TMI Blog2023 (9) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... E] - thus we remand these comparables to the Ld.AO/TPO to reconsider them in the light of the annual reports that will be filed by assessee. In the event they are found to be functionally similar with that of assessee, the same may be included in the final list. SSIPL Lifestyle Pvt. Ltd. - On perusal of the annual report of this company the business profile is revealed to be primarily engaged in business of trading of footwear and apparels etc. also submission of the assessee that the parent company of this comparable is into manufacturing activity whereas this company perse engaged in trading activity. In our considered opinion, this needs to be verified and in the event it is found that this comparable is carrying out trading activity, the same may be included. Accordingly, we remand this comparable back to the Ld.AO/TPO for verification as directed above. Aditya Birla Fashion and Retail Ltd. - We note that the annual reports has not been looked upon by the revenue authorities before rejecting this comparable. In the interest of justice, we remand this comparable to the Ld.AO/TPO for reconsidering the plea of assessee in the light of the annual reports. Accordingly we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies and determine the margins afresh in accordance with law. Working capital adjustment not granted - We are of the opinion that this issue is no longer resintegra as this issue is covered by the decision of Coordinate Bench of this Tribunal in case of Huawei Technologies India (P.) Ltd [ 2018 (10) TMI 1796 - ITAT BANGALORE] as held n keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the assessee should be allowed. Refusing the risk adjustment by the Ld.TPO - The same has been rejected as relevant data in respect of the comparables were not provided by the assessee. in the event the assessee is able to establish the risks undertaken by the outstanding comparables, the same may be considered in accordance with Rule 10B by the Ld.TPO. Necessary verification may be carried out in respect of the same by the Ld.TPO. TP Adjustment only to the gross income earned by assessee on sales made to AE. - We direct the Ld.AO to verify the computation of the international transaction to the total operating cost as provided by the assessee hereinabov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholesale and retail trading of group products like footwear, apparel and accessories. The Ld.AO observed that, the assessee had filed its return of income on 30.11.2018 declaring a total income of Rs. 25,67,48,230/- which was revised on 22.02.2019 declaring total income of Rs. 25,67,48,230/-. The case was selected for scrutiny and statutory notices were issued to the assessee calling for various details. The Ld.AO noted that the assessee had international transactions with its associated enterprise for the year under consideration. 2.1 The case of the assessee was referred to the transfer pricing officer to compute arms length price of the international transaction. The Ld.TPO upon receipt of the reference, called upon the assessee to furnish economic details of the international transaction in form 3CEB. It was noted by the Ld.TPO that following were the international transaction undertaken by the assessee. Particular Received/Receivable Paid/ Payable Method Purchase of sample Products 260,71,253 TNMM Import of finished g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty manufacturers to the assessee, sourcing fee was paid towards availing R D for the locally procured goods. 2.6 In response to the notices, assessee submitted that assessee collects reviews, modifies and amends all orders placed by PUMA sales entities in order to consolidate and transmit them to vendors. It was submitted that, the assessee was a central sourcing agent and has entered into the procurement service agreement as per which the assessee provides procurement services to the World Cat Ltd. (WCL) as per the requirements mentioned therein. It was submitted that as per the agreement, the assessee was to provide the details regarding the local manufacturers to its AE. 2.7 It was further noted that the assessee had entered into a supply chain management service agreement with PUMA International Trading Services Ltd., Hong Kong and a technical R D assistance agreement was entered by assessee with Development Services Ltd., Hong Kong w.e.f. 01.01.2017. 2.8 The Ld.TPO was of the opinion that assessee has not clearly established the services received by it, from the third party local manufacturers and thus, these transactions was separated from the distribution segment as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egment are also to be treated as general in nature. Accordingly, the above grounds are not adjudicated. 3.2 Ground nos. 8, 11-14 are in respect of the comparables sought for inclusion / exclusion by assessee. Before we undertake the comparability analysis, it is sinequa non to understand the FAR of assessee under distribution segment. The TP study report describes the FAR to be as under: 4.2.10 Functions performed 4.2.10.1 Strategic Management functions and corporate services Strategic management functions such as corporate strategy, treasury, etc. involve decision making on business strategy, budgeting, selecting lines of business, choosing organization structure, operating procedures, analyzing and undertaking acquisitions and disinvestments, legal and regulatory affairs, responding to competitors and to market forces. PUMA SE plays a significant role in determining the business strategy for its worldwide business (including India). The top management provides strategic direction on product development, marketing strategy and other related matters. These strategies are percolated down to various PUMA Group entities