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TMI Blog2016 (9) TMI 1334X X X X Extracts X X X X X X X X Extracts X X X X ..... ows:- "1. That the adjustment made by Honorable (Hon'ble) Dispute Resolution Panel ("DRP")/ Ld. Assessing Officer (AO) / Ld. Transfer Pricing Officer (TPO) of INR 18,43,49,706/- on account of intra-group services received by the Appellant is covered by favourable rulings received by the Appellant in previous years (i.e. Assessment Year 2007-08 and 2008-09) and accordingly should be struck down. 2. That the Hon'ble DRP erred in fact and law by partly upholding the order of the Ld. AO / Ld. TPO wherein the AO/ TPO has held that the Appellant's international transaction of receipt of intra-group services with its Associated Enterprises ('AEs') does not satisfy the arm's length principle envisaged under the Act and thereby partly upholding an adjustment of INR 18,43,49,706/- and in doing so have grossly erred by: 2.1. not appreciating that the intra-group services received by the Appellant are intrinsically linked to the business operations by the Appellant in its two business segments i.e. Pressure Sensitive Materials ("PSM") and Retail Information Systems ("RIS"); 2.2. not appreciating the business model of the Appellant and rejecting the Appellant's economic analysis of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submits that she is not pressing ground No.3 and 4. Hence, the same are dismissed as not pressed. Ground No.5 is general in nature and Ground No.6 is premature. This leaves us with Ground No.1 and 2. The ld. TPO accepted Transactional Net Margin Method (TNMM) as the most appropriate method with regard to all the international transactions of the assessee, except the receipt of inter group services. The ld. TPO applied Comparable Uncontrolled Price (CUP) method and ascertained the arm's length price of inter group services received as nil and made an adjustment of Rs. 23.5 crore for the AY 2010-11. When the matter travelled to the Dispute Resolution Panel (DRP), they upheld the methodology, but, modified the order by accepting part of the services of Rs. 5.07 crore as at arm's length and held the balance transactions as not at arm's length and restricted the adjustment to Rs. 18.43 crores. Aggrieved, the assessee is before us. 5. After hearing the rival contentions, we find that the very same issue has been dealt by the Tribunal in the assessee's own case in ITA Nos.4868 & 4869/Del/2014 for AYs 2007-08 and 2008-09 at para 23 onwards and held as follows:- "AY 2007-08 23. From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S segment, the AE (Dennison Manufacturing Company, USA) performed various services. The AE hascharged a mark-up of 4% on the cost incurred in providing Marketing support services under RIS segment. And, * In respect of GVP services, VIPFS services and Ticketing Hub services at was charged without margin. 27. In view of the above discussion, we are of the considered opinion that with regard to PSM and RIS segments, even if cost plus method is taken as the MAM, the markup charged by the AEs is within the +/- 5% range, allowed under second proviso tos ection 92C of the Indian Income Tax Act, 1961, these services can be considered to be at arm's length; Regarding GVP services, VIPFS services and Ticketing HubServices, the service charges paid by the Assessee, represents the actual cost incurred by the AEs, without any markup.Hence these can be considered to be at arm's length. AY 2008-09 23. Similarly, in the case of Maruti Suzuki India Limited vs. Additional Commissioner of Income Tax (I.T.A. No. 5237/Del/2011), it was held that: 11. The another purpose for which the royalty has been paid to the SMC is the use of license information for the engineering, design and developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arable service provided between independent enterprises, or by the AE, providing the services to an independent enterprise. 26. In the absence of such information, alternatively the Ld AR submitted that if the said international transaction has to be benchmarked, then testing the full cost plus margin, earned by the AE, who are providing such services under TNMM would be appropriate. The Ld.AR submitted that the services received by the assessee are charged by the AE's as below; * Cost Plus Method may be adopted for arriving at the ALP in the assessee's case. The AE in respect of the PSM segment of services being marketing, accounting and administration, financial services product research and development and operations and logistics have charged the service fees by allocating the full cost incurred in providing support service. The allocation is based on budgeted sales and the AE applies mark-up of 5% on cost. * In respect of RIS segment, the AE (Dennison Manufacturing Company, USA) performed various services. The AE has charged a mark-up of 4% on the cost incurred in providing Marketing support services under RIS segment. And, * In respect of GVP services, VIPFS services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wakefield India Private Limited vs. ACIT (ITA No. 475/Del/2010) ii) Dresser-Rand India Pvt. Ltd. vs. ACIT (ITA No. 8753/Mum/2010). 6. Consistent with the view taken herein, we uphold the contention of the assessee and delete the TP adjustment. 7. We now take up the appeal for the assessment year 2011-12 in ITA No.1701/Del/2016. The revised grounds are as follows:- "1. The Ld. Assessing Officer ("AO") / Ld. Transfer Pricing Officer ("TPO") has erred in fact and law by not giving effect to the specific directions issued by the Honourable ("Hon'ble") Dispute Resolution Panel ("DRP") of allowing, out of the total intra-group services, two intra-group services received by the Appellant, namely Ticketing Hub and VIPS systems. Accordingly, the Ld. AO/ Ld. TPO have inadvertently made an adjustment of INR 16,06,36,482/- as against the adjustment computed in accordance with the directions issued by the Hon'ble DRP amounting to INR 13,47,88,071/-. In this regard, the Appellant has filed a request for rectification of mistake apparent from records under Section 154 of the Act before the Ld. AO/ Ld. TPO/ Hon'ble DRP, which is pending adjudication. 2. That the Hon'ble DRP erred in fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter to the Ld. TPO for computation of the arm's length price ("ALP"), as is required under Section 92CA(1) of the Act. 4. The Hon'ble DRP has erred in law by upholding the adjustment made by the Ld. TPO/ Ld. AO thereby by not appreciating that while making the said adjustment the Ld. TPO/Ld. AO have not satisfied the conditions set out in section 92C(3) of the Act. 5. That the Ld. AO has erred both in facts and in law, in initiating penalty proceedings under section 274 read with Section 271. 8. The TPO, as in the previous year, accepted TNMM as the most appropriate method with regard all the international transactions of the assessee except the receipt of inter group services. 9. The TPO applied an approach similar to Bright Line Test Approach under the Comparable Uncontrolled Price (CUP) method to ascertain the arm's length price of the inter group services received. He made an adjustment of Rs. 16.06 crore. The DRP followed the earlier year's approach and accepted part of the services to be at arm's length and upheld the balance adjustment of 13.48 crore. The TPO did not follow the orders of the DRP and in the final assessment order made an adjustment of Rs. 16.06 crore. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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