TaxTMI 
TaxTMI 
2025 (5) TMI 1335
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.....2017 passed by the learned Commissioner of Income Tax (Appeals), 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 intern....
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....Hub Ltd., Cosmic Global Ltd., E Clerx Services Ltd. and ICRA Online Ltd. as comparables on account of their functional dis-similarities. 11. The Assessee 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)....
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....nformation databases namely Prowess and Capital Line. 17. The TPO did not concur with the analysis undertaken by the Assessee and undertook a fresh economic analysis. It rejected some of the comparable companies identified 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 serv....
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.... of material or information or document in the possession of the Assessing Officer." 23. The order passed by the TPO indicates that it did not concur with the determination of the transfer pricing study furnished by the Assessee. For one, the TPO found that the filters used by the Assessee to select the comparables are inapposite. 24. The TPO also 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 re....
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....essee. * The services received are incidental being in nature of long association. * It is evident from facts stated above that the assessee did not file any evidence to support a claim that these services were actually provided to the assessee at its request to meet the specific need of the assessee and that certain tangible and concrete benefits have actually accrued to the assessee. * Under uncontrolled circumstances any 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 i....
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....il that in the present case, the controversy essentially revolves around the amount paid by the Assessee for intra group services. 29. As noted above, the Assessee had benchmarked the said international transaction in relation to the allocation of such services by using TNMM as the most appropriate method. However, the TPO held that the alleged services were nil on an application of the Comparable Uncontrolled Price [CUP] method. 30. As noted above, the CIT(A) as well as the learned ITAT had found that the Assessee had received services and, therefore, it was necessary that the ALP be determined. Undeniably, the transfer pricing study of the Assessee could not be rejected unless the conditions as set out in Section 92C (3) of the Act were satisfied. It is the Assessee's case that such conditions are not satisfied and, therefore, the TPO cannot make any adjustment on account of intra group services. However, the TPO had proceeded on the basis that the Assessee has been unable to establish that it had derived any benefits from such services and therefore, no independent entity would pay for such services without any cost benefit analysis. 31. In the aforesaid circumstances i....