TaxTMI 
TaxTMI 
2025 (4) TMI 1719
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.... referred to as "Assessing Officer'/'AO] under section 143(3) read with section 144C(13) read with section 1448 of the Income-tax Act, 1961 ["hereinafter referred to as "the Act'] on the following grounds which are independent of and without prejudice to each other. Grounds on Transfer Pricing issue 1. General Ground: Transfer pricing adjustment of INR 6,53,65,772/- 1.1 The Ld. AO/ Transfer Pricing Officer (TPO) pursuant to the directions of the Hon'ble Dispute Resolution Panel ('DRP') erred in law and on the facts and in the circumstances of the case in determining the arm's length price of the international transaction of payment of management fee as "NIL', thereby making a transfer pricing addition of Rs.6,53,65,772/- to the total income of the Appellant, without appreciating the facts that the Appellant has availed and used these services for the purpose of its business activities and has derived benefit from such services. 2 Erroneous rejection of most appropriate method and benchmarking analysis: 2.1 The Ld. AO/TPO pursuant to the directions of the Hon'ble DRP erred in law and on the facts and in....
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....uant to the direction of Hon'ble DRP has erred in law and on the facts and in circumstances of the case in disallowing the 'Payment of management service' under section 37(1) of the act disregarding the fact that the said expenses are incurred wholly and exclusively for the purposes of the business of the Appellant and hence the same is allowable under section 37(1) of the Act. 7 Initiation of Penalty Proceedings: 7.1 The Ld. AD pursuant to the direction of the Hon'ble DRP has erred on the facts and circumstances of the case and in law in initiating penalty proceedings under section 270A of the Act. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law." Submission of ld. AR : 2. Ld.AR submitted that assessee had benchmarked the transaction using TNMM as the most appropriate method. However, ld. TPO rejected assessee's benchmarking without any valid reason. Ld. TPO held value of Management Service Fee at Rs. NIL, using the so-....
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....anagement fees paid. 7.6 It is noteworthy that the documentary evidence for receipt of services provided by assessee is in the form of emails. The same were perused and sample observations are summarized as follows : The submission of the assessee carefully examined. It is observed that the email communications submitted by the assessee are mostly related to the IT Support services only. The e-mail communication referred by the assessee as evidences for receipt of Management Services is primarily regarding the logistics, promotion, supply of material and sales. It is pertinent to mention here that the assessee is mainly engaged in trading and not involved in manufacturing of products in India. Therefore, the AE is required to provide these services as per the e-mails for the efficient coordination of supply chains and logistics. The communication between the employees of the AE and the assessee is regarding the logistics ............. However, the assessee has failed to demonstrate or produce any evidence with regard to the rendering of services for any of the above services mentioned in the agreement. Therefore, the receipt of Management Service....
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....en that the same is for calendar year 2019. Thus, the assessee has not been able to submit the details of costs incurred by AEs for FY under consideration However, assessee was specifically asked to provide justification of allocation key chosen along with evidence. Such rationale of using particular allocation keys has not been submitted by assessee. Thus, allocation of costs has happened whether assessee needed such services or not 7.8. The assessee was also asked to furnish the cost benefit analysis (a) with reference to the cost of the services and benefit received there from and (b) services received from AEs vis-a-vis independent parties. Any independent person would not avail such kind of services unless it is examined as to what is the payment for each and every service and whether the person can avail of such services at a price lower than what is offered by the group companies. Such analysis should have been carried out by the assessee company before entering into any such agreement. Rule 100 (1) (h) .................... 7.9. Thus, to summarize, (a) The assessee has not produced any cogent evidence demonstrating receipt of services. Documentatio....
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....d enterprises, under similar circumstances, the price will be definitely zero. Thus, ALP for the management services fee will be zero using Other Method specified under Rule 10AB of the Income Tax Rules. ................... 7.16. Clarification regarding the benefit test: (a) For the determination of ALP of Intra Group Services, the assessee has to demonstrate that the services were not only rendered by the AE but also that the assessee had paid charges as per the arm's length. Now, the test to decide whether chargeable intra-group services have been provided under the arm's length principle is whether the activity is one for which the independent enterprise would have been willing to pay or perform itself. The independent enterprise would never pay for any service from which it does not benefit Hence, the Benefit Test determines whether the associate enterprise derives any benefit from the payment of service charges and is essential part of determination of arm's length principle. It does not question the need or necessity of incurring the expenditure but only seeks to determine the price to be paid for services in uncontrolled situations by c....