across the globe. India s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al material available. There are also certain products, where PUMA Sports India would modify the styles according to the requirements of Indian customer, for selling them in local market, however the same would be in line with PUMA global standards. Research and development/ engineering PUMA SE engages its subsidiary DSL to provide research and development/ engineering services to PUMA SE. Based on the Tech Packs provided by PUMA's product creation teams, DSL's research and development/ engineering team supports the manufacturers and PUMA's product creation teams during the (sample) production process. This team also supports the entire development phase to engineer PUMA goods and serves all parties concerned as communication platform. Manufacturing PUMA products, purchased from PUMA Austria and other AEs are manufactured by third party vendors. Further locally procured goods are also manufactured by third party manufacturers in India. Procurement a. Sourcing of products from overseas affiliates/ third party vendors Under previous sourcing structure, all the PUMA sales entities (including PUMA Sports India) placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to sourcing of goods for PUMA Sports India, PUMA Sports India procures the goods from PUMA Austria instead of overseas third party vendors, which it used to do previously. PUMA Austria's centralized buying and TradeCo function Centralized buying functions are performed by PUMA TradeCos. PUMA TradeCos primarily serve the purpose of: Centralized order placement guidance (according to order place dates, level loading initiatives, available productions capacities, minimum order quantities, minimum production quantities, etc.); Order fulfillment guidance (in time deliveries, quality and delivery performance checks, key marketing styles, global instore date guidance, etc.); Order bundling to achieve cost savings and to facilitate deliveries; Structured container settings, consolidation and price negotiation with logistics service providers; Logistics coordination and document management. In order to effectively ensure the accomplishment of its centralized buying/TradeCo function, PUMA Austria has implemented and maintains a customized SAP ERP solution which has been in use for many years. The system was designed/cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er settings and consolidation. The logistics coordination as well as the document management are critical success factors for in-time delivery and smooth operations with customs as well as local authorities. The whole business process management is centrally coordinated by PUMA Austria in its own comprehensive ERP system as well as in further affiliated systems. b. Sourcing of products from local vendors PUMA Sports India also procures goods locally from third party vendors in India. In relation to same, PUMA Sports India involves in limited product development activities. With respect to the locally procured goods, PUMA Sports India in consultation with the overseas group entities determines the products to be sold in the India market. 4.2.10.3 Marketing of PUMA products International Marketing - Global As the owner of the PUMA trademarks, PUMA SE is responsible for the global brand building, communication and marketing activities, irrespective of whether products are distributed via wholesale or retail distribution channels. The direction of the brand is set by the PUMA SE, as well as decisions regarding the major campaigns that will be operated gl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marketing, sales and distribution of PUMA products. This includes developing strategies for working with key retailers. The local merchandise managers are responsible for marketing, in deciding which products to take in their territory. They analyse the efficiency of the local business within their respective product category and liaise with major accounts as to their needs. The sales department is responsible for field sales and the management of national accounts. The national accounts team comprises managers and specialist teams each covering accounts within the Sports Performance, Sport Lifestyle and Sport Fashion areas of the business. The tasks performed by a key account manager typically include: Development and implementation of strategic customer specifications; Internal contact person/coordinator for all customer relevant questions; Budget planning on annual/quarterly basis; Preparation of presentations, follow-up sales meetings, preparation of offers, rolling forecast planning and strategic customer planning. The field sales team is responsible for different geographical regions within each PUMA Sports India's sales territory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd development process of PUMA's merchandise. WCL negotiates quality standards with third party vendors on behalf of PIT26 production and quality inspection staff are employed by DSL and its overseas representative offices and affiliates. They perform quality checks on the products produced by the manufacturers. To control and manage this risk, PUMA SE lays down the guidelines/protocols to be followed by the manufacturing entities. The manufacturing units follow the protocols and undertake the quality control/testing of the products to ensure that the goods conform to the prescribed quality standards. Therefore for imported goods, PUMA Sports India does not perform the said function. For goods procured from local manufacturers, PUMA Sports India's sourcing team inspects the quality of products at the time of production as well as at the time when goods are received in warehouse from the manufacturer's factory. The sourcing team regularly visits the factory for detailed inspection of each and every type of product being manufactured and further ensures that the sample product meets the requirements and expectations as per the required quality. Also, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are to be procured from local manufacturers, comes from PIT and are replicated in India. There are certain products where PUMA Sports India would modify the style according to requirements of customer, however the same would in line with the PUMA global standards. ** The products are being manufactured by third party vendors *** Restricted to Indian market. 