Hyundai Motor India Ltd. Vs ACIT (ITAT Chennai)
Tribunal held that increase in brand value due to use of foreign AEs brand name cannot be considered as provision for services, as per international transaction definition u/s.92B of the Income Tax Act, 1961.
The Tribunal further held that the expression ‘benefit’ and ‘service’ have different connotations. A service has to be a conscious activity and not a passive exercise. Not all benefits arise as a result of services rendered by someone and further all services do not result in benefits to the other parties. For the purpose of definition of international transaction, in Indian context rendering of service is what needs to be considered and not benefits. Since, there is no formal agreement or arrangement between the assessee and its AEs for rendering of service in the alleged brand promotion activity, the accretion in global brand value of its parent company cannot be attributable to the assessee by adopting some theory. In this case, facts are identical and pari materia to the facts already considered by the Tribunal for earlier years. Therefore, consistent with a view taken by the coordinate Bench in assessee’s own case for earlier assessment years, we are of the considered view that the learned TPO as well as learned DRP were erred in making transfer pricing adjustments towards brand services by adopting Spearman’s Rank Correlation method and concluded that there is positive accretion between brand value and market capitalization of HMC Korea and hence, we direct the Assessing Officer/TPO to delete transfer pricing adjustment made towards brand development services
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against final assessment order passed by the Assessing Officer u/s.143(3) r.w.s 144C(13) of Income Tax Act, 1961 dated 18.11.2019, in pursuant to the directions of the learned DRP-2, Bengaluru dated 05.09.2019 u/s.144C(5) of Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2015-16.
2. The assessee has raised following grounds of appeal:-
1. “The Appellant objects to the order dated 18 November 2019 issued under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (‘Act’) by the Assistant Commissioner of Income-tax, Large Taxpayer Unit – 2, Chennai (‘Assessing Officer’/ ‘AO’) for the aforesaid assessment year on the following grounds:
