Case Law Details
Goodyear South Asia Tyres Private Limited Vs ACIT (ITAT Pune)
Conclusion: No transfer pricing addition in respect of international transaction of payment of Regional Service Charges pertaining to five intra-group services could be made because even if presume that the comparable uncontrolled transaction was at zero mark-up, still the value of the international transaction was within the notified tolerance range.
Held: Assessee was an Indian company engaged in the manufacturing of Goodyear branded Medium, Commercial truck tyres, etc. Return of income was furnished declaring total income of Rs.75.83 crore. After set-off of brought forward depreciation/loss of Rs.56.74 crore, income was arrived at Rs.19.09 crore. Assessee reported 17 international transactions in Form No.3CEB. AO made a reference to the TPO for determining the arm’s length price (ALP) of the international transactions. The extant dispute related to the international transaction of “Payment of Regional Service Charges (RSC)” amounting to Rs.30,22,17,046/-. Assessee adopted the Comparable Uncontrolled Price (CUP) method as the most appropriate method for demonstrating that this international transaction was at ALP. As observed by TPO, assessee, in its Transfer Pricing (TP) study report, stated that costs pertaining to RSC were reimbursed to Goodyear USA on cost-to-cost basis and further Goodyear USA aggregated the services provided by other Goodyear affiliates and compensated them on arm’s length basis. TPO did not accept the benchmarking done by assessee under the CUP method because assessee made comparison of the actual transaction (controlled transaction) with the same transaction itself conducted between assessee and its Associated Enterprise (AE), which was not uncontrolled as stipulated in the mechanism for the application of the CUP method. TPO requested assessee to furnish evidence for receipt of services, nature of services, basis for computation of payment of services to the AE and benefit derived from such services. The issue raked up before Tribunal was the transfer pricing addition of Rs.26,87,68,644/- in respect of international transaction of payment of Regional Service Charges pertaining to five intra-group services, whose ALP had been determined by the TPO at Nil. It was held that it could be seen from the calculation given on behalf of assessee and duly verified by Revenue that the mark-up on actual costs incurred by the Goodyear entities in rendering regional services to assessee was 2.22% on total value of services invoiced. This calculation was based on taking all the six regional services together. Even if the IT services were considered as without any mark-up, the mark-up on aggregate basis in respect of the remaining five services would be 2.52%. Such mark-up was within the tolerance range of 3%. Thus, even if presume that the comparable uncontrolled transaction was at zero mark-up, still the value of the international transaction was within the notified tolerance range. Thus, the case got covered by the second proviso to section 92C(2) not warranting any transfer pricing addition.
FULL TEXT OF THE ITAT JUDGEMENT
These two appeals by the assessee are directed against the separate final assessment orders dated 28-09-2018 and 14-10-2019 passed by the Assessing Officer (AO) u/s. 143(3) r.w.s. 144C and 92CA of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment years 2014-15 and 2015-16. As both the appeals are based on common facts, we are, ergo, proceeding to dispose them off by this consolidated order for the sake of convenience.
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