TMI Blog2023 (4) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee back to the file of the learned transfer pricing officer to determine the arm s length price of the intragroup services based on the documents already produced by the assessee. Addition based on amounts reflected in annual information return - HELD THAT:- Difference in the annual information return about the gross income included by the assessee in its financial statements, this is the first trigger point for investigation. Merely because there is a difference, the addition cannot be made Argument of the assessee also cannot be accepted that merely because assessee has disclosed more income, the difference between the annual information return and the books of account of the assessee can be ignored. Therefore, we set-aside this ground of appeal back to the file of the learned assessing officer with a direction to the assessee to show conclusively that what are those income which have been included in the computation of total income of the assessee in the earlier year and what are those receipts included in annual information return which are pertaining to the cost of the material and not the commission income of the assessee. Unless, this information is available, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 9-12-2022 - SHRI PRASHANT MAHARISHI, AM AND SHRI RAHUL CHAUDHARY, JM For the Assessee : Shri Ajit Jain and Siddhesh Chaugule For the Revenue : Dr. Yogesh Kamat, CIT DR ORDER PER PRASHANT MAHARISHI, AM: ITA No 398/Mum/2019 AY 2014-15 01. This appeal is filed by Lintas India Private Limited (Assessee/ Appellant) for A.Y. 2014-15 against the assessment order passed under Section 143(3) read with section 92CA(3) read with section 144C(5) read with section 144C (13) of the Income-tax Act, 1961 (the Act) dated 29th November, 2018 passed by the Asst. Commissioner of Income Tax 3(2)(1), Mumbai (the learned Assessing Officer), wherein the return filed by the assessee on 28th November, 2014 at ₹46,03,34,743/- is assessed at ₹ 68,08,24,460/-. 02. Assessee has raised the following grounds of appeal: - General 1. On the facts and circumstances of the case and in law, the learned Transfer Pricing Officer( TOP‟) and the learned Assessing Officer(AO) under the directions of the Hon ble Dispute Resolution Panel ( DRP‟) erred in making an adjustment of ₹ 18,36,63,743/- under Chapter X of the Income-tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and circumstances of the case and in law, the learned TPO and the Assessing Officer, under the directions of the Hon'ble DRP have erred in rejecting the Transaction Net Margin Method (TNMM) med, as the most appropriate method for benchmarking these transactions and computing the transfer pricing addition without applying any of the prescribed methods as provided under section 92C (1) of the Act. 10. On facts and circumstances of the case and in law, the learned TPO the AO and the Hon'ble DRP have exceeded their jurisdiction by computing the ALP of these transaction at nil and consequently making a transfer pricing adjustment. Corporate Tax Grounds Disallowance made on account of details reflected in Annual Information Report ( AIR ) amounting to INR 10,25,479 11. On the facts and circumstances of the case and in law, the learned AO under the directions of the Hon'ble DRP erred in making an addition of INR 10,25,479 to the total income on the basis of amounts reflected in AIR. Disallowance of expenses of INR 3,58,00,495 made on account of a responses having been received from parties to whom notices under Section 133(6) of the Act were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see of GIS services because the cost incurred by the Associated Enterprises has not been proved and further according to him, assessee failed to produce need test of the above services. The learned Transfer Pricing Officer also objected as associated enterprise is taken as tested party because assessee did not furnish the financials of associated enterprises with supporting documents. Accordingly, the CUP method was also rejected. The learned Transfer Pricing Officer also analyzed various information submitted by the assessee. He also made comments with respect to the email s correspondence produced before him stating that these email does not provide any information about the services and its need. He also referred to the OECD guidelines. He also questioned whether the services have been rendered or not. He further stated that the learned Dispute Resolution Panel in assessee s own case from A.Y. 2010-11 onwards has rejected CUP method and failure of the assessee to prove the Need-Evidence-Benefit test upheld the Arm s Length Price as transaction at Rs Nil. Accordingly, on GIS Services international transaction of ₹3,25,61,704/- was having the arm s length value of ₹ ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the direction of the learned Dispute Resolution Panel for A.Y. 2011-12, same was also upheld. With respect to the disallowance of ₹3,58,495/-, the assessee submitted additional evidence, the learned Dispute Resolution Panel sought comment of the learned Assessing Officer and based on it, partly upheld the addition. 