TaxTMI 
TaxTMI 
2024 (12) TMI 1566
X X X X Extracts X X X X
X X X X Extracts X X X X
.... referred to as 'ld. AO'). 2. The assessee has raised the following grounds of appeal:- "General Grounds 1) The Ld. CIT(A) erred in law and on facts in not holding the order of the Learned Assessing Officer ("AO") being bad in law, illegal and without jurisdiction. 2) Grounds for Transfer Pricing Adjustment made to Administrative Support Services ("IGS") availed by the Appellant from its Associated Enterprises (AES) 3.1 That the Ld. CIT(A) erred in law and on facts in giving only 30% relief on account of adjustment with respect to Product Technical and Marketing Services, Business Support Services ("IGS") and no relief with respect to Accounting and Financial Services and Legal Services availed by the Company from its Associated Enterprises (AES). 3.2 The Ld. CIT(A) erred in law and on facts in disregarding the Rule of Consistency. 3.3 The Ld. CIT(A) failed to appreciate the fact that the Company is not guided by any motive to evade taxes and has in accordance with the provisions of the Income Tax Act adequately deducted taxes from payments made to AE's for services availed. 3.4 The Ld. CIT(A) erred in law an....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT(A) erred in not adjudicating on allowing the Appellant with risk and other adjustments to arrive at true comparability." 3. The revenue has raised the following grounds of appeal:- "1. Ld. Commissioner of Income Tax (Appeals) erred on law and on the facts of the case in deleting the addition on account of "Sourcing/ Logistics/ HR services, Internal Audit, IT Services, Safety Business Services, Treasury Services, Technical and Marketing Services and Business Support Services" made by the TPΟ. 2. Ld. Commissioner of Income Tax (Appeals) erred on law and on the facts of the case in deleting the comparables in the segment of administrative and business support services using TNMM method". 3. Ld. Commissioner of Income Tax (Appeals) erred on law and on the facts of the case in deleting the comparables in the segment of research and development and engineering support services". 4. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing." 4. The Ground No. 1 raised by the assessee is general in nature and does not require any specific adjudication. 5. The Ground Nos. 3 to 3.6 rais....
X X X X Extracts X X X X
X X X X Extracts X X X X
....port services availed from AEs by the assessee for which it has paid Rs 45,78,91,784/-. The assessee had benchmarked this international transaction of availing support services from AEs by using Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM). The Profit Level Indicator adopted by the assessee was Operating Profit divided by Operating cost (OP / OC). The assessee had incurred administrative support services with mark up of 5% and the comparables chosen by the assessee in the Transfer Pricing Study Report (TPSR) (enclosed in Page 166 of Paper Book) had margins of 4.44% and accordingly the assessee claimed that the Intra Group Services (IGS) paid by the assessee to its AE to be at Arm's Length Price (ALP). 10. The breakup of the amounts paid by the assessee towards support services are as under:- Nature of Charge Treasury Charges Services from Asia Pac DuPont companies SAP Charges Safety Consultancy& others Total Amount (INR) 26,55,269 35,13,43,135 6,32,62,401 4,06,30,979 45,78,91,784 11. From the above, the Learned TPO after going through the details submitted by the assessee decided to direct his attention to the payment for services to DuPon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rds development of marketing program, sales plans, sales forecasts, price and quantity targets, marketing strategies etc. Again, DuPont India can and does avail of these services for its entire business portfolio that it manages as an independent manufacturer and seller. The Learned TPO observed that the assessee had submitted evidences in Annexures 1 to 7. On examination of those evidences, they are only routine email conversations between assessee and AEs marketing team and the emails show that inputs are flowing both ways and it is not as if the assessee alone is the beneficiary of those emails. The Learned TPO thereafter examined the detailed notes mentioned with regard to the marketing effort in respect of each segment such as Sales, Distribution & Marketing, EP Segment, Organic Chemicals Segment and Packaging Products Segment. On perusal of the same, the Learned TPO concluded that assessee is well equipped to meet its marketing needs and there is no need for the assessee to incur the payments towards marketing support services to its AEs. c) Finance Services - These services include providing assistance towards the company's accounting and financial operatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ges can manage its affairs by itself and there is no need for availing the services from the AE and make payments there on to the AE . He observed that assessee has not been able to give a single instance of strategic advice that the AE has provided to the project managers or any assistance provided to the legal team to work with business leaders. 12. The Learned TPO also observed that assessee was unable to prove that any service was received for which payment was made. All the payments made by the assessee to its AE towards administrative support services are only the nature of shareholder activity services and hence no payment per se is required to be made. The assessee had further justified the arm's length nature of these payments by stating that the transaction has been aggregated with other transactions and found to be at arm's length by use of TNMM. This was buttressed by the Learned TPO by stating that TNMM analysis in respect of two segments have been found to be faulty. That apart, the impugned transaction of administrative support services need to be benchmarked separately. Hence the Learned TPO by applying Comparable Uncontrolled Price (CUP) method as the MA....