TaxTMI 
TaxTMI 
2024 (3) TMI 373
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....DRP / TPO erred in making an adjustment to the Appellant's international transaction of receipt of intra-group services with its Associated Enterprises ("AEs") alleging that it does not satisfy the arm's length principle envisaged under the Act and thereby making an adjustment of INR 25,19,80,074 and in doing so have grossly erred in: 3.1. Ignoring the order passed by the Honorable ("Hon'ble") High Court wherein the Hon'ble High Court has directed the Ld. TPO to verify the evidences afresh i.e. uninfluenced by any observations made by the Hon'ble Income Tax Appellate Tribunal ("Tribunal") in its order; 3.2. Ignoring the specific directions of the Hon'ble Tribunal wherein the need and benefit test for the intra-group services had been accepted and the matter was referred to the AO / TPO only for verifying the rendition of the services and therefore, the arm's length price of the said intragroup services cannot be assumed to be Nil and the adjustment made ought to be deleted; 3.3. Ignoring the contemporaneous evidences submitted by the Appellant for each kind of intra group service received; 3.4. Ignoring the decisions of the Hon'ble High Court and....
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....lowed for statistical purposes. Aggrieved with the order of the Hon'ble ITAT, the assessee approached Hon'ble Delhi High Court and Delhi High Court in its decision in 1TA No. 219/2019 and C.M No 10766/2019 has dismissed the assessee's appeal and being pertinent, the relevant extract of the decision of the Hon'ble High Court is reproduced below:- The only question which the assessee urged in this appeal under Section 260A of the Income Tax Act is that even while remitting the matter for reconsideration and verifying the evidence pertaining to intra-group services for the purpose of ALP determination, certain adverse observations with respect to the quality of evidence were made for Assessment Year 2012-13, which have been followed for the current year (Assessment Year 2013-14). This court has considered the submissions of the parties. It goes without saying that the observations of the tribunal for the previous years can be at best a guide. Nevertheless, in order to allay any apprehensions, the TPO is directed to carry out the task uninfluenced by any adverse observations, contained in the order of the tribunal, impugned in the present case (dated 27.06.2018 in paras 4.12 and ....
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....015-16 respectively. From the perusal of the above order (para 11), it is seen that the department could not furnish its comments on the evidences furnished by the assessee with regard to Intra Group Services. Further the Hon'ble Tribunal has merely relied in its earlier order for A.Y. 2009-10. Also the Hon'ble Tribunal based its decision on the composite Agreement however no discussion on the evidence furnished for Intra Group Services has been made in the order (para 13) Thus it can be safely said that the evidence has not been examined by the Hon'ble Tribunal in the above referred recent order for the A.Y. 2012-13 and 2015-16. Moreover, as the issue in the case of assessee is mainly rendering of services accordingly it is humbly submitted that the decision of the earlier years cannot be taken as precedents because for each year rendering of services is different and it has to be established by evidences. The onus for establishing receipt of services from the Associated Enterprise has to be discharged on year to year basis by the assessee company and there are various decision of the Hon'ble High Court/Hon'ble Tribunal which clearly says that in case of Intra Group Serv....
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....ter back to the Assessing officer for reconsidering the issue. In view of the aforesaid, we do not find any valid reason to interfere with the decision of learned Commissioner (Appeals) on the issue. However, at this stage, we must make it clear, we have come to the aforesaid conclusion based on the facts involved in the impugned assessment year, wherein, the assessee has failed to furnish cogent evidence to demonstrate that administrative services were actually received from the AE. Therefore, this decision of ours may not prejudice assessee's claim in any other assessment year, as, it has to be decided based on the evidences produce to establish the claim of receipt of services from AE. Ground no. 3 along with sub-grounds are dismissed." This decision of the Hon'ble Tribunal has also been confirmed by the Hon'ble High Court of Delhi in 145 taxmann.com 468 vide order dated 27 September 2022. Again the issue was of Intra Group Services and applicability of the decision of the Hon'ble High Court for other years. The Hon'ble Delhi High Court has held that each year is separate unit and governed by its peculiar facts. Being pertinent, relevant extract of the Hon'bl....
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....s of the documents /evidence furnished with regard to services rendered Before analyzing the individual documents, it is first necessary to refer to the comments of the Hon'ble 1TAT for A.Y. 2013-14 wherein reliance was made on the decision of A.Y. 2012-13. The directions of the Hon'ble Tribunal for A.Y. 2012-13 after considering the documents. In ITA No. 5578/Del/2016 are very pertinent and reproduced below:- "4.12 We have heard the rival submissions and perused the relevant material on record. This is undisputed that in the immediately preceding assessment year i.e. 2012-13, the issue of arm's length price of intra-group services has been restored back to the file of the Ld. AO/TPO by the Tribunal in Avery Dennison (India) (P.) Ltd. v. DCIT taxmann.com Trib). The finding of the Tribunal on the issue in dispute is reproduced as under: "13. We have perused the orders of the coordinate bench as well as Hon'ble High Court. To determine ALP of intra group services according to us it is necessary for TPO to assess (a) need test, (b) benefit test, (c) rendition test, (d) duplication test and (e) share holder Activity Page 10 of 13 test. It is also accepted that need test a....
