TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 1580
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....d 30 grades of adhesives, of which it manufactures 14 grades in India. 4. In the transfer pricing study report, assessee had stated that its activities undertaken have been categorized as under:- Manufacturing activities - Purchase of certain intermediate chemical products from its AEs for processing into finished chemical products for sale to end customers in India and Sri Lanka. Trading activities - Import of finished goods from its AES for repacking into smaller packs and sale in the Indian markets Services rendered- In the nature of co-ordination activities with respect to the Aviation sector Services rendered are very miniscule as compared to other activities. 5. It has reported following international transactions undertaken with its AE which have been summarized in the following manner:- Nature of the international transaction Value of the international transaction Method Profit Level Indicator ('PLI') Margin of the Appellant (Page 105 of the Paper book) Single year updated margins of the comparable companies (Page 105 of the Paper book) Purchase of raw material (Manufacturing segment) 14,75,80,682 Transaction l Net Margin Method (TNMM1) Operating p....
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....Pacific region. For this purpose, it has entered into a service agreement dated 01/06/2008 for availing intra-group services in the following areas - * Production / Corporate Strategy: Corporate strategy functions include those activities that provide guidance to the enterprise on how to organize and control its activities, react on sudden demand changes, and change in regulations. The corporate strategy function of the Asia Pacific region is conducted by LAPL which is responsible for corporate decision and implementation strategies that affect LORD's regional operations. * Operations: LAPL oversees the operations for the production and distribution activities undertaken by the LORD group companies operating in Asia Pacific region, LAPL is also responsible for overseeing the quality control function. * Human resources: LAPL established HR policies hiring strategies, supporting and administering payroll and benefit functions, designing employee retention policies etc. Further, LAPL is also responsible for developing and coordinating employee training activities * Sales and marketing: LAPL perform the marketing function for the Asia Pacific region by setting the strategy for ....
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....osts incurred in rendering the services shall be identified, including all-costs of personnel travel and depreciation of equipment, all expenses paid to third parties and overhead expenses. * On the aggregated cost pool, a mark-up of 4% shall be added. The share of costs shall be allocated to the group company by multiplying the total service cost by a fraction the numerator of which shall be the net sales value of the group company itself and the denominator of which shall be aggregate net sales. 9. The assessee has also provided the basis of allocation keys (i.e., turnover of the LORD group companies availing services from LAPL) based on which costs are allocated to LORD group companies along with annual reports of LORD group companies for details of turnover. Further, the expense wise break-up of the services availed is submitted vide letter dated 09/11/2016. Particulars Amount in INR Human resources and Finance 32,90,999 Information Technology 6,11,796 Legal 13,52,125 Operation 11,12,968 Marketing 41,62,369 Total 1,05,96,650 10. The ld. TPO after referring to certain paragraphs of OECD guidelines and certain judgments of the Tribunal held that assessee was req....
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....providing technical inputs on forklift sought to be purchased at the manufacturing location in India and potential saving in costs. * Reviewing and providing technical inputs on installation of underground fire water piping * Reviewing and providing technical inputs on drawings for sprinkler system to be installed in the factory Suggestions on sand mill transfer process in the Indian manufacturing plant * Preparation of checklist for operability hazard analysis * Suggestions on observations from the safety audit conducted * Inputs on design/ drawing for packaging tank filling automation system. * Suggestions on purchase of Flameproof forklift * Inputs/suggestions on wastewater tanks to be set-up in the manufacturing facility * Recommendations provided while putting up Barricates * Recommendations on putting up Pallet racks * Recommendations/ inputs on need for new flow meters Inputs on start-up activities identified Information technology * Detailed description of the IT services performed by LAPL alongwith with screenshots * Snapshots of various modules used by Lord India for carrying out its day-to-day operations. Sample reports/ documents that can be downloaded ....
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....the documentation maintained for various heads of expenses and commented that assessee had failed to produce the following documents:- * Amount paid to AE for availing of services * Documentary evidence to support the services * The commercial benefit received by availing of the service * Whether the assessee would have paid to the third party any amount for availing above services * How much the comparable independent services recipients under comparable circumstances would be willing to pay for that service. * Whether any economic and commercial benefit is sufficiently direct and substantial * Whether the arm's length entity is prepared to pay for such services in comparable circumstances. of employee related expenses * Email correspondences regarding reconciliation of inter- company balances * Details of professional fees paid Details regarding depreciation expenses forecast * Email correspondences regarding closing of India books at December end * Query related to reconciliation of revaluation reserve resolved * Whether the entity availing the services can reasonably perform the services by itself. * Whether any expenditure is in the nature of stew....
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....ales made to distributor by LORD India and a copy of purchase order for purchase by ANCO from distributor * LORD India has received marketing support serviced from its AE in relation to marketing. LORD India had submitted detailed nature of sample marketing support services availed by it from AE. * The AE also assists LORD India in recommending the right product variant to customers. Sample copy of email correspondences in this regard has been submitted in Exhibit 3D. * Upon perusal of the email correspondences, it can be seen that AE has recommended product variant RC-3Q11 black / RC-3012 which could be marketed to ALP Nishiawa Company Pvt Ltd (ANCO). * It is important to highlight such guidance of AE, eventually helped LORD India in winning additional business from ANCO. Having said the sale of said products only started from 2016 as in this business / industry, it may typically take some time / even years for the prospective customer to place an order. This is primarily because, the buyer would test the sample provided to evaluate if it meets the end objectives / requirements. * In the present case, the sale was undertaken through distributor (Rubber Chemical Centre). Fin....
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.... the various observations given by the ld. DRP and submitted that assessee could not justify the payment made for availing of services from its AE and therefore, adjustment has rightly been made by the ld. TPO. 17. We have heard both the parties at length and also perused the relevant material referred to before us at the time of hearing. What is required to be seen while analyzing the arm's length analysis of intra-group services that it needs to satisfy prima facie following tests, broadly: i) need test; ii) rendition test; iii) benefit test; iv) duplicative services test; and v) shareholders activity test. In the transfer pricing study report assessee has given not only given the detailed business overview and the activities carried out by the assessee but also what were the services which were required for carrying out those activities. First of all, the services availed by the assessee is purely for the purpose of business as it is seen from the records and the nature of services rendered and they are not in the nature of any kind of shareholder's activities. There is also no comment or any material brought on record that there is any kind of duplicative services, i.e., the a....