TMI Blog2022 (1) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the management services provided by the AE to the appellant as duplicate service and consequent determining its ALP at Nil. The appellant succeeds on other grounds raised before us. The transfer pricing adjustment made by the TPO and upheld by CIT(A) is hereby deleted. - ITA. No. 449/Del/2019 - - - Dated:- 7-12-2021 - Shri Amit Shukla, Judicial Member And Dr. B.R.R. Kumar, Accountant Member For the Assessee : Shri Pradeep Dinodia, C. A.; For the Department : Shri Mrinal Kumar Das, Sr. D.R.; ORDER PER AMIT SHUKLA, J. M. 1. The aforesaid appeal has been preferred by the Metalsa India Private Limited (hereinafter referred to as appellant ) for the assessment year 2012-13, wherein the appellant has challenged the order passed by the Commissioner of Income-tax (Appeals)/ CIT(A) dated 25thOctober, 2018 under section 143(3) r.w.s 144C of the Income Tax Act, 1961 (for short the Act ). 2. The appellant has raised following grounds in connection with the appellant's appeal having ITA no. 449/DEL/2019, for the assessment year 2012-13: GENERAL GROUNDS 1. The Ld. Commissioner of Income-tax(Appeal) [ CIT(A) ] has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Rules, 1962. 3.6 The Ld. TPO and consequently the Ld. CIT(A) have failed to appreciate that the intra group services have been charged by the holding AE company to its group companies on cost allocation basis without adding any mark-up. Therefore, no adjustment could have been made on account of common services rendered by group company for and on account of group subsidiary companies. 1. That the Ld. A.O has erred in law in initiating penalty proceedings u/s 271(1)(c) for alleged concealment of income. 2. That each ground of appeal is independent and without prejudice to other grounds of appeal raised herein. 3. That the appellate craves the leave to add, amend or alter all or any of the grounds of appeal. 3. The appellant is engaged in the manufacturing and selling of side rails for heavy commercial vehicles. It also provides services in relation to manufacture of side rails for heavy commercial vehicles. It has a manufacturing plant in Jamshedpur, Jharkhand and Sales offices and technology centres in Pune, Maharashtra. The appellant is wholly owned subsidiary of foreign parent company namely Metalsa S.A. de C.V. ( Metalsa Mexico ) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly selected the Other Method as MAM based on the facts and the nature of international transaction and the availability of comparable data. 8. The AE allocated the total cost incurred (i.e. USD 5,20,61,689/-) on aforesaid group services to recipient entities based on the budgeted sales of group entities including the appellant (i.e. 0.30% of budgeted sales amounting to INR 23,46,65,610/- of the appellant i.e. INR 69.66 lakhs). The detailed working of cost allocation made by AE was enclosed at PB Page No. 115-116. It was further stated that while making allocation for management fee, the AE only recharged the actual cost so allocated without any mark-up on such costs. 9. The ld. AR submitted that TPO as well as the CIT(A) simply rejected the Other Method selected by the appellant as the MAM and applied CUP method to compute the ALP of the international transaction under consideration without giving any cogent reasons, which is not permissible as per law. 10. It was submitted that unless cogent reasons are given for adopting a method as MAM, the selection and application of such method is unjustified in law.In this regard, the ld. AR has referred to the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. Another exception would be where the duplication is undertaken to reduce the risk of a wrong business decision (e.g., by getting a second legal opinion on a subject). 13. In relation to the same, it was further submitted that contention of the CIT(A) that the TPO s contention of duplicate services is not challenged by the appellant is factually erroneous since the appellant challenged this point before the Ld. CIT(A) vide submission dated 25.06.2018 (refer PB Page No. 151-152). Reliance was placed on the following judicial pronouncements where in it was held that the revenue authorities can t examine/question the duplication of services rendered by the AE: L'oreal India Pvt. Ltd [TS-159-ITAT-2021(Mum)-TP] Adcock Ingram Ltd [TS-57-ITAT-2018(Bang)-TP] 14. Before us, the ld. AR has stated that the TPO/Ld. CIT(A) erred by disregarding the evidences provided towards renderingof services such as invoices, email correspondences etc. by the appellant without providing cogent reasonsand considering them as general in nature. In this regard, it was submitted by the ld. AR that appellant has filed several emailcorrespondences (refer PB Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chieved break-even point in FY 2015-16 much before the usual industry break-even benchmark. Further, it was submitted that not only sale but customer base and actual production have also been on rise year on year. The ld. AR has provided the customer-wise break-up of side rails manufactured and sold by the appellant which shows the exponential growth in market share of the appellant which isevident by the consistent increase in sale volume of side rails, which can be considered as the tangible evidence of benefit received from intra group servicesreceived from AE. In this regard, reliance was placed on the Hon ble Jurisdictional Delhi ITAT in the case of McCann Erickson India Pvt Ltd V Addl. CIT [TS-391-ITAT-2012 (Del)] and in the case of AWB India P. Ltd V Addl. CIT [TS-67-ITAT-2013(Del)-TP]. 