Disa India Limited Vs ITO (ITAT Bangalore)
The Tribunal in assessee’s own case for assessment year 2012-2013 (supra) had directed to do afresh transfer pricing analysis and determine the ALP of international transactions with regard to group service fees paid by the assessee to its AEs.
In view of the Tribunal order in assessee’s own case for assessment year 2012-2013 (supra), which is identical to the facts of the instant case, we restore the matter to the AO / TPO. The AO / TPO shall follow the same directions that are given by the ITAT in assessee’s own case for assessment year 2012-2013 for determining the ALP of impugned international transaction the assessee had with its AE’s.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal at the instance of the assessee is directed against the final assessment order dated 21.09.2017 passed u/s 143(3) r.w.s. 144C(13) of the I.T.Act. The relevant assessment year is 2013-2014.
2. The assessee has raised seven grounds. All the grounds relate to the solitary issue regarding Arms Length Price (ALP) adjustment amounting to Rs.1,33,76,590 made to group service fees paid by the assessee to its Associate Enterprises (AEs).
3. The brief facts of the case are as follow:
The assessee is a company. It is engaged in the business of manufacturing and services. For the assessment year 2013-14, the return of income was filed on 30.11.2011 declaring total income of Rs.27,19,08,550. The assessment was taken up for scrutiny by issuance of notice u/s 143(2) of the I.T.Act. During the course of scrutiny assessment, the matter was referred to the Transfer Pricing Officer (TPO) for determining the ALP of the international transactions entered by the assessee with its AEs.
4. The TPO vide order dated 25.10.2016 passed u/s 92CA of the I.T.Act, proposed TP adjustment amounting to Rs.1,33,76,590 to the group service fees paid by the assessee to its AEs. The TPO was of the view that the assessee was not able to justify the need for making payment of Rs.1,33,76,590 to its AEs on account of group service fees. The TPO held that the assessee has not received any benefit / service from its AEs for making such payment. Accordingly, the TPO treated the ALP as `Nil’ and proposed the transfer pricing adjustment of Rs.1,33,76,590.
4. The AO passed a draft assessment order u/s 143(3) r.w.s. 144C(1) of the I.T.Act dated 22.11.2016 incorporating the arms length adjustment proposed by the TPO. The assessee preferred objections to the DRP against the draft assessment order. The DRP vide its directions dated 16.08.2017 upheld the arms length adjustment proposed by the TPO. Pursuant to the DRP’s direction, the A.O. passed final assessment order dated 21.09.2017.
6. Aggrieved by the final assessment order passed u/s 143(3) r.w.s. 144C(13) of the I.T.Act, the assessee has preferred this appeal before the Tribunal. The learned AR submitted that an identical issue was considered by the Tribunal in assessee’s own case for assessment year 2012-2013 in IT(TP)A No.290/Bang/2017 (order dated 25.11.2020). The learned AR submitted that the Tribunal in assessee’s own case for assessment year 2012-2013 (supra), had restored the matter to the AO/TPO directing to determine the ALP afresh for the group service fees paid by determining the most appropriate method and comparability analysis.
7. The learned Departmental Representative also agreed that the issue in question is squarely covered by the order of the Tribunal in assessee’s own case for assessment year 20122013 (supra), and accordingly submitted that similar view may be taken for this assessment year also.
8. We have heard rival submissions and perused the material on record. The Tribunal in assessee’s own case for assessment year 2012-2013 (supra) had directed to do afresh transfer pricing analysis and determine the ALP of international transactions with regard to group service fees paid by the assessee to its AEs. The relevant finding of the Tribunal reads as follow:-
“17. Grounds from 1-10 relate to payment made to AE in view of intragroup services received by assessee.
18. It is observed that Ld.TPO determined ALP at NIL by applying CUP, vis-à-vis, ALP determined by assessee at aggregate level by using TNMM. Ld.TPO held that assessee did not obtain any benefit out of such services and that such services provided by AE were not required, as, assessee failed to provide evidence regarding receipt of services, alleged to be rendered by AE, necessitating any payment. It is observed that, Ld.TPO thus held that, as there is no benefit from services for which payments has been made, he determined ALP of international transaction at Nil, without carrying out any FAR analysis of intra-group services. This approach of Ld.TPO is not acceptable, as once a transaction has been categorised as independent international transaction, it is necessary to determined ALP of such transaction. Ld.TPO cannot consider ALP at ‘NIL’ and value of transaction has to be computed as per law.
19. The Income Tax Act provides computation of arms length price of any international transaction as under:
Computation of income from international transaction having regard to arm’s length price.
92. (1) Any income arising from an international transaction shall be computed having regard to the arm’s length price. Explanation.— For the removal of doubts, it is hereby clarified that the allowance for any expense or interest arising from an international transaction shall also be determined having regard to the arm’s length price.
(2) Where in an international transaction [or specified domestic transaction], two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm’s length price of such benefit, service or facility, as the case may be.
20. According to above provisions following principles emerge:-