4.2.11 Risks assumed Briefly summarized below are some of the key business risks, which are applicable to PUMA Sports India and its Group Companies in relation to the trading activity of PUMA Sports India: 4.2.11.1 Market risk PUMA Austria shares the market risk with its distributors (including PUMA Sports India), which may result from increased competition, declines in market demand or changes in market perceptions regarding PUMA products. In the event that the ranges launched, reflects a misreading of the market or the market sentiment undergoes sudden unexpected shifts, PUMA Sports India's sales could decline. This in turn would also result in a decline in PUMA Austria's sales to its Distributors. Both, PUMA Austria and PUMA Sports India needs to ensure that they are adequat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From an Indian customer standpoint, it is primarily the responsibility of PUMA Sports India to ensure that the products sold in the market meet the prescribed quality standards. However, PUMA Sports India passes on any liability incurred by it on account of a defective product to PIT and in turn to the respective manufacturing entity. Thus PUMA Sports India does not assume warranty and/or product liability risk. 4.2.11.3 Inventory risk PUMA Sports India determines its inventory levels and re-order levels based on the estimated demand for the products during the year although, PUMA SE provides management insights in relation to trading conditions and budget objectives. With respect to the wholesale business, PUMA Sports India aims to get its customers to place their orders as long as possible in advance before the required delivery date in order to be able to place back orders for stock. In practice this only happens to a limited extent and it is necessary to make speculative purchases in order to fulfill market potential and not to lose sales. Also, in the event of a particularly poor consumer response to a product or range, the customers of PUMA Sports Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia PUMA Group Market risk Yes Yes Product liability risk No Limited Inventory risk Yes No Credit and collection risk Yes** No Foreign Exchange risk No Yes * PUMA Sports India bears limited product liability risk with regard to Indian customers ** PUMA Sports India will face the said risk with respect to goods sold to wholesalers/ distributors only 4.3 Assets employed 4.3.1 Tangible Assets PUMA Sports India owns routine tangible assets associated with sales and distribution such as leased property including warehouses, offices, showrooms etc. In addition, PUMA Sports India also owns inventory and customer accounts receivable. Key tangible assets employed by PUMA Sports India are as follows: Tangible Assets Amount (in INR) Leasehold improvements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, the support received has been routine and has not enabled developing any significant local sourcing intangibles. Further, with the modification in sourcing structure and concentration of some of the core activities at PIT, PUMA group would be able to achieve higher synergies and administer sourcing function appropriately. Any procurement related intangible created such as vendor lists, supplier information etc. are owned by PUMA group. Also, these intangibles cannot be termed unique as this information would also be developed by similarly placed procurement companies. PUMA Sports India assists PIT/WCL in sourcing goods from India for supply to other PUMA sales affiliate. However, the functions performed by PUMA Sports India does not enable to create a unique intangible as PUMA Sports India largely uses the existing information available within the group and hence PUMA Sports India does not own any such intangible. Human capital related intangibles PUMA Sports India's workforce whom it uses for undertaking trading activities generally constitutes of graduates or appropriately qualified for performing the aforementioned functions. Further, PUMA Sports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e group AEs. 3.5 The AE has entered into a local sourcing support agreement with assessee on 01.04.2015 to grant assessee a non-exclusive and non-transferable sub-license to manufacture or have manufactured and to use, offer for sale and sale the licensed products bearing the licensed trade markets within the licensed territory. Further assessee has also received R D services and support services from its AE for the goods locally procured, manufactured by third party manufacturers in India. 