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TMI Blog2020 (2) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... and services income of ₹ 45,02,00,743/- out of which the marketing support services is only ₹ 5,14,37,962/-. Therefore, bifurcation of sales and service income the income earned from marketing support services is only to meager, therefore, which cannot be compared with Asian Business Exhibition Conference Ltd. Transfer pricing adjustment in respect of management services - HELD THAT:- We reverse the order of DRP and direct the AO to accept the value of managerial services as claimed by the assessee at Nil. Thus, ground No. 3 raised by the assessee is allowed. Transfer pricing adjustment as directed by the DRP on account of payment of royalty - HELD THAT:- The new and improved technology helps the RMSPL in minimizing its risk of producing sub-standard products and maintaining the highest manufacturing quality. The assessee does not incur any expenses on the research and development and no expenditure was debited to profit and loss accounts as on 31-03-2010. It is observed from the pages Nos. 587 and 589 of the paper book that the research and development which reveals that the Renishaw it incurred huge cost for updation of the technology which supports the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 2.2.4.4 of DRP at page 14 directed the TPO to verify the comparability of the said company based upon its annual report for F.Y. 2009-10 involving the year under consideration i.e. A.Y. 2010-11. Therefore, we uphold the directions of DRP with a direction to AO to get the report from TPO and decide the comparability of the said company be that of assessee. Regarding inclusion of Quadrant Communications. 7. The assessee objected for considering the Forex as Non-Operative to the inclusion of Quadrant Communications that it is not functionally comparable and the said company involved in advertising agency and non-availability of required data for comparability. The TPO rejected the objections of assessee and held the said company is engaged in the advertising business and the services provided include full service advertising agency, providing clients with 360 degree marketing communications solutions. The DRP upheld the TP report for inclusion of Quadrant Communications by holding that it is functionally comparable with the assessee. 8. Renishaw plc is incorporated in England and Renishaw Metrology Systems Private Ltd. is incorporated in India. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the TPO has observed in its remarks that the said company involved in conducting exhibitions and events and most of the income comes from exhibitions and events. The DRP held the functions of the said company are comparable with the assessee and the AO made transfer pricing adjustment. The assessee placed on record the order dated 25-04-2019 of this Tribunal passed in M/s. John Deere India Pvt. Ltd. wherein the Revenue challenged directions of DRP for exclusion of Asian Business Exhibition Conference Ltd. from the list of comparables. The Tribunal rendered the detailed discussion and held the DRP is justified in directing to exclude the said company from the comparables. We note that the Asian Business Exhibition Conference Ltd. is engaged in organizing exhibition and conference. 11. The Tribunal examined the profit and loss accounts of the said company and held the direct income of said company is from exhibition and events. Therefore, as we discussed in the aforementioned paragraphs the agreement between Renishaw plc and RMSPL is an internal affiliate agreement of the said two companies to co-ordinate and exchange the communication and correspondence between them rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. However, the TPO held that in fact no services were received by assessee and also observed that services were routine in nature and were neither asked for nor given by associated enterprise and the TPO benchmarked the said transaction at Nil and made an upward adjustment of ₹ 2.18 crores. 16. The learned Authorized Representative for the assessee pointed out that last year the TPO had accepted the said transaction to be at arm's length price. The Assessing Officer had disallowed the said payment under section 37(1) of the Act. However, the DRP deleted the addition, against which no appeal has been filed by Revenue. Our attention was drawn to the order of Tribunal in this regard. He also pointed out that the assessee had filed detailed letter to the TPO explaining the need for availing management services dated 06.05.2011 along with several enclosures and also documents were filed evidencing the said provision of services. However, the TPO does not give any cogent reason in holding that no services were provided and in determining the arm's length price at Nil. 17. The learned Departmental Representative for the Revenue placed reliance on the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee is allowed. 14. Ground No. 4 raised by the assessee challenging the action of AO in confirming the transfer pricing adjustment as directed by the DRP on account of payment of royalty of ₹ 27,32,494/-. 15. Heard both parties and perused the material available on record. The assessee made payment of ₹ 27,32,494/- to its associated enterprise Renishaw plc on account of royalty. The TPO called for explanation as to why the royalty should not be treated as Nil. The assessee explained the margin earned by the assessee is higher than that of comparables and assessee made substantial purchase of raw material from local market, assessee is not a contract manufacture. The TPO held that the assessee is a contract manufacture and referred to relevant TP documentation regarding the functions. On perusal of the functions as reproduced by the TPO in its order at page No. 15 shows that the assessee provides manufacturing services for the products of Renishaw group and does assembly of a range of machine tool probing products and cable harnesses. The manufacturing activity is predominantly manual assembly, aided by some computerized semi-automated proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in India the products by use of any or all of the know-how and a nonexclusive license to use and sell the said products throughout India and outside India to Renishaw and its affiliates. Therefore, it is clears that having technical know-how owned by the Renishaw plc including a technical and engineering data, calculation and information, design data, calculations and information, details of layout of works, including details and specification of machinery and license to make in India and nonexclusive license to use and sell the said products throughout India and outside India has been granted to RMSPL. 18. We note that the statement showing that the details of payment of royalty on the basis of total sales to its affiliates is placed at page No. 560 of the paper book which clearly shows that the total sales to its affiliates is ₹ 13,66,27,209/- and royalty of ₹ 27,32,494/- @ 2% was paid by the assessee to its AE Renishaw plc. Further, we note that the RMSPL manufactured goods and goods other than arms and manual control unit to Renishaw plc to an extent of ₹ 12,62,13,313/- and ₹ 4,46,69,492/- where no royalty was paid under the transactions had with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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