TaxTMI 
TaxTMI 
2025 (3) TMI 1086
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....ad in law and liable to be quashed. 2. That on the facts and circumstances of the case and in law, the Ld. AO / Hon'ble D RP / Ld. TPO erred in making an adjustment to the extent of INR 10,81,27,623 in respect of international transaction pertaining to receipt of Intra Group Services CIGS') alleging that the same to be not at arm's length and erred in fact and law by: 2.1. Not appreciating that the subject transaction is closely linked to the main business activity of the Assessee, an aggregation approach using the Transactional Net Margin Method CTNMM') having Net Operating Profit Margin based on income CNPM') as the Profit Level Indicator CPLI') is the most appropriate transfer pricing methodology for benchmarking the subject transaction. 2.2. Exceeding their jurisdiction, by determining the Arm's Length Price CALP') of IGS at NIL, by applying the benefit test, not being a valid method prescribed u/s 92C of the Act, thus applying other method in incorrect manner. 2.3. Not appreciating the documentary evidence including allocation methodology/ information/ explanation as provided by the Assessee during the course ....
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....porate management services of Rs. 2,09,65,711/- and purchase of fixed assets from its AEs for the value of Rs. 9,18,13,926/-. During the course of TP proceedings, the TPO directed the assessee to file all the agreements entered by it relating to intra-group services and submit relevant documents for the services actually received by the assessee. In response, assessee has submitted various evidences vide its letter dated 07.12.2020 and 18.01.2022. After considering the submissions made by the assessee, TPO observed that various evidences submitted by the assessee contain list of various services provided by its AEs, however he observed that there is no evidence of actual services provided by them during the year. Basically he rejected all the evidences submitted by the assessee on the basis of benefit test. Further he observed that assessee has paid huge sum of Rs. 10.81 crores to its AEs for purported services, one would expect highly specialised services by necessary documentation by the assessee. Assessee has failed to file any worthwhile evidences of purported services. Assessee also failed to produce necessary documentation of services in this regard as per section 92B and Rul....
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....rbook volume 2). 1.2. The detailed of agreements in respect of these services were entered into by the Appellant with its AE is as under: a. Global Services and cost allocation agreement with Bio-Rad Laboratories Inc with effect from January 1.2009. (refer pg. no. 1089-1104 of the paperbook volume 2) b. Global Services and cost allocation agreement with Bio-Rad Laboratories (Singapore) Pte Ltd with effect from January 1. 2010(refer pg. no. 1130-1145 of the paperbook volume 2) 1.3. The details of the specific services rendered are mentioned at Page no 1103-1104 & 1116-1117 of paperbook volume 2. Further, it may also be noted that the AEs also agreed to a mark-up of 5 % on the cost incurred would be the appropriate remuneration for these services. 1.4. The Hon'ble Bench directed the Appellant to file the basis for allocating the cost by the AE i.e. the allocation keys. Accordingly, the details on the basis of which the allocations were made to the Appellant under each head is tabulated below for the Hon'ble Bench's ready reference: Service Group Allocation Keys/ Method Information technology services Headcount Sa....
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....ces during the subject year (refer page 37 para 4.6 of the appeal set). This is factually incorrect in view of the assessment orders passed for the Appellant's AE's i.e. Bio-Rad USA and Bio-Rad Singapore for AY 2018-19 and AY 2019-20. In these order, the services rendered under the same agreement (as impugned in the subject proceedings) were held to be is in the nature of management support services through which the AE's have rendered professional/expert services to the Indian AE (i.e. the Appellant in the subject case). It was further held that technical knowledge, experience, skill, know-how etc. were made available by the Appellant's AE to the Indian affiliate and therefore these services were in the nature of Fee for Technical Services being taxable under the provisions of the relevant DTAA. (refer page no 1172 to 1193 of the paperbook Volume 2 for the assessment order for Bio- Rad Singapore & refer 1213 to 1258 of the paperbook Volume 2 for the assessment order for Bio-Rad USA). Thus, from the above facts it is clearly evident that the finding of the TPO that the services were not rendered buy the AE is factually incorrect and liable to be rejected. It is also....
