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2022 (2) TMI 1318 - AT - Income TaxTP Adjustment - selection of MAM - benchmarking under TNMM method - HELD THAT - TPO has reached a conclusion that assessee has been in existence since long and has developed its own name, goodwill expertise and knowhow. Further, the group provided these services for which no cost can be earmarked. For each of the email he mentioned that these are shareholder activities and duplicate in nature. At paragraph No.4.8.1 onwards he has not stated that there is no rendition of the services. Therefore, the earlier finding of the TPO and subsequent finding of the TPO at paragraph No. 4.8 are contradictory. Even while examining the email he does not state that no services have been rendered but emails have been rejected stating that these are shareholders activity or duplicative in nature. CIT(A) examined the emails and gave categorical finding about the rendition of the services. This finding remains uncontroverted. Further, if the learned TPO was not satisfied with the contents of the email, he could have further probed the transaction with respect to various programme and its content. In view of this facts, we do not find any infirmity in the order of the learned CIT(A) in holding that the peculiar Intra group services are shown to have been rendered by the associate enterprises to the assessee. Therefore, he directed it to be benchmarked under TNMM method. In view of these ground Nos.1-4, the appeal of the learned Assessing Officer are dismissed.
Issues:
Cross appeals on determination of total income, application of Transactional Net Margin Method (TNMM), rendition of services, remand power of CIT(A). Analysis: 1. Determination of Total Income: - The Assessing Officer (AO) determined the total income of the assessee at a higher amount based on transfer pricing adjustments. - The CIT(A) directed the AO to accept TNMM as the most appropriate method and examine if further adjustments were necessary. - The AO passed a subsequent order granting relief to the assessee, deleting the transfer pricing adjustment and accepting the lower total income returned by the assessee. 2. Application of TNMM: - The TPO determined the Arm's Length Price (ALP) of support services at nil, questioning the rendition of services and their valuation. - The CIT(A) reviewed email exchanges and documents, concluding that services were rendered, benefiting the assessee and not duplicative. - The CIT(A) held TNMM as the most appropriate method, directing the AO to consider ALP under TNMM, leading to the deletion of the adjustment. 3. Rendition of Services: - The TPO rejected evidence provided by the assessee regarding services rendered, considering them as shareholder activities or duplicative. - The CIT(A) analyzed the emails and found proof of services rendered, unique programme content shared, and reasonable allocation of costs, supporting the rendition of services. 4. Remand Power of CIT(A): - The CIT(A) lacked the power to remand the matter under section 251 but used authority under section 153 for verification. - The CIT(A) directed the AO to benchmark the intra-group services under TNMM, leading to the deletion of the adjustment by the TPO. 5. Final Decision: - Both parties appealed the decision, but due to an appeal effect order, all grounds of the assessee's appeal became infructuous. - The ITAT confirmed the order of the CIT(A), dismissing both appeals and upholding the application of TNMM for determining the ALP of services rendered. In conclusion, the ITAT upheld the CIT(A)'s decision, emphasizing the rendition of services, the application of TNMM, and the lack of infirmity in the order. The judgment clarified the power of the CIT(A) to remand matters and highlighted the importance of evidence in transfer pricing assessments.
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