TaxTMI 
TaxTMI 
2024 (6) TMI 408
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.... filing of appeals w.e.f. 15.03.2020 under all laws has been granted; hence there is no delay in fact. We confronted Ld. DR for Revenue who agreed to the submission of Ld. AR. In view of this, we proceed with hearing of appeal, there being no delay. 3. The background facts leading to this appeal are such that the appellant/assessee is a company originally known as "M/s Bisco Bio Sciences Private Limited", later changed to present name "M/s Limagrain India Private Limited". It is engaged in the business of research, production and sale of hybrid seeds of various field crops and also provides services in the field of agro bio-technology. For the relevant AY 2017-18, the assessee filed return of income u/s 139(1) on 30.11.2017 declaring total income at Rs. Nil with a loss of Rs. 37,90,21,971/-. The case was selected under scrutiny and statutory notices u/s 143(2)/142(1) were issued by AO while were complied with by assessee. During assessment-proceeding, the AO found that the assessee had entered into international transactions with its Associated Enterprises ["AEs"] situated outside India. The AO made a reference to Transfer Pricing Officer ["TPO"] on 27.09.2019 to determine Arm's....
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....nce of the reference made by AO, the TPO examined these transactions. The TPO has dealt these transactions in Para 6 of his order. When the TPO show-caused assessee vide notice dated 23.01.2021 to file documentary evidences of the service received, working of cost allocation etc., the assessee filed a reply dated 28.01.2021 which is re-produced by TPO in Para 6.1 of his order. The assessee submitted that it has received these services from AEs (i) Human resources support services, (ii) Strategic assistance services in relation to development of business, (iii) Finance and treasury services and (iv) General administration and organization services. The TPO, however, considered assessee's reply in Para No. 6.2 to 6.11 and rejected assessee's submission precisely on following basis: (i) The assessee did not file any documentary evidence with regard to actual receipt of services and without proof of actual receipt of service, the benchmarking and determining ALP was not possible. The assessee had filed only invoices raised by AEs, Transfer Pricing Study Report ["TPSR"] of AEs and Copy of agreement. (ii) The "TPSR" dated 30.06.2015 submitted by assessee did not pertain....
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....ng Para Nos. in TPO order, we have suitably rectified for a smooth discussion) and rejected assessee's submission for following reasons: (i) The assessee has not filed any documentary evidence with regard to the actual receipt of services and without proof of receipt of actual services, it is not possible to determine the ALP and benchmark the same. The assessee has filed only copy of the invoices raised by AEs. (ii) The assessee has not filed "TPSR" although the assessee claimed to have filed. (iii) The assessee has not only failed to submit evidences of actual receipt of service but also failed to submit detailed working of allocation and mark-up charged by AEs. The allocation done by assessee is not based on actual facts and no third party would pay for such services in independent situation (Para 10.4 and 10.10 of TPO order). Accordingly, the TPO determined ALP at Rs. Nil. The assessee objected to the TPO's order before DRP. The DRP dealt assessee's objection in Para 10 of his order. Finally, vide Para 10.3.1, the DRP approved TPO's action of determining ALP at Rs. Nil by stating that this issue was identical to the issue of 'intra-group services' ....
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.... and determining ALP? Ld. DR, however, fairly agreed with assessee's claim that the time of 5 days given by AO for filing reply was very short and during relevant time, there was Covid pandemic also. Ld. DR submitted that due to these reasons, the additional evidences filed by assessee can be considered at appropriate level and the Bench can take a suitable call. 11. We have peacefully heard the learned representatives at length, considered their rival submissions and perused the orders of lower- authorities. After a careful consideration, we find that the TPO has determined ALP of impugned transactions at Rs. Nil and the same is accepted by DRP and AO. The foundational reason of taking a decision to determine ALP at Rs. Nil as culled out from order of TPO is such that the TPO was not even satisfied that the assessee had actually received services for which payments were made. The TPO has strongly noted that in absence of proof of receiving services, it is not possible to carry out benchmarking exercise and determine ALP. Ld. AR for assessee also acknowledges that there was a short period of just 5 days allowed by TPO and moreover that period was a difficult time of Covid due to....
