AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1484
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....solution Panel ('DRP'), Mumbai, dated 21 June 2024 under section 144C(5) r.w.s 254/260A of the Act on the following grounds, which are independent of and without prejudice to each other: Legal Grounds: 1. On the facts and circumstances of the case and in law, the Technical Unit has erred making a reference u/s 92CA(1) of the Act without having any powers for making such a reference. Accordingly, the Transfer Pricing reference is bad in law, consequently the Transfer Pricing order issued u/s. 92CA, is bad in law and ought to be quashed. 2. On the facts and circumstances of the case and in law, the Learned Transfer Pricing Officer ('Ld. TPO) [Deputy Commissioner/ Assistant Commissioner of Income Tax 3(1)(1)] has erred in passing the Transfer Pricing ('TP') order dated 28 July 2023 without having any powers of passing the said order. Accordingly, the TP order is bad in law and ought to be quashed. 3. On the facts and circumstances of the case and in law, the final assessment order dated 17 July 2024 is issued beyond the time limit as prescribed u/s 153 of the Act. Consequently, the final assessment order is time barred and deserves to be ....
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....to substantiate the need-benefit-evidence test of the services availed, without providing cogent reasons and erred in concluding that the Appellant is not able to discharge the onus of proving that the services have been availed by the AEs without acknowledging substantial information submitted by the Appellant. 12. Not appreciating that the Appellant duly withheld the taxes on payment made to the AE and that the AE has also duly filed a return of income in India offering such services to taxes, and that disallowing payments made by the Appellant would lead to double taxation. 13. Not appreciating that the services availed by the Appellant are not in the nature of shareholder services nor stewardship, duplicative or incidental services for which no independent entity would agree to make any payment. 14. Not appreciating that the said payment for the services are technical and has a direct nexus with the business of the appellant. The Ld. AO/Ld. TPO without appreciating the services under dispute have direct nexus with the business of the appellant. 15. The Ld. AO/Hon'ble DRP have further erred in disallowing the said payment u/s 37 of the Act....
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....9 Other Method F.Y. 2018-19 Total 11,064,705,675 2.2 The Ld.TPO noted that, the assessee received various intra- group services from its AE's, against which charges were paid by the assessee as under: Sr. No. Particulars Value of International Transaction (INR) Most appropriate method Tested party 1 IT Services 15,67,15,332/- Other method NA 2 IEA Services 13,13,850/- 3 Atrion Services 37,06,075/- 4 Centralized Services 2,44,76,809/- 5 Accounting Services 1,52,45,103/- TNMM Method AE 6 General Support Services 12,01,26,842/- 7 PTSE charges 7,53,54,211/- 8 HAZOP charges 5,33,228/- 2.3. The Ld.TPO noted that, intra-group services being IT services, IEA services, Atrion services, Centralized services was aggregated by the assessee together under the head cost allocation and benchmarked the transactions under the head other method. The transactions being, accounting services, general support services, PTSE charges and HAZOP charges, were also aggregated under the head 'support services' and was bench marked to....
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....es before the DRP in support of the services rendered by the AE's. 3.1. The Ld.DRP called for remand report from the transfer pricing officer on the additional evidence filed by the assessee. A copy of the remand report by the Ld.TPO is placed at page 1555-1561 of the factual paper book, scanned and reproduce as under : GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT ITO HQ TO DRP1 WZ MUMBAI To. LANXESS INDIA PRIVATE LIMITED PLOT NO. A/162-164 LANXESS HOUSE, ROAD NO. 27 WAGLE ESTATE THANE WEST 400604, Maharashtra India PAN: Assessment Year: Dated: DIN & Letter No : AACCB3880A 2020-21 14/05/2024 ITBA/DRP/F/17/2024-25/1064856689(1) Sir/ Madam/ M/s, Subject: DRP PROCEEDINGS-REG. Please find the remand report received from the Office of DCIT(TP)-3(1)(1), MUMBAI. The remand report reproduce here for your comment/ Rejoinder. To, The Dispute Resolution Panel-1 28th floor, Centre One Building World Trade Centre, Cuffe Parade Mumbai - 400005. Sir, Sub: Remand Report on Additional Evidence filed in the case of LANXE....
