TaxTMI 
TaxTMI 
2025 (8) TMI 956
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....urn of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. In view of international transaction carried out by the assessee with its Associated Enterprises (AEs), the matter of determination of arm's length price (ALP) of those international transactions was referred to the ld. Transfer Pricing Officer (TPO). The ld. TPO proposed adjustments to the value of the international transaction of the Intra group services and interest on outstanding receivables. The Ld. Assessing Officer after taking into consideration, transfer pricing adjustment proposed by the Ld. TPO, passed draft assessment order on 28.11.2023. 2.1 Aggrieved by the variations proposed in the draft order, the assessee filed objections before the Dispute Resolution Panel (DRP), along with additional evidences relating to receipt of intra-group services from its AE. The DRP sought a remand report from the AO and, after considering the same along with the assessee's rejoinder, issued directions under section 144C(5) of the Act. Pursuant to those directions, the AO passed the final assessment order under section 1....
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.... reproduced as under: "8.3.4. The findings of the Panel are as under: (i) Failure of Service Rendition and Receipt Test: In this case, the Transfer Pricing Officer has meticulously analyzed the extent of the so-called services provided by the AE to the Applicant Assessee. The Transfer Pricing Officer has also worked out the price of services actually rendered. Upon scrutiny, the T.P.O concluded that the services rendered did not yield any further discernible economic or commercial benefits to the Applicant, than what was determined as Arm's Length Price. Even, the Applicant assessee has failed to establish the threshold conditions of necessity, request, and rendition of services by the AE or receipt of services by the applicant. (ii) "Other Method" (chosen by TPO) as Most Appropriate Method: In the absence of concrete evidence demonstrating receipt as well as tangible benefits received by the assessee, the T.P.O arrived at the decision to set the ALP for the so-called services at Rs. Nil/-. This decision has been based on the principle that transfer prices between related entities should be at arm's length to ensure absence....
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.... It is unclear how the applicant is using the same agreement to benchmark transactions taking place in Financial Year 2020-21 viz April 2020 to March 2021. (v) The invoices provided by the applicant as evidence of payment for 'services; also refer to Service Agreement dated January 1, 2010, which has expired before the current financial year. No evidence of any extension of the Inter-Company agreement has been provided before the TPO or the Panel. (vi) Allocation Keys are not Evidence of Receipt: The Group has solely relied on the Allocation Keys for charge of group cost to the Applicant. Further, it is noteworthy that the applicant has contended that the Allocation of group cost across different departments or entities have been made as per varied parameters. For example, in the IT department, costs have been allocated based on the number of users/units/headcount available. These are methods for determination of "payment", but not evidence of receipt of services. The proceedings focus on actual "receipt" of services; the issues of allocation key etc. are not relevant. Further, as per the Applicant/common agreement, costs for differi....
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....39;s length valuation. Consequently, without specific details, it is impossible to ascertain the costs incurred by the AEs for payments made. (x) Furthermore, the applicant has not furnished details of the exact expenditures incurred by the AE in providing the services. Mere descriptions of various services rendered by the AE are insufficient to justify the prices charged for intra-group services. The applicant has outlined various services without disclosing the actual amounts expended by the AE for each of these services. (xi) No Valid Comparables: Moreover, the applicant has not presented any valid comparable cases to justify why any party would make such payments without evidence of services being rendered or benefits accruing. The applicant has mentioned 7 foreign companies as comparables which it claims are engaged in provision of similar services as the AE, but has not demonstrated comparability, further details of those companies or audited financials. Hence, the applicant's case suffers from absence of application of any method prescribed under the Income Tax Act, 1961/ the Income Tax Rules, 1962. (xii) The applicant has not....
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....ssee must demonstrate need test, benefit test and rendition test. Hence, upon careful examination of the "evidences", the Panel is of the considered opinion that the Applicant has not received any service form the Associated Enterprises for which a third-party, unrelated person would pay the sums." 5.1 Before us, the assessee has invoked Rule 18(4) of the Income-tax (Appellate Tribunal) Rules, 1963, for admission of additional evidence. The Ld. Counsel for the assessee submitted that during the course of the assessment proceedings before the Ld. TPO and the Ld. DRP, the assessee had submitted a sample set off contemporaneous e-mails correspondences to substantiate rendering of services by the AE. The Ld. Counsel submitted that the Ld. TPO and the Ld. DRP observed that the evidences were only 'sample based' and failed to conclusively demonstrate that services were rendered by the assessee. The Ld. Counsel further submitted that counter the aforesaid conclusion and substantiates the continuous and active involvement of the AE, the assessee now seeks to submit additional evidence containing following documents for consideration: "a. Larger Set of Email Corresponde....