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TMI Blog2021 (2) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... idence establishing the fact of receipt of services by the assessee. 2. Looking to the facts and circumstances of the case and in law, the DRIP has erred in directing and the TPO has erred in determining the Arms Length Price at Rs. NIL in respect of the expenditure on account of regional management charges on the ground that the claim of services availed does not get proved which action is without jurisdiction and beyond the domain of the TPO and the correct jurisdiction is with the AO. 3. Looking to the facts and circumstances of the case and in law, the DRIP has erred in directing and the TPO/AO has erred in determining the Arms 4. Length Price at Rs. NIL in respect of the expenditure on account of regional management charges by erroneously disregarding the transfer pricing analysis carried out by the assessee in compliance with the provisions of sect ion 92C(1) only as far as the same is concerned with RMC while accepting the very same analysis for other international as well as Domestic Transactions such as purchases, etc. 5. Looking to the facts and circumstances of the case and in law, the Assessing Officer (AO) has erred in referring the computation of arm's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational transactions during the year under consideration, the A.O in the course of the assessment proceedings made a reference under Sec. 92CA(1) of the Act to the Transfer Pricing Officer (for short "TPO‟) for determining the Arm‟s Length Price (for short "ALP‟) of the international transactions. On the basis of his order passed under Sec. 92CA(3) dated 19.01.2015 the TPO made a transfer pricing adjustment of Rs. 3,73,16,920/-, as under: Particulars ALP as per assessee ALP as per TPO Adjustment Adjustment to the arm‟s length price of regional management services received by the assessee from its domestic AE, viz. Chembond Chemicals Ltd. Rs. 1,29,54,736/- Nil Rs. 1,29,54,736/- Adjustment to the arm‟s length price of regional management services received by the assessee from its foreign AE, viz. Henkel Ag and Co KgaA. Rs. 2,43,62,544/- Nil Rs. 2,43,62,544/- Total Rs. 3,73,16,920/- Accordingly, the TPO vide his order passed under Sec. 92CA(3), dated 31.10.2016 made a transfer pricing adjustment of Rs. 3,73,16,920/-. 4. The A.O after receiving the order passed by the TPO under Sec. 92CA(3), dated 31.10.2016 passed a draft assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 5,77,647/-. 7. The A.O after receiving the order passed by the DRP under Sec. 144C(5), dated 22.09.2017 therein passed the final assessment order under Sec. 143(3) r.w.s. 144C(13) of the Act, dated 10.10.2017 and assessed the income of the assessee company at Rs. 19,58,97,470/-. 8. The assessee being aggrieved with the order passed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 10.10.2017 has carried the matter in appeal before us. The ld. Authorized Representative (for short "A.R‟) for the assessee at the very outset of the hearing of the appeal submitted that the issue pertaining to transfer pricing adjustment of Rs. 2,43,62,544/- made by the TPO by taking the arms length price of the regional management services received by the assessee from its foreign AE, viz. Henkel Ag and Co KgaA at Nil was squarely covered by the recent order of the Tribunal in the assessee‟s own case for A.Y 2011-12 in ITA No.1049/Mum/2019 (copy placed on record). In order to buttress his aforesaid claim, it was submitted by the ld. A.R that the DRP had sustained the adjustment by simply relying on the view that was taken by the panel while disposing off the objection of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. As regards the transfer pricing adjustment made by the A.O in respect of the regional management services received by the assessee from its foreign AE, viz. Henkel AG & Co. KGaA, Germany it was fairly admitted by the ld. D.R that the issue was covered by the recent order of the Tribunal in the assessee‟s own case for A.Y 2011-12 in ITA No. 1049/Mum/2016, dated 09.12.2020. It was however submitted by the ld. D.R that the issue pertaining to transfer pricing adjustment as regards the transaction of receipt of regional management services by the assessee from its domestic AE was not there before the Tribunal in the case of the assessee for A.Y 2011-12. As regards the disallowance of "bad debts‟ of Rs. 5,77,647/-, the ld. D.R took us through a letter dated 08.09.2017 addressed by the assessee to the DRP. Taking us through the aforesaid letter, it was submitted by the ld D.R that the assessee had therein categorically admitted that no documentary evidence in support of its claim of deduction of "bad debts‟ of Rs. 5,77,647/- (out of Rs. 1,08,02,000/-) had been filed. It was submitted by the ld. D.R that now when the assessee had failed to substantiate its claim of " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not produced any documentary evidences in support of actual services received. By mere submission of agreement copy, debit notes, details of event and exhibition and elevator programs, the claim of service availed does not get proved. Operations. Assessee has failed to provide the amount paid to AE for availing this service. -Copy of regional service agreement dated 1.1.2010. -debit note raised by AE The assessee has not produced any documentary evidences in support of actual services received. By mere submission of agreement copy, email correspondence and debit notes, the claim of service availed does not get proved. Human Resources (HR) Assessee has failed to provide the amount paid to AE for availing this service -Copy of regional service agreement dated 1.1.2010. -debit note raised by AE On perusal of details submitted by the assessee it is observed that assessee has merely enlisted various services to be availed. However, assessee has not submitted a single document in support of service availed from AE except agreement copy and debit note. Safety, Health & Environment (SHE) Assessee has failed to provide the amount paid to AE for availing this service Copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 13.12.2014 Amount paid to AEs (as submitted by the assessee vide submission letter dated 13.12.2014 Documentary evidence submitted by assessee (as submitted by assessee vide letter dated 11.12.2014 & 31.12.2014) TPOs comments Regional Planning & Guiding services Assessee has failed to provide the amount paid to AE for availing this service Copy of regional service agreement dated 1.1.2010 debit notes raised by AE The assessee has not produced any documentary evidences in support of actual services received. By mere submission of agreement copy and debit notes, the claim of service availed does not