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing such services and the basis of allocation key 10. If the AE has charged any markup on such payments the arm's length margin is also examined. 14. The learned TPO applied the aforesaid parameters to the present case and concluded that the assessee could not show that the above mentioned criteria were fulfilled. The assessee was not able to show as to when and how the various services were requisitioned from the AEs, whether the services were actually needed by it, whether the same were actually received by it by producing contemporaneous documentary evidence at the time of entering into agreement or at the time of availing the service( if actually availed), what benchmarking analysis was done, what cost benefit analysis was done, particularly when a huge payment has been made by it to the AEs. The learned TPO concluded that in arm's length situation, before availing any service, an independent person would consider the nature of services required by it and would make the payment which commensurates with the nature of service and expected benefit derived therefrom. Accordingly he concluded that irrespective of the need for those services from the AE, the payme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted evidences like emails sent for review of work done, monthly reports, accounting entry, emails pertaining to review and permission of data etc. New evidences submitted by the assessee to reflect the receipt of services from AEs and cost of such expenses have been allocated to the assessee. But no revenue has been allocated to the assessee which accrued as a result of these expenses. The Learned TPO also observed in the remand report that the evidence furnished by the assessee is vague and inadequate as it does not in any way establish the purpose of intra-group services claimed to have been availed by it from its AE. Most of the services for which payment has been made are at best duplication of assessee's efforts. Moreover, those services were never specifically requisitioned by the assessee. No demonstration or cost benefit analysis has been carried out to substantiate that the service has led to benefit / cost cutting etc. for the assessee. The emails filed do not show any commercial or economic benefits derived by the assessee. The assessee furnished its rejoinder to the remand report vide letter dated 22-062017 which is reproduced in pages 10 to 13 of the order of Learned C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is that the Learned TPO had incorrectly calculated the value of services as 76% instead of actual number of 49%. Factual mistakes committed by the Learned AO in the computation part were duly pointed out by the assessee before the Learned CITA coupled with so many incorrect statements assumed by the Learned TPO. The Learned TPO had not disputed the direct administrative support services availed by the assessee from its AEs which pertain to IT services, safety business services and treasury business services received from DuPont Singapore. However, the Learned TPO had not accepted the services received from regional resource centers for which payment was made through regional billing. The assessee submitted before the Learned CITA that the total cost of services availed from AEs was Rs 45,78,91,784/- which included services amounting to Rs 35,13,43,135/- payment for which was made through regional billing. It was submitted that the services availed helped the assessee to leverage the expertise which was available with its' group and which may not have been available within the company or locally. The assessee pointed out that allegation of the Learned TPO that the services were dup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not doubted per se the rendition of services by the AEs to the assessee. The Tribunal in assessee's own case for assessment year 2007-08 had accepted the reasoned decision of Learned CITA in accepting that no adjustment was required for treasury services, safety business services, internal audit services, product technical services and information system services. By following the order of the Tribunal, the Learned CITA directed the Learned TPO to delete the addition made on account of such services. He also observed that in the instant year, the assessee had not provided a figure separately for product technical services, but has included it in the heading "product technical and marketing service, business support services". 21. With regard to sourcing / logistics / HR services and engineering services, the Learned CITA agreed with the assessee's contention that such services are required by it in the running of business and the same cannot be construed as duplicative in nature. Accordingly, the adjustment made in respect of such services were directed to be deleted. 