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....f 38.8% as against PLI of 7.75 % determined by the TPO himself. We find that the approach of the TPO to apply PLI at entity level and then apportioning towards the segment of the 'Business Support Services' is totally unjustified in the facts of the case when the limited issue before the TPO was to determine the arm's-length price of the 'Business Support Services'. Therefore, in our view, any adjustment on account of PLI has to be restricted to the transaction of Rs. 10,217,344/-reported as Revenue from Business Support Services. Accordingly, the TP is directed to apply a markup of 7.75% on the transaction value of Rs. 10,217,344 reported as Revenue from Business Support Services, allow benefit of mark of 5% to the assessee, if it is found to be charged separately in the invoices submitted to the AE, and make adjustment to the arm's-length price of the transaction of Business Support Services, accordingly." 14. Ld. AR submitted that the assessee is not disputing the above order passed by DRP. The assessee's submission is only such that the DRP has directed the AO to apply mark-up of 7.75% and also allow benefit of mark- up of 5% actually charged in the invoices, if any. But, ho....
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.... of intra-group services 2. On the facts and in the circumstances of the case and in the law, the Ld. AO /Ld. TPO erred in and the Hon'ble DRP further erred in upholding / confirming the actions of the Ld. AO/Ld. TPO in computing the Arm's Length Price ('ALP') of the receipt of intra-group services of Rs.6,59,25,424 paid by the Appellant to its AE as 'Nil'. 3. On the facts and in the circumstances of the case and in contrary to law, the Ld. AO /Ld. TPO and the Hon'ble DRP further erred in going beyond the scope under section 92CA in questioning the commercial rationale of the legitimate business expenses incurred by the Appellant and further erred in determining the ALP of receipt of intra group services to be 'Nil'.. INDIA PRIVATE LIMITED O RECUNDERABAD Document 2 The Ld. AO/Ld. TPO further erred in not appreciating the nature of business of the Appellant and the need for management support services from its Associated Enterprises ('AE'), which was critical for the Appellant's business in India. 4. On the facts and in the circumstances of the case and in contrary to law, the Ld. AO/Ld. TPO erred in and the Hon'ble DRP further erred....
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....e and in contrary to law, the Ld. AO /Ld. TPO and Hon'ble DRP further erred in going beyond the scope under section 92CA in questioning the commercial rationale of the legitimate business expenses incurred by the Appellant and further erred in determining the ALP of the seed testing and trial charges to be 'Nil'. The Ld. AO/Ld. TPO further erred in not appreciating the nature of business of the Appellant and the need for seed testing and trial services from its Associated Enterprises ('AE'), which was critical for the Appellant's business in India. 12. On the facts and in the circumstances of the case and in contrary to law, the Ld. AO /Ld. TPO erred in and Hon'ble DRP further erred in disregarding the relevant extract of the benchmarking study report submitted by the Appellant in relation to seed testing and trial charges incurred. Sale of Services to Seed Asia Company 13. On the facts and in the circumstances of the case and in contrary to law, the Ld. AO /Ld. TPO erred in and Hon'ble DRP further erred in erroneously applying the ALP mark-up of 7.75% that was determined for the aforesaid provision of business support services, without apprec....
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....quest will be met with your understanding and favorable consideration. Your cooperation is deeply appreciated. Yours sincerely, For Limagrain India Pvt Ltd DIA PRIVAT ELIMITED Satish Sadasivappa Ganiger Managing Director CUNDERABAD Encl.: Acknowledgement copy of the additional evidence paper book submitted on August 07, 2023 Cc: Department Representative Document 6 Al-m #52 Limagrain India Private Limited ITA NO. 65/IND/2022 AY 2017-18 Big (वि. .पà¥à¤°.) oner of Income Tax (0.R 16 NOV 2023 Income Tax Appe Tribunal, HIDORE * आयकरलीय अधिकरण, इनà¥à¤¦à¥Œà¤° Index to Additional Evidence Paperbook -2 Sr. No. of Pages Particulars Page No. No. Annual Report of Vilmorin & Cie for FY 2016-17 - Relevant Extracts 50 295 344 2 Cost Allocation Workings for the FY 2016-17 (VCO & GLH) IT Systems, Policies, Training, Support & Services: 7 345 351 51 3 KB COM-Content library accessible on the Group Intra-net: Contains communication, tools, presentatio....