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..... 1,250 to 1,657 3. Centralized Services :- Particulars Paper book Page No. Copy of Inter-company Agreement Page No. 4,028 to 4,039 Nature of services and benefits derived Page No. 3.530 to 3,531 Cost allocation working Page No. 4,040 to 4,04l Sample back-ups and documents Page No. 3,532 to 4,027 4. TPO's Remarks : 4.1. In respect of IT Services, the assessee has stated to have received IT support services from its AE. These services are stated to be in the nature of IT support services which involve mainly provision, installation, removal, upgrade, replacement, management and maintenance of the equipment / software. The total costs incurred by LANXESS Deutschland are allocated to the various LANXESS group entities without any mark-up. In this regard, assessee contended that Other Method has been selected as the most appropriate method, as none of the specified methods are applicable for the said transaction. As the reimbursements are stated to be made at cost without any mark up, considering the commercial circumstances surrounding the transaction, the assessee treated this transaction at arms length. Further, d....
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....st of the employees of AE without any markup or margin. Further, during the Remand Proceedings the assessee filed copy of invoices and certain other details but no evidence in regard of expenses incurred by the AE and the financials of AE were filed. Also, assessee failed to substaintate the no. of hours & hourly rates charged in invoice without any supporting documens & comparables. As the assessee failed to submit the evidence of expenses incurred by AEs, financials of AEs reflecting the cost incurred & the proper benchmarking of the services by assessee. It is settled preposition of law that it is the onus of the assessee to prove that the transactions were taken at Arm's Length. In view of the same, the TP adjustment made by the TPO may be confirmed. 4.3 In respect of Centralized Services, the assessee has entered into an agreement with the AE LANXESS Deutschland GmbH, wherein LANXESS Deutschland GmbH has agreed to provide certain centralized services to the assessee. The Centralized services include Accounting, Human Resource, Controlling, Treasury & Investor Relations, Production, Technology, Safety & Environment. The costs for these services ar....
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....ve so much of utility as being projected by the assessee. The Ld.TPO in the remand report was of the opinion that many of the services would not have much relevance and it may be a tool to profit shifting as identified by the Ld.TPO by the present facts. 3.3. The assessee in rejoinder to the remand report submitted that Copies of invoices and various other evidences furnished before the Ld.TPO shows rendering of services. It was submitted that, details of basis of allocation based on time from the group was also furnished. The assessee thus objected to the observations of the Ld.TPO in the remand report to be incorrect and contrary to the facts. Various submissions filed before the DRP dated 23/10/2023, 22/04/2024, were relied to establish that assessee provided all necessary details like, basis of cost allocation, certificate from the AE regarding the same in respect of each services rendered by the AE's. 3.4. The DRP rejected the contention of the assessee and upheld the addition proposed by the Ld.TPO by observing as under: 9.3 Directions of the DRP: The applicant has not been able to demonstrate what actual services has been delivered by the AE. Emai....
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....ion of the issue by This ground is related to PTSE services availed by the assessee. The services are related to production, technology, safety and environment. These services are also intra group services. The TPO benchmarked the same using need benefit test and determined the ALP as Nil. The panel has considered the submissions of the assessee, order of the TPO, additional evidences, remand report and rejoinder of the assessee. The issue on the facts and circumstances of the case is examined as under: For allowing payment for central services, three things are required to be seen: i) Whether the assessee required it ii) Whether services were actually provided ii) Whether any benefit is derived from such services. The assessee failed to prove any of the above. Much of the discussion in ground no 3 holds good for this ground also. Further, the assessee has submitted that these expenses are towards engineering and design for construction a plant in India for the production of chemicals 4-ADPA, CALD and Benzyl Benzoate. The assessee has submitted e-mails, meeting plans and has stated that employees of th....
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.... 5. Before us the Ld.AR submitted that, only issue contested on merits in the present appeal is challenging the addition made by the Ld.AO in respect of the payments made to the AE's towards availing IT services, PTSE services, and centrelized services by determining ALP of the transaction to be Nil by disregarding the bench marking approach and methodology adopted by the assessee in the TP study report. 5.1. The Ld.AR relied on voluminous evidence to establish the need benefit test. The Ld.AR submitted that, evidence were furnished to establish rendition of services by the AE's. The Ld.AR submitted that, considering the facts and circumstances of its case and the law prevailing on the subject, the international transaction relating to payment of the management charges entered into by the assessee with its AEs could not be regarded as NIL and, therefore, the stand taken by the Ld.AO/DRP/TPO in this regard is misconceived, erroneous and incorrect. 5.2. The Ld.AR drew our attention to the factual Paper Book filed by the assessee containing pages from 1570 to 4382. Another Paper Book was relied by him for remand report by the Ld.AO on the additional evidences and rejoind....
