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2022 (1) TMI 1306 - AT - Income TaxTP Adjustment - downward adjustment to the value of international Transaction of Finance & General administration related service charges - Reference to threshold of business needs / requirements of the assessee - HELD THAT:- Assessee has availed bundle of services from its AE and made payment pursuant to the terms of the agreement. These payments are recurring in nature and are determined by applying specific allocation keys. TPO, while accepting that all the other services benefitted the assessee, termed the services of finance / general management to be in the nature of stewardship services and alleged that the assessee did not submit any evidence of the receipt of services disregarding the fact that these services were emanating from the same agreement. The rendering of services was duly evidenced by the agreement as well as debit notes issued against the assessee. The copies of email / correspondences to support the receipt of services were duly furnished (43 to 88 of paperbook). Another observation of TPO is that the assessee may not be requiring these services in the normal course of business. The same, in our opinion, is not correct approach since the role of Ld. TPO was limited to determine the ALP of the transactions and not to adjudge the same at the threshold of business needs / requirements of the assessee. TPO observed that the transaction was to be benchmarked applying CUP method, however, no effort has been made to determine the ALP of the transaction using CUP method. Simply determining the ALP to be nil on the basis that the services were not required to be availed and not determining ALP without applying any of the prescribed method is not in accordance with statutory mandate. TP provisions mandate application of any of the prescribed method to arrive at Arm’s Length Price of the international transactions. See case Flakt (India) Ltd. [2016 (6) TMI 557 - ITAT CHENNAI] wherein it was held that in the absence of any comparison of the transaction with transaction carried out in uncontrolled market, Ld. TPO could not independently come to conclusion that volume and quality of services was disproportionate to the payment made by the assessee. The estimation of the services rendered and costs of such service was outside the scope of transfer pricing adjustment. CIT-DR has referred to the decision Bombardier Transportation India Pvt. Ltd. [2015 (11) TMI 1527 - ITAT DELHI] which is factually distinguishable since in that case the assessee could not file sufficient documentary evidences and the adjustment was partially confirmed. Lastly, it is an uncontroverted fact that the assessee has paid for these services in earlier years also which has been accepted by the revenue and this is the first year in which such an adjustment has been proposed. Therefore, the value of impugned transactions, in our considered opinion, could not be taken to be nil in this year. We would hold that the TP adjustment as made by Ld. AO in the final assessment order could not be upheld in the eyes of law. By deleting the same, we allow the appeal.
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