TaxTMI 
TaxTMI 
2026 (10) TMI 346
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....sclosure Standards International transaction(s) arising out/being part of business restructuring or reorganizations (T.O.Risk Parameter) Large value receipt or repayment of loans other than through banking channels Addition of assets during the year in the block of assets where rate of depreciation claimed is 40% or higher 2.1 Notice u/s 143(2) of the Act 01.06.2023 and notices u/s 142(1) of the act dated 10.07.2023 and 30.12.2024 were issued. The assessee submitted reply and filed necessary details on various dates. Considering nature of international transactions entered into by the assessee company with its Associated Enterprises referred in an audit report in Form No. 3CEB, it was considered expedient to refer computation of Arm's Length Price to the Transfer Pricing Officer ('TPO'). A reference u/s 92CA(1) of the Act dated 21.07.2023 was made for determination of arm's length price u/s 92CA(3) of the Act in respect of international transaction entered into by the assessee company. Ld. Transfer Pricing officer vide order passed u/s 92CA(3) of the Act dated 27.01.2025 made an upward adjustment to the Arm's Length price by Rs. 2,11,05,018/- in relati....
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....n Method ('TNMM') applied as the most appropriate method in the TP Study for benchmarking the IGS without giving any cogent reasons, and: 4.1 by disregarding the aggregation of the IGS transaction with other international transactions of the Appellant which are being inextricably linked to the Appellant's manufacturing business for determining the ALP of all the international transactions affecting the Profit and Loss Account, 4.2 by not appreciating the availability of reliable comparability data and the operating margin of the Appellant being much higher than its comparables under the aggregated TNMM analysis; and 4.3 in not accepting the impugned services at arm's length since such IGS payment forms part of the operating cost of the Appellant's manufacturing business (comprising other international transactions) which have been held at arm's length by the Ld. TPO. 5 That without prejudice to Ground No. 3 above, the Ld. TPO and consequently the DRP have grossly erred in law and on facts of the Appellant's case in exceeding its jurisdiction in determining the ALP of IGS received from its AE at NIL as against INR 2,11,....
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....d. TPO and consequently the DRP have grossly erred in law and on facts of the Appellant's case in not considering the TP documentation (conducted by third party consultant - PricewaterhouseCoopers Ltd) maintained by the AE for the purpose of benchmarking the international transaction of IGS rendered by the AE to the Appellant. 9. That without prejudice to Ground No. 3 above, the Ld. TPO and consequently the DRP have failed to appreciate the fact that the Appellant is not guided by any motive to evade taxes and has in accordance with the provisions of the Income Tax Act adequately deducted taxes from payments made to AEs for services availed. 10. That without prejudice to Ground No. 3 above, the Ld. AO has erred in charging interest u/s 234B and 234C of the Act, not applicable on the facts of the case. 11. That without prejudice to Ground No. 3 above, the Ld. TPO and consequently the Ld. AO have erred in law and in the circumstances of the Appellant by initiation of penalty proceedings u/s 270A of the Act for underreporting of income. 12. That each ground of appeal is independent and without prejudice to other grounds of appeal raised herein."....
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....s approach in AY 2012-13 and AY 2013-14 wherein the aggregation of management fees payment with other international transactions forming part of Profit & Loss Account and benchmarking under Aggregated TNMM was allowed by the Ld. TPO (refer Litigation History as Annexure 6) * IGS availed from its AEs enabled the Assessee to focus on its core manufacturing function and to carry out its manufacturing operations efficiently and on competitive terms. * Few instances showing IGS being intrinsically linked to core manufacturing operations and direct nexus between revenue earned/ cost incurred by Assessee and IGS availed: -Division Management Services from AEs assisted in procurement of raw materials at lower costs resulted in lower direct costs. -Business Development/Global Account Management Services from AEs resulted in higher sales by adding new customers-Example of one such customer introduced by AE: (Amounts in INR'000s) Customer Name FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Sales from John Deere India Pvt Ltd 485 6,576 69,505 185,243 230,116 * Legal Provisions on Aggregated Benchmar....
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....charged in similar uncontrolled transactions under similar circumstances having regard to all relevant facts. However, the recourse to this method would be available only if none of the other methods are considered as the most appropriate method. However, as noted above, the TPO had provided no reasons for rejecting TNMM, which had been used in earlier years. The TPO had also not discussed the applicability of any other methods. 32. As noted above, the Tribunal had referred to the Guidelines issued by the Institute of Chartered Accountants of India (hereafter the Guidelines) in regard to use of "Other method" under Rule 10AB of the Rules. 33. The Guidelines rightly observe that the Rule 10AB of the Rules does not describe any methodology but provides flexibility to determine the price in complex transactions where third party comparable prices/transactions may not exist. The said method would be most appropriate in cases where the other methods are found to be inapposite on account of difficulties in obtaining comparable data on account of uniqueness of the transactions, which are to be benchmarked......." --Gates India (P) Ltd [TS-367-ITAT-2024(DEL)-TP] ....
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.... -Avery Dennison (India) Pvt Ltd [TS-713-ITAT-2016(DEL)-TP & TS-514-ITAT- 2021(DEL)-TP] -ACIT v Lumax Industries Ltd [TS-ITAT-2013(DEL)-TP) PRAYER - Aggregated TNMM approach followed by the Assessee be accepted for benchmarking the IGS availed from AEs." 5. Ld. Departmental Representative relied on orders of TPO and DRP. 6. From examination of record in light of aforesaid rival contention, it is crystal clear that description of services availed from AE and economic value derived therefrom is mentioned in IGS agreements reference to paper book Volume 1- page no. 347 to 364 and 385 to 448 is important submissions dated 22.01.2025 page No. 3 to 40 Volume II of paper book were filed before ld. TPO. All other international transactions under TNMM accepted at ALP by Ld. TPO accept IGS transactions and determined its ALP at Nil under the other method contrary to ld. TPOs approach for A.Y. 2012-13 and A.Y. 2013-14 wherein the aggregation of management fees payment with other international transactions forming part of P&L account and benchmarked under aggregated TNMM was allowed. Reference to Annexure 6 as below mentioning litigation history is as under: LITIGATI....