TaxTMI 
TaxTMI 
2025 (5) TMI 271
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....for scrutiny. Notice under section 143(2) of the Act dated 25.08.2010 was issued. Shri Sanjeev Bansal, C.A. and Shri Greenize Jain, C.A. and Authorized Representative for the assessee attended proceedings, furnished requisite details and information. Draft assessment order was passed on 21.03.2013. Assessee vide letter dated 25.04.2013 submitted that the assessee is filing appeal before the CIT(A) under section 246A of the Act. The assessee company had entered into International Transactions for which reference was made to the Transfer Pricing Officer to determine the Arm's Length Price of such transactions under section 92CA of the Act. The Additional Commissioner of Income Tax (OSD) [TPO-1], New Delhi vide order dated 28.01.2013 enhanced the Arm's Length Price of the International Transaction for the year 2009-10 at Rs. 28,74,84,138/- instead of Rs. Nil. Final assessment order dated 29.04.2013 as per order dated 28.01.2013 of the TPO was passed by learned AO. 3. The appellant/assessee preferred appeal before learned CIT(A) which was partly allowed vide order dated 26.12.2017. 4. Being aggrieved, appellant/assessee and Revenue preferred present appeals with following grounds....
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....al at any time before or during the hearing of this appeal." 5. The Ground No. 1 raised by the assessee is general in nature and does not require any specific adjudication. 6. Ground Nos. 2 to 5 of the assessee and Ground No. 1 of the Revenue are challenging the Transfer Pricing Adjustment made towards Project Technical and Marketing Services, Accounting and Financial Services, Sourcing/Logistics/HR Services and Business Support Services ('IGS') availed by the company from its Associated Enterprises (AEs). 7. Learned Authorized Representative for appellant/assessee submitted that learned CIT(A) erred in not appreciating that the learned TPO made addition on account of administrative and business support services availed from Asia Pacific Companies (INR 287,484,138/-) (hereinafter referred to as "IGS"), out of total administrative support services availed by the Company (INR 775,628,690/-) during the year under consideration i.e. F.Y. 2008-09, the detail of which is as follows :- Sr. No. Service Description Regional Billing Direct Total 1. Product Technical and Marketing Services 220,789,236 - 220,789,236 2. Accounting and Financial Servi....
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....Services and business support services. 7.5 Learned Authorized Representative for appellant/assessee submitted the Regional billing agreements, Basis of Cost Allocation, Segmental Margin Calculation sheet with nature wise breakup of Services availed. 7.6 Learned Authorized Representative for appellant/assessee also submitted the following benchmarking: According to Transfer Pricing Study: • In line with administrative support services Dupont India receives services pertaining to assistance with Marketing, product technical, administration HR activities treasury etc from other entities. • In order to benchmark these services, transactions TNNM was adopted as the most appropriate method due to factors such as unavailability of the Comparable prices, fact that goods were not resold, transactions are not complex/integrated. • Dupont entities presented in Asia Pac are taken as tested party & Operating Profit Margin (OPM) was selected as the best Profit level Indicator (PLI), Additionally comparables for these services were selected From Asia Pacific and US region. • Financial Analysis for Asia pacific Co's: For Asia paci....
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.... Special Audit and Investigation 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/ Latin America/ 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 services 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 investigated. The cases scrutinised are also shared with all the employees in the region which serve as guidance and lesson to employees to refrain from being engaged in Ethics violation incident. The Investigating Team is to probe into Potential violations of the DuPont Code of Conduct by employees or contractors in Asia Pacific entities of DuPont. Such investigation helps the organisation to know the weak links in its system and help either rem....
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....ed at Page No. 55 to 92. 3 Training 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 their supervisors The 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 guiding 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 relevant field and develop people to take key management decisions. A power point presentation of the workshop conducted in Shanghai is attached at Page No. 93 to 108. 4 Business Support Services and Information System Services Support on R&D IT for DKC, Evaluation and strategic plan for GSS and S&D etc. By way of advice and personal visit Improved services from KDC to its customers. Played role in import clearance lead time redu....
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....ached at Page No. 133 to 136 2. Four Quadrant Personnel Planning Model and draft template as provided by Toshimitsu is attached at Page No. 137 to 139. 7 Business Support 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 f global processes such as Finance and Sourcing, impressive transition management process - training, quality metrics and to ensure quality performances and continuous improvement. it has also resulted in higher customer satisfaction through provision of update information as and when required. Higher customer satisfaction results in higher revenues and more mouth-to-mouth publicity of the company's products. Chris Y K Han is the Asia Pacific P&IP commodity business as well as commercial manager. He has the overall responsibility to set up the service hub at Hyderabad along with the Indi....
