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TMI Blog2025 (3) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... The assets which are used for demonstration purposes were capitalized by the assessee. The transaction is closely inter-linked and aggregated with the trading segment of the assessee for the purpose of determination of ALP, we observed that assessee has also claimed depreciation on these assets on the assessee's trading margin was determined after claim of the depreciation on abovesaid assets which are used for demonstration purposes. Further it is brought to our notice that the TPO has accepted the ALP of the trading segments which is at arms length. Since the assessee has capitalized the same traded assets, in our considered view, the ALP of the purchase of fixed assets to be determined based on the value of input cost of traded goods which assessee has traded during the year and shown relevant profits. The assessee has submitted a comparative purchase chart of traded and the assets utilized for demonstration purposes which was already reproduced in the submissions of the ld. AR. Thus, remit this issue back to the file of AO/TPO with a direction to verify the cost of assets utilised for demonstration purposes and also the cost of input of traded goods. We direct TPO to redo the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpediency wisdom of the Assessee for availing such IGS. 2.5. Rejecting the corroborative search for IGS submitted by way of additional evidence dated May 28, 2021, for APAC and America region to substantiate adherence to the arm's length principle. 3. That on the facts and circumstances of the case and in law, the Ld. AO/ Hon'ble DRP / Ld. TPO erred in making an adjustment to the extent of INR 9,18,13,926 in respect of international transaction pertaining to purchase of fixed assets alleging that the same to be not at arm's length and erred in fact and law by: 3.1. Not appreciating the back-up documentary evidences, including documents pertaining to the customs valuation of fixed assets and price comparison of similar assets in trading business, provided by the Assessee during the course of the assessment proceedings evidencing the transaction to be at ALP. 3.2. Not appreciating the fact that since the subject transaction is closely linked to the main business activity of the Assessee, an aggregation approach using TNMM having NPM as the PLI is the most appropriate transfer pricing methodology for benchmarking the subject transaction. 3.3. Applying Other Metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained by the assessee or challenged the commercial decision of the assessee company not incurring the purported services. He has only tried to see whatever services actually received to be able to determine the ALP. Therefore, assessee has failed to convince that these services were actually availed. By relying on various decisions, TPO has rejected the submissions of the assessee. He also rejected the plea of the assessee that other method under section 92C and Rule 10B the same cannot be applied in absence of critical information. Accordingly, he proceeded to treat the total payment of Rs. 10.81 crores as ALP adjustment and determined the ALP at Rs. nil. 4. Aggrieved with the above order, assessee preferred an appeal before the DRP. Ld. DRP, after considering the submissions of the assessee, remand report from TPO and assessee's response to remand report, observed that the adjustment on account of intra-group services has been the subject matter in the case of the assessee for AYs 2011-12 to 2016-17 wherein the ld. DRP upheld the findings and adjustments made in the draft assessments for AYs 2012-13 to 2016-17 and the ld. CIT (A) also upheld the AO's order in AY 2011-12. Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others Revenue *(i.e. Revenue of India/Group Revenue) - (i.e. Head Court of India/Group Head Count) 1.5. The Appellant had submitted to the Ld. TPO the detailed documentation explaining the mode, manner and utilisation of the services along with detailed necessary documentation to substantiate the rendition of such services (refer pg. no. 112 to 758 of the paperbook volume 1). 1.6. The Appellant submits that invoices with regard to the services rendered were filed before the Ld. TPO/DRP (refer Page no 822-835 paperbook volume 2). The Hon'ble Bench would appreciate that monthly management cross charges and the markup of 5% charged by the AE is reflected in these invoices. Further, a complete break-up of the cross charges with respect to each Department has also been stated in these invoices. 1.7. In addition to the above, the Appellant has submitted that it had provided the cost break-up and the documentary evidence to demonstrate the need-benefit test before the TPO and the DRP through various submissions which are available from Page no 3- 932 of the paperbook. 1.8. In the DRP proceedings, the Ld. TPO/ AO has reiterated its stand that the documentary evidence subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders for AY 2018-19 and AY 2019-20 passed by higher authorities (i.e. !TAT and High court) in case of Bio-Rad USA and Bio-Rad Singapore (Annexure 1 - Page no 6 to 23 of this submission), Bio-Rad USA (Annexure 2 - Page no. 24 - 52 of this submission) and High court order of Bio-Rad Singapore (Annexure 3 - Page no. 53 to 56 of this submission). 1.12. Thus, in these orders, the factum of services being rendered is duly established. Though, the services rendered by the AE have been held not chargeable to tax due to the non-satisfaction of the make-available test prescribed in the relevant DTAA. 1.13. Prayer: In view of the submissions above, it is prayed that the conclusion of the Ld. TPO that no services have been rendered is liable to be rejected. Consequently, the determination of the arm's length price of the transaction as NIL by applying Other Method is unwarranted. Hence, the adjustment proposed in relation to the receipt of intra group services should not be made. 7. On the other hand, ld. DR of the Revenue brought to our notice page 2 of the TPO order and submitted that assessee has not submitted any evidence to support the services availed by it from its AEs on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies operating in India would fall within the expression 'fees for technical services' as appearing in article 13(4)(c) of the DTAA read with section 9(1)(vii) of the said Act. XXXXX 11. The Tribunal also noted the process by which the transaction takes place. It has been pointed out that the originating insurer in India would contact J.B. Bodal M.B. Boda for placing identified risks/ class of risks with international reinsurers. J.B. Boda, in turn, would contact one or more international firm(s) of reinsurance broker(s) like the assessee for competitive proposals from the international reinsurer. Then, the international reinsurance brokers like the assessee would contact other primary brokers and various syndicates in the Lloyds market for competitive proposals. Based on the various offers or proposals given by the international reinsurance brokers, like the assessee, to J.B. Boda, the latter would present various options to the originating insurer in India, which would take a final decision in the matter. Based on the decision of the originating insurer in India, the policy terms would then be agreed upon and the risk would be placed with the international reinsurer. