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TMI Blog2020 (12) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... te method and Comparability analysis. Protective assessment u/s. 40(a)(i) for non deduction of TDS on payment made towards managerial services - We note that Ld. TPO has made adjustment in respect of payments made towards managerial services, which has been remanded for denovo consideration based on evidences/documents filed by assessee. Assessee has deducted TDS on certain payments made to AE. It is the submission of Ld. AR that balance amount, pertains to other services. Ld. AR submits that such other payments cannot be termed as technical in nature. As we have remitted the transfer pricing adjustment on same issues to Ld. TPO for denovo consideration, this issue becomes academic at this stage. X X X X Extracts X X X X X X X X Extracts X X X X ..... eement or understanding and that for specific services a separate contract between the parties is necessary. 1.9. The learned AO / learned TPO/ Hon'ble CIT(A) have erred in considering Comparable Uncontrolled Price ("CUP") method for benchmarking the intra-group services for determination of ALP without providing the detailed benchmarking and basis for application of CUP as the most appropriate method. 1.10. The Hon'ble CIT(A) has erred in not accepting the evidences filed to substantiate the receipt of services without appreciating the fact that the evidences further supplement the existing evidences filed before the learned TPO. 2. Corporate Tax Ground 2.1. The learned AO / Hon'ble CIT(A) have erred in re-characterizing the payment towards managerial services as fees for technical services under Explanation 2 to Section 9(1)(vii) and also under Article 13 of the India-France Double Tax Avoidance Agreement. 2.2. The learned AO / Hon'ble CIT(A) have erred in disallowing the payment for intra-group services of INR 3,03,22,402 under Section 40a(i) of the Income Tax Act, 1961 ("the Act") 2.3. The learned AO / Hon'ble CIT(A) have erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using CUP. 6. Submissions were made by assessee in support of its contention, however Ld. TPO analysed that, management fee transaction is a class of its own and the same has to be examined as intragroup services under CUP as the most appropriate method. He was thus of the opinion that this transaction has to be analysed separately. 7. On analysing the various services rendered, Ld. TPO was of the opinion that, the payment made by assessee is based on the allocation of group services and no amount is charged for any specific benefit received by assessee from its AE. He thus determined the arm's length price of management fees at 'nil' due to inadequacies of evidences in rendition of services by AE. Ld. TPO thus proposed the adjustment of ₹ 3,03,22,402/- in the hands of assessee in respect of management services. 8. Based on proposed adjustment, Ld. AO passed draft assessment order. In the draft assessment order, Ld. AO called upon assessee to justify why the said sum of management fees should not be disallowed for non-deduction of TDS under section 40(a)(i) of the Act. Assessee in response, filed various details, wherein in TDs deducted in which a sum of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch services provided by AE were not required, as, assessee failed to provide evidence regarding receipt of services, alleged to be rendered by AE, necessitating any payment. It is observed that, Ld. TPO thus held that, as there is no benefit from services for which payments has been made, he determined ALP of international transaction at Nil, without carrying out any FAR analysis of intra-group services. This approach of Ld. TPO is not acceptable, as once a transaction has been categorised as independent international transaction, it is necessary to determined ALP of such transaction. Ld. TPO cannot consider ALP at 'NIL' and value of transaction has to be computed as per law. 18. The Income Tax Act provides computation of arms length price of any international transaction as under: Computation of income from international transaction having regard to arm's length price. 92. (1) Any income arising from an international transaction shall be computed having regard to the arm's length price. Explanation.--For the removal of doubts, it is hereby clarified that the allowance for any expense or interest arising from an international transaction shall also be determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is placed at page 467 of paper book Volume II. This goes to prove that services were required by assessee. 21. Hon'ble Delhi High Court in case of Cushman Wakefield Limited reported in 46 taxmann.com 317 has held that: "34. The Court first notes that the authority of the TPO is to conduct a transfer pricing analysis to determine the ALP and not to determine whether there is a service or not from which the assessee benefits. That aspect of the exercise is left to the AO. This distinction was made clear by the ITAT in Dresser-Rand India (P.) Ltd. v. Addl. CIT [2011] 47 SOT 423/13 taxmann.com 82 (Mum.): "8. We find that the basic reason of the Transfer Pricing Officer's determination of ALP of the services received under cost contribution arrangement as 'NIL' is his perception that the assessee did not need these services at all, as the assessee had sufficient experts of his own who were competent enough to do this work. For example, the Transfer Pricing Officer had pointed out that the assessee has qualified accounting staff which could have handled the audit work and in any case the assessee has paid audit fees to external firm. Similarly, the Transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangement. We have also noted that the stand of the revenue authorities in this case is that no services were rendered by the AE at all, and that since there is No. evidence of services having been rendered at all, the arm's length price of these services is 'nil'." 22. Another aspect that was made clear by coordinate bench of this Tribunal in Delloite Consulting India (P.) Ltd. v. Dy. CIT/ITO reported in [2012] 137 ITD 21/22 taxmann.com 107 (Mum) is that: '37. On the issue as to whether the Transfer Pricing Officer is empowered to determine the arm's length price at "nil", we find that the Bangalore Bench of the Tribunal in Gemplus India (P.) Ltd. v. Asstt. CIT [IT Appeal No. 352 (Bang.) of 2009, dated 20-10-2010] held that the assessee has to establish before the Transfer Pricing Officer that the payments made were commensurate to the volume and quality service and that such costs are comparable. When commensurate benefit against the payment of services is not derived, then the Transfer Pricing Officer is justified in making an adjustment under the arm's length price." 23. Placing reliance upon aforestated decisions, we are of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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