9911796707
TMI Blog2024 (1) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... tted for adjudication. 3. The assessee is a private limited company engaged in the business of providing manpower recruitment and consultancy services to clients in India. The assessee filed its return of income for AY 2013-14 on 29.11.2013 electronically declaring a loss of Rs. 13,81,44,517/-. The case was selected for scrutiny and statutory notices duly served on the assessee. A reference was made to the Transfer Pricing Officer (TPO) in order to determine the Arm's Length Price (ALP) of the International Transactions entered into by the assessee with its Associated Enterprises (AE). During the Transfer Pricing (TP) proceedings the TPO noticed that the assessee has entered into various international transactions which included payment towards shared services availed to the tune of Rs. 5,98,33,677/-. The TPO called on the assessee to provide information regarding the specific activities performed by the AE and the specific benefits accruing to the assessee from the said services. The assessee submitted that it has received various services during the year such as ITeS, Finance, Marketing, Human Resources, Legal activities from its AEs located in Hong Kong, Australia and Singa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various details submitted before the TPO including the inter company agreements (page 169 to 180). It is submitted by the ld. AR that the reason for computing the ALP at Nil is that the assessee could not substantiate the evidence for availing of services and the benefits. In this regard the ld. AR submitted that the assessee during the course of appellate proceedings has submitted various details including the detailed break up of cost of each services incurred by the AEs with time sheet of various employees of AEs who rendered services to the assessee (page 347 to 524 of the PB). The ld. AR further submitted that the various documents substantiating the receipt of services (page no. 525 to 757 of PB) were submitted before the Appellate Authority. The ld. AR also submitted that the from the perusal of the various documentary evidences submitted, it would be clear that AEs are rendering services with regard to Human Resources, Marketing, finance and legal services. The ld. AR summarized his arguments stating that in spite of submitting various details evidencing the rendering of services and the benefits received, the TPO has proceeded to determine the ALP at Nil without any benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, break up of the cost are not submitted. Before the CIT(A), the assessee submitted further evidences and a remand report was called for. Based on the remand report the CIT(A) confirmed the determination of ALP at Nil by the TPO. We notice that the assessee has submitted substantial documents in the form of agreements with AEs, details of cost recharged, employee wise cost details allocated to assessee, details of employee wise time sheet evidencing the time spent by various employees towards rendering services to various countries including assessee in India, email correspondence in support of nature and benefit of the services rendered (pages 347 to 757 of paper book). From the perusal of these records it is evident that the assessee before the lower authorities have submitted evidences in support of rendering of services, the benefits derived, basis of allocation of cost i.e. allocation key etc. and therefore we are of the considered view that lower authorities were not justified in holding that no services were rendered by the AEs in respect of which payments were made by the assessee. 8. The assessee before the lower authorities submitted that the assessee does not have any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, NFAC [2022] 142 taxmann.com 246 (Mumbai - Trib.) where it has been held that - 23. As noted above, in the present case, no search was conducted to find out the independent entity in a comparable transaction and the arm's length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the Assessing Officer under section 37 of the Act. Further, accrual of benefit to assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by Hon'ble Delhi High Court in the case of CIT v. EKL Appliances Ltd. [2012] 24 taxmann.com 199/209 Taxman 200/345 ITR 241. 24. We further find that Hon'ble jurisdictional High Court in CIT v. Lever India Exports Ltd. [2017] 78 taxmann.com 88/246 Taxman 133 (Bom.), observed as under: "7. We note that the Tribunal has recorded the fact that the respondent assessee has launched new products which involved huge advertisement expenditure. The sharing of such expenditure by the respondent assessee is a strates to develop its business. This results in improving the brand image of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - "7.23 In such cases, MNE groups may find they have few alternatives but to use cost allocation and apportionment methods which often necessitate some degree of estimation or approximation, as a basis for calculating an arm's length charge following the principles in Section B.2.3." "7.25 The allocation should be based on turnover, or staff employed, or some other basis. Whether the allocation method is appropriate may depend on the nature and usage of the service. For example, the usage or provision of payroll services may be more related to the number of staff than to turnover etc." 11. We notice that the coordinate bench of the Tribunal in Jabil Circuit India Private Limited v/s ACIT, [2018] 100 taxmann.com 165 (Mum.), after considering the OECD guidelines upheld the usage of allocation keys for allocation of intra-group services. The relevant findings of the coordinate bench in the aforesaid decisions are as under:- "28. We note that it is the claim of the assessee that the assessee has intra group AEs spread around the length and breadth of the globe. It has been claimed that the intra group services have been allocated on the basis of global agreement among the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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