22. With regards to accounting, finance services and legal services, the Learned TPO had stated that a subs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d hereunder:- S.No. Description of Service Type of Services Received How are these Services received Benefits Derived Cost Benefit Analysis Documents Submitted on Sample Basis 1 Product Technical Services Technical assistance provided to two Customers namely -Duflon and Fluoroflon with respect to products supplied by DuPont India, to resolve the product performance issue on PTFE 62N tubing and to resolve the problems faced in CFP 6000 resin processing, Teflon seal application and resolving query relating to ASTM D3294. Richard Cheung made a personal visit to India to address the technical issues in relation to products supplied by DuPont. The receipt of Services depend on facts and circumstances of the case. The personnel may at times travel to India for supporting big customer. Also regular conerence calls and communications via email take place to provide necessary business guidance both on technical and non technical aspects including production process. Enabling solution to the problems faced by the propsective and/or existing customers of DuPont India customers and generating revenue for DuPont India. Richard Cheung is a Bachelor in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n New Product offerings. -Guidance on cost allocation of Customer Service Manager, development and promotion of new products etc. -Recruitment Guidance -Sharing Brochures / PPT's on new product offerings. -Regular conference calls and personal visits on need basis. -Regular Exchange of e-mails. Received education on new products offerings in the Engineering Polymer Business to create additional Business for DuPont India. It may be noted that the sales of one of the Products Zytel has moved to 77.97 Crores in FY 2009-10 from 66.51 Crore in FY 2008- 09. Have a proper check on the efforts put in by various support people performing staff functions for the group for the correct allocations and correct recording within the group. Philippe Hanck is a qualified Engineer and had joined DuPont in 1987. Over the years he has gained rich experience though handling multiple roles in DuPont. He is the Regional Sales Director for the Asia Pacific Region of Engineering Polymer Business. During the FY 2007- 08, an amount of only USD 26,238/- was charged to India which is only approximately 6% of its total efforts put in for the AP Region. Having such a resource....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Managing and overseeing audit requirements, reporting metrics communications, inventory reporting, respond to all technical queries relating to MACS and others, etc. The Central Inventory Team is based out of Australia and there are dedicated resources which provide the said services not only to India but to other countries in AP Region. The resepctive countries don not have any teams or personnel to do such activities. By way of ongoing support and advice, undertaking necessary communications (e-mail / Conference calls) etc. Helping India to have a proper check on their operations and attain efficiencies, resolving of queries as and when arises because of technical issue involved resulting in continuous course of actions without delay. This being an outsourced function has helped India to save on overall costs of putting certain employees to Inventory Management job and related administrative costs. 1. Email exchanges of the employees within the group evidencing Inventory Audits being conducted, handling technical queries etc. is enclosed at Annexure 5. 2. Formats of Monthly R3 accounts for reconciliation and others to meet the DuPont Internal Control standards and Sarba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on shared by Greg on India Off site. 7 Product Technical Services Support on Product and colour issues and development of new products to meet customer demands in Car Industry By way of regular teleconference, email based activity and personal visits. Enabling solution to the problems faced by the propsective and/or existing customers and bringing into new products to meet the demands of prospective customers. The car industry in India is highly dynamic and customers may have there own chice of colours. The experience of Steve enbales the DuPont India to meets its customers demands and resolve issues if any helpign India business not only retain customers but create new ones. Steve J Burns has graduated from Science and had joined DuPont in 1980. He is a Six Sigma Champion and the Product Manager for Performance Coating Business for entire AP Region. Availing services of such a senior and seasoned person for a paltry sum of USD 37,925/-, which is approx. 9.22 % of his total cost, shall be cost effective at any time. 1. Email exchange of the employees within the Group is enclosed at Annexure 7. 2. Presentation on India Color Issues is enclosed at Annexure 7. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Steel limited. is enclosed at Annexure 9. 2. Power point presentation of Cement business safety Improvement communications plan outline for Aditya Birla Group is enclosed at Annexure 9. 3. Power point presentation of DSR India Marketing Effort 2009 & 2010 is enclosed at Annexure 9. 4. Talking points of Mr. Simon Herriott representing DuPont on safety before ONGC, a Global Fortune 500 leader in Oil & Gas E&P is enclosed at Annexure 9. 5. Copy of Invoices raised on Tata Chemicals and Tata Steel during the FY 2008-09 is enclosed at Annexure 9. 6. Case Study done on DuPont Knowledge Centre at Hyderabad and HUL is enclosed at Annexure 9. 7. Meeting details of DSS India extended team meeting where Soo Leng Chee delivered speech on New DSS naming guidelines and marketing update is enclosed at Annexure 9. 