TaxTMI 
TaxTMI 
2025 (5) TMI 1335
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....), Delhi-38 [CIT(A)]. The present appeal filed by the Assessee is confined to the impugned order insofar as it relates to the Assessee's Appeal [ITA No. 6253/Del/2017]. 3. The Assessee is a company incorporated under the laws of the United States of America and is engaged in the business of banking. The Assessee had set up its Branch in India during the financial year [FY] 2007-08 after obtaining the licence from the Reserve Bank of India [RBI] for following activities: (i) credit card business; (ii) services in relation to travellers cheque; and (iii) acceptance of institutional deposits as defined by the RBI. 4. The Assessee filed its return of income for AY 2009-10 declaring total income of Rs. 52,74,06,080/-. The same was selected for scrutiny. 5. The Assessee had entered into international transaction with its Associate Enterprises [AEs] of a value of Rs. 320 Crores (Rupees 3.2 Billion). In view of the same, the Assessing Officer [AO] made a reference under Section 92CA (3) of the Act to the Transfer Pricing Officer [TPO] for determining the Arms' Length Price [ALP] of the international transactions. 6. The TPO passed an order dated 23.01.2013 and made the transfer p....
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....essee challenged the order of the CIT(A), inter alia, on the ground that it erred in not considering that the conditions as specified under Section 92C (3) of the Act were not satisfied and, therefore, the TPO could not have proceeded to determine the ALP on the basis of the material available with it. The Assessee also questioned the CIT(A)'s decision to determine ALP for intra group services at 50 per cent of the value as without any basis. The Assessee also challenged the exclusion of M/s. CG VAK Software and Exports Ltd. as a comparable. 12. The learned ITAT did not find any fault with the CIT(A)'s decision regarding exclusion / inclusion of the companies as comparable asserted by the Revenue or the Assessee. However, insofar as the intra group services is concerned, the learned ITAT faulted the TPO for determining the ALP for intra group services as nil and concluded that some intra group services had been received by the Assessee and, therefore, ALP of such services could not be determined as nil. 13. Although, the CIT(A) had also faulted TPO for considering the ALP of intra group services as nil, it had held that same should be determined as 50 per cent of the said value. ....
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....d by the Assessee on the following factors: (i) unavailability of the data for FY 2008-09; (ii) different accounting year filter; (iii) turnover filter of revenue for the relevant activity for less than Rs. 5 Crores; (iv) diminishing revenue filter; service income less than 75 per cent of the total operating revenues; (v) persistent loss for the last three years; (vi) related party transactions being greater than 25 per cent of the operating revenues; and (vii) export revenue being less than 75 per cent of the total sales. 18. The TPO computed the average net margin of comparable companies at 29.91 per cent on operating cost as against 18.12 per cent determined by the Assessee, in respect of the back office support services. The TPO also did not concur with the Assessee's cost allocation of expenses by AEs was at ALP. The TPO held that the Assessee had not established that it had received any service and, therefore, determined the ALP for allocation of cost of back office services as nil. 19. There is no cavil that the TPO's finding that the ALP of back office services provided by the AEs was nil, is unsustainable. The CIT(A) as well as the learned ITAT had retur....
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....o issued the show cause notice dated 21.12.2012. In the said notice, the TPO had recorded the filters used by the Assessee and had recorded his comments in respect of such filters. The relevant extract of the show cause notice dated 21.12.2012 is set out below: - Sl.No. Particular Remarks of TPO 1. Companies for which sufficient financial or descriptive information was not available to undertake analysis: This is an appropriate filter. 2 Companies that were declared sick or had persistent negative net worth This may be seen from case to case basis. 3 Companies that have ceased business operations or inactive This is an appropriate filter. 4 Companies that undertook significantly different functions compared to the taxpayer. An appropriate filter will be rejecting Companies whose services revenue is less than 75% of the total operating revenues. 5 Companies that did not have significant (<25%) foreign exchange earnings The appropriate threshold limit in this regard is 75% considering the ratio of your exports earnings to total income. 6 Companies that had substantial (>25%) transactions with related parties This is an appropriate filter. 7 Companies which had ....
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.... independent enterprise having skilled and sufficiently trained manpower would, not have been willing to pay any third party to do so. In my opinion, services which are incidental or mere duplicity do not fall in the category of Intra group services. * However, without prejudice to the above discussion, it may not be impossible, however, for a group member to benefit incidentally from services being provided to one or more fellow affiliates. For example in this case, the assessee might be benefited from services rendered by AE in general to its other AEs. However, such incidental benefits do not give rise to Intra Group Services and cannot be regarded as giving rise to arrangement subject to arm's length pricing as stipulated in OECD TP guidelines paragraph 7.13 under Chapter VII. These findings lead to an irresistible conclusion that payments for liaison services allegedly provided by the AEs are not at arm's length price. * Moreover, it is seen from the details contained in the transfer pricing report of the assessee submitted under Rule 10D that the assessee had not conducted FAR analysis in regards to these alleged services and had failed to justify the functions performed ....