3.6 The nature of services as described in the transfer pricing study are as under: 4.2.2.1 Nature of services R D Services PUMA Sports India receives research and development/support services from PIT for the goods locally procured, manufactured by third party manufacturers in India. Research and development /Engineering services are rendered by Development Services Limited, but the costs incurred in providing research and development/engineering services are taken over by PUMA SE. PUMA SE has granted to PIT a non-exclusive and worldwide right and license to manufacture or have manufactured PUMA products. As per the agreement PIT has granted non-exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uppliers on application of special labels on products, changing packing requirements, delay in shipment, size run, and/or increase or decrease in the order quantity; Monitoring and following up with the logistic departments of suppliers to arrange on time delivery of the manufactured products; and Performing any miscellaneous activities incidental to the above as may be required by PUMA Sports India from time to time. Along with the above and as way of support to PUMA Sports India with relation to procurement of goods from local manufacturers, PIT has also provided a set of policy/ principle documents directing PUMA Sports India and the local manufacturers being engaged by PUMA Sports India, to adhere to the said principles and standards ( referred as Declaration of Principles ) which are also being followed by PUMA Group at global level. The list of said Declaration of Principles are as follows: A. Anti-corruption statement. B. Building safety policy. C. Policy against use of exotic skins, feathers and mulesed wool. D. Pay for Play policy - to encourage manufacturers to improve their social, health, safety and environmental standards and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparable must have incurred losses consequently, for three years and that if it has incurred profit in event one of the three years, it cannot be held that this comparable has to be rejected by applying persistent loss filter. 4.2 It is submitted by the Ld.AR that the annual reports of this comparable which is filed in the paper book Part 2 for all the three preceding assessment years reveals that, it has never incurred loss referring to page 3479 (FY 2015-16), 3554 (FY 2016-17), 3608, 3676 (2017-18). He submitted that the observations of the Ld.TPO are incorrect for rejecting this comparable. The Ld.AR has also submitted that this company is functionally similar with that of assessee as it is engaged in the wholesale and retail sale of textiles, clothing, footwear and leather goods. He also submitted that the Ld.TPO however has not objected for the functional dissimilarity of the assessee with this comparable, but has rejected it by holding that this comparable fails the persistent loss filter. 4.3 On the contrary, the Ld.DR placed reliance on orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r u/s 92CA(3) after rejecting the TP study report prepared by the assessee, for various reasons mentioned in his order, he is bound to do a fresh search of the comparables. For this purpose, certain filters are adopted. These filters have almost been standardised and are being used all over India. This fresh search gives us a list of comparable companies which have passed the filter test. This constitutes the search matrix of the assessee company. For example, in this case, it is related to AY 2018-19 for which the order by TPO has been passed on 19.03.2021. Therefore a search would have been made around September 2020 in Prowess and Capitalline database which is extensively used by TPOs. Therefore, for FY 2017-18 when a search is made in September 2020, it is fairly assumed that the financials of all the companies for the current year i.e.. 2017-18 will be available in the public domain and hence, will be captured. It may humbly be noted that when the appellant prepares and submits the Transfer Pricing Study Report, the current year data is not available in most of the cases. Therefore, the TPO is left with no other option but to do a fresh search as per the Act and Rules. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will also give some comparables which will not be favourable to the appellant. 5. The assessee can participate in the proceeding before the TPO and he can point out if any such company has not been captured. The TPO can consider only those comparables which are available in Province or Capitalline database. If the assessee asked for inclusion of any comparable then TPO will have to do a fresh search in these two databases to include these comparables if available in the database and passes all the filters as a corollary it may throw up some new comparables which were not available on the date of previous search. Therefore, entire exercise will be repeated once more and we may arrive with a new set of comparables some of which may be favourable to the assessee and some of which may not be favourable to the assessee. Therefore, in all fairness, a cut off line has to be drawn and we will have to restrict ourselves to all the companies available in the search matrix of the TPO. 6. To sum it up, if these comparables are considered for inclusion then the TPO will have to be directed to carry out a fresh search and as a consequence he also will have the freedom to select few ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. b) Aditya Birla Fashion and Retail Ltd. SSIPL Lifestyle Pvt. Ltd. 5.4 The Ld.AR submitted that these companies was rejected by the Ld.TPO, primarily for the reason that it is mainly into manufacturing and fails the core function filter. Before the DRP, the assessee had sought for their inclusion but DRP upheld the observation of the Ld.TPO. 5.5 The Ld.AR emphasized that though this comparable is engaged in manufacturing, it also has a trading segment and is engaged in trading lifestyle products like footwears, apparels and accessories etc. The Ld.AR referring to page 527 of paper book Vol 2 submitted that this company is primarily engaged in the business of trading of footwear and accessories through its retail and wholesale network. 