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2019 (5) TMI 178 - AT - Income TaxTransfer pricing adjustment - treating arm’s length value of payment of management service fees at Nil - The TPO was of the view that since no benefit arose to the assessee - import of cutting and drilling tools from its associated enterprise and selling the same in domestic market - whether the payments made to Sandvik AB, the holding company is on account of provision of services by Walter AG, Germany ? - HELD THAT:- The assessee had explained before the TPO that the said service fees consisted of cost pertaining to services within ambit of marketing management, general administration, human resources and information technology. The said interactions were happening on day-to-day basis and documentations were voluminous. Sample copies of documents, e-mails, advise visits reports, etc. were filed before the authorities below. The copies of same are available and the assessee had also filed certificate from the auditor of Sandvik AB under which they have certified the cost allocated by Sandvik AB to the assessee. As already referred to the terms of agreement, wherein Sandvik AB is referred to as ‘Providing Party’ and the services are to be provided by the providing party, which is defined in clause 1.1 include all or some of Sandvik companies, which provide management services. The concern Walter AG, Germany is part of Sandvik group of companies, which is also not doubted and once the services were provided by Walter AG, Germany, which in turn, as part of Sandvik group of companies, which is headed by Sandvik AB, Germany, then there is no merit in the orders of authorities below in holding that no services have been provided by Sandvik AB to whom the management fees has been paid. Sandvik AB through its group companies was providing similar services to all the group companies and allocation key is adopted for allocating the cost to the individual companies, which is clearly mentioned in the report of auditor. The authorities below cannot sit in judgment over the decision of assessee in availing the services and there is no question of providing documentation to specify the benefit test. Only thing which needs to be considered is whether the services have been provided. However, in the facts of present case, the same is not doubted as the authorities below have time and again referred to the services being provided by Walter AG, Germany, but the adjustment has been made in the hands of assessee on the ground that services are not provided by Sandvik AB with whom the assessee has entered into an agreement. Where the management services have actually been rendered, may be by Sandvik entity i.e. Walter AG, Germany, then arm's length price of such transaction cannot be taken at Nil. However, we find no merit in the orders of authorities below - See SANDVIK ASIA (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE- 10, PUNE [2017 (6) TMI 1290 - ITAT PUNE] - No merit in the orders of authorities below in adopting the arm's length price of international transactions pertaining to payment of management service fees at Nil. The order of Assessing Officer / DRP in this regard is thus, reversed and the issue raised by assessee is thus, allowed.
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