TaxTMI 
TaxTMI 
2026 (6) TMI 495
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....rises (AEs). 2. Erroneous TP addition amounting to INR 23,25,657 to the international transaction of payment of royalty. The Ld. AO/TPO pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and circumstances of the case in making a proportionate upward adjustment of Rs. 23,25,657 to the value of international transactions entered by the Appellant with its Associated Enterprises (AEs). The Appellant prays to delete the proportionate adjustment to the value of international transaction of payment of royalty. 3. Erroneous rejection of aggregation of international transaction of payment of management support services availed with the 'Manufacturing Activity and adoption of 'Other Method' over TNMM as the most appropriate method as applied the Assessee. The Ld. AO/TPO pursuant to the directions of the Hon'ble DRP has erred in law and on the facts and in circumstances of the case in making an upward adjustment of Rs. 5,43,44,296 to the value of international transactions entered by the Appellant with its Associated Enterprises (AEs) by rejecting aggregation of international transaction of payment o....
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....for A.Y.2021-22 filed u/s. 139 of the Act on 11.03.2022. Case selected for Complete Scrutiny under CASS to examine two issues namely (1) International Related Party Transactions in support of intangible property; (2) International Related Party Transactions in services. After validly servicing notices u/s. 143(2) of the Act, Transfer Pricing issues were referred to the Transfer Pricing Officer (TPO) who passed the order u/s. 92CA(3) of the Act proposing adjustments of Rs. 5,67,75,140 /-. Thereafter, ld. Assessing Officer passed Draft Assessment Order on 10.11.2023 to which objections were filed by the assessee on 08.12.2023 before the Dispute Resolution Panel (DRP). Thereafter, on 30.08.2024 ld. DRP dealt with the issues raised by the assessee and after considering the order of the ld. TPO gave the directions to the Assessing Officer who finally passed the Assessment Order on 20.09.2024 making two adjustments; (1) Royalty payment using 'Other Method' as most appropriate method (intangible property) at Rs. 23,25,657/- and also disallowed the Global Management Cost (Services) at Rs. 5,43,44,296/- and assessed the income at Rs. 26,18,94,123/-. 4. Aggrieved assessee is now in appeal....
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....by each Executive. Executive duties fulfilled to the benefit of a given company will be reported as such. NOW, THEREFORE, it is hereby agreed the following: Article 1. General Principles (a) Each L&L company employing an Executive ("Employing Company") shall be entitled to a reimbursement of the corresponding Executive Costs, with a five percent (5%) markup. This reimbursement shall exclude the portion of Executive Costs paid for duties fulfilled to be benefit of the Employing Company. (b) The chargeable Executive Costs will be allocated between L&L. companies which (i) benefit from the duties of the Executives, and which (ii) according to transfer pricing guidelines in force, do not earn a limited profit expressed as a fixed percentage of sales or of operating costs. Article 2. Allocation of Executive Costs (a) The Executive Cost will be allocated between L&L companies based on quarterly questionnaires by each Executive. Executive duties fulfilled to the benefit of a given company will be reported as such. EXHIBIT 1 LIST OF EXECUTIVES Global Management Job Title Employing....
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....nstrate that the costs were cross charged not only to the Appellant but to various entities of the Group and that a reasonable portion of the said executive cost was kept aside for stewardship activities and wasn't cross charged to the Appellant. As is evident from the said statement, the % of costs allocated to the Appellant is comparatively lesser for other executives. Only the cost related to Mr. Nitin Mehta has been cross charged at 29% of his total cost. This is because Mr. Mehta was a President of the Appellant Company during the year under consideration and that much portion of his time was devoted to the operations and affairs of the Appellant. * Rejection of these very crucial evidences by the TPO / DRP is incorrect to say the least and hence their conclusion of the cost allocation being arbitrary or the services being duplicate in the nature or being non-beneficial to the Appellant or not being received is completely baseless and instead contrary to the relevant records and evidence. * Accordingly, the arbitrary determination of the ALP of the said management support services cost of Rs. 5,46,80,710 at Rs. 3,36,414 by the TPO / DRP is unsustainable. ....
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....PO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the TPO is not contemplated or authorised." * Further, reliance is also placed on the decision of Hon'ble Delhi High Court in the case of CIT v/s. Cushman and Wakefield (India) (P.)....
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.... entities of the Group, the expenses incurred by the Appellant would have fallen into the head "employee benefit expenses" which would clearly make the said expenses intrinsically linked to the business of the Appellant of manufacturing automative components, thereby justifying the aggregation approach adopted by the Appellant. Prayer: In the view of the foregoing and specifically in the light of the aforesaid decision(s) since the said expenses are intrinsically linked to the business of the Appellant, we request the Hon'ble Bench to uphold the aggregation approach adopted by the Appellant for benchmarking the international transactions. Further, in the light of the evidences furnished pertaining to the expenses, no adjustment ought to have been made by the TPO. Hence, we request the Hon'ble Bench to delete the aforesaid transfer pricing adjustment vis-à-vis the international transaction of management support services fees. 7. On the other hand, ld. Departmental Representative vehemently argued supporting the order of ld. DRP. 8. We have heard the rival contentions and perused the record placed before us and carefully gone through th....
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....ervices. We observe that the assessee is part of L&L Group located in USA. The operations of the assessee are spread across France, USA, China, India and Czech Republic and Turkey. In pursuance to the Global Management Cost Agreement, the cost of the Executives of the Associated Enterprises is to be allocated to the Group entities along with markup of 5%. The assessee in the Transfer Pricing Study report has calculated the Arms Length Price (ALP) of various international transactions based on Transactional Net Margin Method (TNMM). The details indicate that for the year international transactions relating to import of raw material, export of goods, purchases of assets (software), payment of Royalty, provisions of Research and Product Development Support Services, Management Support Services and are reimbursement of expenses TNMM has been applied and except the Management Support Services, for all the remaining international transactions ld. Assessing Officer has accepted the TNMM applied by the assessee. Ld. Assessing Officer in the impugned order after considering the directions of ld. DRP has observed that the services for which the assessee has paid the Management Support Servic....
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....ee had used TNMM to benchmark all its international transactions it was not open to the Transfer Pricing Officer to subject only one element to payment of Royalty for use of Technology to entirely a different CUP method as this would lead to chaos and detrimental to the interests of both Assessee and Revenue. 14. Same is the situation in the given case where the assessee has benchmarked the international transactions relating to import of raw material, export of goods, purchase of assets, payment of Royalty, provision of Research and Product Development Support Services, Management Support Services and reimbursement of expenses by applying TNMM, however, ld. Transfer Pricing Officer has accepted the TNMM method for all the transactions except that for Management Support Services which is not justified in light of ration laid down by Hon'ble Jurisdictional High Court in the case of ACIT Vs. Cummins India Limited (supra) and therefore the impugned Transfer Pricing adjustment made by the Transfer Pricing Officer deserves to be deleted on this ground itself. Thus, Ground No.3 raised by the assessee is allowed. 15. Coming to Grounds of appeal No.4 and 5 which deals with merits of ....