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TMI Blog2020 (6) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... WD (CWG) by the AE - relevant clauses of the contract and noted that eligibility condition for participating in tender was submission of registration certificate under Delhi Value Added Tax Act, 2004, besides submission of certificate of being original equipment manufacturer of gas turbines. Admittedly, assessee was not a manufacturer of gas turbines but its AE was. However, the AE did not have VAT registration certificate. Therefore, it was not qualified to participate in the tender. On the other hand, assessee had registration certificate under the Delhi VAT Act, 2004. Therefore, for participating in the tender and for obtaining the contract the bid was submitted in assessee s name though it was clearly understood by the contracting parties that the original equipment manufacturer of gas turbines was the AE. Tribunal found that there was nothing on record to suggest that the assessee had provided any services to its AE for sale of its gas based turbines either to PWD or to other customers in India. It was found as a matter of fact that in case of sales made by the AO to other parties in India, the assessee was in no way involved in the sales affected. The six parties had state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of gas turbines to PWD (CGW) by it s A.E. and such services were required to be bench marked for determining the arm s length price as the assessee had not charged any price for providing such marketing support services? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in holding that the assessee did not render any services to its AE in respect of marketing support services provided by the assessee to its AE, in supply of gas turbines to PWD(CWG) by its AE relying upon the fact that the TPO did not make any such adjustment in AY 2012-13 without appreciating that every assessment year is different assessment year and the principle of res-judicata is not applicable to proceedings under the Income Tax Act, 1961? 4. From the above it is evident that both the questions relate to the same issue i.e. whether assessee had rendered any service to its associated enterprise (AE) in respect of marketing support services provided by the assessee to its associated enterprise (AE) in supplying gas turbines to the public works department (PWD) in carrying out construction for Common Wealth Games (CWG). 5. The assessee is a resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to its A.E. is the supply of gas turbines to PWD (CWG) by the A.E.. On the basis of contract entered into by the assessee (formerly TIPL) with PWD (CGW) the Transfer Pricing Officer concluded that such contract has been entered into by the assessee on behalf of its A.E., or as an agent of A.E., thereby, assessee was rendering marketing support service to its A.E. which needs to be bench marked for determining the arm s length price as the assessee has not charged any price for providing such marketing support service. On the basis of such contract entered with PWD (CWG) the Transfer Pricing Officer has also roped in the other direct sales of gas turbines by the A.E. to the customers in India for bench marking the arm s length price of marketing support services allegedly provided by the assessee to its A.E.. At this stage, it needs to be mentioned, as far as the international transactions reported by the assessee with its A.E., the Transfer Pricing Officer has not made any adjustment in respect of them having found the price charged by the assessee to be at arm s length. As observed earlier by us, the entire basis of transfer pricing adjustment is the contract entered with the PW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... participation of an original equipment manufacturer which the assessee is certainly not. There is no dispute to the fact that from the earlier years also, the A.E. is supplying gas based turbine generating system to customers in India, whereas, the assessee is providing services relating to installation, commissioning, annual maintenance as well as supply of spare parts. It is also not disputed that the payments relating to gas based turbine generating systems were made to the A.E. directly by the contractees. That being the case, in the absence of any material to show that the assessee had provided any marketing services to its A.E. in relation to supply of gas turbine generating system, income relating to indenting commission cannot be computed notionally alleging provision of such services. It is further more necessary to observe that on the basis of contract with PWD (CWG), the Transfer Pricing Officer has computed commission on gas turbines sold by the A.E. to other customers in India on a presumptive basis. Admittedly, in case of sales made by the A.E. to other parties in India the assessee is no way involved in the sales effected as the concerned parties have directly entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r pricing adjustment cannot be made unless there are concrete evidence before the Departmental Authorities to establish fact that the assessee has rendered marketing support services to the A.E. in relation to sale of gas turbines to customers in India. This view of our is fortified further from the fact that, though, nature and character of the business of the assessee and its A.E. remained the same over the years, however, in no other assessment year any transfer pricing adjustment on account of provision of marketing support services to AE has been made. This is evident from the order passed by the Transfer Pricing Officer under section 92CA of the Act for A.Y. 2012-13. Though, each assessment year is independent and principle of res-judicata generally do not apply to income tax proceeding, however, rule of consistency cannot be ignored if there is no material difference in facts. Therefore, there being no basis for concluding that the assessee has provided any marketing support services to A.E. or has received any commission from the A.E. for providing such marketing support services, the transfer pricing adjustment made is hereby deleted. Grounds No.1 to 5 are allowed. Since w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its own behalf as well as on behalf of its AE though in its own name. Therefore, it was concluded that though the turbine was supplied by the AE to the PWD (CWG) as per the contract, however, assessee had provided support service to the AE and had also acted like an agent in selling its turbine in India. Transfer Pricing Officer further noticed that communication by PWD was with the assessee and not with the AE from which he inferred that for supply of turbines by the AE to PWD it was essentially the assessee who was liasoning with PWD on behalf of the assessee. He also referred to information obtained from six parties to whom the AE had supplied turbines. 18. Therefore, Transfer Pricing Officer concluded that assessee had provided support service for sale, marketing and after sale service on behalf of AE in India for which it received indenting commission for providing services. 19. On that basis an exercise was carried out to determine the arm s length price. 20. Transfer Pricing Officer obtained copies of contract of indenting commission of five other parties and noticed the rates of commission charged on the sales executed by them. Treating those as comparables, Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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