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TMI Blog2018 (9) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational transactions with its associated enterprises and therefore made reference to the Learned Transfer Pricing Officer to examine the arms length price of those transactions. The learned Transfer Pricing Officer passed order under section 92CA(3) on 18/10/2016, wherein he determined the arm's length price of international transaction of payment of business support service of Rs. 4,08,06,578/- at Rs. Nil, international transaction of payment of technical support services amounting to Rs. 1,73,61,018/- at Rs. Nil and international transaction of payment of royalty of Rs. 4,20,55,227/- at Rs. 47,15,664/-. Consequently the adjustment of Rs. 9,55,07,159/- was proposed. Consequently the Learned Assessing Officer passed the draft assessment order on 30/11/2016 wherein against the returned income of Rs. 20,58,49,610/- the proposed income of the assessee was determined at Rs. 30,13,59,066/-. Against this assessee preferred objection before the Learned Dispute Resolution Panel-I, New Delhi who passed the directions on 31/8/2017 u/s 144C (5) of the Income Tax Act. Consequently the final assessment order under section 143 (3) of the Act was passed on 13/9/2017 wherein the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellant and that the payment made by the Appellant for Business Support Services and Technical Support Services do not tantamount to intra group services with demonstrable benefits; 3.5 in holding that the Appellant failed to demonstrate that the services received by the Appellant is not in form of shareholder services, incidental benefit or duplicative services without appreciating the fact that the Appellant in the first place had discharged its obligation by submitting detailed documentation justifying the arm's length nature of onus and burden to prove the negative has now shifted to AO/TPO/DRP; 3.6 in incorrectly holding that in relation to the payment of Business Support Services and Technical Support Services, the Appellant has not furnished any documentary evidence as to when and how these services were requisitioned from the Associated Enterprises CAEs') and manner and methodology of computation of payment for the services; 3.7 in holding that the Appellant has not been able to establish the need for payment of Business Support Services and Technical Support Services based on the premises that no cost benefit analysis was undertaken with regard to cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal transaction of Rs. 42055227/-. This has resulted into the addition of Rs. 9,55,07,159/-. He submitted that in preceding as well as in subsequent years no adjustment has been made to the arms length price of the international transactions despite those transactions are entered into by the assessee under similar circumstances. For this proposition he referred to the order passed by the learned transfer pricing officer under section 92CA (3) of the Act for assessment year 2012-13 passed on 14/1/2016, wherein all the above transaction of payment of royalty payment, of technical support fees and payment for services charges for business support services benchmarked by the assessee applying the transactional net margin method was accepted by him. Therefore, he submitted that when there is no change in the facts and circumstances of the case learned Assessing Officer/ Transfer Pricing Officer should have accepted the benchmarking methodology adopted by the assessee in subsequent years also. He further referred to the Assessment Order passed u/s 143(3) read with section 144C of the Act for Assessment Year 2011-12, wherein, the methodology of determination of arms length price adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court. He further submitted that the learned transfer pricing officer has not challenged the applicability of most appropriate method as transactional net margin method for other international transactions except in case of business support services. He further submitted that the profit level indicator of the assessee is 17.97% whereas of the comparable companies have PLI of 4.09%. Therefore the net margins of the appellant is much higher than the comparable companies which clearly shows that the international transactions of the company are carried out at arm's length price. He further submitted that the CUP method has been adopted by the learned transfer pricing officer to benchmark intragroup services of business support services where the comparable information cannot be obtained. He further stated that in applying the CUP method the learned transfer pricing officer has not furnished any comparable data to determine the arms length price at nil. With respect to the payment of royalties, he submitted that the transaction of the payment of royalty is inextricably linked with the manufacturing activities and should be aggregated and benchmarked together with the other a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee vied paper book volume No. 2 containing page No. 12-251 is not the evidence of the services received by the assessee. He therefore submitted that details submitted by the assessee is not the evidence of the services rendered by the associated enterprise of the international transactions. He further referred to the order of the learned transfer pricing officer wherein it has been specifically mentioned by him that if the assessee fails to submit the information called for in case of business support services fees then the arms length price of these international transaction would be treated as nil by applying the CUP method. According to him as the assessee has failed to furnish the complete details, learned transfer pricing officer did not have any other option but to follow that. He further referred to benchmarking of the payment of royalty and submitted that the assessee has paid royalty at the rate of 5% of the sales in India whereas the comparable companies have paid royalty @0.6% the percent of the sales. Regarding the aggregation of the transaction he submitted that the transaction by transaction approach is required to be needed for determination of the arms lengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not able to prove that he has actually received the services. He also stated that assessee is also required to prove the need for such services. He further held that Rule 10D of the income Tax Rules also support it. Therefore, he held that payment for business support fees and payment for technical support fees does not satisfy all these criteria. With respect to the royalty he held that it is in nature of price reduction for the products sold to associated enterprise. He worked out that royalty paid by the assessee is 8% of the net export sales whereas, the comparable companies have paid royalty @0.63% and further in case of domestic sales assessee has paid royalty @5% whereas comparable companies have paid royalty @0.63%. Consequently, he held that assessee has paid excess royalty of Rs. 37339563/-. Therefore, he determined the ALP of business support services and technical support services at Nil and ALP of royalty payment at Rs. 4715664/- and thereby proposing an adjustment of Rs. 95507159/-. The above view were confirmed by the ld DRP. Before the ld DRP assessee submitted additional evidences vide letter dated 5th July 2017 which have been recorded by the DRP at page No. 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld AO nor could be seen such documentation placed by the assessee before TPO. From the decision of the Hon'ble Delhi High Court it is deciphered that this is fact based analysis and no set rules can be applied without analysis of the facts. Further, before the ld Assessing Officer assessee has submitted the copies of invoices pertaining to these two services and certain email communications. The assessee has also submitted a chart which is placed at page No. 210-212 of the paper book which shows need for the services and also the benefit translated therefrom. Further, during the course of proceedings before the ld TPO assessee has shown the copies of the email which are placed at page NO. 193 to 208 of the paper book. On reading of the email placed shows that certain services are received however same are only sample emails which are stated by the assessee as proof of receipt of the services. The emails are dated 16.08.2012, 13.06.2010, 02.05.2012, 07.05.2013, 14.06.2013. Some of the emails are not pertaining to the impugned assessment year and from these emails it is for the assessee to show before the ld TPO that services have been received by the assessee. Furthermore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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