TMI Blog2022 (4) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... e order passed by the ld.Commissioner of Income Tax(Appeals)-13, Pune,(in short, the CIT(A) in relation to the Assessment order dated 23/03/2016 passed by DCIT, Circle-5, Pune for the Assessment Year 2012-13.The grounds of appeal raised by the assessee are as follows: On the facts and in circumstances of the case and in law, the ld. Transfer Pricing Officer (TPO)/Assessing Officer (AO) has erred and the Hon/ Commissioner of Income Tax (Appeals) (CIT(A)) has further erred in upholding/confirming the action of the ld. TPO/AO in: 1 Transfer Pricing General Ground 1.1 making an addition to the Appellant s total income based on the provisions of Chapter X of the Act and have further erred in fact and in law in not providing any reasons to show that the conditions mentioned in clauses (a) to (d) of Section 92C(3) of the Act were satisfied before making an adjustment to the income of the Appellant. 2. Transfer pricing adjustment in respect of availing of management Services of rs. 86,69,501 2.1 determining the arm s length price of international transaction pertaining to payment of management services fees by the Appellant to its Associated Enterprise (AE) as S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment by separately taking management service fee as nil and again making an adjustment in software development services segment where it forms part of the cost base. 4. Other Transfer Pricing Grounds 4.1 computing the operating margins by treating foreign exchange gain/loss as non-operating in nature in the case of the Appellant as well as the comparable companies; 4.2 not allowing risk adjustment in accordance with the provisions of Rule 10B of the Rules; 4.3 rejecting the use of multiple year data i.e. contemporaneous data in the transfer pricing study report maintained as per Section 92D of the Act read with Rule 10D of the Rules used for determining the arm s length price of the international transaction of the Appellant; 4.4 violating the principle of Rule of Consistency while making the adjustment to the international transaction of provision of software development services and provision of marketing support service; 4.5 not allowing the variation/reduction of 5 percent while determining the arm s length price as envisaged under the proviso to Section 92C(2) of the Act. 5. Others. On the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services that would have been, or would reasonably be expected to be, levied between independent parties dealing at arm s length for comparable services under comparable circumstances. b) How much a comparable independent service recipient, under comparable circumstances, would be willing to pay for that service? An arm's length entity would be willing to pay for an activity only to the extent that the activity confers on it a benefit of economic or commercial value. c) Whether as a result of such payment, the recipient of the services, the taxpayer, resulted in any economic or commercial value to enhance its commercial position. The expected benefit must be sufficiently direct and substantial so that an independent recipient, in similar circumstances, would be prepared to pay for it. If no benefit has been provided (or was expected to be provided), the service cannot be charged for. d) First of all, the taxpayer has to prove that the services are rendered. The second aspect of intra group services is the quantification of such services in terms of actual expenditure incurred and commensurate benefits derived there from. To conform to the arm's length principle, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if no benefit is received or the benefit is remote or for the benefit of entire group, the same need not be charged. i) When any expenditure is incurred by the AE for stewardship or share holder activities, then the same need not be charged to other group entities. In addition, service fees are not required for services that merely duplicate services the related party independently performs. j) Unless it is shown that tangible and direct benefit is derived by such payment or that the payment made is commensurate with the benefit that is derived or expected to be derived when parties deal with each other at arm's length, the arm's length price of such payment for intra group services would be treated as either Rs. Nil or to the extent it is shown that the benefit actually derived from such payment. 7. The payment for any services are being treated at arm's length only when it is proved substantially by the taxpayer that such service were actually received and further proving that such received services have benefited it. In the present case, the assessee could not produce any information in support of its claim. The assessee further has not demonstrated the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arration provided in few cases in which, the Appellant has provided narration that the Appellant cannot establish that it received the services on the basis of its interaction with the AE s employees . Accordingly, I conclude that the Appellant has not established the receipt of the management services charged to it by the AE under the head Others . Accordingly, I confirm the adjustment at Rs. Nil for the service rendered on account of Others as against 91,690 paid by the Appellant. 9. We have heard the rival contentions and perused the record. In similar circumstances on identical facts, this Tribunal in assessee s own case for A.Y. 2009-10 reversed the order of DRP and directed the AO to accept the value of management services as claimed by the assessee. Similarly, this Tribunal in A.Y. 2010-11 also taking into consideration the findings of Tribunal in A.Y. 2009-10 allowed ground No 3 raised therein and directed the AO to accept the value of management services as claimed by the assessee by reversing the order of DRP vide order dated 29-01-2020. The relevant portion in ITA No. 623/PUN/2015 for A.Y. 2010-11 is reproduced here-in-below : 12. Ground No. 3 raised by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted the addition, against which no appeal has been filed by Revenue. Our attention was drawn to the order of Tribunal in this regard. He also pointed out that the assessee had filed detailed letter to the TPO explaining the need for availing management services dated 06.05.2011 along with several enclosures and also documents were filed evidencing the said provision of services. However, the TPO does not give any cogent reason in holding that no services were provided and in determining the arm's length price at Nil. 17. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. 18. We have heard the rival contentions and perused the record. The issue which arises vide ground of appeal No.3 is against arm's length price of transaction of payment for managerial services availed from associated enterprise. The agreement which has been entered into by assessee with its associated enterprise was w.e.f. 01.04.2006. The assessee is availing managerial services under the same agreement from year to year. In assessment year 2007-08, no issue in this regard was raised; in assessment year 2008-09, the TPO accepted the arm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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