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TMI Blog2021 (10) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... days are given to the non-AE entity for payment from billing date. In view of the above discussion, the ld. CIT(A) held that the AO/TPO is not justified to charge interest on receivables without factoring in the payables to the AE/AEs. Having considered the entire facts and found them to be irrefutable, we decline to interfere with the order of the ld. CIT(A). - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... g, health care, retail, transportation, industrial and durable goods, and food and apparel sectors. 9. ADHK BV is a Hong Kong branch office of the Netherlands entity Avery Dennison Hong Kong B.V. (Netherlands), which is ultimately 100% owned by ADC. ADHK BV is the Asia Pacific regional headquarters of ADC. ADHK BV is responsible for overseeing the operations in Asia Pacific regional countries, and performs a number of services which are of benefit to the Materials segment of its Asia Pacific affiliates. 10. DMC is a wholly owned subsidiary of ADC. It performs a number of services o the benefit of the Avery group affiliates operating in the RIS segment. Intra Group Services: 11. For the conduct of its business of manufacturing and selling of group products a market, the Assessee received various intra-group services from DMC and ADHK BV, which in turn provided a number of critical and operational benefits to the Assessee. A summary of the services received is provided as follows for your reference: Nature of the International transactions Amount (in INR) Sales and marketing 27,508,164 Human Resource 4,616,627 Finance 11,571,204 Technical assistance services 2,645, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been willing to pay any third party to do so. In my opinion, services which are incidental or mere duplicity do not fall in the category of intra group services. √ Incidental benefits, if any, do not give rise to Intra Group Services and cannot be regarded as giving rise to arrangement: subject to arm's length pricing as stipulated in OECD TP guidelines paragraph 7.13 under Chapter VII. These findings-lead to an irresistible conclusion that payments for liaison services allegedly provided by the AEs are not at arm's length price. √ Moreover, it is seen from the details contained in the transfer pricing report of the assessee submitted under Rule 10D that the assessee had not conducted FAR analysis in regards to these alleged services and had failed to justify the functions performed by the AE for these payments. This is probably a reason that the receipt of alleged services have not been benchmarked under any of the five method prescribed under the Act n the Transfer Pricing report. √ Furthermore, the assessee has at the time of requisitioning the so-called services, not carried out any cost benefit analysis at its end. No independent party wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t arm's length and some services are not. 24. The Ld. CIT(A) accepted TNMM to arrive at the ALP, in respect of certain services received by the assessee and in the same breath, has rejected the analysis undertaken by the assessee under the TNMM in respect of other services. We are informed by the assessee that, the authorities have accepted TNMM as MAM in the subsequent years. The revenue has to be consistent in its approach. In our view, the TPO analysis of the assessee using TNMM as the MAM has to be accepted. When there is an agreement for services and certain services out of a bundle of services are undisputedly rendered, the entire agreement has to be viewed as a whole. Whether the services have actually resulted in a benefit to the assessee or not is not material. The conclusion of the Ld. TPO that the services have not resulted in any benefit and no independent entity would have made such a payment is in the realm of surmised and conjunctures and not backed by any material. Thus, the ALP determined by the assessee company is accepted and the TPO adjustment is deleted." 21. The relevant extracts of Co-ordinate Bench of ITAT Delhi in its own case for the A.Y. 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assessee in the form of lower direct costs. 32. We observe that there exists a direct nexus between the revenue earned/cost incurred by the Assessee and the majority intra-group services received, it would be incorrect to analyse the intra-group services received as a single element of cost in isolation..." 23. Further, the Department has also filed appeal against the order of ITAT before Hon'ble Delhi High Court. Hon'ble Delhi High Court has held that the view taken by the ITAT is plausible one and does not warrant any interference. The relevant extracts of the order of Hon'ble Delhi High Court are as under: "The contention of the assessee was that agreement between the assessee and its AE was a composite one and could not be split up for the purposes of holding that some services are at arm's length and some are not. The ITAT appears to have agreed with the above contention of the assessee on viewing the agreement as whole. It was not within the purview of the TPO to determine if some of the services resulted in any actual benefit to the assessee or not." 24. Since, the order of the ld. CIT(A) is based on the order of the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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