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TMI Blog2022 (5) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the arm's length price (ALP) of the international transactions. The TPO took up the international transaction of "Professional Charges paid" with transacted value of Rs.11,63,92,994/-, which the assessee had aggregated with other transactions in applying the Transactional Net Margin Method (TNMM) method on aggregate basis. He did not concur with the assessee's aggregation approach and the consequent application of the TNMM. Hence, he proceeded to determine the ALP of the international transaction under Comparable Uncontrolled Price (CUP) method. Here it is necessary to mention that other international transactions have been accepted at ALP. Since the assessee could not establish the receipt of services to the satisfaction of the TPO, he determined Nil ALP of the international transaction. The assessee remained unsuccessful before the Dispute Resolution Panel (DRP). The matter was brought before the Tribunal. Vide order dated 22-02-2017 in the first round, the Tribunal restored the matter to the AO/TPO for deciding the issue afresh. 4. In the instant round of proceedings, the TPO observed that the assessee was engaged in manufacturing sliders in the Manesar plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er international transactions of Purchase of raw material components, Purchase of spare parts and Payment of Royalty etc. for demonstrating that all the transactions were at ALP. The TPO segregated the international transaction of "Professional Charges Paid" and proceeded to determine its ALP independently. The primary question is if the TPO was justified in segregating the international transaction under consideration. 6.2. Section 92(1) of the Act provides that any income arising from 'an international transaction' shall be computed having regard to its arm's length price. Section 92C(1) provides for the computation of the ALP and mandates to follow one of the prescribed methods as the most appropriate method, which, inter alia, include the TNMM, as was applied by the assessee on aggregate basis. Payment for intra group services is admittedly a `transaction' in terms of section 92F(v) of the Act. The term 'transaction' has been defined in Rule 10A(d) as including 'a number of closely linked transactions'. It, therefore, boils down that the term 'transaction' also includes a plural of transactions. However, the caveat is that in order to cover plural of transactions within the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical assistance fee do not form part of a composite transaction and have to be treated as two separate transactions for computing their arm's length price. 6.5. On an overview of the nature of intra-group services availed by the assessee vis-à-vis the transactions of Purchase of raw materials and spare parts etc., along with Royalty, it gets overt that the international transaction under consideration is not closely linked with other transactions that the assessee aggregated with. The contention of the ld. AR that the intra-group services should be clubbed with the other transactions as the Manufacturing was not possible without availing intra-group services is farfetched and cannot be accepted. If we accept the contention of the ld. AR for aggregation on the basis of some nexus between the receipt of intragroup services and the manufacturing activity, then each and every international transaction would require consolidation because all the transactions ultimately aim at carrying on the business activity. The aggregation can be justified in the case of closely linked transactions and not remotely linked transactions. Acceptance of the ld. AR's argument would set at naught ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussing Changes/Modifications in the orders placed by Maruti. A copy of such an e-mail is available at pages 339 to 341 of the paper book. There is another e-mail for issuing nomination letter to Faurecia Management Company Ltd. Shanghai, China for Maruti discussing the quotation shared by China on behalf of Faurecia, India. There are series of e-mails under Sales and Marketing. The next is `Program Management' services. There is an e-mail communication dated 09-07-2010 from Francis Dussuchale to some employee of the assessee regarding his visit to India for FES Audit and providing detailed purpose and schedule of visit. A copy of such an e-mail is available at page 446 of the paper book. Similarly, there are other FES Audit e-mails. There is another e-mail dated 06-12-2010 exchanged between the assessee's employee and an employee of French company requesting change of GL Account description and assigning, copy of such e-mail is available at page 557 of the paper book. Under the heading `Legal, Insurance and Real Estate', there is an e-mail dated 29-10-2010 from Legal Department of the Group France to the assessee highlighting the recommendations, observations and conclusions f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avail any services. III. ALP OF THE TRANSACTION : 8.1. The assessee applied the TNMM on aggregate basis for showing that the international transaction under consideration was also at ALP. The TPO rejected such an aggregation and in our opinion rightly so for the reasons adduced supra. After rejecting the TNMM on aggregate basis, the TPO proceeded with the determination of the ALP of the transaction by applying the CUP method. In the absence of the assessee proving to his satisfaction that the services were actually availed, the TPO held the ALP of the international transaction at Nil under the CUP method. Ergo, it is ostensible that we are not confronted with a situation in which the TPO did not apply any of the specified methods for determining the ALP of the transaction, which would have otherwise vitiated his order. He expressly invoked the CUP method and then determined the Nil ALP because the assessee, in his opinion, did not prove the receipt of services. We have held hereinabove that the assessee did avail services. Once it is established that the assessee availed intragroup services, then the next step is to determine its ALP. No details about comparables of the internat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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