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....he Id TPO for the following services are as under: SI No. Relevant IGS Evidences Submitted before TPO Marketing Support Services 1. Marketing Services Support Marketing - Product Brochures Email: Tracking Commercialized End use Projects via S5.com Email: SF.corn-May figures Email: Beer in India Product Size of ADIPL and ADC Email-Coca cola India RFS Solutions for Modern Trade & Juices Email- HFS India need your help Email-Improved draft business plant Multitrip Email-2011 OGSM Email: Bisleri - Vedica Mineral Water Email: Samples of MZ2001 to each countries Email: Samsung IMD1 label MZ1081 sample Email. Need forecast for MZ 2000 and MZ 2001 for 2012 Email: Mew projects from LPM-AP Durables Strategy Deployment Meeting Email- Re: New projects from LPM-AP Durables Strategy Deployment Meeting Email - Dust Repellant Coat Email: Converting College Email-Group teleconference Email Regional Beer ami Team Meeting Email: Global Beverage 2. Operations and Logistics Support Email- Re : IN4 Upda....
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.... President. Page No. 263 to 280 is a product finder and similarly some of the mails are very general and pertaining to team meetings and teleconference between the two parties. Similarly we have also perused such evidence with respect to other services also as per chart produced before us. Startlingly, assessee himself has not submitted any proof with respect to accounting administrative services and management information system listed at SI No. 6 and 7 of the chart. With respect to financial services only sector revenue forecast and Q3 forecast revenue were mentioned. Therefore, on analysis of the above documents we found that there are no proper evidences led before the Id TPO that services have infact been Actually rendered by the AE. It is expected from the assessee for proper benchmarking to lead evidence with respect to each of the nature of services with respect to each class of services mentioned in the above chart with corresponding manner of rendering of the services, the time lag of initiation of services and closure of the services. The evidences produced are apparently very general and do not show the rendering of the services. In view of this we set aside the appeal ....
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....e brouchers have been examined and it appears that these are related to the adhesive materials /labels etc. supplied by Avery Group to various customers across the globe and it has nothing to do with the services received by the assessee company (2) From the perusal of the various international transactions undertaken by the assessee company with its AEs it is seen that assessee company transacts with its AEs on many activities like purchase/ sale of raw material/goods/services, rendering of service/reimbursement of expenses etc. and these marketing brouchers appears to be related with those services and there price /cost has already been included in those services so it is unfair on part of the assessee to show them as separate IGS. Further only showing some of the brouchers as example and without explaining how these brouchers constitute IGS is of no relevance and accordingly this evidence is rejected. (3) Page no. 214 to 259 these are the e-mails correspondence between group personnal the assessee has claimed these as support services with regard to marketing however these e-mails appeared to with regard to the material purchased /sold by assessee company to its AEs and agai....
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....s. (9) page no. 402 to 458 , the assessee claims these as emails correspondence in relation of support services. However, on perusal these appears to be normal corporate communication between employees of two AEs and certainly does not show any rendering of services. (10) Page no. 459 to 483 these are the documents which relate to global learning and development curriculum sent by Vice President of the Avery Group. This document appears to be a training document with regard to leadership development in the group. This activity is a common HR activity undertaken by the holding company for its own benefit in all MNCs. By this activity they develop the local leadership which in future, is used by the company for its own benefit and this also does not convey any rendering of services. (11) page 485 to 525, all these papers are basically related to travel scheduling of the various employees appears to be made for the senior executive from outside to review the assessee company performance, which again is done by all AEs and comes in the ambit of share holder/holding company activity because ultimately if the assessee company performs well it will be the advantage of holding compan....
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....el ("DRP") in the past and in this year by the TPO itself. 2. It may also be pointed out, that this is the second round of litigation and in the first round, the Hon'ble Bench of the Income Tax Appellate Tribunal ("Hon'ble Tribunal") vide order dated June 27, 2018 had remanded the matter back to the file of the TPO by holding that the facts of AY 2013-14 are similar to AY 2012-13 and thus following the order of the AY 2012-13, the matter is remanded back with the specific directions that the TPO shall not go into the need and benefit test for the intra group services ("IGS") and only verify the rendition of such services. 3. A perusal of the TPO's order dated January 25, 2021 in the second round clearly shows that the TPO has; (a) again gone into the question of need and benefit which is clearly without jurisdiction; (b) brushed aside all the evidences regarding rendition of services in summarily manner that no document has been filed by the taxpayer. The TPO further, in the same breath has accepted part of the services, i.e., relating to ticketing hub and VIPFS amounting to INR 5,90,30,205, which is historically been accepted by the lower authorities and for balance services a....
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.... has merely tried to distinguish the same without any basis. For the sake of repetitiveness, it may again be highlighted that the sum and substance of the order of the Appellate Authorities, i.e. ITAT, High Court and Supreme Court is that; (a) it is a composite contract under which the services were being rendered and the same cannot be dissected and accepting part services and determining the ALP for other part as Nil; (b) the services were being rendered right from AY 2007-08 and therefore, in the present year the different view may not be taken stating evidences are general and should be ignored; and (c) the adequate documents have been brought on record to demonstrate the rendition of services. The Ld. DR has further erred in relying upon the following cases: (a) Akzo Noble India Limited vs. ACIT: [2022] 137 taxmann.com 369 which has been affirmed by the High Court and reported as [2022] 145 taxmann.com 468 (Delhi); (b) Safron Engineering Services India (P.) Ltd. Vs. ACIT [2018] 89 taxmann.com 77 (Bang. Tribunal). The facts of above-mentioned cases relied upon by the Ld. DR are completely distinguishable for the reason that in both the above cases no evidence was finished....