10 Business Support and Marketing (training) services Assistance on Indian crop protection business, usage of Asia Pacific CPP database, on smooth Trade India projects covering grapes and gherkins, on undertaking testing (Eurofin residue testing) for Indian grapes to meet the export norms and on enhancing marketing skills. By way of auditing SMP plan for cor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... DuPont India -Enabling meeting the expectations of the customer by giving on time delivery of the products through matching the demandsupply equations -Enabling accurate demand forecasting and meeting the demand supply equations. Se Young Oh is a qualfied person and enable the Indian team to implement demand/DRP Planning and Master Production Scheduling process. Having such a resource on the rolls of DuPont India shall be a highly costly affair. Kindly note that only approx 9% of his cost (i.e. USD 7,129/-) has been charged to DuPont India in the FY 2007- 08. 1. Email exchange of the employees within the Group sharing Training information and tools to improve Demand Planning is enclosed at Annexure 11. 2. Email exchange within the employees of the DuPont Group is enclosed at Annexure 11. 3. Errors file supplied by the Indian couterpart for the solution is enclosed at Annexure 11. 4. Power point presentation developed by Se Young on Savli MPS Workshop is enclosed at Annexure 11. 12 Safety Business Services Consultation and Support on development of safety culture in DuPont India's clients. By way of undertaking safety audits throu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ws to deal with the expatriates in relation to their social security, tax chargeability and migration. It always essential to have an expertise to deal with such issues so that the Company can enjoy the real services of the expatriates. Frances G. Pensabene is a APAC global mobility manager and have a rich professional and working experience in the field of global mobility. Availing services of such a qualifed person for a paltry sum of USD 5,829/-, which is approx. 8% of his total cost, shall be cost effective at any time. 1. Email exchange with the employees of DuPont India is enclosed at Annexure 14. 2. Expense report of his visit to India is enclosed at Annexure 14. 3. Power point presentations on various policies drafted by him is also enclosed at Annexure 14. 15 Accounting and Financial Services Support on supply network planning (Kanban system for Inventory planning) -Monthly conference calls and exchange of e-mails. -Providing trainings Enable DuPont India to have the timely availability of the inventory and consequent meeting the requirements of the customers. Jeffrey X Huang is a qualified person having rich experience in the planning functio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnexure 16. 6. Email exchange of the employees within the Group related to monthly calls is enclosed at Annexure 16. 17 Business Support Services Assistance on undertaking DKC lab start up project -Regular conference calls and personal visits on need basis. -Regular Exchange of e-mails. Starting up of DKC lab in most economical and efficient manner. Joji Inoue is a senior qualified person and is part of core management team in charge of technical consultation for DKC lab project. Availing services of such a senior and seasoned person shall be cost effective at any time. 1. Email describing his role is enclosed at Annexure 17. 2. Project charter is also enclosed at Annexure 17. 3. Expense reports are enclosed at Annexure 17. 18 Product Technical Services Support on colour development as DuPont India was struggling to match Light Blue Mica in Cromax Pro in a Toyota Bodyshop. It is to be noted that the color Formulae developed in India are sent to a regional Lab wherein the same are tested to confirm if they meet the DuPont Environment Safety Norms. DuPont has laid down very high safety standards and Environmental Stewardship is one of the Cor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equesting the concerned employees to share their particulars to process visa formalities is enclosed at Annexure 18. 19 Business Support Services DuPont is very High on Ethics compliance and for this purposes DuPont has separate team investigating Ethics Violation for USA / Canada, Europe/Middle East and Africa/ LatinAmerica/ Mexico and Asia Pacific. DuPont has its own charter defined in relation to Ethics. Gordon Yee the Senior Audit Consultant travelled to India during February to March 2008 for investigating a few cases. For rendering these serivces, the Investigating team may either travel or may even give advice over Conference Calls / E-mails depending on the level of investigation required to be made or the gravity of the matter. The team also keeps on updating the DuPont Ethics charter from time to time based on new cases invetsigated. The cases scrutinsed are also shared with all the employees in the region whcih serve as guidance and lesson to employees to refrain from being engaged in Ethics violation incident. The task of Investigating Team is to probe into Potential violations of the DuPont Code of Conduct by employees or contractors in Asia Pacific enti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ail from Scott Nigel is enclosed at Annexure 20. 