9911796707
TMI Blog2022 (4) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ground 1: The Ld. AO under the direction of Hon'ble DRP have erred in holding that the arm's length value of the international transaction pertaining to payment of Management Service Fee to be Ni. While doing so the Ld. AO/Hon'ble DRP have erred. - in rejecting the benchmarking analysis conducted by the appellant by considering the overseas Associated Enterprise ('AE') as the tested party under Transactional Net Margin Method ("TNMM") as the most appropriate method. - in not taking cognizance of the submission made by the Appellant covering substantive documentary evidences demonstrating the receipt of management services and benefits derived therefrom, - in challenging the commercial business needs and decisions of the Appellant with respect to availing the services from AE, - in disregarding the analysis conducted by the appellant under aggregation approach, while applying entity level TNMM as the most appreciate method for its Distribution activity, thereby ignoring the fact that the transaction of payment of Management Service Fee is inextricably linked with Applicant's Distribution activity, and - in determining the arm's len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual services rendered to individual units. This implies that the payment terms of the MSA are independent of the nature or volume of services and therefore expenses. As no details are available on record with respect to the nature of services rendered by the AE to the Taxpayer the assessee has failed to establish that fees charged are commensurate benefits against the payment of service fees to the AE. Reliance is placed on the Bangalore ITAT decision in the case of M/s. Gemplus India Pvt. Ltd., (ITA No. 352/bang/2009) Under these circumstances, it is difficult to accept proposition of the assessee that the cost of the services rendered is at arm's length. In absence of all these details, I considered value of these service at NIL and accordingly there is an upward adjustment of ₹ 1,17,45,602/-. 06. Tested Party: Without prejudice to the upward adjustment as proposed in the order, issue of selecting Walter AG as a tested party was also considered independently. It was brought to the notice of the assessee that tested party should be least complex entity. Walter AG is having unique expertise in manufacturing and trading in tools for metalworking and mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the TPO or his Panel. Without this basic information, appropriate verification of the benchmarking analysis carried out by the assessee using Walter AG as the tested party cannot be carried out. Moreover, it would have been apt if the assessee also would have submitted a TPSR of Walter AG in connection with the benchmarking done in respect of management service fees. All this information has not been submitted. 3.2.3.7 In view of the above discussion, we see no infirmity in the action of the TPO in rejecting the benchmarking analysis of the assessee related to MSF, using Walter AG as the tested party, since Walter AG is not the least complex party and also because reliable data of Walter AG and the comaparables selected by the assessee are not available. Accordingly, the first issue raised by the assessee in this objection is rejected. 3.2.4.3 The nature of service to be rendered and the fees to be charged for the services have been laid out in the said MS.F. Agreement entered into by the assessee with Walter AG, effective from 1/1/2012. It is observed that in this agreement (Appendix 1 to Schedule 1 of this agreement), the services to be rendered are very general in nature, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's own case for the A.Y. 2012-13 which was submitted on page No. 221 to 235 of the paper book. The ld. AR took us through the Hon'ble ITAT's order for the A.Y. 2012-13. The ld. AR vehemently argued that the TPO's findings that no details were filed is actually incorrect. The ld. AR invited our attention to the page No. 327 to 367 of the paper book. The page No. 351 to 367 is the agreement for MSF. Page No. 327 is the covering letter, page No. 333 to 335 is a Chart explaining the nature of services provided by the AE. The ld. AR also submitted that the TPO has not benchmarked the MSF services using any of the methods prescribed by the Act. Therefore, determination of value of MSF transaction at NIL is bad in law. For this proposition the ld. AR relied on the decision of Hon'ble ITAT in ITA No. 150/PUN/2017 for the A.Y. 2011-12 INA Bearings India Pvt. Ltd., 6. The ld. Departmental Representative (ld. DR) for the Revenue supported the order of the TPO and DRP. The ld. DR specifically invited our attention to the fact that the decision of Hon'ble ITAT in assessee's own case for A.Y. 2012-13 is distinguishable on facts. The ld. DR submitted that for A.Y. 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fashion, the assessee has explained the services provided, there are corresponding emails to explain the services. The ld. DR has not pointed out any discrepancy in the said Chart. Therefore, after carefully analysing the Charts and Emails, one can arrive at the conclusion that services were provided to the assessee by the AE. 7.3. Once the question related to services have been answered, the second question is determination of ALP. The Hon'ble ITAT in assessee's own case for A.Y. 2012-13, in the identical facts and situations has held the transaction of payment of management services fee at ALP, following the earlier years decisions. The factual assertion could not be controverted by the ld. DR. 7.4. For relevant issue discussed by the Co-ordinate Bench in assessee's own case for the A.Y. 2012-13 is placed at page No. 221 of the paper book and the relevant portion being at para No. 9 to 10 reproduced herein below for ready reference: "9. We have heard both the sides and gone through the relevant material on record. It is seen from a copy of Management services Agreement between Sanedvik AB (the providing party) and the assessee(the receiving party), which is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
