| The Tax Publishers2020 TaxPub(DT) 4400 (Pune-Trib) INCOME TAX ACT, 1961
Section 92C
Where assessee Indian company was aggrieved by transfer pricing addition made by TPO in relation to international transaction of 'Payment of Regional Service Charges (RSC)', considering fact that services were actually availed from foreign AE and cost allocation was done as per terms of agreement, TPO was not justified in making TP addition even if it was presumed that comparable uncontrolled transaction was at zero mark-up, because value of the international transaction was within the notified tolerance range in terms of section 92C(2).
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Transfer pricing - Determination of ALP - Payments towards Regional Service charges (RSC) - International transaction was within notified tolerance range in terms of section 92C(2)
Assessee was an Indian company engaged in manufacturing of Goodyear branded Medium, Commercial truck tyres, Wire built tyres, Road tyres and Rear farm tyres. Issue was as regards Transfer Pricing (TP) addition made by AO in respect of international transaction of 'Payment of Regional Service charges (RSC)', except component of Income Tax Services. Charges pertained to five intra-group services, whose ALP was determined by TPO at Nil. Held: Assessee produced paper book containing a summary of emails on selective basis evidencing receipt of 'Production and Tyre performance services'. On having a glimpse of such a detailed account of nature of regional services furnished to assessee, there remained not even an iota of doubt that assessee did receive such services from Goodyear, USA and other affiliates. In such circumstances, it was absolutely not justified on part of TPO/DRP to hold that these were general e-mails not evidencing any provision of services to the assessee. TPO nowhere in his order questioned correctness of certificate of the auditor on cost allocation. Thus, it manifestly established correctness of the cost allocation as per the terms of agreement. Further, as per calculation given on behalf of assessee, mark-up on actual costs incurred by 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. As IT services were not to be considered, even if such services are considered as without any mark-up, the mark-up on aggregate basis in respect of the remaining five services will be 2.52%. Such mark-up was within the tolerance range of 3%. In other words, even if it was presumed that comparable uncontrolled transaction was at zero mark-up, still value of the international transaction was within the notified tolerance range. In that view of the matter, case got covered by the second proviso to section 92C(2) not warranting any transfer pricing addition.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2014-15 & 2015-16
IN THE ITAT, PUNE 'B', PUNE BENCH--VIRTUAL COURT
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