Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (1) TMI 933 - AT - Income TaxTransfer pricing adjustment - whether the services received by the assessee should be considered to be arm’s length under TNMM - Held that:- With regard to PSM and RIS segments, the markup 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 application of any markup. Accordingly, these can be considered to be at arm’s length. Based on the above discussion, we are of the opinion that the services received by the assessee should be considered to be arm’s length under TNMM. We have perused the OECD guidelines which has recommend an aggregate bench marking approach in situation, where the underline transactions are closely linked to the core business operation. Principle of aggregation, is a well-established rule in transfer pricing analysis. This principle seeks to combine all closely linked transactions wherein arm’s length price can be determined for a number of transactions taken together. The OECD Guidelines recommends an aggregate benchmarking approach, in situations where, the underlying transactions are closely linked to the core business operations. The assessee is predominantly a manufacturer and the services received by the assessee from its AEs are intrinsically linked to the core business operations of the assessee, in the following form: i. Based on the support provided by the AEs in terms of marketing services and strategic services, the assessee is able to achieve higher sales, both in terms of higher sales quantity and sale prices. ii. Based on the support provided by the assessee in terms of operations and logistics the assessee has been able to procure raw materials at lower costs. Accordingly, the impact of such support services is received by the assessee in the form of lower direct costs. We observe that there exists a direct nexus between the revenue earned/cost incurred by the Assessee and the majority intra-group services received, it would be incorrect to analyze the intra-group service received as a single element of cost in isolation. In this regard, the Assessee would like to place reliance on the following rulings, wherein aggregation of closely interlinked international transactions. We are of the opinion that, ascertaining whether a service has actually benefitted the taxpayer or not is not within the prerogative of the Tax Authorities. To avail a service or not is a commercial decision which cannot be challenged by the Tax Authorities. - Decided in favour of assessee.
|