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2023 (10) TMI 300 - AT - Income TaxTP Adjustment - Downward adjustment - raw materials and components purchased from the AEs which was not in accordance with the arm s length principles - HELD THAT - No material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on its record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, we hereby set aside the finding of the DRP and direct the AO/TPO to delete the enhancement of income on account of TP adjustment in the transaction of import of Raw material and components. Hence the ground of appeal of the assessee is hereby allowed. Enhancing the income in relation to receipt of data management and other related service fees paid by the Appellant to its AEs by rejecting the TP documentation maintained by the Appellant and arbitrarily determining arm s length price as Nil by applying Comparable Uncontrolled Price Method( CUP ) Method - HELD THAT - Before us, Revenue has not placed any material on its record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order of this tribunal in the own case of assessee 2022 (12) TMI 542 - ITAT AHMEDABAD we hereby set aside the finding of the DRP and direct the AO/TPO to delete the enhancement of income on account TP adjustment in the transaction as discussed above i.e. Data Management Fees. Hence, the ground of appeal of the assessee is hereby allowed. Purchase of fixed assets and payment of Trademark Fee by aggregating the same with the transaction of purchase of Raw Materials and components - Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of the earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby set aside the finding of the learned DRP and direct the AO/TPO to delete the enhancement of income on account TP adjustment in the transaction of import of Raw material and components. Hence the ground of appeal of the assessee is hereby allowed. Enhancing the income pertaining to reimbursement of expenses received from the AEs by recharacterizing reimbursement of expenses received as provision of support services thereby imputing a markup of 5% on the cost of the reimbursements without providing any detailed/cogent reason for the same - As no material has been placed on record by the learned AR for the assessee that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, AR has not placed any material on record pointing out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, we confirm the finding of the learned DRP. Hence the ground of appeal of the assessee is hereby dismissed.
Issues Involved:
1. Validity of the assessment order under Section 143(3) read with sections 144C(13) and 144B. 2. Rejection of the Transfer Pricing Study Report (TPSR) and adjustments related to the purchase of raw materials and components. 3. Adjustment related to receipt of data management and other related service fees. 4. Adjustment related to the purchase of fixed assets and payment of trademark fees. 5. Adjustment related to reimbursement of expenses received from associated enterprises (AEs). Summary: 1. Validity of the Assessment Order: The first and second issues raised by the assessee were deemed general in nature and dismissed as infructuous, requiring no separate adjudication. 2. Rejection of TPSR and Adjustments for Raw Materials and Components: The assessee's TPSR was rejected by the TPO due to various deficiencies, including failure to provide the Group Transfer Pricing Policy, insufficient documentation, and inappropriate selection of comparables. The TPO adopted the assessee as the tested party and proposed a downward adjustment of Rs. 9,22,28,801/-. The DRP partially upheld the TPO's findings but reduced the adjustment. The Tribunal, following its decision in the assessee's case for AY 2017-18, ruled in favor of the assessee, directing the AO/TPO to delete the enhancement of income on account of TP adjustment. 3. Adjustment for Data Management and Related Service Fees: The TPO determined the arm's length price (ALP) for data management services as "Nil," citing insufficient evidence of services received. The DRP upheld this adjustment. However, the Tribunal, referencing its decision for AY 2017-18, found that the services were indeed availed and that the TNMM method applied by the assessee was appropriate. The Tribunal directed the AO/TPO to delete the enhancement of income on this account. 4. Adjustment for Purchase of Fixed Assets and Trademark Fees: The TPO aggregated these transactions with the purchase of raw materials and components for benchmarking. The Tribunal, consistent with its earlier decision, held that once the primary transaction (purchase of raw materials) is accepted at arm's length, no further adjustments are required for the aggregated transactions. The Tribunal directed the AO/TPO to delete the enhancements related to fixed assets and trademark fees. 5. Adjustment for Reimbursement of Expenses: The TPO recharacterized reimbursements as "provision of support services" and added a 5% markup. The DRP upheld this adjustment. The Tribunal, following its decision for AY 2017-18, agreed that while reimbursements are international transactions requiring benchmarking, the assessee failed to determine the ALP. Thus, the Tribunal upheld the adjustment, dismissing the assessee's appeal on this ground. Conclusion: The appeal was partly allowed, with the Tribunal directing the deletion of certain TP adjustments while upholding others. The Tribunal's decisions were largely based on consistency with its rulings in the assessee's case for the previous assessment year.
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