9911796707
TMI Blog2023 (6) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Dispute Resolution Panel ("DRP"), as against the returned income of INR 40,245,490 returned. 2. That on the facts and in the circumstances of the case and in law, the order passed by the learned Assessing Officer ("AO") is bad in law and void ab-initio as the same has not been passed in confirmation to the provisions of section 144C of the Act. 3. That on the facts and in the circumstances of the case and in law, the AO / DRP / TPO erred in making an adjustment to the Appellant's international transaction of receipt of intragroup services with its Associated Enterprises ("AEs") alleging that it does not satisfy the arm's length principle envisaged under the Act and thereby making an adjustment of INR 230,271,861 and in doing so have grossly erred in: 3.1. Ignoring the specific directions of the Honourable Income Tax Appellate Tribunal ("Hon'ble Tribunal") wherein the need and benefit test for the intra-group services had been accepted and the matter was referred to the Ld. AO/ Ld. TPO only for verifying the rendition of the services. 3.2. Not appreciating the fact that since the Hon'ble Tribunal has accepted the need and benefit test for the intra- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... del of the Appellant and rejecting the Appellant's economic analysis of benchmarking closely interlinked transactions using Transactional Net Margin Method ('TNMM') and arbitrarily applying Comparable Uncontrolled Price ("CUP") method only to a fragment of services; 4.3. Failing to appreciate that the services received from the AEs are part of a package of composite agreements which cannot be unbundled, especially when the DRP / TPO have accepted the bundled approach for a segment of services; 4.4. Ignoring documents, cost allocation methodology and analysis provided by the Appellant and placing reliance on previous year's conclusion that the services availed by the Appellant from its AE were in nature of 'duplicate' and "shareholder" services which have not conferred any commercial benefit upon the Appellant. 4.5. Not appreciating that the DRP / TPO cannot question the commercial wisdom of the Appellant and the benefit received by the Appellant from the receipt of intra-group services and can only ascertain the arm's length price payable for such services; 4.6. Not appreciating that the DRP / TPO, while applying CUP method failed to apply any compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices. However, later, he accepted another amount of Rs. 5,17,75,129/- in intra-group services at arm's length price by relying upon the orders passed by the ld. DRP in AYs 2010-11 & 2011-12. Hence, the proposed adjustment now was Rs. 23,02,71,861/- which was also upheld by the DRP. TPO by relying upon the order passed by the ld. DRP in AYs 2010-11 and 2011-12 applied CUP method for benchmarking the international transactions qua intra group services and thereby proposed an adjustment of Rs. 23,02,71,861/-. 7. In first round, the ITAT remanded the issue to the file of TPO to examine the evidence of intra group services afresh. In the second round, ITAT again remanded the matter to the TPO to examine the evidence of intra group services afresh by TPO. 8. Assessee took the matter to Hon'ble High Court. Hon'ble High Court upon assessee's appeal set aside the orders of ITAT for AYs 2012-13 and 2015-16 and directed that ITAT should examine the issue and appreciate the evidences. 9. In these circumstances, we have heard both the parties and perused the records. 10. Ld. Counsel for the assessee submitted that the issue involved in the present appeals is squarely covered in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act from the ruling of the Co-ordinate bench of ITAT Delhi in Assessee's own case for AY 2007-08 is as under: "20. On perusal of the TP Study, we observe that each transaction are interlinked with each other. We notice that the assessee has treated the agreement as a whole, and has applied TNMM, in respect of the services received to arrive at the ALP. It is observed that the Id. CIT(A) accepted the contentions of the assessee that; intra group services were received by the assessee as per the agreement, and that these are critical, and linked to the core business operations of the assessee. However, the Ld. CIT(A) held that certain services specified in the agreement did not result in any benefit to the assessee. 21. All the services received are part of composite contracts/agreements which in our view cannot be unbundled... 23. From the above discussion we are of the considered opinion that the agreement is an intrinsic one and that it is wrong to split the same and hold that some services are at arm's length and some services are not. 24. The Ld. CIT(A) accepted TNMM to arrive at the ALP, in respect of certain services received by the assessee and in the same bre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecommend an aggregate benchmarking approach in situation, where the underline transactions are closely linked to the core business operations. Principle of aggregation, is a well-established rule in transfer pricing analysis. This principle seeks to combine all closely linked transactions wherein arm's length price can be determined for a number of transactions taken together... 31. The assessee is predominantly a manufacturer and the services received by the assessee from its AEs are intrinsically linked to the core business operations of the assessee, in the following form: a. Based on the support provided by the AEs in terms of marketing services and strategic services, the assessee is able to achieve higher sales, both in terms of higher sales quantity and sales prices. b. Based on the support provided by the assessee in terms of operations and logistics the assessee has been able to procure raw materials at lower costs. Accordingly, the impact of such support services is received by the assessee in the form of lower direct costs. 32. We observe that there exists a direct nexus between the revenue earned/ cost incurred by the Assessee and the majority intra-group se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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