5.6 Referring to page 542 of paper book, the Ld.AR submitted that the expenses incurred by this company is in respect of purchase of stock in trade and no expenses are incurred on purchase of raw materials that reveals that it is engaged in trading activity. It is the submission of the Ld.AR that the observations of the revenue that this comparable is in manufacturing activity is wrong having regards to the annual report and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is into manufacturing activity without verifying the annual reports. The Ld.AR submitted that the annual reports placed at page 157 of paper book clearly reveals the segmental details of the trading and manufacturing activity carried on by this company. He thus prayed for its inclusion. 5.12 The Ld.DR on the contrary relied on the orders passed by authorities below. 5.13 We have perused the submissions advanced by both sides in the light of records placed before us. We note that the annual reports has not been looked upon by the revenue authorities before rejecting this comparable. In the interest of justice, we remand this comparable to the Ld.AO/TPO for reconsidering the plea of assessee in the light of the annual reports. Accordingly we remand this comparable back to the Ld.AO/TPO for necessary verification in accordance with law. Accordingly, ground no. 14 raised by assessee stands allowed for statistical purposes. 6. Ground no. 15 The Ld.AR is seeking exclusion of following comparables by submitting that they are functionally not similar with that of assessee. a) Metro Brands Ltd. (Also known as Metro Shoes Ltd.) b) Adidas India Mktg. Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Income/Total Income 37.15% 38.31% 38.75% Result Fails trading income filter of 75% 12. We also notice that the TPO has applied trade filter of 75% while selecting fresh comparable companies and according to the above working the company fails the trade filter of more than 75%. We further notice from the financials of Metro Shoes Ltd., that the company has paid customs duty. We do not see any merit in the contention of the DRP that Metro Shoes is also primarily engaged in trading of footwear similar to the business of the assessee while rejecting the plea of the assessee on the application of trade filters. In view of this discussion we hold that Metro Shoes fails the trade filter of more than 75% and therefore should be excluded from the comparable companies. 6.4 The Ld.DR relied on the orders passed by authorities below. We have perused the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that this comparable operates on a different business model as compared to assessee. It is submitted that this comparable has been excluded by Coordinate Bench of this Tribunal in assessee s own case for A.Y. 2015-16 in IT(TP)A No. 306/Bang/2022. 6.12 The Ld.DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. 6.13 We note that Coordinate Bench of this Tribunal has rejected this comparable by observing as under: 13. With regard to the exclusion of Sreeleather Ltd: the learned A.R. contended that Sreeleather Ltd. is engaged in both wholesale and retail trading of footwear and leather articles. The learned A.R. drew our attention to the financials of the company for FY 2014-15 (page 1973 of the paper book III) wherein out of the total turnover of the company 66.76% is derived from retail trading activity and only 12.78% is derived from wholesale trading activity. The learned A.R. therefore contended that the assessee who is into wholesale trading business cannot be compared with Sreeleather Ltd. whose major income is from retail trading. 14. We heard th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pokarna Marketing Pvt. Ltd. 6.14 The Ld.AR submitted that sufficient information is not available in respect of this company, however the Ld.TPO has adopted this comparable only observing the principle business activity to be wholesale distribution of textiles. 6.15 The Ld.DR on the contrary relied on the orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. 6.16 The Ld.TPO has considered this comparable in the final list by observing as under: On Page No. 6 of the annual report for FY 2017-18, it is clearly mentioned that the principal business activity of the company is wholesale distribution of textiles. So, the contention of the taxpayer is rejected. 6.17 It has been argued by the assessee that there is insufficient description regarding the business activity carried on by this comparable. It was also submitted before the DRP that there is no information of this comparable even available on the public domain. The DRP however affirmed the observations of the TPO by observing as under: 6.7 Having considered the submissions of the assessee, it is noted that page 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted the ALP having regards to the financials of the two companies and determine the margins afresh in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes. 8. Ground no. 17 is regarding the working capital adjustment not granted to assessee. 8.1 After hearing the contentions of both the sides, we are of the opinion that this issue is no longer resintegra as this issue is covered by the decision of Coordinate Bench of this Tribunal in case of Huawei Technologies India (P.) Ltd. v. Jt. CIT reported in (2019) 101 taxmann.com 313 wherein this Tribunal has held as under: 17. In the light of the above discussion we are of the view that the CIT(A) was not justified in denying adjustment on account of working capital adjustment. Since, the CIT(A) has not found any error in the TPO s working of working capital adjustment, the working capital adjustment as worked out by the TPO has to be allowed. We may also add that the complete working capital adjustment working has been given by the assessee and a copy of the same is at page 173 192 of the assessee s paper book. No defect whatsoever has been pointed out in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is able to establish the risks undertaken by the outstanding comparables, the same may be considered in accordance with Rule 10B by the Ld.TPO. Necessary verification may be carried out in respect of the same by the Ld.TPO. Accordingly this ground raised by assessee stands partly allowed for statistical purposes. 