09. Accordingly, assessment order was passed on 29 th November 2018 determining the total income at ₹68,08,24,460/- which was determined in draft assessment order as the learned Dispute Resolution Panel did not give any relief to the assessee. Against this, assessee is in appeal before us. 010. The learned Authorized Representative submitted that only effective ground of appeal in this appeal is with respect to the transfer pricing adjustment covered by ground no. 4 to ground no. 10 with respect to Intra group services where the learned Transfer Pricing Officer has determined the Arm s Length Price of the international transaction at ₹ nil holding that assessee has failed to prove the need test, rendition rest and benefit test. He also submitted that learned Dispute Resolution Panel has also considered the order of the learned Transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Intra group services. He further referred to page no. 335 onwards with respect to the agreement between the assessee and other parties for the payment of intra group services. He submitted that the overwhelming, voluminous and robust documentation have been shown to the learned Transfer Pricing Officer and the learned Dispute Resolution Panel to substantiate that the services were required by the assessee, those have been rendered by the Associated Enterprises, which have benefited assessee mainly and therefore accordingly remunerated as per agreed terms he submitted that same cannot be rejected without showing any infirmity in them. 012. The learned Authorized Representative also submitted that the learned Dispute Resolution Panel has rejected the objections of the assessee in just two lines stating that the direction of the Dispute Resolution Panel in the earlier years is against the assessee, same was followed. He also referred to the order of the learned Transfer Pricing Officer to submit that all email exchanges between the Associated Enterprises and the assessee are rejected by the learned Transfer Pricing Officer holding that it neither proves rendition of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of such services, benefit arising out of receipt of such services and therefore, he determined the Arm s Length Price of all these three transactions of intra group services at ₹ nil. 017. Firstly, we do not agree with the assessee that the learned Transfer Pricing Officer has not adopted any method. We hold that the learned Transfer Pricing Officer has determined the nil value of this services adopting comparable uncontrolled price method. This is so because unless above four basic specific tests are fulfilled, no independent party would have paid such as sum to the Associated Enterprises. Accordingly, as nobody has paid for these services, the comparable uncontrolled price as per the learned Transfer Pricing Officer of these services is ₹ nil. Therefore, there is a definite method adopted by the learned Transfer Pricing Officer which is one of the prescribed methods under Indian transfer pricing legislation. 018. However, any payment for intra group services, the payer of such services definitely maintained a robust documentation to show that those services are required for the business of the assessee, therefore, they were requisitioned by the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The description of the documentation provided by the assessee which has been described by the learned authorized representative clearly shows that assessee has maintained a reasonably sound documentation of intra group services. The learned transfer pricing officer and learned dispute resolution panel has heavily relied on their findings in the earlier years which have already been negated by the ITAT. We are not in agreement with the lower authorities by following the decisions taken by them in earlier years in determination of arm s-length price of intra group services at Rs. nil. This is so because for each year test of rendition of services, need of such services, benefits derived from the services and those services are not duplicative or shareholder services is required to be established by assessee based on proper documentation. Therefore, decisions rendered in earlier years by the authorities either in favour of the assessee or against the assessee does not help the case of the either party because these tests are required to be satisfied every year and also needs to be examined every year. 020. With respect to the orders of the co-ordinate Bench of earlier years, they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istic order passed by the learned dispute resolution panel by following its earlier order without giving an independent finding for the year on all these activity tests is not sustainable. 023. As the services of the assessee has not been benchmarked by examining the documents produced by the assessee for this year, we are not inclined and impressed with the argument of the learned authorized representative that the addition deserves to be deleted. According to us, the transactions deserves to be tested for its arm s-length price for this year. Therefore, we set-aside the issue of determination of the arm s-length price of the international transaction of intragroup services back to the file of the learned transfer pricing officer who has to examine the same from the perspective stated by us earlier. Hence , we set aside ground number 4 10 of the appeal of the assessee back to the file of the learned transfer pricing officer to determine the arm s length price of the intragroup services based on the documents already produced by the assessee. The learned TPO/AO is directed to examine the same for determination of the arm s-length price. Accordingly, ground number 4 10 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the annual information return about the gross income included by the assessee in its financial statements, this is the first trigger point for investigation. Merely because there is a difference, the addition cannot be made. Further, the argument of the assessee also cannot be accepted that merely because assessee has disclosed more income, the difference