American Express Banking Corp Vs ADIT (ITAT Delhi)
Conclusion: Transfer Pricing Officer ( TPO ) had erred in setting the Arm’s Length Price ( ALP ) for Intra Group Services at NIL for assessee as he failed to determine ALP by applying applicable transfer pricing mechanism as per Income Tax Rules and determine the TP Adjustment hence, he was directed to reconsider the ALP by evaluating all the evidence afresh.
Held: Assessee was a non resident company incorporated under the laws of USA and engaged in the banking business. During the assessment proceedings, on perusal of Form No. 3CEB filed by assessee, it was noticed that assessee had entered into International Transactions with its Associated Enterprises (‘AE’) amounting to Rs. 3.20 billions. A reference u/s 92CA(3) was made to TPO. TPO made transfer pricing adjustment amounting to Rs. 24,30,24,147/-. The final assessment order came to be passed u/s 143(3)/144C on 15/05/2023 by making addition of Rs. 24,30,24,147/-. Aggrieved by the order, assessee preferred an Appeal before CIT(A). CIT(A) directed the TPO to grant 50% of the adjustment claimed by assessee on account of Intra Group Services availed by assessee. Assessee claimed to have receiving services in the fields of technology, Services, Risk Information Management, Head quarter, Technology Services/back office support services/treasury/regional headquarter services etc. On going through the reply filed by assessee, it was found by TPO. that assessee had failed to furnish any evidence which could establish receipt/rendering of service, though the assessee submitted description of services, but had not submitted any evidence. TPO observed that assessee had submitted “Performance score card” which showed evaluation of services, but failed to establish its authenticity and neither submitted any evidence regarding the details, how such services were received. It was held that considering the profile of assessee and the business structure of assessee, it was found that TPO was not correct in arriving the ALP at NIL on the ground that assessee had not produced the evidence for the receipt/rendering of service. TPO should have looked into all the evidences submitted by assessee and give finding after adjudicating the same. It was an accepted fact that the transaction between assessee and AE would always subjective in nature, it was fact that assessee American Express being a running and established foreign entity and they had established the business in India. Thus, there was a considerable advantage engaged by Indian entity, hence there was a greater chance of Intra Group Services transferred to Indian entity which had to be verified by the TPO by applying applicable transfer pricing mechanism as per Income Tax Rules and determine the TP Adjustment. Once again reiterate that the TP Adjustment cannot be at ‘NIL’ as determined by the TPO. Accordingly, the matter was remanded to the file of TPO for determining the ALP afresh.
