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2019 (12) TMI 1282 - AT - Income TaxTP Adjustment - Arms Length Price in respect of shared services at Rs.Nil. - assessee is a market research company - HELD THAT:- We find from the perusal of Clause 6 of the said agreement , it specifically excludes from within its ambit, the services which are in the nature of shareholder services or services which have been provided by the group company to another for the exclusive benefit of the other. Hence the argument of the revenue that the services rendered are in the nature of shareholder activities cannot be accepted as the same is without any basis. We find that as per Clauses 11 and 12 of the said agreement, SMSL is appointed as a pooling entity for all costs incurred by each of the group companies in rendering the shared services and thereafter to allocate the same to the various group companies based on benefits the respective companies had derived. There is a binding agreement between parties to render services and contribute costs ; that there is a recognition by all group entities of the need for such services ; that SMSL is a special purpose vehicle existing for the sole purpose of pooling of costs ; that no costs for rendering of any shareholder/stewardship services are charged under the Shared Resources Allocation Agreement and that no costs for rendering any exclusive group company specific services are charged under the Shared Resources Allocation Agreement. PO has accepted the segmentals so prepared. This demonstrates that the ld TPO agrees that the support and assistance under the Shared Resources Allocation Agreement are integral to rendition of the Market Research Services. Further when the TPO had accepted the receipts and payments towards the Market Research Services (rendered and received) by the assessee to be at arm's length by applying Internal TNMM, and when, the segmental margin have been arrived at after debiting the payments under Shared Resources Allocation Agreement, which segmentals have been accepted by the ld TPO for benchmarking the Market Research Services and accepting the same to be at arm's length , we find that automatically the payments under the Shared Resources Allocation Agreement also stand benchmarked. It is therefore improper of the ld TPO to then once again separately benchmark payments under Shared Resources Allocation Agreement and subject them to a CUP analysis. We further find that the co-ordinate bench of this tribunal in assessee’s own case for the Asst Year 2008-09 , being the first year of operation of Shared Resources Allocation Agreement, had upheld the method of benchmarking adopted by the assessee. It is well settled that Internal TNMM based on segmental data would always be preferable over Extenal TNMM. On applying Internal TNMM , the margin from services rendered to international AEs is 22.04% , whereas the margin from services rendered to other international Non-AEs is 4.29%; and hence no adjustment is required to be made with respect to payments made under the Shared Resources Allocation Agreement. We find that the ld TPO ought not to have determined the ALP of the payment made under the Shared Resources Allocation Agreement at Rs Nil. Cost incurred on Shared Resources Allocation Agreement - It would be pertinent to note here that the payment made under Shared Resources Allocation Agreement had been duly subjected to deduction of tax at source, except an amount of ₹ 73.81 lakhs which was suo moto disallowed by the assessee for failure to deduct tax at source, and that no refunds have been claimed by the recipients thereon. Hence the actual claim by the assessee for the year under consideration is ₹ 6.77 crores only and therefore it is erroneous to make an addition of the entire amount of ₹ 7,50,68,892/-. This is only made as a passive observation by us as we direct the ld TPO to delete the entire adjustment made towards payment of cost contribution charges pursuant to Shared Resources Allocation Agreement. - Decided in favour of assessee.
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