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2018 (10) TMI 1982 - ITAT DELHITP Adjustment - determining the arm's length adjustment to the Assessee's international transactions from Associated Enterprises ("AEs") - payment of intra group services/management fee - HELD THAT:- When we examine the reasons given by ld. TPO for declining the contentions of the taxpayer for rendering such services by the AE and taking benefit therefrom by the taxpayer in the light of the fact that its intra-group charges are merely 1.39% of the total turnover which has been increased five times within last five years and the taxpayer is a subsidiary of Donaldson Company Inc., USA, its AE, and is into manufacturing and marketing of air filtration systems, etc., without these services 5 times increase is not possible. Moreover, all the services are being rendered as per agreement of 2004 and since then facts have not been changed. Merely because of the fact that the payment on account of management fee / intra-group services is increasing every year, the case of the taxpayer cannot be falsified as it is to be seen in the light of the fact that if payment of services has been increasing the turnover has also been increasing. It is the case of the taxpayer that payment has been made for beneficial services as per OECD Guidelines of 2010 to cater the specific needs of the taxpayer necessary for business of the taxpayer in India. Moreover, had these services been availed of by the taxpayer from a third party, it would have entailed more cost. Revenue Officer cannot decide while sitting on the armchair of a businessman to decide as to what services are required. So far as question of deriving the benefit of such services is concerned, benefit may always not be the result of any business decision. But, in the instant case, the taxpayer has explained the benefits derived from rendering of services by the AE. When it is not in dispute that the business model of the taxpayer has not undergone any change since 2004 and payment of intra-group services have been formed to be at arm’s length by the Revenue by passing detailed order by the TPO for AYs 2008-009, 2009-10, 2011-12 and 2012-13, available at pages 129 to 136 of Case Law Paper book, no reason whatsoever has been given by the ld. TPO to depart from the rule of consistency. No doubt, principle of res judicata is not attracted to the income-tax matter but when the business model has not undergone any change and facts and circumstances are identical “rule of consistency” is required to be maintained as has been held by Hon’ble Apex Court in Radhasoami Satsang payment of intra group services/management fee When we examined TP order payment of intra-group charges respectively have been held to be arm’s length as per TP analysis conducted by the taxpayer. So, it cannot be held that since payment of intra-group services is increasing day by day, it leads to profit shifting. We are of the considered view that issue at hand is required to be remitted back to the TPO/AO to decide afresh in the light of the observation made herein before and in view of the order passed by ld. TPO in preceding and succeeding years. Appeal filed by the taxpayer is allowed for statistical purposes.
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