TMI Blog2023 (9) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer and therefore, naturally the assessee cannot be considered as a distributor. Further, determination of Arm s Length Price of marketing support services by applying the proportionate sales percentage based on the sale of comparable companies is also not a correct approach for the reasoning nature of the services rendered by Associated Enterprises to the assessee was not demonstrated to be similar. The assessee has also failed to completely demonstrate the Arm s Length Price of intra group services by satisfying need test, benefit test, rendition test, duplicative test etc . We set aside the whole issue back to the file of AO/ TPO with a direction to the assessee to substantiate the Arm s Length Price of the intra group services demonstrating the above tests / ingredients mentioned. On submission of the detail by the assessee, the learned Transfer Pricing Officer may examine and determine the Arm s Length Price in accordance with the law. TPO may examine the claim of the assessee and determine the Arm s Length Price of these intergroup services. We make it absolutely clear that Onus would be on assessee first to show that international transaction is at arm's leng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of expenses of ₹16,70,138/- and further, reimbursement of expenses is ₹7,04,81,427/- totaling to total allocation of corporate expenses of ₹9,84,57,908/-. The learned Transfer Pricing Officer asked the assessee to justify the Arm s Length Price of allocation of corporate expenses in the form of intra group services payments. The assessee submitted that this allocation of corporate expenses of ₹2,63,06,343/- was not claimed as deduction in its return of income. The learned Transfer Pricing Officer noted that assessee has voluntarily disallowed the above expenditure but Transfer Pricing Officer is required to determine the Arm s Length Price of intra group services. The learned Transfer Pricing Officer examined whether the services have been rendered and assessee has received any benefit of the same or not. After analysis, the learned Transfer Pricing Officer noted that assessee has incurred a loss of ₹10.97 crores on turnover of ₹57.68 crores and therefore, assessee did not get any benefit of intra group services payments. He further held that the loss is mainly on account of ₹9.85 crores shown as allocation of corporate expenses paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement after 1st August, 2007 to 31st march, 2008. Further, the agreement made on 11th September, 2008, on expiry of the earlier year agreement has been executed with retrospective effect. The details are also submitted by the assessee in the form of email etc., on sample basis. The learned CIT (A) also considered the explanation of the assessee that the learned Transfer Pricing Officer has chosen the assessee as a tested party‟. After considering the facts and circumstances of the case, the learned CIT (A) reached at a conclusion that if market supports services have been rendered by the Associated Enterprises to the appellant, such services would be undertaken by the Associated Enterprises as that of a distributor. He further held that in the present circumstance the application of Comparable Uncontrolled Price as the most appropriate method is justified. He further noted that assessee has disallowed ₹2.63 crores on its own. The above disallowance is also pertaining to the part of the year being only four months and further no reasoning are given for balance period. Accordingly, he dismissed the appeal of the assessee on this ground. Thus T P Adjustment was confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower authorities cannot be disturbed. 012. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly, in this case, the intra group services paid by the assessee are supported by agreement only for the part of the years. For the balance period merely on the basis of conduct of the assessee, the Arm s Length Price of intergroup services cannot be determined. Further, it is also the fact that assessee is not a distributor but is a manufacture. As the learned Transfer Pricing Officer himself has determined the Arm s Length Price of the intergroup services and after that holding that Arms Length Price is merely Rs. . 85 lacs of the total intergroup services of ₹9.84 crores, itself says that there are certain services which were required by the assessee and same were provided by Associated Enterprises. Naturally to that extent the benefit is derived by the assessee. Further, assessee has also submitted certain email communications on the basis of which assessee wanted to prove that services have been rendered. Those emails are only on sample basis. Therefore, assessee has not submitted the complete details of proof of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 143(3) read with section 144C(1) of the Act dated 6th September, 2013 and has preferred the appeal before us. The only adjustment in the assessment order was with respect to the determination of Arm s Length Price of the intra group services and adjustment of ₹4,41,05,838/-. The grounds of appeal raised by the assessee are also challenging this issue only. 014. The brief facts shows that assessee filed its return of income on 29th September, 2009 at ₹ nil. Subsequently, the return of income was revised on 30th September, 2009 at ₹nil. The return of income was picked up for scrutiny. As the assessee has entered into the international transaction, the reference was made to the learned Transfer Pricing Officer for determination of Arm s Length Price. The only dispute was with respect to the intra group services amounting to ₹9,07,38,948/- on account of business development, marketing support finance support and IT support services, which is benchmarked by the assessee following the Transactional Net Margin Method as the most appropriate method. The learned Transfer Pricing Officer has examined the above international transaction. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee as tested party, Assessee selected its Associated Enterprises as tested party. Ld TPO reejcetd Foreign AE as tested party because assessee claimed to have received services for the goods produced in India. Further, the learned Dispute Resolution Panel upheld the action of the learned Transfer Pricing Officer taking assessee as a tested party. The learned Dispute Resolution Panel also upheld the manner of determination of Arm s Length Price of the international transaction. Based on this, the final assessment order was passed on 6th September, 2013, which is challenged before us. 017. The learned Authorized Representative reiterated his argument made for A.Y. 2008-09. He further submitted that there is no reason why a foreign tested party i.e. foreign Associated Enterprises cannot be taken as a tested party. He otherwise submitted that intra group services have been rendered by the Associated Enterprises and they have been remunerated at Arm s Length Price. 018. The learned Departmental Representative vehemently supported the orders of the lower authorities. 019. We have carefully considered the rival contentions and perused the orders of the lower authorities. Identi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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