9911796707
TMI Blog2022 (10) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... ributed in Indian market. The royalty payments were also made in terms of the agreement. The claim of the assessee that by paying the royalty, the assessee gets a right to use trademark and knowhow to market the products in India which in term increases its customer base. The assessee also claimed that it s established with the primary object of distribution of modified starch in Indian market. Therefore, it is never to be a manufacturer. Assessee benchmarked all these above three transactions on an aggregate basis using transactional net margin method as the most appropriate method. The claim of the assessee is that net operating margin of the assessee is higher than the comparable companies and therefore it is at arm s length. TPO has determined ALP of royalty at ₹ Nil. The assessee claims that the MNE group has a global royalty policy which is common across all regions. The agreement entered into is also containing standard clauses. Picking one of the standard clause from that agreement cannot be used against the assessee. The royalty payment by using trademark and patent is only for the sale of the product. As assessee is engaged in FMCG food sector, the assessee wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent assessment year. Further, the Appellant submits that has no objection for the withdrawal of the set-off in respect of aforesaid unabsorbed depreciation allowed in A.Y. 2013-14, if allowed in A.Y. 2012-13. Transfer Pricing: 1. The learned Assessing Officer/ Transfer Pricing Officer ( TPO ) under the directions of the Hon ble Dispute Resolution Panel (DRP), erred in making an upward adjustment of ₹ 1,52,62,664/- to the total income of the Appellant, under section 92CA(3) of the Act in respect of the various international transactions entered into by it with its Associated Enterprises (AEs ) during the year ended 31 March 2012. 2. The learned Assessing Officer/TPO, while making the aforesaid adjustment of ₹ 1,52,62,664/- under the directions of the Hon ble DRP, erred in considering the arm s length price of the international transaction of payment of regional service fees and headquarters fees at NIL value without providing any cogent reasons and not appreciating the facts of the case in their proper perspective. 3. The learned Assessing Officer/TPO erred in not appreciating the detailed economic analysis and benchmarking analysis conducted by the AEs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d TPO, on reference held that a. payment of regional fees of ₹ 71,60,700/- is the services claimed to have been received fall under passive association benefits. The assessee is not the manufacturer hence, R D facilities cannot be a requirement for the assessee. However, the assessee has sharing expenses of the AE under this head. The benefit received for other services are also not clearly laid out, no methodology for determination of markup has been furnished by the assessee and the basis for allocation key is not properly justified hence, ALP of the same is determined at ₹ Nil. b. With respect to payment of management fees of ₹ 18,60,449/- the learned Transfer Pricing Officer determined ALP at ₹ Nil in absence of any concrete evidence of benefit received was shown. c. With respect to the payment of royalty for use of intangibles amounting to ₹ 62,41,515/- paid to Corn Products Limited. Learned TPO noted that royalty is agreed percentage of net sales ranging from 1-4 percent depending upon the categorization of products. Assessing Officer noted that assessee has purchased the goods from associated enterprise and sales in its open market, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having certain technical, industrial, commercial and scientific information of value and therefore, the royalty paid by the assessee cannot be determined at ₹ Nil. It is also paid for using its intangibles on the products distributed in Indian market. It was also stated that the learned TPO rejected the claim only for the reason that assessee is not a manufacturer. 09. The learned DR vehemently supported the order of the learned TPO and direction of the learned DRP. 010. We have carefully considered the rival contentions as well as the orders of the lower authorities. The assessee is in the business of importing modified food starch from the affiliate companies and selling the same in Indian market. It caters to the FMCG food sector and precisely processed food segments. Assessee has paid payment of regional fees of ₹ 71,60,700/- to its Singapore associated enterprise as per the agreement, it was stated that the company has only 10 individuals to manage its India operation and out of that 5 employees were involved in food sales, 1 employee in industrial starch sales and 1 employee in finance and administration etc showing that it did not have adequate human resou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned TPO has determined ALP of royalty at ₹ Nil. The assessee claims that the MNE group has a global royalty policy which is common across all regions. The agreement entered into is also containing standard clauses. Picking one of the standard clause from that agreement cannot be used against the assessee. The royalty payment by using trademark and patent is only for the sale of the product. As assessee is engaged in FMCG food sector, the assessee would require know how about the product information, product specification, application and formulation for its customers. Assessee also stated that, without trademark the assessee would not earn such a markup. 013. The learned TPO has determined the ALP of royalty and other two IGS at ₹Nil. As of these three international transactions have not been benchmarked properly, we set aside them back to file of the learned TPO with direction to the assessee to demonstrate the requisite test for intra group services and as well as the need and benefit of the use of trademark and patent involved in payment of royalty. The learned TPO may verify the evidence documentation produced by the assessee and then determined arm s le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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