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.... - Designing the reactor and plant - Reaction monitoring - Optimization study of distillation column - Preparation of design technical specification 817 -898 6 Email Communication / Presentation a) AE provided inputs and suggestions pertaining to the distillation procedure of India 3975 - 3977 b) Project Narmada - Charter document is a blueprint outlining the scope, drawing the responsibility of AE, etc. 3988 - 3995 c) Email from Kolja Neumann, wherein the AE provides inputs on TMAOH recovery data 3996 - 3997 d) AE shared batch procedure for HLE for the mini plant at Jhagadia plant in India 3998 - 3999 e) AE provided comments pertaining to distillation data for Batch #15 & 16 of India manufacturing plant 4000 f) Between Johanna Schell and desired participants wherein the AE provided comments on concepts shared for residue distillation 4212 - 4215 7 Technical studies / inputs a Mass from hydrogenation from HLE experiments along with details of temperature pot liquid mass (measurements in detail) 733 - 734 b) AE assisting by providing complex formulation for coil....
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....presentation between the AE and LANXESS India) wherein the AE: - Assisted in data archiving - Providing authorization support in LXP system - Ensured error-free performance of the business process in SAP system - Providing incident management support, software deployment management support, system monitoring, etc. 922 - 975 c) Client Directory services (email communications / presentation between the AE and LANXESS India) wherein the AE assisted in: - Providing back-up of local software via "Connected Back-up" - Documentation of device commissioning and all changes in asset management - Installation, maintenance and end-of-life disposal of PC's and laptop 976 - 1000 d) MDM Platform (email communications / presentation between the AE and LANXESS India) wherein the AE assisted in: - Providing access to modify SAP software through administration control - Undertaking server monitoring, incident management, back-up and restore services - Providing license to various software's 1003 - 1056 8 Email communication / Presentation a) Between Christopher Beyer and various particip....
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....d centralize all the data obtained 1457 - 1554 5 Email communication / Presentation a) AE provided schedule for closing December 2019 4400 - 4401 b) AE provided schedule for closing February 2020 4402 - 4403 c) AE provided schedule for closing March 2020 4404 d) AE assisted in uploading sales express data for January - December 2019 onto SEM 4427 e) AE Shared the latest preliminary balance sheet data after determining lowest value / net realizable value and updating CP3 prices 4439 - 4445 f) AE assisted in settling the process orders for cc 1593 4446 - 4454 5.3. Referring to page no. 1573 of the Paper Book to show that vide letter dated 20/06/2023, complete details were filed before the Ld.TPO. He thus submitted that, the assessee provided all details which proves the rendition of services, need of the services, and benefit arising from the service and further, that these services are cannot not considered to be duplicative or shareholders activity as these are . The Ld.AR submitted that, despite the above details, the Ld.DRP/TPO observed that no details were furnished by the assessee and determined/upheld ....
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.... herein above. Before the DRP, the assessee filed these voluminous evidences for all services rendered by the AE to demonstrate the services which was subjected to remand to the Ld.TPO. Hoever the Ld.TPO in the remand held that these evidences are not sufficient to show that assessee received any services and the benefits are not derived out of it. It is noted that in the remand order the Ld.TPO reiterated his observations same as in the original TP order. 7.2. It is noted that, in rejoinder submitted by the assessee reproduced in the DRP direction, the assessee rebutted each and every observations of the Ld.TPO. Clearly this leads us not note that, the authorities have not considered the evidences and has denied the claim on pure surmises and conjunctures. It noted that, the assessee also obtained certificate from the AE's for the cost allocations and the financials of the AE's in the additional evidences filed during the DPR proceedings. However that Ld.TPO in the remand took a contrary view. There is nothing on record brought by the Ld.TPO/DRP or the Ld.DR to establish that any of the services rendered by the AE's are duplicative services and can be catagorised as....