2021 (9) TMI 1361 - AT - Income Tax

TP Adjustment - ALP determination - whether intra groups activities performed by Nalco US under SA and by Nalco Pacific under the RMASA constitute intra group services and the said activities are not in the nature of stewardship activity? - HELD THAT - It is common submission by both the sides that the issue raised in this appeal is similar to the one raised in the Revenue s appeal for the immediately preceding assessment year, 2009-10. Except for increase in mark-up rate under the two agreements, both the sides fairly conceded, that nature of the services is unchanged. The appeal for the assessment year 2009-10 was fixed simultaneously with the extant appeal. During the course of hearing of the appeal for the immediately preceding year, both the sides made elaborate submissions. In fact, the parties adopted their submissions made for the earlier year insofar as the instant appeal is concerned. This shows that the nature of services availed by the assessee from Nalco, USA and Nalco Pacific Pte Ltd., Singapore is similar to that of the preceding assessment year. We have passed separate order for the assessment year 2009-10 approving the view taken by the CIT(A) to the effect that the services received by the assessee were in the nature of intra group services and not stewardship activity. Since the dispute in the instant appeal, as appearing from the ground extracted above, is only on the nature of the services, following our view taken for the immediately preceding year, we countenance the impugned order on this score. It is made clear that the Revenue has challenged only the ascertainment of the nature of services by the ld. first appellate authority and not the ALP determination of the international transaction by the ld. CIT(A).

Summary

Issues:
Nature of services received by the assessee - whether intra group services or stewardship activity.

Analysis:
The appeal by the Revenue was against the order passed by the CIT(A) for the assessment year 2010-11. The main ground raised by the Revenue was regarding the nature of services provided by Nalco US and Nalco Pacific to the assessee, whether they constituted intra group services or stewardship activity. The international transactions of receipt of services were reported by the assessee, and the AO referred the case to the TPO for determining the Arm's Length Price (ALP). The TPO concluded that the services were stewardship activities, resulting in a proposed transfer pricing adjustment. However, the CIT(A) held that the services were intra group services, leading to the deletion of the addition. The Tribunal noted that the issue was similar to the preceding assessment year, where a similar decision was made. As the dispute was solely about the nature of services, the Tribunal upheld the CIT(A)'s order based on the previous year's decision.

The Tribunal clarified that the Revenue's challenge was only regarding the nature of services determined by the CIT(A) and not the ALP determination of the international transaction. Ultimately, the appeal by the Revenue was dismissed, affirming the CIT(A)'s decision that the services received were intra group services and not stewardship activity. The judgment was pronounced in the Open Court on 30th September, 2021.