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....SC and Operations DPT, during the period her projects on AP regional contract converters and warehousing optimization are more concerned with India. Having such a resource on the rolls of DuPont India shall be a highly costly affair. 1. Email exchange of the employees within the Group is attached at Page No. 150 to 151. 2. Power point presentation on AP Warehousing Optimisation is also attached at Page No. 152 to 190. 11 Business Support Services Supply Network Planning (Kanban system for Inventory planning) By way of expertise knowledge sharing Reduction in inventory and smoothing the production by having just-in-time inventory Jeffrey X Huang is a qualified and expert in inventory management. These services enable company to substantially reduce cost of maintaining excess inventory and time to time stoppage of production due to stock out of some of the stock Email exchange of the employees within the Group and other supporting are attached at Page No. 191 to 194. 12 IT System Business Support services Support in Biz VAP implementation, AP RO#3 SAP Implementation etc. By way advice and interaction through audio meetings, sharing templates, me....
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....ales 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 2008- 09 an amount of only $ 45,000/- was charged to India which is only approximately 6% of its total efforts put in for the AP Region. Having such a resource on the rolls of DuPont would have only enhanced the total cost of the Indian Business. 1. E-mail sent to Indian Employee providing a guidance on new offerings of EP business - Zytel is enclosed at Annexure A. 2. E mail sent by an Indian Employee seeking Guidance of Cost allocation to Engineering Polymer (EP) Business is enclosed at Annexure A. 3. E-mail exchange demonstrating guidance on Recruitment(s) done for EP business in India so as to ensure that new possibilities of b....
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....d at Annexure C. 2. Email exchange with DuPont India employee having a discussion on Banners to be developed / customised for Indian Businesses. PPT's and other relevant material are being shared is enclosed at Annexure C. 3. An e-mail providing guidance to handle Media on proposed change in the CEO of the DuPont Group is enclosed at Annexure C. 4. Email exchange with DuPont India employee providing guidance with respect to the design of the Advertisement and also sharing survey questionnaire relating to Corporate Brand Campaign is enclosed at Annexure C. 4 Product Technical Services Technical assistance to resolve the product performance issue on PTFE 62N tubing Richard Cheung made a personal visit to India to address the technical issues in relation to products supplied by DuPont. Additionally regular calls and exchange of e-mails happen between the employees to share experience and guidance. Enabling solution to the problems faced by the prospective and/or existing customers. Richard Cheung is a Bachelor in the Field of Chemistry and had joined DuPont in 1988. He is the Technical and Marketing Development Manager for the AP Region for Engineering P....
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.... 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 G. 2. Formats of Monthly R3 accounts for reconciliation and others to meet the DuPont Internal Control standards and Sarbanes Oxley legislation is enclosed at Annexure G. 8 Safety Consultancy Consultation and Support on development and training of Emergency Response Competency and Distribution Safety. Conducting Regular Training Sessions. Sharing of e-mails, PPT's. Regular Conference Calls. Visits on need basis. Evaluation of Plans on regular basis. Evaluation of Preparedness of India to Emergency Situations and the path forward. Training conducted at Savli to Start up new DuPont Performance Coating facility in the most secure and safe manner. Mana....
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....s describing his roles and responsibilities is enclosed at Annexure I. 10 Marketing Services Manage the Asia Pacific region and give directions By sponsoring and attending workshops (having facilitators from USA) with Indian team, carry out project reviews and lead the Indian leadership team Higher reach of the products with the help of shared expertise, resulting in increased revenue. Peter J Skellern is an Engineer by Qualification and has graduated in the Field of Chemistry. He joined DuPont in 1995 and has handled a no. of portfolios over the years in DuPont. He is the Director of Corporate Marketing & Sales for Asia Pacific. During the FY 2008-09 an amount of $ 26300/- has been charged for his services. Having regard to the fact that such a senior person is available at all times to assist Indian Employees such a cost is very immaterial and hence cost effective from DuPont India's perspective. Email from Peter describing his roles and responsibilities is enclosed at Annexure J. 11 Business Support services Earnings optimisation for the DuPont CPP business in India by way of Information exchanges on present and potential herbicide portfoli....
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....rs against which orders are filled. - Reviews performance versus mutually acceptable standards in the arenas of safety, occupational health, environmental control and waste disposal, product quality, production rates, costs and shipping practices. Provide assistance in upgrading in these arenas as needed. - Accountable for operations planning process for in and outputs such as production rates estimates, unit consumption rates estimates, etc. to ensure an effective and accurate planning process. - Is accountable for cost, systems and accurate planning of the service and delivery to the sales countries and/or downstream manufacturing locations. - Accountable for, makes regular visits, ensures standards and guidelines are in place for production toll/contract manufacturing sites to assure cost, quality of products, service and quality and cost of service, productivity, safety, health, environment, CP standards, assets and methods are in alignment with objectives, corporate and legal standards. Attaining the efficiency in the operations of the crop protection business with the help of shared global expertise (say through zero leakage kickoff planning), leverage on the expe....
