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TMI Blog2025 (2) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... gument. When the basic fact as to whether any services has actually been received by the assessee from its AE, is not established, these arguments would have no applicability. These arguments do have force, provided the factum of rendition of services by the AE is proved by the assessee with documentary evidences. We are also of the firm opinion that so far as the application of Benefit test by the lower authorities is concerned, we are in agreement with the submissions made by the counsel for the assessee and hold that merely because the assessee has failed to prove any benefit from the services received the disallowances cannot be made. Therefore, the assessee is given one more opportunity to prove his case. Payments made to secondment employees - Again the finding of the fact as recorded by the lower authorities is that the assessee has failed to establish that documentary evidences of the assessee was actually the legal/economic owner of these employees. For this issue also we remit the matter to the file of ld AO for examining afresh in accordance with law. AO has granted lesser refund to the assessee - We direct the AO to compute the refund amount once again in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pies of the following information/ documents were filed by the Assessee. * Signed financial statement for financial year ('FY') 2019-20 * Transfer Pricing Documentation ('TP Report/ TP Documentation') for FY 2019-20 * Relevant agreements in respect of international transactions * Computation of total income for FY 2019-20 Tax return for FY 2019-20 * Tax audit report for FY 2019-20 * Accountant's Report in Form 3CEB for FY 2019-20; and * Assessee's response to the show cause notice ('SCN') issued by the Ld. TPO and reply to various queries raised during the assessment proceedings. 2.2 The Learned TPO passed the TP order under section 92CA (3) of the Act dated on 14 July 2023 ('TP Order') proposing an adjustment of INR 130,495,777 to the transfer price of the international transactions undertaken by the Assessee with its AEs during the AY 2020-21. In the said TP order, the Learned TPO has proposed the following adjustments: Sl. No. Nature of proposed TP adjustment Amount in INR 1 Central procurement, commissioning, professional, recruitment and training cha es 124,866,708 2 Warranty cost Total adjustment u/s 92CA 130,49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d consequential benefits accrued to the Assessee. ii. These expenses are incurred at a group level and the Indian entity is made to contribute as a share. There is no proof of any procurement actually carried out by the AE to the Taxpayer. No supporting document regarding central procurement services has been provided by the taxpayer. With regards to other services, the taxpayer has submitted certain invoices however these invoices are not sufficient to prove the actual rendering of the services. iii. The taxpayer has submitted the copies of relevant agreements with the AEs. However, service agreements do not mention the exact nature of services provided by the AEs. iv. The existing facts and circumstances amply show that there is nothing on record to prove these have actually been rendered. v. Even if it is assumed that the Intra Group Services to the Taxpayer were rendered by the AE, they are basically to promote group interest and group standards. If the contentions of the Taxpayer were to be accepted, as a stakeholder, the services rendered are in the nature of stake holder's activities. There would be in an Arm's Length situation no requirement for separate pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -ITAT-2019(Mum)-TP] (21 June 2019)- Mumbai bench of Hon'ble ITAT held that it is imperative to demonstrate rendition of services, relying on the OECD guidelines. 3. Lintas India Pvt. Ltd. [TS-890-ITAT-2022 (Mum)-TP] (09-12-2022)- Mumbai bench of Hon'ble ITAT held the need for benefit-rendition test for IGS to be established every year. 4. International Flavors Fragrances India Pvt. Ltd. [TS-251-ITAT-2023 (CHNY)-TP] (27 April 2023)- Chennai bench of Hon'ble Tribunal upheld the Nil ALP determination for management and marketing service fees citing failure to demonstrate receipt of such services. 5. Ingredion India Pvt Ltd [TS-255-ITAT-2023(Mum)-TP] (28 April 2023)- Mumbai bench of Hon'ble 3.1 With respect to the second issue i.e. payments made to secondment employees, the ld. TPO while denying the benefits has observed as under:- a. On verification of employment contract, it is seen that it was entered between seconded employee with the assessee company. The relevant content of the contract, indicating the same, is represented below: 1. Employment This contract is based on a foreign assignment from your Home Country Unit (HCU). Therefore special regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the seconder as an administrative convenience. There is no deduction of tax at the time of remittance made to the seconder. It is assessee's responsibility is to deduct tax u/s 195 for payment of FTS to the seconder. c. The Secondment fees are payable by the assessee company to a non- resident in respect of services utilized in a business or profession carried on by such person in India or for the purpose of making or earning income from any source in India. India being a source country in respect of the secondment fees being paid abroad has a right to taxation at source from the said payment at the rate as given in IT Act, 1961 or as per DTAA whichever is more beneficial to the assessee. This taxation is on gross basis. The assessee in this case by not deducting TDS at said rate as applicable to Fees for Technical services has caused a loss of this Revenue to the Government. Since the assessee was liable to deduct TDS on secondment fees treating it as Fees for Technical services, and as the same has not been done. the claim of expenses made by the assessee on account of secondment salary at Rs. 4,45,16,242/- is proposed to be disallowed u/s 40(a)(i) of the IT Act, 1961. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Roca Bathroom. However, when the bench asked the assessee as to whether the assessee is pressing this ground, the ld. Senior counsel Mr. Suryanarayana candidly submitted that he is not pressing this limitation ground. He requested the bench to decide the matter on merits. Therefore, we are proceeding to decide the matter on merits and dismissing the limitation ground as not pressed. 3.9 In ground Nos.4 to 9, the assessee is challenging the order of TPO/AO/DRP with respect to the disallowance of payments made to its AE. The assessee counsel has made following submissions: (a) When the assessee has computed the TP studies at entity level, then there is no loss to revenue by computing the ALP at unit level. In other words, the assessee's counsel is contending that when the assessee itself has made adjustment by applying aggregation principle, then the TPO has erred in computing the ALP by applying segregating principle. (b) When the AE of the assessee had already paid taxes, qua the payments received by them from Indian entity, then the TPO and the AO has erred in presuming that assessee has not received any services from the AE. (c) Benefit test as applied by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not established, these arguments would have no applicability. These arguments do have force, provided the factum of rendition of services by the AE is proved by the assessee with documentary evidences. We are also of the firm opinion that so far as the application of Benefit test by the lower authorities is concerned, we are in agreement with the submissions made by the counsel for the assessee and hold that merely because the assessee has failed to prove any benefit from the services received the disallowances cannot be made. Therefore, the assessee is given one more opportunity to prove his case. 5.2 So far as the payments made to secondment employees, again the finding of the fact as recorded by the lower authorities is that the assessee has failed to establish that documentary evidences of the assessee was actually the legal/economic owner of these employees. For this issue also we remit the matter to the file of ld AO for examining afresh in accordance with law, who after providing reasonable opportunity of being heard to the assessee. These observations will take care of the grounds of assessee running from ground Nos.10 to 14. 5.3 In ground No.15, the assessee has contend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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