TaxTMI 
TaxTMI 
2022 (4) TMI 1574
X X X X Extracts X X X X
X X X X Extracts X X X X
.... intra-group services. 3.1 The brief facts of the case pertaining to this issue as emanating from the records are: The assessee, an Indian Company, is wholly owned subsidiary of ISS Global A/S, which in turn is a downstream subsidiary of ISS World Services A/S, Denmark. ISS World Services A/S, Denmark has certain large Global Corporate Clients and it enters into agreement with these Global Corporate clients for provision of services globally. These clients are served by ISS group entities in their respective jurisdiction. Assessee is engaged in rendering cleaning, catering, guest house management, office support, pest control and technical services in India. During the previous year relevant to assessment year 2013-14, the assessee entered into following international transactions with its associated enterprise: Sr. No. Nature of Transaction Amount (in Rs.) 1. Payment of Royalty 5,04,38,236 2. Payment of management service fees 1,10,06,624 3. Payment of Global Client Management fee 5,14,98,036 4. IT Charges paid 98,32,888 5. Insurance Charges paid 47,89,429 6. Acquisition of equity shares 25,97,26,8....
X X X X Extracts X X X X
X X X X Extracts X X X X
....compute the adjustment accordingly. Giving effect to directions of DRP, TPO revised the amount of adjustment to Rs. 3,66,71,462/- and same was, inter-alia, added in total income of assessee in impugned final assessment order. 3.5 During the course of hearing, the ld. Authorised Representative referring to paras 3.5.12 and 3.5.26 of the DRP's order submitted that DRP even after taking note of instances of services rendered by AE to assessee erred in not granting complete relief to assessee. It was further submitted that managerial services received from AE has resulted in growth of assessee's business as the revenue and profitability increased over the years. The ld. Authorised Representative submitted that TPO in its subsequent orders for AYs 2015-16, 2016-17 and 2017-18 accepted similar transactions relating to Payment of Management Service Fees and made no adjustment. Further, in respect of transactions pertaining to Payment of Global Client Management Fee where partial adjustment was made by TPO, the ld. Authorised Representative placed reliance on the decision of co-ordinate bench in the case of M/s Lintas India Pvt. Ltd. v. Deputy Commissioner of Income Tax: ITA Nos 1156/Mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Management Service Fees cannot be determined at NIL and adjustment made by TPO and confirmed by DRP is directed to be deleted. 3.9 As regards the international transaction of Payment of Global Client Management Fee, it is also evident that TPO in subsequent assessment years has partially accepted the assessee's submission of rendition of service by AE and made ad-hoc adjustment without applying any prescribed method under section 92C(1) of the Act. Further, it is also unrebutted that receipt of service from AE has resulted in growth of assessee's business as the revenue and profitability has increased over the years. The Revenue could not controvert any of the facts nor could place any material on record to the contrary to suggest that Revenue is aggrieved by part relief granted by the DRP. We are s in agreement with the findings of co-ordinate bench of the Tribunal in case of M/s Lintas India Pvt. Ltd. (supra), which in turn has followed the decision of Hon'ble Jurisdictional High Court in the case of CIT v. Johnson & Johnson Ltd. in ITA No. 1030 of 2014. The relevant extract of the order in the case of M/s. Lintas India Pvt. Ltd. reads as under: "8. We have heard the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see preferred an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 22ndMarch,2007, the appeal of the respondent assessee on the issue of royalty payable on technical know how, allowed the appeal. It inter alia held that restricting the royalty paid on account of technical know how to 1% was arbitrary and adhoc. Inasmuch as, there were no reasons justifying the restriction of the technical know how royalty paid by the respondent assessee to its AE at 1%. Moreover, it also records the fact that the TPO did not determine the ALP of the technical know how royalty by adopting any of the methods prescribed under Section 92C of the Act. (c) Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order dated 20th August, 2013 the Tribunal dismissed the Revenue's appeal inter alia upholding the order of the CIT(A). (d) We find that the impugned order of the Tribunal upholding the order of the CIT(A) in the present facts cannot be found fault with. The TPO is mandated by law to determine the ALP by following one of the methods prescribed in Section 92C of the Act read with Rule 10B of the Income Tax Rules. H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich the assessee is also paying the royalty. During the course of hearing, the ld. Authorised Representative referred to Function, Asset and Risk analysis of AE and other relevant parameters of transfer pricing study and contended that AE is the least complex entity. 4.2 On the other hand, Ld. CIT DR, placed reliance on orders passed by TPO and the DRP. 4.3 We have considered the rival submissions and perused the relevant material on record. The TPO in subsequent assessment years has accepted the transfer pricing analysis submitted by assessee in respect of transaction of payment of Management Service Fees and in respect of intra-group services i.e. payment of Global Client Management Fee granted partial relief. There is no bar in treating foreign A.E as tested party. The only condition is that the tested party should be the least complex entity. It is pertinent to note that in the subsequent assessment years i.e. AY 2015-16, 2016-17 and 2017-18, there was no change in assessee approach of conducting its benchmarking analysis for intra-group services by treating AE as a tested party, as in the assessment year under our consideration. The Revenue has failed to give any plausib....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... interest bearing loans/advances @12% per annum from group companies to meet the working capital requirements on need basis. The AO treated the loan from subsidiary as deemed dividend under section 2(22)(e) of the Act and made an addition of Rs. 1,39,68,442/-. The DRP did not accept assessee's objections and upheld the addition made by AO. The ld.Authorised Representative submitted that interest bearing loans/advances were taken by the assessee from group companies and thus, the provision of section 2(22)(e) of the Act would not be applicable in present case. The ld.Authorized Representative of the assessee further submitted that the assessee has taken loans from its two group companies i.e: (i) ISS Support Services Pvt. Ltd. Rs. 2,12,13,524/- (ii) ISS Hi Care Pvt. Ltd. Rs. 32,39,74,360/- The assessee has taken substantial loan from ISS Hi Care Pvt. Ltd. which is engaged in the business of advancing loans. Thus, in any case, loans advanced by the said company is in normal course of its business, hence, the provisions of section 2(22)(e) of the Act would not get attracted. On the other hand, ld. DR relied upon the orders passed by lower authorities. However, the....