TaxTMI 
TaxTMI 
2023 (12) TMI 634
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....9;AE') were not at arm's length; Reference made to the Transfer Pricing Officer 3. erred in referring the Appellant's case to the Learned Transfer Pricing Officer ("TPO") under Section 92CA(1) of the Act, without satisfying the conditions specified therein, Rejecting the benchmarking analysis undertaken by the Appellant/selection of tested party 4. erred in rejecting the transfer pricing analysis undertaken by the Appellant by rejecting the selection of AE as the tested party, without appreciating that the analysis was in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("the Rules") and incorrectly holding that the Appellant' s international transactions of GCCM service availed from its AE were not at arm's length; Determining ALP of GCCM services availed by the Appellant from its AE at 50% of the GCCM fees paid to AE 5. erred in determining the ALP in respect to the international transaction of GCCM services availed by the Appellant from its AE at 50% of its value. Scope of TPO 6. erred in not appreciating the commercial rational/ expediency of the Appellant f....
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.... Act read with Rule SD of the Rules even though no exempt income was earned by the Appellant during the subject AY; Short grant of TDS Credit tax 14. erred in not to grant credit for TDS tax of various subsidiary companies which got merged with the Appellant and whose income is included in the Appellant's income while offering tax for the current year; Penalty Proceedings 15. erred in initiating penalty proceedings under Section 274 r.w.s. 271(1)(c) of the Act. Each of the above ground is independent and without prejudice to one another. The Appellant craves leave to add, to alter, to amend or to delete any or all of the above grounds of appeal, at or prior to hearing of the appeal so as to enable the Income Tax Appellate Tribunal to decide the appeal according to law. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case." 2. Fact in brief is that assessee (ISS Facility Services India Private Limited or ISS India) is wholly owned subsidiary of ISS Global A/S, which in turn is a downstream subsidiary of ISS World Services A/S (ISS A/S) Denmar....
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....rvice by the associate enterprise to the assessee for which any payment need to be made by an independent party in an arm's length scenario. The TPO also stated that the cost allocation was not reliable and the documents furnished by the assessee did not demonstrate the rendering of any service or the benefit received for which such payment was made. The TPO referred two of the agreement of the assessee made with Barclay and Citi Group in respect of the GCC fees which was recovered from the third party clients. The TPO has allowed the claim of GCC fees to the extent of Rs. 12,94,05,791/- which was charged from the third parties and disallowed the remaining amount of Rs. 10,84,93,555/- claimed as GCC cost by the assessee and added back as income. 5. The assessee has filed objection against the aforesaid adjustment made by the TPO before the ld. DRP. Following the directions of the DRP for earlier years, the ld. DRP has restricted the disallowance to the extent of 50% of the amount received by the AE with reference to services rendered under Global Corporate Client Management agreement. 6. Heard both the sides and perused the material on record. During the course of appellate p....
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.... 8.1. We hold that once a reference is received by the ld. TPO u/s.92CA(1) of the Act from the ld. AO, the ld. TPO is required to determine the ALP of the international transaction as per the provisions contained in Section 92C and 92CA of the Act read with relevant rules thereon. From the conjoint reading of the relevant sections and the relevant rules, we find that the duty of the ld. TPO is restricted only to the determination of the arm's length price of an international transaction between two related parties by applying any of the methods prescribed u/s.92C of the Act read with rule 10B of the rules. Thus, there is no provision made in the statute empowering ld. TPO for determining the ALP on a particular international transaction on an estimation basis / adhoc basis. 8.2. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs. Johnson & Johnson Limited in ITA No.1030 of 2014 dated 07/03/2017 wherein it was held as under:- "4.Regarding question (D) : (a) The respondent assessee paid to its Associated Enterprises (AE), technical know how royalty of 2%. The Transfer Pricing Officer (TPO) by order dated 24th March, 2005 restric....
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....fully following the aforesaid decision of Hon'ble Jurisdictional High Court, we have no hesitation in directing the ld. TPO to delete adjustment made to ALP in respect of aforesaid three services viz., GIS services (Rs.62,95,226/-), MSF Services (Rs.7,88,90,157/-) and MNC Services (Rs.19,29,008/-). Accordingly, grounds raised by the assessee are allowed on this technical aspect and grounds raised by the revenue are dismissed on this technical aspect." In view of the above we hold that as no method under section 92C(1) of the Act was followed by TPO/ DRP for upholding partial adjustment in respect of international transaction pertaining to Payment of Global Client Management Fee and same was done merely on ad-hoc basis, TPO is directed to delete the transfer pricing adjustment of Rs. 3,66,71,462/- in respect of Payment of Global Client Management Fee. Accordingly, transfer pricing grounds no. 7 to 11 raised in the appeal are allowed." Since, during the year under consideration also the TPO/DRP has not followed any method u/s 92(1) of the Act for making adjustment in respect of international transaction pertaining to payment of Global Client Management Fees and similar to....