TaxTMI 
TaxTMI 
2020 (9) TMI 1325
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....ram Holding Pty Limited, South Africa (AIHPC). They hold 50.1% and 49.9% in the shareholding of the assessee company. The assessee declared international transactions with its associated enterprise. Hence, the A.O. referred the matter of determination of Arm's Length price of international transaction to TPO. The TPO accepted ALP of international transactions except payment of management fee to M/s. Medreich S.A. and license fee to AIHPL. The TPO determined the ALP value of both the transactions at Nil in both the years. Accordingly, he made transfer pricing adjustment of Rs. 6,44,08,340/- in assessment year 2011-12 and Rs. 12,75,98,570/- in assessment year 2014-15. 4. It is pertinent to note that the assessee had bench marked the transaction under TNMM method by aggregating all the international transactions. It is also pertinent to note that the TPO had benchmarked the transaction relating to payment of management fee and license fee separately in A.Y. 2009-10 and 2010-11. The assessee has challenged the action of the TPO by filing appeal before the Tribunal in those years. The ITAT, vide its order dated 31.1.2018 passed in IT(TP)A. No. 1039 & 1078/Bang/2015, has taken the vie....
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....ere in the TP Assessments for AY 2013-14, 2009-10, 2010-11. It is seen from the record that consequent to the Hon'ble ITAT Decision for AY 2009-10 & 2010-11 remanding the issue to the CIT(A)1, the matter was taken up for hearing to decide the issue as per the directions of the ITAT and finally decided in favour of the appellant. 5.1.1 During FY 2008-09, the margins on account of the international transaction despite pay-out of the license fee and management fee were 25.49% for FY 2008-09 and 19.42 for FY 2009-10 which are higher than the margins of the comparable companies identified by the Company at 9.05% for FY 2008-09 and 8.57% for FY 2009-10 respectively. The said margin has been arrived at after aggregating license fees, royalty and management fees. The TPO did not agree with the position taken by the company in aggregating the transactions. On appeal, the then Hon'ble CIT(A) upheld the Company's position in relation to the licence fee and management fee. 5.1.2 The revenue preferred appeal to ITAT. The Hon. ITAT in this case had held that aggregation of transaction is permissible under Act and Rules framed there under. The ITAT also held that the....
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.... we observe that the comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the most appropriate method has not been examined by either of the authorities below who have merely concentrated merely on the issue of aggregation/segregation of transactions. The CIT(A) has mechanically accepted the results of the assessee to be at arm's length by accepting the operating profit/ operating cost of the assessee as 25.49% as against non-AE at 5.26%. In that view of the matter, we deem it appropriate to remand the issue to the file of the CIT(A) for examining the correctness of the ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. The CIT(A) is directed to take the remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter" In relation to management fees, the Hon. ITAT similarly held the issues substantially in favour of the Company. The relevant paras have been reproduced below: 21........... The assessee has furnished the details of the services available by the assessee from Medreich to the ass....
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....rvices cannot be held to be NIL. Similarly, the findings that no services were rendered and that the assessee could have performed these services on its own are contradictory. If no services were rendered, which services the authorities below hold that the assessee could have performed on its own The computation of nil for Management services by the TPO was done on the basis of method not permissible under the laws by bringing in the comparable uncontrolled transaction by the TPO However, we observe that the comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the most appropriate method has not been examined by either of the authorities below who have merely concentrated merely on the issue of aggregation/segregation of transactions. The CIT(A) has mechanically accepted the results of the assessee to be at arm's length by accepting the operating profit/operating cost of the assessee as 25.49% as against non-AE at 5.26%. In that view of the matter, we deem it appropriate to remand the issue to the file of the CIT(A) for examining the correctness of the ALP at the entity level by applying the TNMM as the most appropri....
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....u vide remand report dt 20-02-2019, remarked that the tax payers margin being higher than the comparable's margin, and suggested no adjustment. Considering the same, the adjustment made in the original order in respect of license fee and management fee (impugned order) is deleted on this ground." 5.7 The facts and circumstances of the issue involved in the present Asst Year being identical to that of the Asst Years 2009-10, 2010-11 & 2013-14, I am constrained to follow the decisions of the Hon'ble ITAT, Bangalore pronounced for these years (supra), and accordingly, it is decided to examine the correctness of the ALP at the entity level by aggregation of transactions after applying the TNMM as the most appropriate method. 5.8 For the above purpose, the matter was referred to TPO vide this office letter dated 01.10.2018, for examining the correctness of the ALP at the entity level by aggregation of transactions after applying the TNMM as the most appropriate method. The TPO, DCIT, Transfer Pricing 1(1)(1), Bengaluru vide remand report dt 08.05.2019, remarked that the tax payers margin being higher than the comparable's margin, suggested no adjustment. ....