2. Power Points Presentations which are shared on monhtly basis over conference calls sharing the business performances for each country in the region and the path forward is enclosed at Annexure 20 21. Business Support Services Training on Demand Planning aspects of Business Through workshops held at regular intervals and also over conference calls. Those who may not have been able to attend workshops are educated subsequently by there supervisors. Business team gets useful insight into the Demand Planning Process and gets to gain knowledge from the wide and rich experience of the trainer. The hitches and glitches faced in one area work as gudiing factor for team in other areas. Conducting such Business Trainings from outside agencies for employees at various locations is neither feasible nor cost efficient. Moreover the company believes in leveraging on the rich experience of its personnel in the relvant field and develop people to take key management decisions. A power point presentation of the workshop conducted in Shanghai is enclosed at Annexure 21. 22 T Services Support on R&D IT for DKC, Evaluati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g good experience in human relation. Having such a resource on the rolls of DuPont India shall be a highly costly affair. Availing services of such a qualifed person for a sum of USD 31,375/-, which is approx. 10% of his total cost, shall be cost effective at any time. 1. Email exchange of the employees within the Group is enclosed at Annexure 24. 2. Four Quadrant Personnel Planning Model and draft template as provided by Toshimitsu is enclosed at Annexure 24. 25 Business Support & HR Services Support India's commodity, ensure proper supply to meet the demand, accountable for setting up India's COFP and BPO Hub for P&IP business By way advice, interaction with the Indian HR team and through personal visit as well Setting up of India's COFP and BPO Hub at Hyderabad has supported the P&IP CSR Centralisation project, streamline the P&IP back end processes as well, handling many global processes such as Finance and Sourcing, impressive transition management process - training, quality metrics and to ensure qulaity performances and continuous improvement. it has also resulted in higher customer satisfaction through provision of update information as and whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... format and understanding the high level design of the DB. Taemyung Jung has educated in MS in Technology management from the University of New York. He has an experience of more than 18 years and had a variety of roles in application development and project management. Having such a resource on the rolls of DuPont India shall be a highly costly affair. Availing services of such a qualifed person for a sum of USD 27,646/-, which is approx. 11% of his total cost, shall be cost effective at any time. 1. Email exchange of the employees within the Group is enclosed at Annexure 28. 2. Copy of power point presentation on AP RO#3 SAP Implementation is enclosed at Annexure 28. 3. Copy of power point presentation on AP SAP Implementation - Leadership Team Meeting is enclosed at Annexure 28. 29 Marketing Services Negotiation with car manufacturers headquatered in Japan to get global product and system approval of DuPont refinish paint. Develop training manual for some car makers. By way of negotiation, making training manual for Indian auto makers and trip to India to meet makers or importers offices of Japanese OEMs to get local product and sytem approval Due to negotia....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... costly affair. Email exchange of the employees within the Group is enclosed at Annexure 31. 32 IT Services 1. Review and approval of security request forms for SAP R3. 2. Resolve security related issues. 3. Coordinating SAP R3 Annual access review. 4. SAP R2 access request management. 5. SOD Management - mitigating control update. By way of ongoing support and advices Efficient control on the usage of SAP, mitigation of security issues relating to IT system. Jeff Chan is a qualified person and is AP SAP Security leader. During the FY 2007-08, only an amount of $ 20,666 was charged to India. Having such a resource on the rolls of DuPont India shall be a highly costly affair. Email exchange of the employees within the Group is enclosed at Annexure 32. 33 Business Support services Onboarding and management of DuPont India Product Stewardship and Regulatory (PS&R) country expert employee, Consultation on India PS&R issues and advocacy. Training and System Improvement Services. Sharing Brochures / PPT's on new product offerings. -Regular conference calls and personal visits on need basis. -Regular Exchange of e-mails. -Visit to India. Availabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oles and responsibilites is enclosed at Annexure 35. 36 Accounting and Financial Services Inventory management - improvement on GM/GMT and FP inventory reduction, DIBM process and ESOPT implementation By way of Blackbelt project, tracking lead excess inventory, making RCCA etc. Reduction in warehousing cost, improving efficency, reduction in inventory and improving health of inventory. Improving over all supply chain and service to customers. Shinichiro Nomura is a senior person who joined DuPont in 1987. He was Regional Six Sigma black belt for TLG/Marketing and worked for AP Inventory investment 2008 and AP 177 DCP Reduction of Excess Inventory in AP projects meant for DuPont India also. Having such a resource on the rolls of DuPont India shall be a highly costly affair. During the FY 2008-09, only a sum of $ 10,000/- was charged to India for his services Email received from Shinichiro describing his roles and responsibilities is enclosed at Annexure 36. 37 Product Technical Services Imparting knowledge with respect to Refinish products and their suitability to various geographies. On the spot practical demostration of use of products to repair damag....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... fact that Tina Garewal's cost was also charged to various entities. 