CEVA LOGISTICS INDIA P.LTD,GURGAON vs. DCIT, CIRCLE-1(1), GURGAON

The present appeal has been filed by the assessee challenging the final assessment order dated 30.10.2018 passed under section 143 (3) r.w.s. 144 C of the Income Tax Act, 1961 (for short the ‘Act) pertaining to assessment year 2014-15, in pursuance to directions of Learned Dispute Resolution Panel %\ (DRP).

In ground No.l, the assessee has challenged the validity of the assessment order being passed in the name of a nonexistent entity. However, at the time of hearing, on instructions, Ld. Counsel did not press the ground and submitted for arguing the issue on merits.

Keeping in view of the aforementioned submission of learned Counsel, we dismiss ground No. 1 as not pressed.

In ground No.2 to 4, the assessee has challenged the decision of the departmental authorities in determining the value of the international transaction relating to management services availed from the associated enterprises at Nil.

Briefly the facts relating to the issue in dispute are, the assessee is a resident corporate entity engaged in the business as a logistic service provider, offering comprehensive freight and forwarding services. In the assessment year under dispute, assessee entered into various international transactions with the overseas Associated Enterprises (AE) one amongst them being management services availed from the AE. Assessee benchmarked the transactions as per the statutory provision and claimed that the transactions with AE are at arm’s length. After verifying the TP study report the TPO accepted the arm’s length nature of all transactions, except, payment made towards management fees amounting to Rs. 15,05,26,398/-. Accordingly, he issued a show cause notice to the assessee to furnish necessary details to A 3 demonstrate that not only it has received the services from the AE but such services has benefited the assessee. In response to the show cause notice, the assessee furnished copy of the agreement with AE and all other details including allocation key, invoices raised etc. to support its claim that payment made towards management fee is at arm’s length. However, the TPO did not accept assessee’s contention. Ultimately, he concluded that neither the assessee could establish that it has actually availed the services of the AE nor any benefit has accrued to it as a result of such services. Accordingly, he determined the arm’s length price of the transaction at Nil by applying Comparable Uncontrolled Price (CUP) method and suggested the fee paid of Rs. 15,05,26,398/- as adjustment to be made to the income of the assessee. While framing the draft assessment order, the Assessing Officer added back the amount to the income of the assessee. Challenging the addition, the assessee raised objections before learned DRP. However, Learned DRP referring to similar adjustment made in assessment year 2011-12, ultimately, upheld the decision of the TPO.

Before us, learned Counsel appearing for the assessee submitted, the issue is squarely covered by the decision of the Tribunal in assessee’s case in assessment year 2007-08, 2009- 10, 2010-11, 2011-12 and 2012-13. He submitted, though Ld. DRP has accepted that the assessee has received management services from the AE however it has upheld the adjustment by merely saying that no benefit has accrued to the assessee.

Learned Departmental Representative submitted, the assessee has not made any separate benchmarking of the management services as the assessee has adopted an aggregate approach. He submitted that the AE has merely allocated certain cost to the assessee, which does not reveal whether any services were actually rendered or assessee benefitted through such services. Thus, he submitted, assessee having failed to demonstrate the actual rendering of services and benefit received, the adjustment is justified.

We have considered rival submissions and perused material on record. It is evident, the assessee had paid the amount in dispute to the AE towards ie4e^group services in the nature of management services. The details of services rendered broadly are as under % * Broad heads of administrative Nature o f administrative support functions support functions \ , ---------------------------------------------------------------------------i t Solutions - Supply Chain Solutions, Warehouse Management and Value- added solutions; in IT Run & charge o f customer systems and back office applications; responsible for Maintain cost developing, managing and maintaining such systems. - Global Infrastructure - design, build and run platform s that hosts

It is further relevant to observe^ this is not the first year wherein the assessee received such services and made payment to the AE. The TPO himself has referred to similar nature of transaction made in assessment years 2012-13, 2013-14 and 2014-15. Thus, the assessee has made payment towards identical nature of transaction in various assessment years including assessment year 2011-12. In fact, Ld. DRP has referred to similar transaction in assessment year 2011-12. Notably, while deciding identical issue in assessee’s case in assessment years 2007-08, 2009-10, 2010-11, 2011-12 and 2012-13 the coordinate Bench, in and others dated 12.02.2019, deleted identical additions holding as under “15. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the TPO did not dispute the fa ct that the management fee has been paid to its AE fo r the services provided by the AEs to the assessee company and these services are interlinked transaction with the freight forwarding services, whereas fo r A.Y. 2007-08, the TPO took the value o f the transaction at Nil by benchmarking the payment o f management fee as separate transaction. For A. Y. 2008-09, the assessee company furnished TP documentation, however, transactions o f the assessee was not disturbed. Thereafter again from A.Y. 2009-10 to 2012-13, the TPO treated the payment o f management fee as separate

Facts being identical in the impugned assessment year, the aforesaid decision of the coordinate Bench will squarely apply.

In any case of the matter, while the TPO has observed that the assessee failed to demonstrate that services were actually received and benefit has accrued, learned DRP has acknowledged that voluminous documentary evidences were filed before the TPO as well as before the Panel including invoices to demonstrate that the assessee, indeed, had received management services. However, it appears, learned DRP ignored the evidences filed by the assessee demonstrating receipt of management services by merely stating that the assessee failed the benefit test. As per settled judicial principles the departmental authorities are not competent to apply the benefit test to determine the value of a transaction entered with the AE at Nil. In this regard, we may

Thus, considering the overall facts and circumstances of the case as well as the decisions cited before us, more particularly, the decision of the coordinate Bench in assessee’s own case in earlier assessment years, we hold that the adjustment made by the TPO by determining the arm’s length price of the management services at nil is unsustainable. Accordingly, we direct the Assessing Officer to delete the addition.

Ground No.6 being consequential and ground No.7 being pre mature at this stage, do not require adjudication.