AI Drafter 
TaxTMI 
TaxTMI 
2025 (5) TMI 2266
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.... and without any basis. Brief factual matrix of this case is that the assessee company is a wholly owned subsidiary of AVO Carbon Holding LLC, USA. The assessee company is engaged in the business of manufacture and supply of carbon brushes to both domestic and overseas customers which are used in automotive, power tool, and home appliances. The assessee's customer include manufacturers of automobile / automobile ancillaries and also manufacturers of electronic and household appliances. The Ld.TPO accepted assessee's adoption of TNMM method as the most appropriate method for determination of the ALP. All the international transactions were accepted as at arm's length except the payment of management charges. The TPO separately benchmarked the payment of management charges considering other method as the most appropriate method. The learned counsel submitted that management charges included purchase and procurement related charges, manufacture, research and development related charges, marketing and sales related charges, finance & general administration related charges. In response to queries of Ld.TPO, as to why the ALP for the impugned management service charges be not treated as ....
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.... 1,02,24,500 1,21,83,288 1,35,41,638 X 1,70,33,626 1,51,80,685 2,56,53,807 X 3,11,66,676 Purchase X 42,75,214 36,76,588 16,63,231 X 22,64,170 X 18,36,172 X 28,12,355 X 31,46,841 Finance & General Administration X 47,81,715 X 89,18,152 X 71,36,454 X 1,07,25,656 X 96,89,132 X 9 5,13,088 X 1,25,58,640 AY 2014-15, 2018-19 to 2021-21 not referred to TPO X Disallowed by TPO 3.0 Per contra, the Ld.DR relied upon the order of authorities below. 4.0 We have heard rival submissions in the light of materials available on records. The management services which have been disallowed by the Ld.TPO and his decision affirmed by the Ld.DRP are integrally related to conduct of any business activity of the type undertaken by the assessee. It is not a case of any service or activity devised by the assessee which is one of its type, over which any doubts can be caste. The mark up of 5% placed by assessee and its group companies also appears to be more or less reasonable. It has also been noted that the assessee has not separately booked any expenditure of the type in its financ....
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....ns carried out by the assessee was payment of Rs. 392.53 Lacs paid by the assessee to one of its AE i.e. M/s AVO Carbon Holdings, LLC to procure management services. These services include payment of Rs. 89.12 Lacs towards finance and general management / administration services. The services were availed by the assessee under an agreement with its AE. The Ld. TPO proposed to benchmark this transaction separately using Comparable Uncontrolled Price (CUP) method which was opposed by the assessee on the ground that in the absence of comparable data, CUP method could not be applied. Further, these transactions were interrelated and inter-linked and related to manufacturing operations undertaken by the assessee. Therefore, the determination of ALP on TNMM would be most suitable method. However, the same could not convince Ld. TPO. The Ld. TPO also noted that the assessee was required to make payment prior to its receiving of services and the need to avail such service may not arise during the normal course of business of the assessee. Though the other services arising out of same agreement translated into certain benefits to the assessee, however, the assessee could not submi....
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....ion was to be benchmarked applying CUP method, however, no effort has been made to determine the ALP of the transaction using CUP method. Simply determining the ALP to be nil on the basis that the services were not required to be availed and not determining ALP without applying any of the prescribed method is not in accordance with statutory mandate. The TP provisions mandate application of any of the prescribed method to arrive at Arm's Length Price of the international transactions. Our view is duly fortified by the decision of this Tribunal in Flakt (India) Ltd. V/s DCIT (ITA No. 1032/Mds/2014) wherein it was held that in the absence of any comparison of the transaction with transaction carried out in uncontrolled market, Ld. TPO could not independently come to conclusion that volume and quality of services was disproportionate to the payment made by the assessee. The estimation of the services rendered and costs of such service was outside the scope of transfer pricing adjustment. The Ld. CIT-DR has referred to the decision of Delhi Tribunal in Bombardier Transportation India Pvt. Ltd. V/s DCIT which is factually distinguishable since in that case the assessee could not fi....
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....s Tribunal for AY 2012-13 in assessee's own case and submits that similar issue basing on identical facts, the Coordinate Bench of this Tribunal deleted the addition made by the Assessing Officer on account of payment made towards management services rendered by the AE. 4. The ld. DR Shri A. Sasikumar, CIT did not dispute the same. On perusal of the said order of the Coordinate Bench of this Tribunal, we find that the issue decided therein are similar to the case in hand. For ready reference, relevant portions are reproduced herein below: 4.1 The material facts are that the assessee being resident corporate assessee is stated to be engaged in manufacturing of carbon brushes. Since the assessee entered into various international transaction with its Associated Enterprises (AE), the same were referred to Ld. Transfer Pricing Officer 1(1), Chennai [TPO] u/s. 92CA(1) of the Act for determination of Arm's Length Price (ALP). These transactions are detailed in para-4 of Ld. TPO's order. The assessee, in its Transfer Pricing (TP) study report, aggregated all these transactions and benchmarked the same using entity level Transactional Net Margin Method (TNMM). Since assessee's margin was s....
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.... assessee is in further appeal before us. 6. Going by the factual matrix as enumerated in preceding paragraphs, it could be seen that the assessee has availed bundle of services from its AE and made payment pursuant to the terms of the agreement. These payments are recurring in nature and are determined by applying specific allocation keys. However, Ld. TPO, while accepting that all the other services benefitted the assessee, termed the services of finance/general management to be in the nature of stewardship services and alleged that the assessee did not submit any evidence of the receipt of services disregarding the fact that these services were emanating from the same agreement. The rendering of services was duly evidenced by the agreement as well as debit notes issued against the assessee. The copies of email / correspondences to support the receipt of services were duly furnished (43 to 88 of paper book). Another observation of Ld. TPO is that the assessee may not be requiring these services in the normal course of business. The same, in our opinion, is not correct approach since the role of Ld. TPO was limited to determine the ALP of the transactions and not to adjudge the sa....