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2021 (2) TMI 833 - AT - Income TaxTP Adjustment in respect of Regional Management Charges - TPO concluded that the assessee has failed to provide documents in support of various services availed and determined the Arm's Length Price (ALP) of Regional Management Services at nil, thereby making adjustment - HELD THAT - Considering the fact that in the impugned assessment year the services were rendered by AE in pursuance to the same Regional Services Agreement dated 23/11/2010 and there has been no change in the nature of services rendered by AE and method of remuneration, we see no reason to take a different view. Therefore, in the facts of the case and the decisions of Co-ordinate Bench in assessee's own case for assessment year 2011-12 and assessment year 2013-14, the transfer pricing adjustment on account of Regional Management Charges paid to foreign A.E is deleted for parity of reasons. To amplify the services rendered the assessee has filed copies of debit notes supporting Regional Management Charges, cost benefit analysis of Regional Management Charges, reasons for availing intra group services, nature of services availed, basis of charges, etc. The ld. Departmental Representative has not disputed that the nature of expenditure in respect of Regional Management Charges in the impugned assessment year is in any manner different from that in the preceding assessment year. 2021 (2) TMI 773 - ITAT MUMBAI .- Appeal by the assessee is allowed.
Issues Involved:
1. Transfer Pricing Adjustment in respect of Regional Management Charges. Detailed Analysis: 1. Transfer Pricing Adjustment in respect of Regional Management Charges: The appeal by the assessee is directed against the assessment order dated 30/01/2017 for the assessment year 2012-13. The sole issue raised by the assessee pertains to the Transfer Pricing (TP) adjustment concerning Regional Management Charges paid to its Associated Enterprises (AE). The assessee, a joint venture between Henkel KGaA Germany and Chembond Chemicals Ltd., India, paid ?2,24,50,358/- towards these charges. The assessee provided necessary documents to the Transfer Pricing Officer (TPO) to substantiate the services provided by the AE. However, the TPO determined the Arm's Length Price (ALP) of these services at nil, citing insufficient documentation, and made an adjustment of ?2,24,50,358/-. The Dispute Resolution Panel (DRP) upheld this adjustment, noting that the assessee failed to establish the services rendered, the benefits derived, and the market value of such services, if any. The assessee contended that a similar issue had been decided in its favor by the Tribunal for the assessment year 2011-12 (ITA No. 1049/Mum/2016) and 2013-14 (ITA No. 6999/Mum/2017), where the Tribunal deleted the adjustment. The Tribunal, in those cases, found that the assessee had provided substantial evidence, including agreements, debit notes, cost-benefit analysis, and email correspondences, demonstrating the receipt and benefits of the services from the AE. In the current case, the Tribunal noted that the nature of services rendered and the method of remuneration had not changed from the previous years. The Tribunal reiterated that the TPO is required to follow one of the prescribed methods under Section 92C(1) of the Income Tax Act, 1961, and cannot determine the ALP at nil without such an exercise. This view is supported by several judgments of the Hon'ble High Court of Bombay, which state that the TPO cannot benchmark international transactions at nil without following the prescribed methods. The Tribunal found that the assessee had filed similar evidence for the assessment year 2012-13 as in the previous years, including debit notes, cost-benefit analysis, and documentation of services availed. The Departmental Representative did not dispute the nature of the expenditure. Therefore, the Tribunal saw no reason to deviate from its earlier decisions and deleted the TP adjustment on account of Regional Management Charges for the assessment year 2012-13. Conclusion: The Tribunal allowed the appeal by the assessee, deleting the TP adjustment of ?2,24,50,358/- for the assessment year 2012-13, consistent with its earlier decisions for the assessment years 2011-12 and 2013-14. The order was pronounced in the open Court on February 3, 2021.
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