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2022 (5) TMI 1468 - ITAT PUNETP Addition - international transaction of “Professional Charges paid” - segregating the international transaction under consideration - Payment under the international transaction of “Professional Charges Paid” to its AE in France is a quid pro quo for the receipt of intra-group services availed by the assessee from its AEs - Whether aggregation approach in the instatnt case is correct? - HELD THAT:- On an overview of the nature of intra-group services availed by the assessee vis-à-vis the transactions of Purchase of raw materials and spare parts etc., along with Royalty, it gets overt that the international transaction under consideration is not closely linked with other transactions that the assessee aggregated with. The contention of the ld. AR that the intra-group services should be clubbed with the other transactions as the Manufacturing was not possible without availing intra-group services is farfetched and cannot be accepted. If we accept the contention of the ld. AR for aggregation on the basis of some nexus between the receipt of intragroup services and the manufacturing activity, then each and every international transaction would require consolidation because all the transactions ultimately aim at carrying on the business activity. The aggregation can be justified in the case of closely linked transactions and not remotely linked transactions. Acceptance of the AR’s argument would set at naught the judicial decisions discussed above, which have countenanced the segregation approach. We, therefore, hold that the DRP was justified in upholding the view of the TPO in segregating the international transaction of “Professional Charges paid” to be processed independent of other international transactions. TPO determined NIL ALP on the ground that the assessee did not furnish evidence of receipt of services and further no benefit was established by the assessee from receipt of services - Whether Intra- group service were availed? - HELD THAT:- In our opinion, the relevant consideration is the incurring of bona fide expenditure and availing the services, which may or may not lead to increase in revenue. Application of “benefit test” is not warranted in determining the ALP of an international transaction of payment for intra-group services. There are series of e-mails under the heading `Production Purchasing, Manufacturing’ delving into Plant Manager training Programme, Logistics, Welding Time plan, Control plan, Engineering functional milestone checklist etc. Similarly, there are e-mails under the heading `Quality’, which talk about Health, Safety and Environment Review Document, Quality Specifications, Quality self-assessment and Environment diligence assessment report. Turning to the Cost Sharing Agreement, there are e-mails about Presentation- Design, Change proposal to solve S/R issue on Suzuki YN recliner assembly Latch modification. There are e-mails concerning change in Design recliner and latch lock for all Faurecia customers; details of changes made in the design and approval; SMC approval for change in latch design presentation. Then, there are e-mails regarding Securitization Rate (SR) training; Visit Report; Presentation-FAS Suzuki G2 pumping command cam broken; Manesar Layout workshop; Feedback on SMC query; YP test reports, etc. The above description of the necessary documents and e-mail communications running into more than 1000 pages of the paper book amply prove that the assessee availed services under the Service Agreement and Cost Sharing Agreement. The TPO referred to e-mails in a generalized manner without going into their contents. In our considered opinion, the detailed e-mail communications between the assessee and its AEs abundantly prove that the AEs rendered services to the assessee under the two Agreements, which the assessee undoubtedly availed. We, therefore, hold that the authorities below were not justified in coming to the conclusion that the assessee did not avail any services. ALP determination - assessee applied the TNMM on aggregate basis for showing that the international transaction under consideration was also at ALP - We are not confronted with a situation in which the TPO did not apply any of the specified methods for determining the ALP of the transaction, which would have otherwise vitiated his order. He expressly invoked the CUP method and then determined the Nil ALP because the assessee, in his opinion, did not prove the receipt of services. We have held hereinabove that the assessee did avail services. Once it is established that the assessee availed intragroup services, then the next step is to determine its ALP. No details about comparables of the international transaction were either provided by the assessee or taken note of by the TPO. In these circumstances, we set aside the impugned order on this count and direct the AO/TPO to determine the ALP of the international transactions of “Professional Charges paid” afresh in accordance with law. It is hereby clarified that all the methods for determination of the ALP are open before the TPO, who is competent to adopt anyone of them. Similar is the position about the selection of tested party. After the advent of Virtusa Consulting Services Private Ltd. [2021 (2) TMI 378 - MADRAS HIGH COURT] an assessee or its AE can be taken as a Tested Party depending upon the fact that which out of the two is a least complex party to the controlled transaction and facilitates the ALP determination in a proper manner. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh determination of the ALP of the international transaction. Assessee appeal is allowed for statistical purposes.
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