BRINKS INDIA PVT. LTD. (FORMERLY KNOWN AS 'BRINKS ARYA (INDIA) PVT. LTD.),MUMBAI vs. DCIT -CC - 6(4), MUMBAI

This appeal by the assessee is directed against the assessment order dated 20/07/2018 passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [in short ‘the Act’] for the assessment year 2014-15.

The brief facts of the case as emanating from records are; the assessee is a 100% subsidiary of Brink’s Security International Inc. USA and Brink’s Dutch Holding BV. Thus, the assessee is part of Brink’s Global Services which provides global risk management and secure logistics for high valuables viz. diamonds, jewellery, precious metals, securities, currency, hi-tech devices, etc. During the period relevant to the assessment year under appeal, the assessee carried out various international transactions with its overseas Associated Enterprise (AE). The international transaction which is subject matter of dispute is management fees paid by the assessee to its AE Brink’s Inc. USA. The assessee had paid management fees aggregating to Rs.4,30,77,526/- during the relevant period. To benchmark the transaction the assessee relied on “other method”. The Transfer Pricing Officer (TPO) following the decision in assessment year 2012-13 and 2013-14 applied CUP as the most appropriate method and thus, made adjustment of Rs.4,08,27,526/-. The assessee filed objections before the Dispute Resolution Panel (DRP) assailing the adjustment. The DRP observed that similar issue was decided by the DRP in assessment year 2012-13 and 2013-14 and had rejected the claim of assessee. For the similar reasons, the DRP dismissed the objections raised in the impugned assessment year as well. The Assessing Officer passed the order in line with the direction of DRP, hence, the present appeal.

Shri Farrokh V Irani appearing on behalf of the assessee submits at the outset that the issue raised in present appeal is identical to the one adjudicated by the Tribunal in assessee’s own case in for assessment year 2012-13 vide order dated 27/12/2019 and in ITA No.7071/Mum/2017 for assessment year 2013-14 decided vide order dated 15/11/2022. The ld. Authorized Representative for the assessee submits that the primary issue assailing adjustment of Rs.4,08,27,526/- on account of intra- group services on account of payment of management fee is raised in ground No.1 of the appeal. The other grounds raised in the appeal are in support of ground No.1 or are argumentative. Hence, ground No.1 is the only ground for adjudication. The ld. Authorized Representative for the assessee submits that the assessee has entered into management and technical services agreement dated 01/01/2011. The assessee has paid management fee in accordance with the aforesaid agreement for the services rendered by its AE. The facts in the instant case are identical to the facts in assessment year 2012-13 and 2013-14. The reasons for making adjustment on account of payment of management fee is also identical. The TPO in para 7.2 of the order has mentioned that the facts of the case and the submissions made during the year are identical to previous year. Similarly, the DRP in para 2.5 of the directions have recorded that the assessee’s claim with respect to management services is similar to assessment year 2013-14 and the method of benchmarking in assessment year 2013-14 and 2014-15 is also same. The DRP in para 4.1 of the directions has again reiterated that there is no material change from assessment year 2013-14. 4. representing the Department Ms.Samruddhi Dhananjay Hande, vehemently defended the assessment order. However, the ld. Departmental Representative fairly submits that the solitary issue raised in the appeal has been considered by the Tribunal in assessee’s own case in the preceding assessment years.

On the other hand, the Ld. Departmental Representative (DR) submits that as observed by the DRP the assessee has not benchmarked the international transactions at all, which is clearly a violation of law. It has not shown how the various transactions are closely linked and how they cannot be evaluated adequately the AE, for which payment to the extent made by it needs to be paid. Further, it is stated that nothing has been placed either before the TPO or the DRP to demonstrate any benefit received by the assessee from the services rendered for which payment is claimed. Elaborating further, the Ld. DR submits that the assessee has not submitted any details and evidence of costs actually incurred by the AE, specifically for providing the services to the assessee; it has also not been able to give separate details of costs paid for each service stated to have been availed; all that is stated is that costs incurred by AE have been reimbursed on allocation basis, however, no details of such costs incurred by AE and actual evidence thereof were furnished. On the basis of the above arguments, the Ld. DR supports the order passed by the AO.

We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. In the instant case, the assessee has consistently been benchmarking all of its transactions with the AE under TNMM from the beginning, for now over seven years. In all three previous assessment years i.e. from AY 2009-10 to 2011-12, wherein its international transactions with AEs were in the scrutiny, the assessments have been completed by accepting the transactions with AE being at arm‟s length holding TNMM as the most appropriate method. The assessee had submitted before the TPO that its operating revenue is Rs.168.88 crores and the operating profit is Rs.21.78 crores; the profit level indicator i.e. OP/OR works out to 12.90% for the year under consideration. The assessee submitted working of it before the TPO. Also it submitted the arithmetic mean of the profit level indicator of the comparables which worked out to 4.86% for the year under consideration. We find that in respect of management fees paid/payable during the year under consideration, the assessee had submitted before the TPO its working, calculation, allocation, method, rational and business expediency. In such a situation, the TPO should not have summarily rejected the TNMM in respect of management fees paid/payable by the assessee to its AE and proposed an adjustment of Rs.3,83,75,622/- under the CUP method, without benchmarking with comparable on a separate basis. It is further stated that the assessee has failed to show that specific and distinct services were rendered by uncontrolled transactions. In the instant case, the TPO has resorted to an ad-hoc unilateral pricing of management fees, disregarding the facts and circumstances of the case. In the case of Kellogg India Pvt. Ltd. (supra), the Tribunal has rightly held that:

On perusal of the above order of the Tribunal, it is apparent that for the Assessment Year 2012-13, the TPO had made transfer pricing adjustment by determining ALP of Management Fee at INR 22,50,000/- (750 hours x INR 3,000/- per hour) by using CUP Method, and while doing so the TPO made an adhoc unilateral estimation by assuming that around 750 hours would have been spent for providing the aforesaid services for which remuneration of INR 3,000/- per hour was appropriate. The Tribunal deleted the addition holding that the TPO had resorted to an adhoc unilateral pricing of the Management Fee without applying any of the prescribed methods and disregarding the facts of the case by placing reliance upon the decision of the co-ordinate Bench of the Tribunal in the case of Kellogg India Pvt. Ltd. v. DCIT (ITA No. 2866/Mum/2014) for AY 2009-10; M/s CLSA India Pvt. Ltd. v. DCIT (ITA No. 1182/Mum/2017) for AY 2012-13; Firmenich Aromatics India P. Ltd. v. DCIT (ITA No. 2590/Mum/2017) for AY 2012-13.

In the result, the present appeal preferred by the Assessee is allowed.”

The other grounds raised in the appeal are argumentative and are in support of ground No.1, hence, require no separate adjudication.

In the result, appeal by the assessee is allowed.