2022 (2) TMI 1301 - AT - Income Tax

TP Adjustment - determination of ALP of certain intra-group services claimed to have been received by the assessee from its AE - ALP of the payment made to the Associated Enterprises (AEs) towards provision of administrative services - assessee has benchmarked all the transactions by applying Transactional Net Margin Method (TNMM) by clubbing them with other transactions - HELD THAT - On a specific query made by the Bench to demonstrate the receipt of services from AE through cogent evidence including any communication with the AE Assessee expressed his inability to furnish any evidence and repeated his submission to restore the matter back to the AO for enabling the assessee to furnish evidence if any. We are unable to accept the aforesaid submission of learned counsel for the assessee. When the assessee has failed to furnish any evidence either before the departmental authorities or before us to demonstrate that administrative services indeed were rendered by the AE and the nature and scope of such services in our view no useful purpose would be served in restoring the matter back to the Assessing officer for reconsidering the issue. In view of the aforesaid we do not find any valid reason to interfere with the decision of Commissioner (Appeals) on the issue We have come to the aforesaid conclusion based on the facts involved in the impugned assessment year wherein the assessee has failed to furnish cogent evidence to demonstrate that administrative services were actually received from the AE. Therefore this decision of ours may not prejudice assessee s claim in any other assessment year as it has to be decided based on the evidences produce to establish the claim of receipt of services from AE. Assessee appeal dismissed.

Summary

Issues:
1. Determination of Arm's Length Price (ALP) of the payment made to Associated Enterprises (AEs) for administrative services.

Analysis:
The appeal before the Appellate Tribunal ITAT DELHI involves a dispute regarding the determination of the Arm's Length Price (ALP) of the payment made by the assessee to its Associated Enterprises (AEs) for administrative services. The assessee, a resident company engaged in the distribution and sale of car refurnishes, entered into international transactions with its overseas AEs, including a transaction related to the provision of administrative services. The Transfer Pricing Officer (TPO) noticed that the assessee paid a significant amount towards administration fee to the AE and called upon the assessee to justify the arm's length nature of the payment. The TPO ultimately determined the ALP of the administrative services at nil using the Comparable Uncontrolled Price (CUP) method, proposing an adjustment against the assessee.

The assessee contended that it had entered into a service agreement with an AE, providing various administrative support services, and had submitted evidence to demonstrate the receipt of such services. However, both the TPO and the Commissioner (Appeals) found that the assessee failed to provide any concrete evidence to prove the actual receipt of the services from the AE. The Tribunal noted that the assessee could not furnish any evidence, including communications with the AE, to substantiate the claim of receiving administrative services. Despite the assessee's request to restore the matter for further evidence submission, the Tribunal held that without sufficient proof of service receipt, there was no justification to interfere with the decision of the lower authorities.

The Tribunal emphasized that its decision was based on the lack of evidence presented by the assessee in the specific assessment year under consideration. It clarified that the dismissal of the appeal in this instance would not prejudice the assessee's claim in other assessment years, which would require separate evidence to support the receipt of services from the AE. Consequently, the Tribunal dismissed the appeal, upholding the decision of the Commissioner (Appeals) regarding the determination of the ALP for the administrative services provided by the AE to the assessee.