TaxTMI 
TaxTMI 
2026 (6) TMI 665
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....arately by analyzing each of the actual services received by the assessee also the assessee company has separate team for seeing the HR issues, Administration, Finance, Marketing, Sales, Legal and Product development, technical planning. (iii) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in law and facts in not considering the facts of the case that the assessee-company has not brought on record any cogent, relevant and reliable evidence to prove how and when these services were requisitioned from the AE were submitted by the assessee, whether the AEs have the capacity to provide such services to Indian AE or the details of the cost incurred by the AE for the provision of each type of service purported to have been received by the assessee. (iv) On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in law and fact in not considering the facts of the case that TNMM method selected by the assessee should be rejected and CUP method should be Most Appropriate Method to determine the arm's length price separately. (v) On the facts and circumstances of the case and in law, the Ld. CIT/A) erred in law and fa....
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....d Price (CUP) method. According to the TPO, the services allegedly rendered by the Associated Enterprise were in the nature of shareholder activities or stewardship services which did not require separate compensation. The TPO further observed that the assessee had not demonstrated any specific commercial need for such services and that many of the activities were merely duplicative in nature because the assessee already had its own management structure and experienced personnel. The TPO also doubted whether any tangible benefit had actually accrued to the assessee from such services. On these grounds, the TPO determined the Arm's Length Price of management service fees at Nil and proposed transfer pricing adjustment of Rs. 5,87,74,700/-. 6. Apart from the management fee adjustment, the TPO also made adjustment of Rs. 5,71,40,169/- in the manufacturing segment. While determining such adjustment, the TPO recomputed the operating margin of the assessee by altering the Profit Level Indicator, modifying the operating expenditure and rejecting certain comparable companies selected by the assessee. The TPO excluded companies such as Clutch Auto Ltd., FCC India Manufacturing Pvt. Ltd.,....
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....sprudence. The assessee relied upon decisions rendered in the case of group concern INA Bearings India Pvt. Ltd., which had subsequently merged with Schaeffler India Ltd., wherein identical issue relating to payment of management support fees to Schaeffler Holding (China) Co. Ltd. had already been decided in favour of the assessee by the Pune Bench of the Tribunal. 9. The CIT(A) called for remand report from the TPO and thereafter examined the issue. The CIT(A) noted that identical issue had already been adjudicated in favour of group entities of the assessee including INA Bearings India Pvt. Ltd. and Schaeffler India Ltd. for earlier assessment years. The CIT(A) reproduced findings of the Pune Tribunal wherein the Tribunal had analysed the concept of stewardship services and held that the services rendered by Schaeffler Holding (China) Co. Ltd. were not shareholder activities but actual business support services producing commercial benefit to the recipient company. The Tribunal had observed that stewardship activity means an activity undertaken merely to protect shareholder's investment and not an activity which directly affects or benefits the recipient company's business ope....
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.... assessee submitted that due to delay in commencement of localization/manufacturing facility, the assessee was compelled to import YC5 parts from its Associated Enterprise at substantially higher prices in order to honour commitments made to Maruti Suzuki and to avoid business losses and reputational damage. The assessee submitted that such extraordinary costs arose due to exceptional business circumstances involving a non-AE customer and therefore required normalization while benchmarking the manufacturing segment. However, the TPO rejected the assessee's claim for abnormal cost adjustment, recomputed the operating margin at 4.52% and also rejected several comparables selected by the assessee while introducing a fresh set of comparables, thereby arriving at average comparable margin of 9.79% and consequently proposing transfer pricing adjustment of Rs. 5,71,40,169/-. 13. During appellate proceedings, the CIT(A) examined the transfer pricing study, documentary evidences, remand report of the TPO and revised comparable analysis in great detail. The CIT(A) noted that the assessee had substantiated the extraordinary business circumstances by furnishing project reports, localization....
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....ports, e-mails, time sheets and cost allocation workings substantiating actual rendition of services by the Associated Enterprise. However, the TPO overlooked the entire evidentiary material and proceeded to determine the Arm's Length Price of such services at Nil by characterizing them as shareholder/stewardship activities. 18. We find that identical issue had arisen in assessee's own group concern namely INA Bearings India Pvt. Ltd. (now merged with Schaeffler India Ltd.) in earlier years. The Pune Bench of the Tribunal in the case of INA Bearings India Pvt. Ltd. v. DCIT in ITA No.150/PUN/2017 for A.Y. 2011-12 vide order dated 24.06.2019 had examined identical agreement with Schaeffler Holding (China) Co. Ltd. and after detailed analysis held as under:- "It is ergo patent that such services are in the nature of normal business services performed with a view to enable the assessee to carry out its business operations producing effect on the assessee company. In our opinion, these do not qualify as stewardship activities." 19. The Tribunal further held:- "The payment to Schaeffler Holding (China) Co. Ltd. at the actual costs incurred in providing such servic....