TaxTMI 
TaxTMI 
2026 (9) TMI 1232
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.... 2. The Ld. DRP/AO is not justified in making an adjustment u/s 92CA of Rs. 2,31,94,697/-/- 3. The Ld. DRP/Ld.AO erred in disregarding the transfer pricing study report and the information, documents and the clarifications provided by the Assessee to evidence the arm's length nature of technical and stewardship services ie., management services (intra group services) and thereby erred in determining the ALP for the following international transactions as Nil: * Technical Services -Rs. 59,12,994/- * Stewardship services-Rs. 1,72,22,586/- 4. The Approach adopted by the Ld. DRP/AO of using other method as Most Appropriate method is not justified, since reimbursement of legitimately incurred cost by AE in rendering services had been disallowed treating it as Nil. 5. The Ld. DRP/AO erred in considering the ALP of stewardship services i.e., management services (intra group services) and technical services as Nil by questioning the commercial expediency of the transaction and ignoring the fact that, what is paid to AE in cost-to-cost reimbursement without any mark up. 6. The Ld. AO/TPO erred by considering outstanding rece....
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....ered into with AE, basis of allocation/charging of fee by AE, supporting documentary evidence, copy of back-to-back invoices, and explained that the Indian entity does not have strategic level personnel in marketing, IT, and business development department in its payroll. The operational level employees of the assessee company work under the guidance and supervision of Hammond Power Solutions Inc., Canada, and the cost incurred by the AE towards salary cost of managerial persons has been allocated on cost-to-cost basis without any mark-up on the basis of total number of hours spent on Indian operations. The assessee had also furnished supporting evidence like email correspondence between the Indian entity and Canadian company along with emails, video conferencing/web meetings and other supporting documents. 5. The Ld. TPO, after considering the submissions of the assessee and also taking into account the OECD guidelines for benchmarking intra-group services, observed that, in order to justify the claim of payment of management services or intra-group services, the assessee is able to prove that the services were actually rendered by the AE for which the above payments were said ....
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....e and technical fee, and also interest on trade receivables. The Ld. DRP, for the reasons stated in their directions issued under Section 144C(5) of the Act, rejected the objections filed by the assessee and upheld the TP adjustment in respect of management fee and technical fee, and also computation of interest on trade receivables from AE. In pursuant to the directions of the Ld. DRP issued under Section 144C(5) of the Act, the A.O. passed the final assessment order under Section 143(3) r.w.s. 144C(13) of the Act on 07.10.2024, and determined total income of the assessee at Rs. 2,14,78,192/- by making addition towards TP adjustment of Rs. 2,31,94,697/- in respect of payment of management fee and technical fee, and also interest on trade receivables from AE. 7. Aggrieved by the final assessment order, the assessee is now in appeal before the Tribunal. 8. The first issue that came up for our consideration from Ground Nos. 2 to 5 is TP adjustment of Rs. 2,31,94,697/- in respect of payment of management fee and technical fee. The learned counsel for the assessee submitted that the Ld. TPO and the Ld. DRP erred in making 100% disallowance of payment of management fee and technic....
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....ted in (2022) 135 taxmann.com 328 (Chennai- Trib.), the decision of the Hon'ble Delhi High Court in the case of CIT Vs. EKL Appliances Ltd., reported in (2012) 24 taxmann.com 199 and also the decision of the Hon'ble Supreme Court in the case of Principal CIT vs. Pragati Glass India Private Limited, (Tax Appeal No. 149 of 2019 dated 23.07.2019). Therefore, he submitted that the TP adjustment made by the Ld. TPO and confirmed by the Ld. DRP should be deleted. 10. The learned CIT-DR, Shri Waseem UR Rehman, on the other hand, supporting the order of the Ld. TPO and the Ld. DRP, submitted that the assessee had failed to justify the services rendered by the AE and payment made to such services as commensurate with the services provided by the AE. The assessee had also failed to file relevant documentary evidence, except filing email correspondence and proof of video conferencing between the assessee employees and AE employees. The assessee company had also failed to bring on record any comparable case of similar nature to prove that any independent enterprise would make payment for services where neither any services had been received nor any economic or commercial benefit had....
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....in its payroll, which is evident from the amount of salary expenditure incurred for the year under consideration. Further, the assessee has also furnished various evidences, including a copy of back-to-back invoices submitted by the AE, with description of services, basis of allocation, and charging of cost by the AE and supporting documentary evidences. 12. We have gone through the relevant evidences submitted by the assessee, including email correspondence between the Indian entity and Canadian AE and proof of conducting meetings through video conferencing, and upon perusal of the relevant evidences, we find that, there are lot of deliberations and discussions between the Indian entity and Canadian entity in respect of manufacturing activity, management and technical services. From the evidences filed by the assessee, it clearly shows that there are clear evidences for providing services by the AE to the assessee on which the assessee has paid the management fee and technical fee. Also, the A.O. has not disputed the fact that the assessee has furnished various evidences, including the basis for allocation of salary paid to certain employees of the Head Office on cost-to-cost b....
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....ear that there is no bar in availing services from AE and the only requirement is the assessee should prove the availment of services from AE and the payment made for such services is commensurate with the services rendered by the AE. 13. In the present case, going by the evidences filed by the assessee, there is no dispute with regard to the fact that the assessee has availed various services as listed in the agreement between the assessee company and the AE in the area of manufacturing services, human resources development services, and financial services. The assessee has also proved the relevancy of the services by filing various evidences and proved that the assessee is not having strategic level managerial employees in its payroll, and all those services to be performed by the managerial level employees have been availed from the AE. To prove this contention, supporting evidence like email and video conferencing and proof of meetings conducted through video conferencing has been furnished. Therefore, in our considered view, the Ld. TPO and the Ld. DRP erred in determining the ALP of the management fee and technical fee at Nil and consequently making a 100% TP adjustment. ....