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.... new markets and attaining the efficiency in the operations of the crop protection business with the help of shared global expertise (say through DuPont Smooth Trade Solutions), leverage on the expertise that is available within the DuPont Group etc. Siew Ling Cheh is the Product Manager for Crop Protection Business for AP Region. He had joined DuPont in 1991 and have handle multiple portfolios in DuPont over a span of two decades. DuPont India was charged only $29,000/- for the services of such an experienced person. 1. Email sent by Indian Employee appreciating the training given by Siew Ling Chen is enclosed at Annexure O. 2. Power point presentation for SMP training is enclosed at Annexure O. 3. Power point presentation on DuPont Smooth Trade Solutions prepared by Siew Ling Cheh for Indian projects is enclosed at Annexure O. 4. Summary of various audio discussions held is enclosed at Annexure O. 16 Business support 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, improvin....
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.... 1. Job description of Sung Ki Lee is enclosed at Annexure R. 2. Detailed final audit report of the Savli 1 & 2 plants on fire protection, occupational hazards & safety aspects is enclosed at Annexure R. 3. Email exchange of the employees within the Group sharing the audit schedules, audit report, advise to develop facility action plan is enclosed at Annexure R. 4. Itinerary of Sung's visit to India is enclosed at Annexure R. 5. Power point presentations on various safety meetings and trainings held in India by various SHE leaders is enclosed at Annexure R. 19 Business support Services 1. Providing Direction and Coordination with respect to HR Strategies and Policies. 2. Worked Closely with Business Leadership to identify and validate HR needs to achieve Business Objectives. 3. Managing and Reporting Plans and Achievements. By way of advice through conference calls, personal visits, email exchanges and video conferencing. Human resource is one of the essential pillar of a successful organisation. A company can achieve its goals only when its human resource are motivated. A company can achieve this only by availing the services of an experience m....
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....turing and arranging a common cash pool that would benefit to all the participating entities. Availability of best funding resources for the Company at the minimal cost. DuPont Singapore is the centralised finance organisation of the DuPont Group for the Asia Pacific region. Due to centralised operations, the economies of scale is enjoyed by the Company. 1. Copies of financing plans for DuPont India that has been developed with the assistance of DuPont Singapore is enclosed at Annexure U. 2. Relevant email exchange and presentations received from DuPont Singapore is enclosed at Annexure U. 22 Legal Services -Assistance on drafting legal contracts and carrying out recovery operations. - Guidance on Intellectual Property Protection. - Legal guidance with respect to Mergers and Acquisitions. By way vetting the legal contract developed by DuPont India, sharing global templates and providing advice on need basis. To have a secure instruments for carrying out the necessary operations, enabling higher revenues and lesser chances of litigations. Since DuPont is a science based company, protection of its Intellectual Property is an important function for the....
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....n charged to various other countries in AP Region. Job description of ST Tsay; Email exchange of the employees within the Group sharing the best practices for female leadership development, Reviews on HR query portal made for India, etc.; Itinerary of ST Tsay's visit to India; Presentation on the APAC HR function. (Pg. 1057 - 1080, of ITAT PB of A.Y. 2009-10.) 3. Marketing Services & Product Technical Services Marketing Services: The benefits of these services can be summarised as below: a) Marketing Tools: Indian Employees are trained on various Management and Marketing tools to enhance their know how to create business opportunities. b) Guidance on Brand campaign: the Indian Team gets the basic guidance from the Region and further work on it to customise the brand development activities to reach out to the Indian Market. This Guidance has been provided by Mini Lam, who is a Brand & Corporate Marketing Communication Leader. During the FY 2008-09 an amount of $ 56000/- was charged to India which constitutes 20% of her total cost. c) Conducting Workshops and events: By sponsoring and attending workshops (having facilitators from USA) ....
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....pply chain and service to customers. Shinichiro Nomura a senior person who joined DuPont in 1987, was heading the said project. He was designated as Regional head 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. Demand Forecasting and training: Email exchange of the employees within the Group sharing Training information and tools to improve Demand Planning. (Refer Pg. 971-977, Vol. 2 of the Paper Book); 11. A Co-ordinate Bench of the Tribunal in assessee's case titled as "Corteva Agriscience India Pvt. Ltd. vs. DCIT' ITA Nos. 6879 & 7454/Del/2017 decided on 19.12.2024 observed as under: "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 rendered are also elaborated in the aforesaid chart, the cost benefit analysis made by the assessee for deriving the said services and benefits derived by the assessee out of rendition of services. Further we find that the payments made to AEs were....
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....le, 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 Proposal after site visit; Technical Audit report etc. The TPO rejected the assessee's claim again by holding that no direct benefit was received. Similar position prevailed for other services availed by the assessee from Nalco Paci....
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....ipient 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 regulations were proposed in 2003, which took the form of Temporary regulations in 2006, and eventually Final Regulations for Treatment of Services under section 482 (USA Regulation 2009) were issued. The final regulations are effective....
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....nnel-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; Marketing; Credit and Collections; Operations Planning; Supply chain; Procurement; Safety, Health & Environmental; Information Technology; Customer service; Human resources etc. We have also noticed supra the portrayal of services performed b....