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2019 (9) TMI 372 - ITAT PUNETP adjustment - payment of Regional Service Charges (RSC) - comparable operating margins - arithmetic mean of margins - Proof of the services rendered by the associated companies - assessee had aggregated most of the international transactions and applied TNMM method AND transactions relating to sale of machinery and payment of technical and license fees were benchmarked using CUP method - TPO expressly held the transaction to be at arm's length price - whether the TPO while ascertaining whether the price paid for availment of services was at arm's length price or not ? HELD THAT:- Issue squarely covered by the order of Pune Bench of Tribunal in Emerson Climate Technologies (India) Limited Vs. DCIT [2017 (12) TMI 1568 - ITAT PUNE] and following the same parity of reasoning, we hold that there is no merit in adjustment made by the Assessing Officer / TPO in taking arm's length price of transaction of payment of RSC at Nil. The said payments being accepted in the hands of assessee to be at arm's length price in earlier years, we delete the adjustment made on this count. As refer to the order of DCIT, Circle-Gurgaon International Taxation, who has completed the assessment in the case of associated enterprise Goodyear Tire & Rubber Co. for assessment year 2011-12 under section 143(3) r.w.s. 144C(1) of the Act and has held that service charges received by it were taxable as fees for technical services or alternatively as royalty, both under the provisions of Income Tax Act as well as under the provisions of Indo-USA DTAA. Without going into merits of the facts whether the same is taxable or not in the hands of associated enterprises, we hold that fall out is that the payment made by assessee on account of RSC was for services availed from associated enterprise and there is no merit in the order of Assessing Officer in holding that no services have been availed by assessee in this regard. Duplication of services i.e. payments - held that:- these payments were towards reimbursement of cost incurred by regional entities in providing assistance to the assessee with regard to engineering, quality assurance, safety, etc. and the same was not towards technology, know-how being made available to the assessee by associated enterprise. The assessee had also submitted the list of personnel at the Region engaged in providing the aforesaid services in different countries of Asia Pacific Region, where the group did not have any R&D / Innovation center. On the other hand, the technical assistance and license fees were for know-how developed by R&D Center located in Akron, USA and Luxemburg, Europe. In other words, there was no similarity in the nature of payments made under technical assistance and license agreement and under the service agreement for Production and Tire Performance / Product Resolution. Hence, there is no merit in the observations of TPO in this regard and we reverse the same. Under Rule 10B(4) of the Income Tax Rules, 1962, it is provided that international transactions which are inter-linked need to be benchmarked on aggregate basis and since the payment has been made, which is linked to other transactions undertaken by assessee i.e. import of raw materials and spare parts, import of machineries, sale of raw materials and sale of machineries including the payment of technical assistance and license fees and that aggregation has not been disturbed by TPO. On the other hand, he further observed that the payment of RSC can be independently benchmarked. We have already in the paras above reversed the finding of TPO and hold that payment of royalty also needs to be aggregated. In any case even if benchmarked separately, the same is at arm's length price and no adjustment at Nil, merits to be made. Accordingly, we hold that no adjustment on account of payment of RSC merited in the hands of assessee. - Decided in favour of assessee
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