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TMI Blog2023 (6) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... eptable at arm s length price. Huge details of intra-group services have been furnished by the assessee. Respectfully following the precedent from the ITAT and Hon ble High Court, we uphold the contention of the assessee and delete the TP adjustment. - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER For the ASSESSEE : Shri Vishal Kalora, Advocate, Shri S.S. Tomar, Advocate, Shri Ankit Sahani, Advocate, Shri Yishu Goel, AR For the REVENUE : Shri R.D. Burman, CIT DR ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER: These appeals are preferred by the assessee against the orders of Assessing Officer passed pursuant to the directions of the ld. CIT (A)/ Dispute Resolution Panel (DRP) for the concerned assessment years. 2. The grounds of appeal in both the assessments years taken by the assessee read as under :- ITA No. 7960/Del/2019 (AY 2012-13) 1. That on facts and circumstances of the case and in law, the AO erred in assessing the income of the Appellant under the normal provisions of the Act at INR 270,517,350 in pursuance to the directions of the Dispute Resolution Panel ( DRP ), as against the returned income of INR 40,245,490 returned. 2. That on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror 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 erred in making an adjustment of INR 47,01,46,362 on account of international transaction of receipt of intra-group services with its 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 of the Appellant for its two business segments i.e. Self Adhesive Materials ( SAM ) and Retail Information Branding Solutions ( RBIS ); 4.2 Not appreciating the business model of the Appellant and rejecting the Appellant s economic analysis of benchmarking closely interlinked transactions using Transactional Net Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peration. During the year under assessment, the taxpayer returned international transactions entered into with its AE in Form No. 3CEB as under:- S. No. Description of the transactions Amount (Rs.) 1 Purchase of material 1,029,235,500 2 Purchase of Traded material 124,206,127 3 Receipt of services 282,046,989 4 Reimbursement of expenses paid 16,218,343 5 Reimbursement of expenses received 32,086,979 6 Rendering of services 48,809,183 7 Sale of material 406,287,680 8 Packing material 58,168 9 Purchase of stores, spares 3,675,216 10 Computer software and licence fee paid 57,127,321 11 Purchase of fixed assets 9,068,947 12 Repair Maintenance 3,718,586 13 Selling commission paid 182,539,808 14 Rebate 93,719,213 6. Originally, except international transactions qua intra group services, all other international transactions were accepted to be at arm s length. The TPO originally proposed an adjustment of Rs. 28,20,46,989/- in relation to intra group services. However, later, he accepted another amount of Rs. 5,17,75,129/- in intra-group services at arm s length price by relying upon the orders passed by the ld. DRP in AYs 2010-11 2011-12. Hence, the proposed adjustment now was Rs. 23,02,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed part of the same and treated part of the same not allowable. On similar facts, ITAT has deleted the adjustment for several years and the Revenue s appeal against them has been dismissed by Hon ble High Court. The matter came before the Tribunal originally in AY 2009-10 in ITA No. 4720/Del/2017 wherein ITAT has held as under:- 19. Before us, the ld. AR submitted that the ITAT, in the Assessee s own case for AY 2007-08 and AY 2008-09, after understanding the nature of the Assessee's business operations and the nature of various intra-group services received by the Assessee held that there existed a direct, nexus between the intra-group services received by the Assessee vis-a-vis the revenue earned/cost incurred by the assessee. 20. Hence, the Co-ordinate Bench of ITAT held that 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities. 22. The Co-ordinate bench of ITAT in the Assessee s case for AY 2008-09 held that OECD guidelines end an aggregated benchmarking approach in a situation, where the underline transactions are closely linked to the core business operations. The relevant extracts in this regard are reproduced below: 28. We are of the considered opinion that, with regard to PSM and RIS segments, the mark-up charged by the AEs is within the +/-5% range, allowed under second proviso to section 92C of the Indian Income Tax Act, 1961. Accordingly, these services can be considered to be at arm's length; and with regard to of GVP services, VIPFS services and Ticketing Hub Services, the service charges paid by the assessee, represents the actual cost incurred by the AEs, without applicable 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 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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