Determination of ALP of intra group services as NIL not sustained as reasonable documents maintained

Lintas India Private Limited Vs ACIT (ITAT Mumbai)

ITAT Mumbai held that determination of Arm’s Length Price (ALP) of intra group services at Rs. Nil is not justified as the assessee has maintained a reasonably sound documentation of intra group services.

Facts- the assessee is engaged in the business of advertising business and offer services related to advertising media planning services, marketing services, public relations etc. to its clients. As the assessee has entered into international transactions being part of Lowe worldwide group with its Associated Enterprises as assessee is engaged in providing advertisement services, assessee reported that it has paid GIS services charges to M/s Lowe and partners worldwide incorporation limited, London amounting to ₹3,25,61,704/-. It is also made payment of MSF services to the same entity of ₹12,93,98,247/- and payment of MNC services amounting to ₹2,17,03,792/-. The assessee has submitted that Global information services are benchmarked adopting CUP method stating that its fully loaded cost of salaries and related expenses incurred by the Associated Enterprises in providing GIS services to the assessee on actual basis.

TPO refused to accept the benchmarking. TPO concluded that on failure of assessee to prove the Need-Evidence-Benefit test upheld the Arm’s Length Price as transaction at Rs. NIL.

Conclusion- in the case of the assessee We find that the documentation of the assessee clearly shows the description of the categories of services provided, the resultant benefit arising therefrom, the rational for provision of such services, the reasonable description of the benefits or expected benefits of the services, the reasonableness of adoption of the allocation keys and reasons justifying that such allocation keys produce outcomes that reasonably reflect the benefit received. There are written contracts for the provision of services with respective obligations and rights of both the parties, describing the nature of services therein, manner of computing the remuneration was also documented. The description of the documentation provided by the assessee which has been described by the learned authorized representative clearly shows that assessee has maintained a reasonably sound documentation of intra group services. The learned transfer pricing officer and learned dispute resolution panel has heavily relied on their findings in the earlier years which have already been negated by the ITAT.

Please become a Premium member. If you are already a Premium member, login here to access the full content.