10. Ground nos. 19-20 is in respect of restricting the transfer pricing adjustment only to the gross income earned by assessee on sales made to AE. The Ld. TPO, in the TP order determined the TP adjustment on the entire business operation of the assessee, which also includes revenue from third party customers and expenses incurred/payment made to third party vendors. It is submitted that the Ld.TPO did not restrict the transfer pricing adjustment to the quantum of the disputed international transactions undertaken by the assessee. The detailed computation of TP adjustment undertaken by the Ld. TPO is provided in Section 19 of the TP order. 10.1 The Ld.AR provided the computation of the ratio of disputed international transactions to the total operating cost and the subsequent computation of the TP adjustment which is as under: Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before us. 10.3 Based on the above submissions, we direct the Ld.AO to verify the computation of the international transaction to the total operating cost as provided by the assessee hereinabove. In any event, the transfer pricing adjustment has to be restricted to the value of international transaction alone. The Ld.AO is directed to consider the claim of assessee in accordance with law. Having regard to the observations of various Tribunals and Hon ble High Courts, Hon ble Supreme Court on this issue in the referred cases. Accordingly, these grounds raised by assessee stands allowed for statistical purposes. 11. Ground nos. 21-28 11.1 The Ld.AR submitted that under the sourcing structure, assessee is responsible for sourcing PUMA products which is located in Germany. It is submitted that, the assessee purchases PUMA products from unrelated third party vendors in its own name and for its own account for resale to PUMA entities. For this activity of global sourcing function, the assessee is assisted by PUMA International Trading Services Ltd. (PITS) in Hongkong that performs sourcing support activities for assessee, and World Cat Ltd. (WCL) in Hongkong that ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 1683/PN/2011) Ericsson Mobile Communications India Pvt. Ltd. and others [ITA No. 16/2014] Avery Dennison (India) P Ltd [TS-619-ITAT-2015(Del)- TP] 11.6 He submitted that, a similar issue has been considered by Coordinate Bench of this Tribunal in assessee s own case, wherein the buying commission fee paid by the assessee was treated as an integral part of the distribution activity performed by assessee. He relied on assessee s own case in IT(TP)A No. 1611/Bang/2017 for Assessment Year 2013-14. 11.7 On the contrary, the Ld.DR vide written submission dated 20.06.2023 submitted as under: iii. Grounds related to local sourcing support services: TPO has discussed this issue in detail in Para no. 20 to 21.5 (Page no. 44 to 55) of the paperbook submitted by the assessee and DRP has discussed this in para no.12 of its order as under: 12.0 Ground of Objection 12: Payment of Local Sourcing Support Fees: 12.1 The learned TPO/A0 have erred, in law and in facts, by determining the ALP of the local sourcing support fees paid by PUMA Sports India of INR 21,28,16,303/- as 'NIL' by stating that payment of local sourcing support fees mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that the assessee continues to show poor profits and still pays a procurement fee to the PIT. Thus, the transactions are routed through the PIT in order to shift profits outside India. 12.7 Hence, we are inclined to uphold the TPOs decision of holding the ALP of the payments towards local sourcing support as NIL. Thus, the objection of the assessee is rejected. 7. Each transaction of the assessee which can be separately benchmarked needs to be segregated. This is a transaction which can be separately benchmarked and has noted by the TPO and DRP that the assessee has capability, knowledge and resources about the local manufacturers directly, without help of PIT. Moreover, it is practically impossible for PIT, a company headquartered in Germany to coordinate the procurement made locally as per the needs of the local market. Therefore, this transaction is similar to loyalty, management fee where separate benchmarking has been applied by various orders of the Tribunal and it has also been held that the assessee needs to show that services has indeed been rendered. We have perused the submissions advanced by both sides in the light of records placed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mse India (P) Ltd. vs. ACIT reported in (2016) 380 ITR 307 considered the question of aggregation of international transactions. Their Lordships laid down the principles of aggregation of international transactions by holding that, several transactions between two or more AEs can form a single composite transaction, if they are closely linked transactions and the onus is always on the assessee to establish that such transactions are part of an international transaction pursuant to an understanding between various members of a group. 11.12 The Hon ble High Court observed that, in case of a package deal where each item is not separately valued but all are given a composite price, these are one international transaction. And that, where a number of transactions are priced differently but on the understanding that the pricing was dependent upon the assessee accepting all of them together (i.e. either take all or leave all), then also they have been held to be taken as one international transaction. 11.13 The onus is cast on the assessee to prove that although each is priced separately, they were provided under one composite agreement. It is further held by the Hon ble Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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