2022 (8) TMI 908 - AT - Income Tax

TP Adjustment - determining the ALP at Nil in respect of international transaction of Management Support Services - assessee challenging the action of TPO/DRP in not appreciating the documentary evidences, remand report, etc. - HELD THAT - On the question of the TPO s view point about the arising of some benefit to the assessee because of the services, we find that the same is not correct. It is a settled legal position that arising or not arising benefit is not an essential criterion for claiming deduction as business expenditure. The mere fact that the assessee received the services, itself enables it to claim the deduction. If the view adopted by the TPO is taken to logical conclusion, then no businessman will ever suffer loss. We, therefore, hold that the benefit test applied by the TPO cannot be approved. Having found that the assessee did receive intra group services from its AE, the next question is the determination of its ALP. The assessee has nowhere determined the ALP of transaction on individual basis. The TPO determined Nil ALP on the premise that since, the assessee did not receive any services, there was no question of making any payment in view thereof. We have overturned the impugned order on the question of receipt of services by holding that the intra group services were actually received by the assessee. In that view of the matter, the ALP of the international transaction needs to be determined afresh. We, therefore, set aside the impugned order and direct the AO/TPO to determine the ALP of international transaction of intra group services afresh as per the law after allowing reasonable opportunity of hearing to the assessee. Appeal of assessee is partly allowed for statistical purpose

Summary

Issues:
1. Challenge to final assessment order dated 16-10-2019 passed by ACIT, Circle-8, Pune u/s. 143(3) r.w.s. 144C(13) for assessment year 2015-16.
2. Dispute regarding determination of Arm's Length Price (ALP) for international transaction of Management Support Services.
3. Segregation of international transaction of intra group services for ALP determination.
4. Consideration of benefit received from services for claiming deduction as business expenditure.
5. Initiation of penalty proceedings u/s. 274 read with section 271(1)(c) of the Act.
6. Charging of interest u/s. 234B and 234C of the Act.

Analysis:
1. The appeal challenges the final assessment order for the assessment year 2015-16. Ground No. 1, being general, is not adjudicated.
2. Ground Nos. 2 to 6 contest the TPO/DRP's determination of ALP at Nil for Management Support Services. Assessee provided evidences of services received, disputed by TPO. Tribunal found some services were proved but directed fresh ALP determination.
3. TPO segregated intra group services for separate ALP determination, upheld by Tribunal due to distinct nature of transaction.
4. TPO's view on benefit received from services was disputed. Tribunal held that mere receipt of services enables deduction, benefit test not essential.
5. Ground No. 7 challenged premature penalty proceedings initiation, dismissed by Tribunal.
6. Ground No. 8 contested charging of interest u/s. 234B and 234C, dismissed as mandatory and consequential.
7. The appeal was partly allowed for statistical purposes, directing fresh ALP determination for intra group services and dismissing penalty and interest challenges.