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TMI Blog2023 (4) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... most appropriate method. While rejecting objection raised by the Appellant, the DRP had concluded that the Appellant has failed to establish, both, the rendition of all the intra-group services the as well as the benefit derived by the Appellant from the same. Thus, there is disconnect in the reason given by the TPO for determining ALP of Intra-Group Services at 'Nil' and the reasons given by the DRP for rejecting the objections. TPO opposed admission of the additional evidence filed by the Appellant before DRP - While rejecting objection raised by the Appellant, the DRP had concluded that the Appellant has failed to establish, both, the rendition of all the intra-group services the as well as the benefit derived by the Appellant from the same. Thus, there is disconnect in the reason given by the TPO for determining ALP of Intra-Group Services at 'Nil' and the reasons given by the DRP for rejecting the objections As regards, the payment towards distribution rights, the Appellant has place on record the Agreement for Grant of Distribution Rights. The aforesaid agreement entitled the Appellant to receive commission from AEs in respect direct sales made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Distribution rights, payment for IT Support Services payment for marketing consulting and support services as Nil. In doing so the AO has erred in: 1.1) Considering payment of distribution rights as intra group services. 1.2) Not appreciating that the Appellant has submitted various evidences in relation to provision of intra group services, the economic and commercial benefit derived by it and back-up supporting workings and therefore, the determination of ALP of the said transactions as Nil was not justified. The Appellant prays that the book value of International Transactions be accepted to be the ALP of the said transaction and the methodology adopted by the Appellant should be accepted deleting the adjustment made by the Ld. A.O. 3. Brief facts of the case are that the Appellant-Company was incorporated in 2003 as wholly owned subsidiary of Hafale Holding GmBH. The Appellant engaged in the business of trading in fitting, architecture hardware, access control system and ancillary products, both, in and outside India. The Appellant export products outside India and also imports certain finished goods from other third parties for the purpose of resale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Payment of INR 77,06,608/- made to Hafale GmBH Co. K.G. as Marketing Consultancy Fee for Marketing Consultancy Support Services, and (c) payment of INR 45,94,512/- made to Hafale GmBH Co. K.G. towards IT Consulting Support Services. Rejecting the TNMM adopted by the Appellant as the most appropriate method, the TPO issued show cause notice, dated 18.10.2017. According to the TPO, no reply was received from the Appellant, and therefore, TPO determined the ALP of the aforesaid three transactions as 'Nil' holding that the Appellant has failed to satisfy the need/benefit of the intra-group services, and rendition thereof. The TPO, thus, made transfer pricing addition of INR 3,70,91,170/- vide order dated 25.10.2017. However, in the Draft Assessment Order, dated 27.12.2017, transfer pricing adjustment of INR 2,47,90,050/- was proposed. During the course of hearing it was stated by the Ld. Authorised Representatives that the aforesaid error has been corrected. Nothing has been placed on record in support of the same. However, since in the grounds of appeal, the Appellant has challenged the transfer pricing addition of INR 2,47,90,050/-, we take it that the error has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RP. Since some of the documents/evidence provided by the Appellant to DRP was in the nature of additional evidence, the TPO was called upon by the DRP to submit a Remand Report on the additional evidences. The TPO filed Remand Report, dated 27.08.2018. In the Remand Report, the TPO admitted that during the hearing held on 18.10.2017, the Appellant was asked to produce details in respect of intra group services by 27.10.2017. However, since the Appellant failed to furnish the same by 27.10.2017, the transfer pricing addition was proposed on the basis of material on record. According to the TPO, sufficient time was granted to the Appellant and therefore, he objected to admission of the additional evidence. However, without prejudice to the aforesaid objections, the TPO provided following comments in the Remand Report, dated 27.08.2018 in relation to the additional evidences: 1. Marketing Consultancy and Support Services: I have gone through the additional evidences submitted by the assessee in this regard. It is observed that there is central server for marketing. But it is not established that what is tangible and direct benefit received by assessee from AE. The services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO. Thereafter, on 16.10.2017, another submission was filed by the Appellant. On 18.10.2017, notice was issued to the Appellant asking for information in respect of international transaction of payment towards distribution rights, IT Support Services, and Marketing Support Services. The aforesaid notice was sent to the e-mail of the authorized representative of the Appellant and in effect provided only two normal working days to furnish the required details/documents as there were festival, holidays and Sunday in between. Therefore, the Ld. Authorised Representative for the Appellant requested for hearing after three to four days. However, the TPO did not consider the aforesaid request and passed the transfer pricing order on 25.10.2017. The Learned Authorised Representative for Appellant submitted that even before DRP, the Appellant had contended that methodology adopted by the Appellant should be accepted. However, the DRP also rejected the objection without assigning any reasons. 9.6. In response the submission of the Ld. Departmental Representative was that the Appellant had not provided any reasoning for adopting aggregation approach for clubbing the transactions. She s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thod adopted by assessee for computation of arm's length price of IT Support Services, Marketing support services and payment of distribution rights In Transfer Pricing Study for FY 2013-14, the assessee had aggregated the international transactions pertaining to payment of distribution rights, commission income, payment of IT support services, marketing consultancy support services, sale of diaries, logistic charges and payment of dividend. The assessee has compared the net margin earned with net margins of third party comparable companies and evaluated the arm's length price for these transactions. The TPO has erred in disregarding the aggregation of abovementioned international transactions with other international transactions entered into by the assessee with its AES. The TPO further erred in rejecting TNMM as most appropriate method for these transactions and computing Nil'arm's length price for these transactions without mentioning any method as most appropriate method for computation of arm's length price. It may be noted that the TPO has accepted the TP methodology adopted by the assessee for other international transactions i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed position that while computing the ALP at 'Nil' for Intra-Group Services, the TPO did not take into any account the documents/details furnished by the Appellant. The Appellant had also filed additional evidence to support need/benefit/rendition of Intra-Group Services. In relation to IT Consultancy Support Services, table summarizing computation of total cost and per hour cost incurred by Hafele Germany, Certificate of Statutory auditors of Hafele Germany certifying actual personnel costs incurred, Bifurcation of payments and copy of invoices and Sample copy of tickets, emails and SS regarding IT services. In relation to Marketing Consultancy Support Services, the Appellant filed Summary of cost of allocation working, Summary of actual costs incurred by AE, Copy of invoice, and Marketing strategy Manual. In relation to Distribution Rights the Appellant filed Agreement of grant of Distribution Rights of Hafele Products in India, Summary of commission income earned along with copy of sample invoices, and Bifurcation of payment of Distribution Rights along with invoices and its reconciliation. 9.14. The TPO opposed admission of the additional evidence filed by the App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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