TaxTMI 
TaxTMI 
2025 (1) TMI 1475
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.... violation of principles of natural justice and is otherwise arbitrary and is thus bad in law and void-ab- initio. 2. That the DRP directions are bad in law to the extent the same are prejudicial to the Appellant. Grounds on Transfer Pricing ("TP") 3. That the AO has erred on the facts and in law in making the TP adjustment of INR 56,38,26,985 in respect of the international transactions. Ground on Rejection of the bonafide TP Documentation/Economic Analysis maintained by the Appellant 4. That the Transfer Pricing Officer ("TPO") and DRP erred on the facts and in law, in rejecting the economic analysis in the TP documentation filed by the Appellant in terms of the Section 92D of the Act read with Rule 10D of the Income Tax Rules, 1962 ("the Rules") and proceeded to make the TP addition based on re-determination of the arm's length price ("ALP") of the international transactions. Grounds on Rejection of combined Transactional Net Margin Method ("TNMM") selected as Most Appropriate Method ("MAM") by the Appellant and adopting Comparable Uncontrolled Price ("CUP") Method/ Other Method without any comparable transaction or any b....
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....hod, accordingly, arriving at the TP adjustment amounting to INR 33,51,64,959. 10. The DRP/ TPO/ AO failed to examine the detailed evidence including the commercial agreement filed by the Appellant to demonstrate that the expenditure was incurred for obtaining operational efficiency in the production of cement. 11. The DRP/TPO/ AO erred in questioning the commercial expediency of the Appellant with respect to the international transaction of payment of technical service fee and license fee. 12. Without prejudice and notwithstanding the fact that payment of technical service fee and license fee is to be benchmarked using combined TNMM approach, the Appellant undertook an external corroborative CUT search to substantiate the ALP of the said international transaction. The corroborative analysis was rejected by the TPO and affirmed by the DRP without providing any cogent reasons thereof. 13. The DRP/TPO erred in the inappropriate application of the Other Method without providing any particulars for the comparability of the independent transactions. Grounds on Incorrect Economic Analysis of Payment of Sub-license fee undertaken by the TPO and....
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.... erred in determining the ALP of the transaction as Nil. 22. The DRP/TPO erred in erroneously disregarding the evidence submitted by the Appellant to substantiate the need, actual receipt and benefits derived from the procurement services obtained from the AES. 23. The DRP/TPO erred by not giving cognizance to the submissions submitted by the Appellant and concluded that the services provided by the AE were in the nature of "shareholder activity" and duplicative in nature and therefore, did not warrant any payment to be made. 24. The DRP/TPO erred in assessing that the payment towards Intra Group service fee is based on an apportionment of expenses basis the agreements despite the fact that same is based on actual receipt of services from the AE. 25. The DRP/TPO erred in assessing that the ALP for the Intra Group services is Nil stating that no Functions, Assets and Risk ("FAR") analysis was submitted by the Assessee in its TP Documentation. 26. The DRP/TPO erred in the inappropriate application of the Other Method without providing any particulars for the comparability of the independent transactions. Grounds on Incorrect Econo....
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.... of receivables from the AEs. 35. The DRP/TPO erred in computing notional interest on the entire outstanding receivables for the period of 10 months, without considering the actual period of recovery by the Assessee for the invoices raised on the AEs. Grounds on Corporate Tax Grounds on adjustment towards claim of refund of excess dividend distribution tax ("DDT") 36. The AO has not given cognizance to the DDT already paid by the Appellant and the documentary evidence substantiating the same furnished during the assessment proceedings, and accordingly, the demand thus created should be deleted. 37. The DRP/ AO has erred, on the facts and in law, in rejecting the claim of refund of excess DDT paid by the Appellant, which was claimed during the assessment proceedings. 38. The DRP/ AO has erred, on the facts of the case, in not allowing the refund of the excess DDT paid by the Assessee inadvertently at the rate of 20.92 percent instead of 20.357 percent amounting to INR 46.83 lakhs. Other Grounds on Erroneous Computation 39. The AO has erred by not allowing the set-off of the Minimum Alternate Tax ("MAT") credit a....