39 Accounting Services Advice on Wharehouse Management and Reporting to ensure adequate controls Kyle Ahn, who is a Business Analyst, participates in Wharehouse Management Call of DuPont India. The objective is to review the MIS Reporting requirements. The Business Analyst share various time to time which help the DuPont India in better appreciation of facts and take decisions for better managemnt of inventory in whaehosue and related cost. Regular Conference Calls are conducted to discuss wharehouse management strategy and reporting requirements. Such discussions enable to the businesses to manage the inventory lying in wharehouses. It also results in developing better formats to represent the data in more meaningful way to assist imporved decision making. It may be noted that only an amount of $ 214 was charged to DuPont India. An e-mail confirming holding of conference call and also describing the agenda is enclosed at Annexure 39. 40 Product Technical Services Conducting Tests on Materials and maintenance of Database. Materials are sent to ULSAN lab ( In South Korea) for te....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... there development from the vast experience of Regional Folks. Jim Demetriou was Regional Technical Manager for the Asia Pacific Region and has been with DuPont since 1975. With more than 35 years of experience - he has been instrumental in generating business for DuPont India. His total cost charged to DuPont India is around $ 61,818/- which is approimately 9% of his total cost in the FY 2007-08 1. Enclosed is the travel Diary of Jim for his AP Travel at Annexure 42. 2. Enclosed is a discussion between Indian employee and Jim for developing a new product for Indian customer at Annexure 42. 3. Enclosed is an e-mail from Pranjal Pandey -India stating that he has sent certain panels developed for Indian Customer for his expert advise at Annexure 42. 4. Also Enclosed is an e-mail communication wherein Indian employee is requesting Jim to advise on the process of mixing the additives for Indian Customer at Annexure 42. 5. In yet another e-mail Jim is addressing all Asia Pacific employees in his team of his observations during his travel in the region is enclosed at Annexure 42.. 43 Accounting and Financial Services * Perform and review inventory costing and associated fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any. The regional business folks inclduing DuPont India employees are also educated on developing pricing strategies. Jason is a qualified accountant and has also done Black Belt Six Sigma process. Having such a resource on the rolls of DuPont India shall be a highly costly affair. E-mail from the employee describing the experience of the employee in handling various profiles is enclosed at Annexure 44. 45 Safety Services Safety Health and Environment Coordination Services By conducting regular Conference Calls and e-mail exchanges. Further services are even available on demand. Further, the service provider or his representative personally visits the plant sites to plug the loopholes. Safety and Health is one of the core values of DuPont India. Presence and adherence of these values are very essential to have the continuous services of human. The regular checks and sharing of global expertise on the adoption and implementation of these core values enable the Company to have lower recruitment cost and higher employee satisfaction resulting in achieving long term goals of higher productivity. The given service is provided by Woona Choi or her ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ils. Appropriate control of the business across region enabling uniform standards and service to the clients. Uniform standard enables uniform service, resulting in higher client satisfaction. Email from the employee describing the roles and responsibilties is enclosed at Annexure 48. 49 General counselling services By way of advice to business/project managers & other internal clients that is creative & solution driven, actual working on strategic real estate, global outsourcing etc., assisting the legal team in India etc. Satisfy strategic legal needs as and when required. Getting on demand advice on legal aspects enable the Company to get going in their business and carry on operations without delay. Emails from the employee is enclosed at Annexure 49. 50 Financial Services Guidance as to the recording of transaction into the Company SAP Accounting package. Enabling extraction of reports for carrying out analysis. Guiding on data entries based on the information in YGLOBET. It enables better reporting of transactions for carrying out detailed analysis on various business aspects. Getting on demand advice on Financi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... goals for the entire Asia Pacific including India By way of advice and personal visit In developing the Indian market for the product - Appeel RX 190 for the company Reduced coating thickness and nonsolvent based properties may enable to attract pharma & other food companies Emails from the employee of the AE is enclosed at Annexure 53. 54 IT Services Lead the Indian IT applications team in implementing and supporting the SAP Systems By way of advice Processing of complex data in a meaningful and undertstandable format Mark King is a qualified person and has more than 29 years of work experience with DuPont. Having such a resource on the rolls of DuPont India shall be a highly costly affair. Emails from the employee of the AE is enclosed at Annexure 54. 