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....benefit to the assessee which has been considered to be of enduring advantage. 21. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. 22. The Hon'ble Delhi High Court in the case of Guy Carpenter 346 ITR 504 [supra] on similar circumstances held as under: "9. A plain reading of Article 13(4)(c) of the DTAA indicates that 'fees for technical services' would mean payments of any kind to any person in consideration for the rendering of any technical or consultancy services which, inter alia, "makes available" technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. According to the Tribunal this "make available" condition has not been satisfied inasmuch as no technical knowledge, experience, skill,....
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....so held that such receipts would not amount to fees for technical services as the "make available" clause contained in article 13(4)(c) had not been satisfied in the facts and circumstances of the present case. 13. In our view, the Tribunal has arrived at these conclusions purely on assessing the factual matrix of the case at hand. The findings are in the nature of factual findings and, therefore, according to us, no substantial question of law arises for our consideration, particularly, because the learned counsel for the Revenue was unable to point out any perversity in the recording of such findings." 23. Similarly, the Hon'ble High Court of Karnataka in the case of De Beers India Minerals [P] Limited 346 ITR 467 has, inter alia, held as under: "Therefore the clause in Singapore agreement which explicitly makes clear the meaning of the word make available, the said clause has to be applied, and to be read into this agreement also. Therefore, it follows that for attracting the liability to pay tax not only the services should be of technical in nature, but t should be made available to the person receiving the technical services. The technology will....
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....a 21] What is the meaning of 'make available'. The technical or consultancy service rendered should be of such a nature that it 'makes available' to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology 'making available', the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered 'made available' when the person acquiring the service is enabled to apply ....
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....o the facts of the case. 27. Further, we find that the Assessing Officer has referred to various decision which are based upon the decision of the Authority for Advance Rulings in the case of Perfetti Van Melle Holding B.V. which has subsequently been reversed by the Hon'ble High Court of Delhi in 52 Taxmann.com and hence is no longer a good law. 28. Considering the facts of the case in totality, in light of the judicial decisions discussed hereinabove, we are of the considered view that the receipts of the assessee on account of provision of information technology and other administrative services to its affiliate in India are not in the nature of Fees for Technical Services under the India Singapore Double Taxation Avoidance Agreement and we, accordingly, direct the Assessing Officer to delete the same. 29. In the result, the appeals of the assessee in ITA Nos. 995 & 997/DEL/2022 are allowed." 9. Respectfully following the above decision, we are inclined to allow Ground No.2 raised by the assessee. 10. With regard to Ground No.3, the relevant facts are, the TPO observed that during the current year, assessee has paid Rs. 17,03,82,112/- to its AEs for p....
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....n. The Assessee has submitted the template of agreement with third party customer in Annexure 2 for your goodself's reference. The cost of depreciation for the purchase of fixed assets (as mentioned above) has been included in the operating cost base of Bio-Rad India and the same has been bench marked at an entity level margin with the primary transaction of trading activity. Kindly refer to the Transfer Pricing Report submitted vide submission dated March 02, 2020. Basis above, it may be reasonable to conclude that the international transaction pertaining to purchase of fixed assets is in compliance with the arm's length principal from an Indian Transfer Pricing perspective. Further, without prejudice to the above submission, Assessee has submitted detailed arguments (along with relevant judicial pronouncements) for adhoc and unjustified adoption of other method to benchmark the said transaction in section 1 (page no. 5 to 6) above" 12. After considering the submissions of the assessee, TPO observed that assessee has failed to respond any of the observations in the show-cause notice issue that assessee has provided only invoice copies, there is no details ....
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....al before us and submitted as under :- "B. Purchase of Fixed Assets 2.1. During the subject year, the Appellant purchased assets which are used by Bio-Rad India for either of the following: A. Trading business: Bio-Rad India sells the equipment's to third party customers in India; B. Capital assets for Reagent business: Bio-Rad India sells regents/ fine chemicals on commercials basis to the third-party customers along with supply of the equipment's. 2.2. The Appellant in the TP Study at Page no 1060 has categorically stated that capital assets were purchased for the purpose of resale. However, a part of these traded goods were used for demonstration purposes. Accordingly, these assets were capitalized. Since, the transaction is closely interlinked and aggregated with the trading segment of the Appellant for the purpose of determination of ALP for the reason that the depreciation on these fixed assets was charged to the Profit & Loss account and the margins were arrived at after considering the impact of depreciation on such assets. It is also an admitted position of fact that the ALP of the trading segment has been accepted by th....