowed. Accordingly, the total income of the assessee was computed at loss of Rs.1,63,305/-. The draft assessment order was made on 2nd December, 2011. 07. The assessee did not file any objection before the learned Dispute Resolution Panel and therefore, the final assessment order under Section 143(3) read with section 144C of the Act was passed on 31st January, 2012, determining taxable income of the assessee at a loss of Rs. 1,63,305/-. 08. The assessee aggrieved with the assessment order preferred an appeal before the learned CIT (A). The assessee before the learned CIT (A) submitted the details breakup of cost with respect to marketing business development and finance related services, IT related, etc. The claim of the assessee is that the Arm's Length Price of international transaction adjustment made by the learned Transfer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on, Assets and Risk ("FAR") analysis provided by the assessee and have reached at a wrong conclusion that Red Rocket Inc. (AE) is responsible for marketing support services. It was wrongly held that the amount charged by the Associated Enterprises is not for the business purpose of the assessee merely because there is absence of the agreement for balance period of 8 months. With respect to the intra group services, the various email submitted by the assessee demonstrating that such services have been received by the assessee was not appreciated. It was further argued that in fact assessee is a manufacturer having its manufacturing facilities at Seepz in Mumbai but the lower authorities have treated the assessee as distributor. It was also challenged the approach of the lower authorities to compare the expenses of intra group services as percentile of sales based on comparable companies. Accordingly, the learned Authorized Representative stated that the orders of the lower authorities deserves to be quashed. 011. The learned Departmental Representative extensively referred to the order of the learned Transfer Pricing Officer and also of the learned CIT (A) and submitted that asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervices. Further, the email correspondence and other documents produced by the assessee were also not discussed. The assessee was considered as a distributor , but it is a manufacturer and therefore, naturally the assessee cannot be considered as a distributor. Further, determination of Arm's Length Price of marketing support services by applying the proportionate sales percentage based on the sale of comparable companies is also not a correct approach for the reasoning nature of the services rendered by Associated Enterprises to the assessee was not demonstrated to be similar. The assessee has also failed to completely demonstrate the Arm's Length Price of intra group services by satisfying need test, benefit test, rendition test, duplicative test etc . In view of this, we set aside the whole issue back to the file of the learned Assessing Officer/ Transfer Pricing Officer with a direction to the assessee to substantiate the Arm's Length Price of the intra group services demonstrating the above tests / ingredients mentioned. On submission of the detail by the assessee, the learned Transfer Pricing Officer may examine and determine the Arm's Length Price in accordance with the law.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... percentage cannot be applied in intergroup services. The learned Transfer Pricing Officer asked the assessee to show the documentation showing the benefits received by the assessee and also the breakup of the cost. Assessee submitted the breakup. He also examined the number of employees employed by the assessee. The learned Transfer Pricing Officer reached at a conclusion that documentation submitted by the assessee could not demonstrate tangible and direct benefit received by the assessee. Therefore, the learned Transfer Pricing Officer compared seven comparables with their sales, total marketing expenses and the percentage thereto. The learned Transfer Pricing Officer found that 19.54% is the marketing expenditure of the comparable companies, whereas the assessee spend is 29.99%. Accordingly, he made an adjustment of Rs.4,41,05,838/- on account of Arm's Length Price of the above services by passing an order under Section 92CA(3) of the Act on 23rd November, 2011. Based on this, the draft assessment order was passed determining the total taxable income at Rs. Nil after setting of the losses. In the draft order, the adjustment of Arm's Length Price of international transaction of ....