INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Computation of ALP - TPO made adjustment without applying any method of benchmarking international transaction -

Assessee-company made payment to its AEs in lieu of certain intra group services. AEs charged 10% mark-up on direct and indirect cost for rendering global services. Assessee applied TNMM as most appropriate method to benchmark its international transaction but TPO rejected the benchmarking of the assessee. TPO held that the assessee failed to provide exact cost incurred for each service and further pointed that the assessee had not been able to substantiate the benefit derived from the services rendered. Accordingly, the TPO determined ALP of the global services and the regional services at 'Nil'. Further, DRP upheld the findings of the TPO. Held: On perusal of documents submitted by the assessee, it was very much evident that the services were rendered by the AEs. Thus, the TPO as well as the DRP totally erred in rejecting the assessee's documents and submissions on the ground that they did not prove the benefit obtained by the assessee. The assignment to the TPO was to benchmark the international transaction and compute arm's length price. Instead of performing his statutory duties, the TPO sat into the shoes of the AO and rejected the documents on the ground that they did not prove the benefit test and such approach was not sustainable. Furthermore, the TPO rejected the assessee's claim without applying any method of benchmarking international transaction as specified in section 92C. Accordingly, the TP adjustment made by the TPO and later confirmed by the DRP failed and hence, the same was set aside.

Followed:Millward Brown Market Research Services India Private Limited v. DCIT [I.T.(TP) A. No. 932/Mum/2016, dt. 8-1-2020]

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 199

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