9911796707
TMI Blog2019 (11) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... llant to prove that certain intra group services were actually availed by the Appellant, undermining the reasonableness of the evidence submitted by the Appellant. 3. The Learned CIT (A) by upholding the addition made by the Ld. Assessing Officer/Transfer Pricing Officer, has grossly erred in questioning the need for availing certain intra group services from its associated enterprises ('AEs'). The Learned CIT (A) has exceeded his jurisdictional reach by challenging the commercial expediency and business decisions of the Appellant and by expecting the Appellant to demonstrate any tangible/quantitative benefit from the receipt of such services. 4. The Learned CIT(A) has failed to take cognizance of the fact that certain intra group services availed by it from its associated enterprises have benefitted the Appellant in the smooth and efficient functioning of its various businesses in India and erroneously concluded that only incidental benefits were received by the Appellant from availing such services. 5. The Learned CIT(A) has grossly erred by concluding that certain intra group services received by the Appellant from its AE were 'duplicate' in nature. 6. The Learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rked the international transactions relating to 'merchant trade' using TNMM as the most appropriate method. The 'other transactions' has been benchmarked using TNMM/CUP the details of which are as under:- Type of the transaction Method selected Total Value (Rs.) Merchating trade (Purchase) TNMM using Operating Profit as PLI Value added cost 27,986,417,370 Merchating trade (Sales) 28,078,622,161 Discounting charges CUP 420,257,359 Provision of business / forwarding support services TNMM using Operating Profit as PLI Operating cost 15,181,220 Provision of support services 13,594,170 Provision of sub-advisory services 31,276,283 Availing of treasury services 559,020 Availing of administrative services 2,719,190 Cost recharge 16,817,000 4. He, therefore, issued a questionnaire to the assessee in respect of the payments made for certain intra group services. It was stated by the assessee that it has received various services such as human resources, business unit engineering, accounting and audit services, credit management and public affairs, tax services, regional network group, availing corporate IT and other services, ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not filed a single piece of evidence which would show that it is connected with receiving any such support. He, therefore, held that the assessee failed to discharge its onus and, therefore, the payment on this account should be reduced to nil. Relying on various decisions, OECD Guidelines, etc., the TPO held that for the purpose of determining the arm's length price, it becomes necessary to examine whether the services were really availed by the assessee or not. He opined that the 'benefit test' is a highly relevant factor and no person would pay for services unless he receives direct and tangible benefit from it. Finally, the TPO, applying the CUP method, determined the ALP of the transaction of payment of service fee at nil as against Rs. 1,97,43,210/- determined by the assessee by observing as under:- "Universally, such payments are being treated at arm's length only when it is proved substantially by the taxpayer that such services were actually received and further proving that such received services have benefited it. In most of the countries like UK, USA, Germany etc it is an established position that a subsidiary does not to have to pay for the auditing, accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccess, phone conferences, meetings and workshops. This assistance results in minimization of financial and regulatory risk and improvement of key financial ratios due to an increase in operational efficiency and profitability. As regards Administrative and Technical training services (Rs. 16,425,830), the TPO has observed that the appellant has not filed single piece of evidence in support of its contention that it receives help for various administrative functions, in terms of training and guidance, that it received advice on trade documentation and other kinds of management support. I have carefully considered the submission of the appellant. I have also perused the additional evidence submitted by the appellant. Cargill TSF Asia Pte Limited has provided the administrative and technical training service to appellant. The appellant has submitted that AE provides various support services such as training and guidance on various administrative functions, provision of information on potential trade transactions and counterparties, advice on trade documentation, and other management support. These services were rendered through Workshops, Conferences, Emails, Research Material. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments necessary for evaluating benchmarking of services availed, cost reimbursed, etc., were submitted. Relying on various decisions, he submitted that when all necessary facts and findings of the lower authorities are available on record remand is unwarranted and opposed to law. A second innings cannot be allowed to the authorities to improve their case. For the above proposition, he relied on the decision of the Tribunal in a Third Member case in ACIT vs. Kumar Ice, 237 ITR 1, the decision of the Hon'ble Gujarat High Court in the case of Rajesh Babhubhai Damania, (2001) 254 ITR 541, the decisions of the Hon'ble Supreme Court in the case of Purushottam Reddy vs. Pratap Steels (2002) 2 SCC 686 and in the case of Mohinder Singh Gill vs. Chief Election Commissioner reported in AIR 1978 SC 851. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. EKL Appliances Ltd., reported in (2012) 345 ITR 241 (Del), he submitted that the Hon'ble Delhi High Court in the said decision has held that there is no need to establish necessity and benefit especially in proceedings before the TPO. Similarly, a conclusion has been reached in the case of Cushman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and administrative and technical training services at Rs. 57,43,506/- being 30% of Rs. 1,94,45,020/- as the ALP. It is the submission of the ld. counsel for the assessee that the method adopted by the TPO/A.O./CIT(A) is without any basis, without reference to any uncontrolled transaction and by emphasizing on irrelevant aspects like the services received in question being duplicative in nature or tangible benefit accruing to the assessee has not been established and there was no need for procuring such services. 10. It is an admitted fact that the assessee has filed certain details before the TPO as well as before the CIT(A) and, after obtaining the remand report from the A.O./TPO, the ld.CIT(A) has deleted the TP adjustment in respect of treasury services amounting to Rs. 5,59,020/- and held the ALP of the administrative services and administrative and technical training services at 30% of the value. The Revenue is not in appeal for the same. This otherwise implies that the Revenue is admitting that certain services have been received by the assessee from its AE. We find from the order of the TPO/Assessing Officer that the only reason cited for determining the ALP of such ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/ brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the TPO is not contemplated or authorised. 23. Apart from the legal position stated above, even on merits the disallowance of the entire brand fee/ royalty payment was not warranted. The assessee has furnished copious material and valid reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