17. The ld. AR has also contended that the TPO/CIT(A) have erred in law by applying CUP method to determine the ALP of management support services received by the appellant at NIL, taking the view that no independent party would have made the payment in the uncontrolled circumstances. This action of the Ld. TPO/Ld. CIT(A) is in contravention to the applying provisions of Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod as MAM. 23. The TPO and consequently the CIT(A) have been of the view that the captioned services received by the appellant are duplicate in nature being various other expenses have been separately paid by the appellant to AE and therefore the said services are duplicate in nature, which is evident from the following observations made by the CIT(A) in its order, which are as follows: 9.13 The TPO in his Remand Report dated 13.09.2018 had categorically stated that the management services received by the appellant were duplicate services in view of the fact that compensation charges, miscellaneous charges and legal and professional expenses had been paid separately by the appellant to the AE. The appellant in its rejoinder dated 10.10.2018 has not challenged the contention of the appellant that the payments for management services were duplicate in nature. In view of the same, the contention of the appellant is not accepted. The ground of appeal is dismissed. 9.14 Ground No. 6 pertains to the contention of the appellant that AO/TPO has erred in not considering the recent OECD guidelines relating to determination of of arm s length price for low value add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,882 Printing of documents reports M/S M.S.ENTERPRISES 1,850 Miscellaneous work Material Issued for Misc expenses 5,50,079 Material Issued NAGESH DHAMGUNDE 3,000 Miscellaneous expenses PANKAJ KUMAR SINGH 3,955 Miscellaneous expenses PRAGATEE ENTERPRISES 2,39,591 Purchase of Housekeeping Materials SANDEEP DAS 990 Miscellaneous expenses SENGEL SINGH SAREN 78,249 Miscellaneous expenses VED PRAKASH 1,506 Miscellaneous expenses TOTAL 28,12,834 Table 4: Details of Legal and Professional Expenses Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judged the commercial expediency of the services availed by the appellant from AE and therefore has surpassed its jurisdiction by concluding that there was no necessity of availing such services in the nature of IGS from the AE. Hon ble SC in case of Pr CIT Vs Frigoglass India Pvt. Ltd. [2018-TII-03-SC- TP] which referred and relied upon the judgment of Hon ble Jurisdictional High Court in case of EKL Appliances Ltd. [TS-206-HC-2012(DEL)-TP], wherein it was upheld that It is not open to the TPO to question the judgment of the assessee as to how it should conduct its business and regarding the necessity or otherwise of incurring the expenditure in the interest of its business. It is entirely the choice of the assessee as to from whom it contemplates to source its technology or technical knowhow and as to what steps should be taken to meet the competition prevalent in the market and to stave off the competitors. This is the domain of the businessman and the TPO has no say in the matter Therefore, in line with the observations relied upon by the Hon ble SC, we are of the considered view that the necessity of entering into agreement entered by the appellant with its AE fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paper book. The assessee has also provided details of cost al location at page nos. 285 to 288 of the paper book. Hence, it cannot be said that the services have not been provided to the assessee. With regard to the mark-up of 5%paid by the assessee, we find that the economical analysis submitted by the assessee at page nos. 121 to 128 of the paper book is acceptable at the same time, the comparable namely, Pay Cheques. Inc. showing the OP/OC of 56.12% is being excluded owing to the extraordinary profits. Taking into consideration, the remaining comparables, we find that the arithmetic mean is more than the 5% mark-up charged from the company. Hence, we hold that no adjustment is called for while determining the ALP on account of payment for Intra Group Services. Further, in case of Bombardier Transportation India Pvt. Ltd. [I.T.(T.P)A.No.1626/Bang /2015], the ITAT has given relief to the assessee (Bombardier) by stating that the services are specific in nature and the assessee has provided detailed e-mail correspondence, invoice etc. to authenticate the availing of services. 29. Thus, based on the various evidences filed by the appellant, it cannot be said that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38,55,17,26,096 48.47% 25,232.78 1,14,44,33,264 Metalsa Argentina SA 1,87,389.15 8,48,87,28,473 10.67% 5,556.02 25,19,93,470 Metalsa Structural Solutions, Venezuela 2,42,407.79 10,98,10,72,922 13.81% 7,187.30 32,59,80,349 Metalsa Hopkinsville 1,23,305.05 5,58,57,18,595 7.02% 3,655.95 16,58,15,719 Metalsa Owensboro Inc. 1,01,536.99 4,59,96,25,488 5.78% 3,010.54 13,65,42,898 Metalsa Australia PTY Ltd 38,738.49 1,75,48,53,522 2.21% 1,148.58 5,20,93,977 Metalsa Roanoke Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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