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....ment 76,51,840 3 Italcementi S p A Technical know how 27,80,94,234 4 Heidelberg Cement AG Technical know how paid 5,70,70,725 5 Italcementi S p A Trademark 11,37,28,509 6 Italcementi S p A IT services fee 50,09,363 7 Heidelberg Cement AG Management charges 2,33,90,705 8 Heidelberg Cement Asia Pte Limited Technical services fees 44,23,008 9 Heidelberg Cement AG IT Support services 8,80,050 10 HC Trading Malta Limited Freight charges 2,24,25,072 11 Heidelberg Cement AG Borrowing 43,38,08,215 12 Ciments Francais S A Recovery of expenses 2,01,550 13 HC Trading Malta Limited Recovery of expenses 2,15,60,010 14 Suez Cement Company SAE Recovery of expenses 14,77,328 15 Singha Cement Pvt. Ltd. Recovery of expenses 1,11,17,498 16 Heidelberg Cement AG Reimbursement of expenses 13,62,750 17 Heidelberg Cement Asia Pte Limited Reimbursement of expenses 9,80,139 18 Singha Cement Pvt. Ltd. Trade Receivables 33,52,854 19 HC Trading Malta Limited Trade Receivables 2,15,60,010 20 CimentsCal....
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.... transactions, to adopt the aggregate transactions approach and to apply TNMM for bench marking. He stated that, the Ld. TPO at page no.7 of his report has specifically mentioned that "aggregation approach has not been substantiated by the assessee with any evidence." Therefore, the Ld. DR submitted that, unless the aggregation approach is substantiated by the assessee with documentary evidence, the claim of the assessee for aggregation approach should not be accepted. 6. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. The limited issue before us under this ground is whether close inter-linking between all the transactions exist or not, so as to justify the aggregation approach. If a number of transactions are closely linked or continuous in nature and arising from a continuous transactions of supply of amenity or services, the transactions can be permitted as closely linked transactions for the purpose of transfer pricing and in terms of Rule 10A(d). Aggregation and clubbing of the closely linked transaction are permitted under the Rules and it is also supported by OECD transfer pricing guidelines. In ord....
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....ction. Therefore, the receipt of services for the purpose of business can be aggregated for the purpose of determination of ALP only to the extent of the transactions or to the extent of number of transactions with each AE. In other words the transactions carried out with different AEs cannot be clubbed or aggregated because they cannot be termed as closely linked or continuous so as to influence the price in aggregate or the profit of the parties arising from these transactions. 6.2 There is no dispute about the fact that, the aggregation transaction approach can be adopted only where, there exists a close inter-linking between all the transactions. There is also no dispute about the fact that, there is a substantial change occurred in the nature of services received by the assessee and the service provider in A.Y. 2018-19 as compared to A.Y. 2009-10. It is therefore crucial to go through the details of the nature of services received by the assessee and the service provider for these two years. The details for A.Y. 2018-19 has already been provided herein above and the details for A.Y. 2009-10 are reproduced as under : Name of AE Nature of transaction Amount (INR) ....
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....f Ld. TPO as per our directions made under para no.6 above. Therefore, the issue involved under all these grounds are also set aside to Ld. TPO to decide the issue as per law on the basis of his findings as per our directions made under para no.6 above. Accordingly, the issues involved under all these grounds are set-aside to the Ld. AO/TPO for statistical purpose. 8. Ground nos.27 to 30 are related to adjustment for payment of interest on Masala Bond. 9. The Ld. AR submitted that, the assessee has paid interest on Masala Bond @ 8.70% per annum. However, the Ld. TPO bench marked the same at 7.53% per annum. The Ld. AR submitted that, the assessee has entered into an Advance Price Agreement ("APA") (copy enclosed at Annexure 9 of paper book) for A.Y. 2021-22 to 2025-26, wherein, the rate of interest on Masala Bond has been agreed at 8.70%. Ld. AR further submitted that, in A.Y. 2017-18 no adverse inference has been taken by the Ld. TPO with regards to bench marking of interest on Masala Bond. Therefore, the Ld. AR prayed before the bench to accept the bench marking of interest at 8.70% per annum as per APA. 10. Per contra, the Ld. DR relied on the order of Ld. TPO / Ld. DRP....