55 Assisting in the day to day activities of the Asia Pacific Cost and Inventory Accounting Centre. Providing procedures on how to find the FICS imbalance. Processing of complex data in a meaningful and undertstandable format Huey Li Chan is a qualified accountant and has more than 14 years of work experience. Having such a resource on the rolls of DuPont Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and planning is discussed is enclosed at Annexure 59. 60 Finance & IT Services Help the Indian IT applications team in upgrading and supporting the SAP Systems By personal visit to resolve A2 related issue in SAP, upgraded GP1 system from v4.0 to v4.6, update all training materials and train key users, design and develop new report for India service tax etc. A2 ledger is a tool used for India specific reporting as India has financial year (April to March) reporting whereas other jurisdictional entities within the DuPont Group have calendar year reporting. A2 ledger was specifically, thus, developed for India to meet its reporting requirment. Shane Sims, Kay Nix and Helen Dazevedo are qualified Australian CPAs and has worked for more than 15 years. Having such a resource on the rolls of DuPont India shall be a highly costly affair. Emails of the employee of the AE is enclosed at Annexure 60. 26. From the above, it is clearly established beyond reasonable doubt that assessee had indeed requested for rendition of services, the AEs have indeed rendered the various services to the assessee, the manner in which those services were rendere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the benefits derived by it from the services rendered by the Nalco Pacific Pte Ltd., Singapore. The TPO has tabulated the benefits claimed to have been derived by the assessee and his Remarks on page 126 onwards of his order. For example, the first category is 'Finance and Accounting'. The assessee gave description of the benefits derived by it from such services in a structured manner catering to Expense claim Reimbursement system; Cash Collection & Credit Control Training; Expense Reimbursement System; Budgeting process and Timetable; India Business Contract and Tax Training; Training for Asia Pacific Sales Improvement so on and so forth. The assessee substantiated the receipt of such services with the help of corresponding e-mails and other documents. The TPO negatived the assessee's contention by simply holding that no direct benefit was received or these were duplicate services. Similar is the position qua other services, namely, 'WPS and water services' for which the assessee stated the benefit in the nature of Integrated Water Management Training Workshop; Integrated Water Management Presentation; Cost aspects of various units, Technical Water Treatment P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as shareholder activity. A stewardship activity in general or a shareholder activity in particular in the case of two related companies, is quite different from a normal intragroup service, which is rendered for the purpose of the recipient company. Effect of a non-shareholder activity is rendered to the company receiving it, which is in sharp contrast to the effect being rendered to a company rendering such service in the case of a stewardship or shareholder activity. If we expand the scope of shareholder activity to producing some direct or indirect effect to the recipient company with the consequence of higher profits to it and the resultant higher dividends to the renderer or the shareholder company, then probably most of the activities, including even operational activities, would fall within the sweep of shareholder activity, which is an absurd proposition. In our opinion, stewardship activity or shareholder activity excludes such activities which produce any effect to the recipient company. 10. It was in 1968 that section 482 regulations of the USA Treasury Regulations on intra-group services provided the first U.S. transfer pricing rules on services. New service re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the performance appraisals of Company Y's executives, monitors levels of compensation paid to all Company Y personnel, and is involved in hiring and firing decisions regarding the senior executives of Company Y. Because this personnel-related activity by Company X involves day-to-day management of Company Y, this activity does not relate solely to Company X's role as an investor of capital or a shareholder of Company Y, and therefore does not constitute a shareholder activity.' Thus it emerges even from the USA Treasury Regulations that an activity will be considered as a shareholder activity if its 'sole effect' is either to protect the renderer's capital investment in the recipient etc. or to facilitate compliance by the renderer with its own reporting, legal, or regulatory requirements. It is further manifested that activities in the nature of day to day management cannot be considered as protection of the renderer's capital investment and hence they cease to be stewardship or shareholder activity. 11. We have noticed the description of services performed by Nalco, USA under the broader heads of Insurance & Risk Management; Treasury; Marketin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....up services. There is no challenge to the decision of the ld. CIT(A) on the second aspect of the international transaction being at the ALP. We, therefore, refrain from going into the aspect of the ALP determination, for which no ground has been raised. In the ultimate analysis, the ground raised in the appeal is not allowed." 