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2023 (5) TMI 106 - AT - Income TaxTP Adjustment - ALP adjustment on account of profit mark-up - assessee obtained IT support services from the AE - TPO held that the assessee merely performs coordination services and adds no value to the functions that the third party performs, hence, the same doesn’t require any mark-up from Indian entity - AO held that third party cost in anyway has been allocated to the Indian entity which includes a mark-up, therefore a double mark-up is not justified - Assessee submitted that 5% mark-up on IT Software services and 7% mark-up on administrative expenses is in consonance with the international trade practices HELD THAT:- Performance/co-ordination of functions/services being rendered through a centralized off ice/Group companies, helps the participating Group companies in achieving global standardization of processes, realization of economies of scale, realizing operating and financial efficiencies, the services received from the BMW Group are provided by experienced personnel who focus on their respective domains, other direct benefits derived by the Company from such IT Support services include leveraging on the specialized support services of BMW Group who have the required expertise and knowledge. Hence, it cannot be said that the software/IT support services cannot be charged at par. A markup of 5% policy for the IT services rendered is an acceptable markup by international guidelines and as per EU Joint Transfer Pricing Forum. It cannot be expected that the parent organization supply support services without charging anything for such services rendered. Hence, we hold that the markup of 5% is sufficient to recoup the expenditure involved by the AE in exploration, inspection, testing and finalization of the suitable software. Accordingly, we direct that no other expenses other than 5% markup be allowed on the support services rendered by the AE. Deduction u/s 80G be allowed. Due TDS credit be given. Appeal of assessee allowed.
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