2024 (3) TMI 1443 - HC - Income Tax

TP Adjustment - Appellant contends that benchmarking in respect of Inter Group Services was not undertaken - HELD THAT - The order passed by the CIT(A) 4. That the AO/TPO have inappropriately rejected the Transactional Net Margin Method ( TNMM ) used by the Appellant and erroneously applied Comparable Uncontrolled Price ( CUP ) method to determine the arm s length price of the international transactions related to availing of intra group services without appreciating the fact that intra-group services availed were proprietary in nature and no uncontrolled data was available for the application of CUP method. 5. That the learned AO/TPO have erred in law and on facts in concluding that the Appellant has derived no benefits from the intra-group services availed from the associated enterprises and arbitrarily determining the arm s length price of said international transaction as Nil as against the actual transaction value of Rs. 5, 32, 51, 014/-. However in order to cut short the controversy which stands raised we request the respondent to place the Transfer Pricing Report on the record. Let the aforesaid be done within a period of three weeks from today.

Summary

The Delhi High Court, presided by Justices Yashwant Varma and Purushaindra Kumar Kaurav, addressed a dispute concerning transfer pricing adjustments related to intra-group services. The appellant's counsel highlighted the Transfer Pricing Officer's (TPO) observation that the assessee failed to conduct a Functional Analysis Report (FAR) and did not benchmark the receipt of alleged services under any of the five prescribed methods, noting also the absence of a cost-benefit analysis, which "weighs heavily against the normal practises of business prudence."Conversely, the respondent's senior counsel relied on the Commissioner of Income Tax (Appeals) [CIT(A)] order, which criticized the TPO's rejection of the Transactional Net Margin Method (TNMM) and the erroneous application of the Comparable Uncontrolled Price (CUP) method, emphasizing that the intra-group services were proprietary with no uncontrolled comparables available. The CIT(A) further held that the TPO erred in concluding that the assessee derived no benefit and arbitrarily fixed the arm's length price as nil against the actual transaction value of Rs. 5,32,51,014/-.To resolve the dispute, the Court directed the respondent to place the Transfer Pricing Report on record within three weeks and adjourned the matter for further hearing.