9911796707
TMI Blog2016 (6) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2009-10. 2. Smt. Vijayalakshmi, the Ld. Departmental Representative, submitted that the assessee is engaged in the business of manufacturing and sale of industrial fans. Flakt Woods (Luxembourg) is the holding company of the assessee-company. The ultimate holding company of the group is Stromboli Investments SAS. The assessee paid management service fee to its Associate Enterprise. The Transfer Pricing Officer acknowledged the services rendered by the Associate Enterprise to the assessee-company. However, he did not approve the Transaction Net Margin Method as most appropriate method for the purpose of transfer pricing adjustment. The Transfer Pricing Officer found that the volume and quality of service are disproportionate to the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that though theoretically Transaction Net Margin Method was the most appropriate method, but, practically adoption of CUP method would be most appropriate. According to the Ld. D.R., when the DRP found that CUP method would be the most appropriate practical method for making transfer pricing adjustment, ought to have adopted CUP method for determination of arm's length price. The Ld. D.R. further pointed out that an inter group activity may be performed relating to group members even though those group members do not need activity / service. According to the Ld. D.R., the Transfer Pricing Officer has rightly disallowed 25% of the payment. The Ld. D.R. has also placed her reliance on the Delhi Bench of this Tribunal in Knorr Bremse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot be adopted. According to the Ld. representative, the Dispute Resolution Panel has rightly found that the management service fee cannot be estimated for the purpose of making transfer pricing adjustment. 5. We have considered the rival submissions on either side and perused the relevant material available on record. Rule 10B of Income-tax Rules, 1962 provides for method of determining the arm's length price under Section 92C of the Income-tax Act, 1961 (in short 'the Act'). The assessee has adopted Transaction Net Margin Method as most appropriate method for the purpose of transfer pricing adjustment. For the purpose of Transaction Net Margin Method, the net profit margin realized by the enterprises from international t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration for the purpose of determining the arm's length price. 7. In the case of Transaction Net Margin Method also, the net profit margin realized by the enterprise or by an unrelated enterprise in an uncontrolled transaction has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transaction, which could materially affect the amount of net profit margin. Therefore, in both the cases, the comparison has to be made with uncontrolled transaction identified with regard to similar services rendered for the purpose of transfer pricing adjustment. In the case of CUP method, the price paid by the assessee has to be compared with other comparable companies ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the services rendered are advice and discussion in nature, therefore, volume and quality of services are disproportionate to the payment made by the assessee. It is not known how the Transfer Pricing Officer came to know that the volume and quality of services received by the assessee was disproportionate to its payment. 9. The Transfer Pricing Officer has not taken any pain to identify uncontrolled transaction between two independent entities. In the absence of any comparison of the transaction with transaction carried out in a uncontrolled market, this Tribunal is of the considered opinion that the Transfer Pricing Officer cannot independently come to a conclusion that volume and quality of services was disproportionate to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
