2022 (4) TMI 391 - AT - Income Tax

TP Adjustment - arm s length price of international transaction pertaining to payment of management services fees by appellant to its Associated Enterprises (AE) - HELD THAT In similar circumstances on identical facts, this Tribunal in assessee s own case for A.Y. 2009-10 2019 (9) TMI 1313 - ITAT PUNE reversed the order of DRP and directed the AO to accept the value of management services as claimed by the assessee. Similarly, this Tribunal in A.Y. 2010-11 2020 (2) TMI 114 - ITAT PUNE also taking into consideration the findings of Tribunal in A.Y. 2009-10 allowed ground raised therein and directed the AO to accept the value of management services as claimed by the assessee by reversing the order of DRP - Appeal of assessee allowed.

Summary

Issues Involved:

1. Transfer Pricing General Ground
2. Transfer Pricing Adjustment in respect of availing of management services
3. Transfer Pricing Adjustment in respect of Software Development Services
4. Other Transfer Pricing Grounds
5. Penalty Proceedings under Section 271(1)(c) of the Act

Detailed Analysis:

1. Transfer Pricing General Ground:
The Tribunal noted that Ground No. 1 raised by the assessee was general in nature and did not require adjudication.

2. Transfer Pricing Adjustment in respect of availing of management services:
The core issue was the determination of the arm’s length price (ALP) for the payment of management services fees by the appellant to its Associated Enterprise (AE). The appellant had paid ?1,40,95,198, which the CIT(A) adjusted to ?54,25,697.

The Tribunal examined whether the services were actually rendered and whether they provided a tangible benefit to the appellant. It was noted that the appellant failed to furnish adequate evidence to demonstrate the receipt and benefit of the services. The CIT(A) had partially accepted the appellant's claims but upheld adjustments where the appellant did not provide sufficient details.

The Tribunal referred to its previous decisions in the assessee's own cases for earlier assessment years (A.Y. 2009-10, 2010-11, and 2011-12), where it had reversed similar adjustments made by the TPO/Assessing Officer. The Tribunal emphasized the principle of consistency and directed the AO to accept the management services fees as claimed by the assessee.

3. Transfer Pricing Adjustment in respect of Software Development Services:
The appellant did not press this ground during the hearing, and it was dismissed as not pressed.

4. Other Transfer Pricing Grounds:
Similar to the software development services ground, the appellant did not press these grounds, and they were dismissed as not pressed.

5. Penalty Proceedings under Section 271(1)(c) of the Act:
The initiation of penalty proceedings was deemed consequential in nature. Given that the primary grounds were resolved in favor of the assessee, the penalty proceedings were dismissed.

Conclusion:
The appeal was partly allowed. The Tribunal set aside the order of the CIT(A) concerning the management services fees and directed the AO to accept the value as claimed by the assessee. The other grounds were dismissed as not pressed, and the penalty proceedings were dismissed as consequential.