ACIT Vs Schaeffler India Pvt. Ltd. (ITAT Ahmedabad)
ITAT Deletes TP Adjustment Because Management Services Were Proven Through Documentary Evidence; ITAT Upholds Relief Because TPO Could Not Treat Business Support Services as Shareholder Activities; ITAT Rejects Revenue Appeal Because Earlier Group Decisions Covered Identical TP Issue; Manufacturing TP Adjustment Deleted Because Assessee’s Margin Exceeded Comparable Margin.
The Revenue filed an appeal before the ITAT Ahmedabad against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2013-14. The dispute related to the deletion of two transfer pricing adjustments: ₹5.87 crore on account of management service fees paid to the assessee’s Associated Enterprise (AE) and ₹5.71 crore relating to the manufacturing segment.
The assessee had filed its return declaring income, which was later revised. During scrutiny, the Assessing Officer referred the international transactions to the Transfer Pricing Officer (TPO) under section 92CA. The TPO examined the manufacturing segment and the payment of management service fees. The assessee had benchmarked the manufacturing segment under the Transactional Net Margin Method (TNMM) and aggregated the management service fees with manufacturing transactions on the basis that they formed part of integrated business operations. It submitted that management support services were received from its AE for specialized business functions and produced service agreements, invoices, presentations, meeting records, training reports, allocation workings, and cost verification reports to establish the actual receipt of services.
