M/S. AKZO NOBEL INDIA LTD.,GURGAON vs. ADDL. CIT, NEW DELHI

At the outset, we must observe, this appeal was earlier disposed of vide order dated 24.07.2018 along with Revenue’s appeal, being ITA No.6144/Del/2014. However, while disposing of the appeal, since ground no. 3 to 3.4 remained un-adjudicated, the Tribunal, on an application made by the assessee, being registered as M.A. No. 605/Del/2018 passed an order on 24.04.2019, recalling the appeal order only to the limited extent of adjudicating ground nos. 3 to 3.4. This is how the present appeal came up for adjudication before this bench. Ground No. 3 to 3.4 raised by the assessee read as under:

As could be seen from the grounds raised, the dispute is with regard to determination of Arm’s Length Price (ALP) of the payment made to the Associated Enterprises (AEs) towards provision of administrative services.

Briefly the facts are, the assessee, a resident company, is a wholly owned subsidiary of Akzo Nobel Coatings International BV, Netherlands. It is stated, the assessee is basically engaged in the business of distribution and sale of car refurnishes. It also undertakes contract research and development for Akzo Group.

In the submissions so made, the assessee further elaborated the nature of services provided by the AE. After analyzing the submissions of the assessee qua the facts and materials on record, the TPO held that the assessee was unable to file any evidence to demonstrate that any such services were actually received. Thus, he ultimately determined the ALP of the administrative services at nil by applying Comparable Uncontrolled Price (CUP) method. Accordingly, he proposed adjustment of Rs.1,94,60,588/-. Against the assessment order passed incorporating such adjustment, assessee preferred an appeal before learned Commissioner (Appeals). However, learned Commissioner (Appeals) also upheld the adjustment made by the TPO.

Before us, learned counsel for the assessee submitted, the assessee has benchmarked all the transactions by applying Transactional Net Margin Method (TNMM) by clubbing them with other transactions. He submitted, the TPO, as such, has not disputed the benchmarking done under TNMM. However, he has treated it as a completely separate transaction and benchmarked by applying CUP method. He submitted, the assessee has entered into a service agreement with the AE, and the fact that services in terms of agreement has been provided, cannot be disbelieved. He submitted, in course of proceeding before the departmental authorities, the assessee has furnished the service agreement and other evidences to demonstrate that services were actually rendered to the assessee by the AE. He submitted, the assessee has also provided allocation key for the fee allocated to the assessee. Thus, he submitted, in face of such evidence, the TPO cannot determine the ALP at nil by disbelieving the fact that the assessee has not received any such services. Without prejudice, he submitted, the matter may be restored back to the Assessing Officer for providing opportunity to the assessee to furnish more evidence to demonstrate that the services, indeed, were received.

Strongly relying upon the observations of the departmental authorities, learned Departmental Representative submitted that the assessee did not furnish any evidence to demonstrate services, indeed, were received. Therefore, there is no reason to interfere with the decision of the departmental authorities.

We have considered rival submissions and perused the materials on record. Undisputedly, the issue in dispute is with regard to determination of ALP of certain intra-group services claimed to have been received by the assessee from its AE. It is the contention of the assessee that certain administrative services have been received from the AE for which payment has been made to the AE. However, on careful perusal of the order passed by the TPO and learned first appellate authority, it is evident, there is a concurrent finding of both the authorities that the assessee failed to furnish even an iota of evidence to demonstrate that administrative services were actually rendered by the AE and the assessee has received such services. On a specific query made by the Bench to demonstrate the receipt of services from AE through cogent evidence, including, any communication with the AE, learned counsel for the assessee expressed his inability to furnish any evidence and repeated his submission to restore the matter back to the Assessing Officer for enabling the assessee to furnish evidence, if any. We are unable to accept the aforesaid submission of learned counsel for the assessee. When the assessee has failed to furnish any evidence either before the departmental authorities or before us to demonstrate that administrative services, indeed, were rendered by the AE and the nature and scope of such services, in our view, no useful purpose would be served in restoring the matter back to the Assessing officer for reconsidering the issue. In view of the aforesaid, we do not find any valid reason to interfere with the decision of learned Commissioner (Appeals) on the issue. However, at this stage, we must make it clear, we have come to the aforesaid conclusion based on the facts involved in the impugned assessment year, wherein, the assessee has failed to furnish cogent evidence to demonstrate that administrative services were actually received from the AE. Therefore, this decision of ours may not prejudice assessee’s claim in any other assessment year, as, it has to be decided based on the evidences produce to establish the claim of receipt of services from AE. Ground no. 3 along with sub- grounds are dismissed.

In the result, the appeal is dismissed, as indicated above.