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the recipient of the services, so that the recipient also acquires technical knowledge, experience, skill, know -how or processes so as to render such technical services. Once all such technology is made available it is open to the recipient of the service to make use of the said technology. The tax is not dependent on the use of the technology by the recipient. The recipient after receiving of technology may use may not use the technology. It has no bearing on the taxability aspect is concerned. When the technical service is provided, that technical service is to be made use of by the recipient of the service in further conduct of his business. Merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilizes for rendering technical services. The crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the technology which the service provider had used. Therefore, unless the service provider makes available his technical knowledge, experience, skill, know-how or proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; only if the twin test of rendering services and making technical knowledge available at the same time is satisfied." 24. In light of the aforementioned judicial decisions, we are of the considered view that the service recipient of the assessee is unable to make use of the said technology only by itself in its business or for its own benefit without recourse to the assessee year after year. 25. The Revenue has relied upon the decision in the case of Shell India Markets (P.) Ltd.(342 ITR 223. This decision was also used in the case of Linklaters LLP vs Deputy Commissioner of Income tax [2017] 79 taxmann.com 12 and while deciding the appeal of Linklaters LLP(supra), the co-ordinate bench at Mumbai has observed as under: "14 Similarly reliance placed by AO on another judgement of AAR in the case of Perfetti Ben case (supra) is misconceived since this ruling has been set aside by Hon'ble Delhi High Court in the judgement reported at 52 Taxmann.com 161. Similarly, reliance on the judgement of Shell India Markets (P.) Ltd., In re [2012] 342 ITR 223/205 Taxman288/l8 taxmann.com 46 (AAR - New Delhi) is also of no use since in this case also earlier ruling in the case of Perfet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences. After considering the submissions of the assessee, TPO observed that assessee has provided copies of invoices raised by its AEs, there is no detail about the cost of purchase of these assets by the AEs and the time period for which they have been used by the AEs and there is no valuation report from an independent valuer. The assessee was asked to submit relevant documents as prescribed under section 92B and Rule 10D. In this regard, assessee has submitted as under :- "In relation to this, we would like to bring to your kind notice that during the subject assessment year, Bio-Rad India purchased specialized biomedical equipments, reagents, fine chemicals and related equipments from its AEs for the purpose of resale to third party Indian customers as part of its business operations. As mentioned above, based on Bio-Rad India's business model, which is similar to industry trend, Bio-Rad India deployed some of the equipments procured from the AEs on the customer's site. Bio-Rad India provides these equipment free of cost with the understanding that the customers would purchase the reagent / fine chemicals for the equipment from Bio Rad India only, since any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus, he proceeded to dismiss the claim of the assessee and determined the ALP at Rs. nil and made the TP adjustment of Rs17,03,82,112/- i.e. total purchase price of the fixed assets. 13. Aggrieved with the above order, assessee preferred objections before the ld. DRP. Assessee has submitted as under :- "(i). It is stated that assessee failed to collect Form F for certain stock transfers undertaken during F. Y. 2009-10. (ii) In this regard, assessee created a provision for sales tax liability amounting to INR 9,670,803 during the F.Y. 2012-13 and the same was added in the profit for computation of total income. (iii) The reversal was credited to the profit and loss by way of reducing expense account. (iv) The journal entry does not show any reversal of Form F liability as claimed by the assessee. (v) The assessee has taken alternative plea that if the claim of the assessee is taken as interest on VAT, the same should be allowed u/s 37 of the Income Tax Act 1961. (vi) The journal entry shown by the assessee does not explain the writing back of sales tax liability. As per details provided to the assessing officer, assessee company had made payment towards interest on VAT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the AE Purchase value of assets used for (Amount in INR) Category A : Sold to third-part customers* (Trading business) Category B : Reagent business (Capital assets) Invoice Number Unit Price Page no. (refer Annexure 1 of the synopsis) Invoice Number Unit Price Page No. (refer Paper book) ID-Incubator 37 SI Bio-Rad France 93124168 123875 1 93124307 123875 786 Variant II System Bio-Rad Laboratories Inc., USA (Bio-Rad USA) 901350918 1955757 2 901624932 1955757 789 901558517 1955757 3 901782177 1921795 790 901703877 1955757 4 D20 Haemoglobin Testing System Bio-Rad France CRI/37018230 829,009 5-6 CRI/36064026 829,009 795 CRI/36072781 829 7 CRI/36147511 829 8 CRI/3616144 829,009 798 CRI/36165020 829 9 Evolis W/O Screen - Printer Bio-Rad France CRI/36132723 2365822 10 Cri/37005389 2365822 804 *The value of fixed assets purchased from AE's and sold to third party customers are reported as "Purchases" in the Form 3CEB. Prayer : It is therefore prayed that the addition made by the Ld. TPO and upheld by the DRP is liable to be deleted as it can clearly be seen from the table above that the unit pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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