proved. Marketing Assessee has failed to provide the amount paid to AE for availing this service -copy of regional service agreement dated 1.01.2010 -debit notes raised by AE. -email correspondence (annexure 6E of submitted dated 31.12.2014) The assessee has not produced any documentary evidences in support of actual services received. By mere submission of agreement copy, email correspondence and debit notes, the claim of service availed does not proved. Supply chain & Operational Support services. Assessee has failed to provide the amount paid to AE for avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich would establish receipt of regional management services by the assessee from its AE; and (ii) that the AO/TPO had erred in law in determining the ALP of the international transactions of rendering of regional management services to the assessee by its AE at nil i.e without following any one of the prescribed methods contemplated in Sec.92C(1) of the Act. 9. We shall first deal with the assessee‟s claim that supporting documentary evidence clearly establishing rendering of regional management services by the AE was duly placed on record in the course of the proceedings before the lower authorities, viz. (i) copy of regional management services "agreement", dated 23.11.2010 executed between the assessee and its AE i.e Henkel AG & Company KGaA; (ii) details of regional management charges; and (iii). copies of "debit notes" raised on the assessee by its AE towards regional management charges. Apart from that, we find that the assessee vide its letter dated 31.12.2014 had submitted with the lower authorities the statement of "Cost Benefit Analysis" of Regional Management Cost for the year under consideration along with details viz. (i) requirement to avail the regional mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AE within the group, viz.(i) regional planning and guiding services; (ii) regional marketing services; (iii) regional supply and chain operational support services; and (iv) regional safety, health and environment support compliance services, therein explaining the benefits derived by the assessee from the services rendered by the AE were also filed by the assessee before the lower authorities in order to drive home its claim of having received the aforesaid services along with benefit derived there from. In the backdrop of the aforesaid documentary evidence, we are unable to comprehend as to how the AO/TPO had concluded that the assessee had failed to furnish the requisite documentary evidence which would substantiate rendering of regional management services by the AE, viz. Henkel AG & Company, KGaA to the assessee during the year under consideration. In our considered view, the material placed on record by the assessee does constitute substantial evidence which clearly establishes that the assessee had received regional management services from its AE, viz. Henkel AG & Company, KGaA. We find that the assessee had entered into the regional management service "agreement" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. It was observed by the Tribunal that just like in a case where an operation is performed by a surgeon the sutures and scars therein left would evidence the role of the surgeon but that of an anaesthesiologist cannot be similarly evidenced on the basis of similarly placed evidence. The Tribunal while concluding as herein above had observed as under: ".........even though some correspondence was placed on record with reference to the advise given to assessee, providing a concrete evidence with reference to the services in the nature of specific activities is difficult, like proving the role of an anesthesian in an operation conducted by a surgeon. There may be an evidence of operation being performed by the Doctor in the form of sutures or scars etc, which can be proved later but the role of an anesthesian before operation and after gaining consciousness is difficult to prove as that is not tangible in nature. Likewise, for the advise given by various group centres to the group companies in day-to-day manner is difficult to place on record by way of concrete evidence but the way business is conducted, one can perceive the same..." On the basis of our aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod. We thus in terms of our aforesaid deliberations vacate the addition towards TP adjustment of Rs. 2,61,63,288/- made by the AO/TPO. The Grounds of appeal No. 1 to 8 are allowed in terms of our aforesaid observations." As the facts and the issue involved as regards receipt of regional management services by the assessee from its foreign AE, viz. Henkel AG & Company KGaA remains the same as were there before the Tribunal in the aforesaid case of the assessee for A.Y 2011-12, therefore, we respectfully follow the view therein taken. Accordingly, adopting the reasoning given by the Tribunal while vacating the transfer pricing adjustment w.r.t regional management services received by the assessee from its aforesaid foreign AE, viz. Henkel AG & Company KGaA, Germany, we herein finding no reason to take a different view direct the A.O/TPO to vacate the transfer pricing adjustment of Rs. 2,43,62,544/- made in the hands of the assesseee for the year under consideration. 12. Adverting to the transfer pricing adjustment of Rs. 1,29,54,376/- made by the TPO w.r.t the transaction of receipt of regional management services by the assessee from its domestic AE, viz. Chembond Chemical Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Company KGaA had been vacated by us in terms of our aforesaid observations, therefore, the adjustment carried out by the TPO as regards the regional management services rendered by the domestic AE of the assessee, viz. M/s Chembond Chemical Limited, which too is found to be suffering from similar incorrect factual observations and invalid of assumption of jurisdiction by the TPO who without following any of the methods provided in Sec.92C had determined the arm‟s length price of the transaction of receipt of regional management services by the assessee from its domestic AE at Nil, also cannot be sustained and has to meet the same fate. Accordingly, in terms of our aforesaid observations we herein direct the A.O/TPO to vacate the transfer pricing adjustment of Rs. 1,29,54,376/- made by him as regards the domestic transaction of receipt of regional management service by the assessee from its AE, viz. Chembond Chemical Limited. The Grounds of appeal Nos. 1 to 7 are allowed in terms of our aforesaid observations. 14. We shall now advert to the disallowance of "bad debts‟ of Rs. 5,77,647/- (out of Rs. 1,08,02,000/-) as had been sustained by the A.O. On a perusal of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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