28. Further we find that the Hon'ble Jurisdictional High Court in the recent decision rendered in the case of PCIT (International Taxation) vs AT Kearney Ltd (India Branch Office) reported in 161 taxmann.com 310 (Del HC) dated 21-3-2024 wherein it was held that where assessee had incurred expenses in respect of intra group services (IGS) to its AE and had submitted detailed break-up of such costs and rendering of services was an aspect which was neither questioned nor doubted, Tribunal was right in deleting adjustment on account of payment of IGS. 29. In view of the aforesaid observations and respectfully following the judicial precedent relied upon hereinabove, the entire TP adjustment made by the revenue on account of administrative support services segment deserves to be deleted. Accordingly, the Ground Nos. 2.1 to 2.5 of assessee's a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t etc primarily related to management and effective utilization of natural resources. Having said that, the Learned TPO observed that in contrast, the services provided by the assessee company are in relation to technical assistance in relation to EPC contracts. This observation of the Learned TPO is factually incorrect. The functions performed by the assessee company had already been elaborated in the earlier part of the order itself. It does not cater to any EPC contracts at all. Hence, the preliminary objection made by the assessee before the Learned TPO that M/s Mahindra Consulting Engineers Limited is functionally not comparable with that of functions performed by the assessee herein is proved correct. Further, the Balance Sheet of Mahindra Consulting Engineers Limited are enclosed in page 3205 of the Paper Book. The assessee herein recognizes revenue from its AE on cost plus 5 % margin, whereas the comparable company recognizes revenue on percentage of completion method (POCM) which is reflected in page 3222 of the Paper Book. We also find that the coordinate bench of this Tribunal in the case of Emerson Process Management Power and Water Solutions India Pvt. Ltd. vs. ACIT vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inal for Coal Handling and is augmenting its efforts to consolidate its position as a front runner in innovative projects. 23. Similarly, perusal of page 24 of Compendium of Annual Report goes to prove that the comparable company is having related party transactions to the extent of 15.51% of the total value whereas, on the other hand, the assessee company is into providing application "Engineered Software Development and Related Services" to its group company which is diametrically dissimilar to the functional profile of the comparable company. 24. The TPO has disposed off both the objections to the inclusion of this comparable company as to the functional dissimilarity as well as a related party transaction to the extent of 15.51% by returning cryptic finding that, "the comparable companies is also operating in the area of consultancy only and the company having less than 25% related party transactions and has taken as comparable". However, when admittedly, the comparable company is engaged in infrastructure in the area of special economic zone, water sewerage, solid waste management, urban infrastructure, agri-infrastructure, social infrastructure, ports and ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....year 2007-08 observed that the said company is carrying on profession of civil engineering and architecture consultancy which is not related with the nature of contract research and engineering services rendered by the assessee company and hence should not be considered as comparable with the assessee. The Learned CITA for this purpose had also relied on the segment information provided in the annual report of the comparable company wherein there was an abnormal growth in the revenue during the year under consideration which also makes the said comparable company not comparable with that of the assessee company. Hence the Learned CITA held that the said comparable company becomes functionally dissimilar and the economic circumstances are also unusual during the year under consideration thereby making the said comparable company not comparable with that of the assessee. No contrary evidence has been brought on record by the revenue before us in this regard. Hence, we hold that the Learned CITA was duly justified in excluding Stup Consultants Pvt Ltd from the final set of comparables by treating it as functionally not comparable with that of the assessee company. C. INCLUSION OF S....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Further, it was pointed out by the assessee that the said comparable company had a negative networth and was going on financial restructuring phase. Hence, by placing reliance on the Special Bench decision of this tribunal in the case of DCIT vs Quark Systems Limited reported in 38 SOT 307 wherein it was held that business organization with negative networth cannot be treated at par with a normal business organization, this comparable company was sought to be eliminated. The learned CITA duly appreciated the said fact of various functions performed by the said comparable company and observed that the said comparable company is engaged in significantly diversified operations and accordingly deserves to be treated as functionally dissimilar with that of the assessee company. No contrary evidence has been brought on record by the revenue before us in this regard. Hence, we hold that the Learned CITA was duly justified in excluding Kirloskar Consultants Limited from the final set of comparables. F. INCLUSION OF COMPUTRONICS FINANCIAL SERVICES (INDIA) LTD The assessee objected to the selection of this company on the ground that it has been rejected by the Learned TPO originally a....