between the annual information return and the books of account of the assessee can be ignored. Therefore, we set-aside this ground of appeal back to the file of the learned assessing officer with a direction to the assessee to show conclusively that what are those income which have been included in the computation of total income of the assessee in the earlier year and what are those receipts included in annual information return which are pertaining to the cost of the material and not the commission income of the assessee. Unless, this information is available, it cannot be ascertained that whether assessee has offered commission income correctly or not. Accordingly ground number 11 of the appeal is set aside to the file of the learned assessing officer for proper examination. Necessary enquiries, if possible, may also be car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred certain expenditure which are supported by the proper bills and vouchers. The addresses given on those bills and vouchers have been provided to the assessing officer based on which the inquiries, letters u/s 133 (6) were issued by the learned assessing officer. Some of the notices were not served, some of the notices were returned as the parties have left the premises and some of the notices were served but no replies were received. We find that the expenses incurred by the assessee were not found to be bogus as books of accounts were accepted by the learned AO. It is also fact that assessee has discharged the liability toward those parties by account payee cheque or bank transfer. Because subsequently those parties could not confirm the transaction, it cannot be inferred that expenses incurred by the assessee were not genuine. It is also an accepted fact that none of the parties were found to be bogus or the purchases were found to be nongenuine. There may be many reasons that notices u/s 133 (6) remained unserved or not responded to. But, merely that fact, cannot result into disallowance. Further, it is not the case of the assessee that they have not deducted tax at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king any comparable analysis and applying Other Method (Need Evidence Benefit Test method) which is not a prescribed methods as provided under section 92C(1) of the Act. 5. On facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon bl e DRP have erred in computing the Ann's Length Price (ALP) of the transaction at NIL, and not following one of the prescribed methods under section 92C(1) of the Act, thereby making an ad-hoc disallowance. 6. On the facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of Hon ble DRP have erred in questioning the commercial wisdom and expediency of the Appellant for receiving GIS services. 7. On the facts and circumstances of the case in law, the learned TPO and the learned AO erred in considering the aforesaid services to be in the nature of shareholder/ stewardship/duplicative/incidental/passive/on-call services without appreciating the underlying nature of the services. Management Service Fee ( MSF ) Services - INR 13,33,27,604 Multinational Client Co-ordination ( MNC ) Services INR 44,51,774 8. On fact and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid services to be in the nature of shareholder/ stewardship/duplicative/incidental/ passive/on- all services without appreciating the underlying nature of the services. Corporate Tax Grounds Disallowance made on account of details reflected in reconciliation of income as per books vis- -vis Form 26AS amounting to INR 17,79,303 16. On the facts and circumstances of the case, in law, the learned AO has erred in making an addition of INR 10,79,303 to the total income on the basis of details reflected in reconciliation of income as per books vis- -vis Form 26AS. Disallowance under section 14A of INR 1,00,56,473 17. On the facts and circumstances of the case, and in law, the learned AO has erred in not accepting the claim of the Appellant (made during the course of the assessment proceedings), that no disallowance is warranted under Section 14A of the Act inter-alia, on account of the following. a. the Appellant did not earn any exempt income during the year under consideration; and b. the investment made by the Appellant were mainly in growth oriented mutual funds which do not yield any dividend i.e. exempt income. Other Grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer for fresh verification, therefore, we also set-aside this ground of appeal back to the file of the learned assessing officer with the same directions. Accordingly ground number 16 of the appeal is allowed with the same directions. 039. Ground number 17 is with respect to the disallowance u/s 14 A of the act amounting to Rs. 10,056,473/ . No such addition was made by the learned assessing officer in the draft assessment order passed on 15/4/2021 and similarly, no addition was found in the final assessment order dated 3/2/2022. Ground of appeal suggest that the assessee has made the fresh claim during the assessment proceedings, that it has not earned any income during the year Under consideration on which the exemption is claimed. If that be the fact, there cannot be any disallowance in the hence of the assessee u/s 14 A of the act. Accordingly, we direct the learned assessing officer to consider the claim of the assessee and if there is any disallowance offered by the assessee, it needs to be tested that if assessee has not earned any exempt income. There should not have been any disallowances u/s 14 A of the act. Therefore, direction is given to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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