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TMI Blog2025 (5) TMI 1656X X X X Extracts X X X X X X X X Extracts X X X X ..... ug repurposing platform and computational biology capabilities. The appellant company had incorporated wholly owned subsidiary, namely, Exceira Inc., for the purposes of supporting it's marketing initiatives and to tap business opportunities in USA. The appellant company entered into a Marketing/Sales Services Agreement with Excelra Inc., for arm's length remuneration based on cost plus mark-up for providing marketing and sales support services. The appellant had incorporated wholly owned subsidiary, namely, Excelra BV, for the purposes of supporting it's marketing initiatives and to tap business opportunities in Europe. The appellant company entered into a Marketing/Sales Services Agreement with Excelra BV, on cost plus mark-up for marketing/sales support services. During the financial year relevant to the impugned assessment year under consideration, the appellant company had incurred total business support services expenses amounting to Rs. 10,17,19,353/-towards payment to it's AEs' and reported the said payment in Form-3CEB as "International Transaction'. The appellant company has conducted a transfer pricing study report for the impugned assessment year in respect of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces provided to the appellant company has not been proved with relevant evidences. The appellant company has merely described that, the services rendered from the AEs is more beneficial compared to providing services directly to off-shore clients, but, not provided necessary evidences in support of it's claim. Further, the appellant has also failed to prove the benefit derived from the services rendered by the AEs. Therefore, observed that, the nature of alleged services as submitted by the appellant company are very vague and general in nature without specifying as to why the appellant company needs such services and how the said services benefitted to the appellant company. No evidences were furnished by the appellant company explaining the actual receipt of services. The appellant company did not furnish any of the evidences in respect of the capabilities of the AEs and how such services has been rendered. The details of number of employees employed by the AE, cost incurred by the AEs, details of market support provided to assessee, location details of contact persons in the AEs to coordinate with the appellant company in rendering services etc. has not been furnished. Since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llocated as per pre-determination key is reasonable/ legitimate or not. In view of above discussion, held that there is no error in the conclusion of the TPO that taxpayer's claims remain un-evidenced and hence, could not be accepted as being at ALP. Therefore, rejected the ground of objection filed by the appellant company and upheld the TP adjustment made by the TPO. 5. In pursuance to the directions issued by the DRP, the Assessing Officer has passed Final Assessment Order u/sec.143(3) r.w.s.144C(13) r.w.s.144B of the Income Tax Act, 1961 on 18.10.2024 and determined the total income of the appellant company at Rs. 43,14,70,823/- by making addition of Rs. 10,17,19,353/- in respect of TP adjustment of payment made to AE for availing business support services. 6. Aggrieved by the Final Assessment Order passed by the Assessing Officer, the appellant company is now in appeal before the Tribunal. 7. Shri Sashi Mathews, Advocate-Learned Counsel for the Assessee submitted that, the learned Assessing Officer/DRP was erred in confirming TP adjustments in the international transactions as made by the learned TPO without appreciating the fact that, in terms of sec.92CA(3) of the Act, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered by the AEs has really benefitted the appellant company or not, is not required to be seen, but, what is required to be seen is the benefit accrued to the taxpayer's in it's view point and it does not necessarily have to be substantial, direct and tangible. Further, the services may not yield any benefit to the appellant company during the relevant period, but, the services rendered by the AEs may yield results in subsequent financial years. Therefore, when the appellant company has furnished all evidences to prove rendering the services by AEs, the TPO/DRP erred in rejecting the evidences filed by the appellant company only on the ground that no tangible benefit has been accrued to the appellant company for the year under consideration. Learned Counsel for the Assessee further referring to the order passed by the TPO for the assessment year 2022-2023 submitted that, the TPO has accepted similar payment of business support services to it's AEs on the basis of very same agreements between the parties without there being any change in facts when it compared to the year under consideration. The appellant company has entered into agreements with AEs since 2017 and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities below. We have also carefully considered the relevant evidences filed by the appellant company including marketing/sales services agreements with it's AEs in USA and Europe. The appellant company had entered into marketing/sales services agreements with AEs from 2017 onwards. The appellant company claims to have paid service charges to it's AEs on cost plus mark-up. We have gone through relevant agreements between appellant and it's AEs and services specified therein. Upon verification of the relevant agreements between the parties we find that, the appellant has specified various services to be rendered by the AEs in the field of marketing/sale support. However, in our considered view, said services are vague in nature and need based services by any organisation, but, it cannot be ascertained from said agreement that the exact nature of services provided by the AEs to the appellant company in the field of marketing/sales support services. Therefore, to this extent, we are in full agreement with the TPO/DRP that, the appellant company was unable to provide relevant evidences to prove the nature of services rendered by the AEs. 11. Having said so, let us come back, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, although, the TPO/DRP not required to examine the cost benefit ratio while benchmarking payment made by the appellant company towards business support services, but, in our considered view, it is necessary to examine the payment made by the appellant company in light of services rendered by the AEs. In case the AEs are not rendered any services, then, it is as good as no services has been rendered by the AEs and thus, payment made by the appellant company to it's AEs cannot be considered as commensurate with services rendered by the said AEs to argue that, it is at ALP. In our considered view, in a third party situation, no payment is made to these kinds of services by any entity. Therefore, in our considered view, going by the nature of services referred by the appellant company in their agreements with AEs and further from the email correspondences between the appellant company and it's AEs, it is clearly established that the appellant company is failed to furnish sufficient evidences to prove rendering of services by the AEs. 12. Coming back to arguments of the Learned Counsel for the Assessee in light of various judicial precedents including decision of Hon'ble Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amine the TP documentation report submitted by the assessee and methods selected for benchmarking the transactions with it's AEs. However, when the assessee has furnished certain evidences including agreements with the AEs and corresponding evidences like email correspondence for rendering services, in our considered view, the TPO cannot make Rs. NIL adjustment on service charges paid by the appellant company. Further, in the present case, it is not a case of availing intra-group services by an Indian entity from it's AEs in Abroad or outside India. Herein a case, the appellant company has incorporated wholly owned subsidiary in USA and Europe for marketing it's products/services in US and Europe markets. Therefore, it is necessary to examine the service charges paid by the appellant company in light of the revenue generated by the appellant company from it's business for the year under consideration. Admittedly, the appellant company has generated majority of it's revenue from international market which is evident from the financial statements submitted by the appellant company. Further, the appellant company has also claimed that it has increased it's client base because of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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