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TMI Blog2023 (4) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the AO has erred in making a reference to the Transfer Pricing Officer ("TPO") by not appreciating that such a reference suffers from jurisdictional error as no reasons have been recorded in the assessment order based on which he reached the conclusion that it was 'necessary or expedient' to refer the matter to the TPO for computation of the arm's length price ("ALP"), as is required under Section 92CA(1) of the Income Tax Act, 1961 ("Act"). 4.That on the facts and in the circumstances of the case and in law, the AO / DRP / TPO have erred in making an adjustment of INR 70,30,77,902 on account of international transaction of receipt of intra-group services from Associated Enterprises ("AEs") alleging that it does not satisfy the arm's length principle and the Appellant has not been able to demonstrate the need, benefit and rendition of such services; and in doing so have grossly erred in: 4.1. Not appreciating that the intra-group services received by the Appellant were intrinsically linked to the business operations/ segments of the Appellant, i.e. Self- Adhesive Materials ("SAM") and Retail Information & Branding Solutions ("RBIS"); 4.2. Not appre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the Act. That the above grounds are independent and without prejudice to each other." 3. Brief facts of the case are that, the Assessee Company is a subsidiary of Avery Dennision (India) Pvt. Ltd. Corporation, USA and is engaged in manufacturing and trading of pressure sensitive adhesive material, selfadhesive paper, self-adhesive film, tape, sheets, tags and labels. During the Assessment Year i.e. 2016-17, the assessee categorized its business into two primary segments i.e. Self Adhesive Material (SAM) and Retail Branding and Information Solutions (RBIS), the details of the same are as under:- SAM Segment 1. Marketing Support Services. 2. Operations, Logistics and Technical Support Services. 3. Labour Law & Employee Relations Services 4. Finance, Accounting, Administration and Management Information Systems Services. 5. Corporate Support Centre (CSC) Services. RBIS Segment 6. VIPS and Ticketing Hub Services 7. GVP Services 8. CSC Services 4. During the course of transfer proceedings, TPO computed the Arm's Length Price of payment of Intra-Group Service Fee to be at Rs. 11,50,23,572/- as against the payment made by the assessee to it's A.E of Rs. 81,81,01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these services are intrinsically linked to the core business operations of the assessee and cannot be analysed in isolation. The relevant extract from the ruling of the Co-ordinate bench of ITAT Delhi in Assessee's own case for AY 2007-08 is as under: "20. On perusal of the TP Study, we observe that each transaction are interlinked with each other. We notice that the assessee has treated the agreement as a whole, and has applied TNMM, in respect of the services received to arrive at the ALP. It is observed that the Id. CIT(A) accepted the contentions of the assessee that; intra group services were received by the assessee as per the agreement, and that these are critical, and linked to the core business operations of the assessee. However, the Ld. CIT(A) held that certain services specified in the agreement did not result in any benefit to the assessee. 21. All the services received are part of composite contracts/agreements which in our view cannot be unbundled... 23. From the above discussion we are of the considered opinion that the agreement is an intrinsic one and that it is wrong to split the same and hold that some services are at arm's length and some services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable of any mark-up. Accordingly, these can be considered to be at arm's length. 30. We have perused the OECD guidelines which has recommend an aggregate benchmarking approach in situation, where the underline transactions are closely linked to the core business operations. Principle of aggregation, is a well-established rule in transfer pricing analysis. This principle seeks to combine all closely linked transactions wherein arm's length price can be determined for a number of transactions taken together... 31. The assessee is predominantly a manufacturer and the services received by the assessee from its AEs are intrinsically linked to the core business operations of the assessee, in the following form: a. Based on the support provided by the AEs in terms of marketing services and strategic services, the assessee is able to achieve higher sales, both in terms of higher sales quantity and sales prices. b. Based on the support provided by the assessee in terms of operations and logistics the assessee has been able to procure raw materials at lower costs. Accordingly, the impact of such support services is received by the assessee in the form of lower direct cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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