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....ssee has not demonstrated that the services have been availed. However, the TPO has accepted that Assessee had filed copies of Emails, copies of Invoices, copy of Agreement. Thus, on one hand, TPO says that no documents were provided, whereas on the other hand, TPO accepts that copies of Emails and Invoices were submitted. Thus, TPO is contradicting his own statements. Be it as it may be, we have perused the copies of the Emails submitted by assessee to prove receipt of management services. Sample Emails are reproduced as under : 7. The sample emails are from page no.257 to 360 of the paper book. The assessee has also provided Cost Allocation of Management Fees which is at page no.228 to 252. Scan copy of page 228 is reproduced as under : 8. Assessee has also filed copies of the service agreement which is at page no.208 to 227. Assessee has also provided copies of the Invoices. These documents clearly establish the receipt of management services by the assessee. 8.1 Thus, assessee has provided necessary documents before the TPO & DRP to demonstrate receipt of Management Services and its Costing. The same documents were also filed before us. The TPO/DRP has not brought on r....
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....ote following observations of Hon'ble Delhi High Court in Cushman and Wakefield (India) Pvt. Ltd., [2014] 367 ITR 730 (Del.): "35. The TPO's Report is, subsequent to the Finance Act 2007. binding on the AO. Thus, it becomes all the more important to clarify the extent of the TPO's authority in this case, which is to determining the ALP for international transactions referred to him or her by the AO, rather than determining whether such services exist or benefits have accrued. That exercise of factual verification is retained by the AO under Section 37 in this case. Indeed, this is not to say that the TPO cannot-after a consideration of the facts-state that the ALP is 'nil' given that an independent entity in a comparable transaction would not pay any amount. However, this is different from the TPO stating that the assessee did not benefit from these services, which amounts to disallowing expenditure." 23. As noted above, in the present case, no search was conducted to find out the independent entity in a comparable transaction and the arm's length price of the international transaction was treated to be NIL. In the present case, no doubts about pay....
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....od to determine the ALP is challenged nor the comparables taken by the respondent assessee is challenged by the TPO. Therefore, the ad-hoc determination of ALP by the TPO dehors Section 92C of the Act cannot be sustained." 25. In view of the above, we are of the considered opinion that TPO as well as learned DRP were not justified in treating the value of international transaction of 'Payment of Corporate IT Support Services' to be NIL, in the present case. Accordingly, ground No. 2, including grounds no. 2.1 to 2.3, raised in assessee's appeal are allowed." 10. Since the facts in the case of assessee and in the case of M/s. Sulzer Tech India Pvt. Ltd., (supra) are identical, therefore, respectfully following the decision of ITAT Mumbai, we hold that TPO has erred in determining Arm's Length Price of Management Services at Rs. NIL. Accordingly, the AO is directed to delete the addition of Rs.6,53,65,772/-. Hence, Ground No.3, 4 and 5 raised by the assessee are allowed. Ground No.6 : 11. The DRP has also invoked Section 37 to disallow management service fee, DRP in our opinion has alleged that there has been no evidence of actual receipt of the services by the asse....
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.... Group Supply Chain & Logistics Manager Via Broletto 44, 20121 Milano Italy Mob. +393485316041 Off. +390285672257 / +390732603617 e-mail: [email protected] Dear Francesco, Hope you're doing good. Requesting you to kindly share the revised technical specification for all products for India for the below products in the format attached like you had shared earlier. 1) 5.5kw Singe phase 2) 9Kw Three phase 3) 12Kw Three phase 4) 24Kw Three phase > Also could you please share the working literature for our 24Kw Aures Pro as we need to share it with our creative agency for creating AV for the product (Which has brief instruction of How the product works and heat- water) so that they can highlight on the right information. Also Can you please share something similar excel which can help us get clearity on each product and its application where it can be installed for easy understanding. E.g .: - 5.5Kw Aures can be installed in a single bathroom home with one shower 9Kw can be installed in one bathroom one kitchen sink tap It would be really helpful if you please share all the above data by 29th EOD as we are nearing to launch this product in India h....