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The Deputy Commissioner of Income-tax, Cirlce-12 (2) , Bangalore Versus M/s Payne (India.) Pvt. Ltd.,

2015 (7) TMI 1110 - ITAT BANGALORE

Intra group services rendered by the AE to the assessee - whether the activities are at arm’s length? - mark-up charged by the AE on the cost - Held that:- The CIT(A) has already disallowed the mark-up and determined the ALP at cost of the group services which has been contributed by the assessee. We further note the CIT(A) has noted that the fact for assessment year 2008-09, the payment of intra group services was accepted y the TPO at arm’s length under the TNMM where the percentage of profit .....

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t from the facts and submissions, the payment is clearly for the ‘cost contribution’ and therefore, there should not be any mark-up on such allocations made by the Parent Company. Hence, for the same reason, the mark-up of 5.8% paid towards ‘cost contribution’ is not at arm’s length and the ALP for the markup is treated as nil. No error or illegality in the order of the CIT(A) qua this issue - Decided against revenue - IT(TP)A No.446(B)/2012 - Dated:- 24-7-2015 - SHRI VIJAY PAL RAO, JUDICIAL MEM .....

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pposed to law and facts of the case. 2. The ld.CIT(A) erred in holding that intra group services are at arm s length as the assessee failed to establish that services were rendered by AE for the direct benefit of the assessee. 3. The only issue arises from the grounds raised by the revenue is whether the intra group services rendered by the AE to the assessee are at arm s length. The assessee entered into various international transactions which include import of raw materi .....

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TPO accepted TNMM as most appropriate method for determination of ALP in respect to all other international transactions except the payment for intra group services. The assessee is making the payment for intra group services with a markup of 5.8% whereas the TPO has determined the ALP in respect of the group services at nil by holding that the intra group services did not result increase any profit margin. 4. On appeal, the CIT(A) has allowed the payment for intra group .....

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de the payment towards the cost contribution on account of intra group services. The AO as well as the TPO has not disputed the actual cost of services which is contributed by the assessee, though the AE of the assessee has allocated the cost with the mark-up of 5.8%. The TPO has determined the ALP of group services at nil on the ground that the services has not resulted in any increase in the profit margin of the assessee. It is pertinent to note that the computation of ALP by the TP .....

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