M/S. AKZO NOBEL INDIA LTD.,GURGAON vs. ADDL. CIT, NEW DELHI
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Income Tax Appellate Tribunal, DELHI BENCH: ‘I-1’ NEW DELHI
Before: SHRI G.S. PANNU, HON’BLE & SHRI SAKTIJIT DEY
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘I-1’ NEW DELHI
BEFORE SHRI G.S. PANNU, HON’BLE PRESIDENT AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No. 6007/Del/2014 Assessment Year: 2008-09
Akzo Nobel India Ltd. Vs. Addl. CIT, (Formerly known as Akzo Circle-1(1), Nobel Car Refinishes India New Delhi Pvt. Ltd.) DLF Cyber Terraces, Building No. 5, Tower A, 20th Floor, DLF Cybercity, Phase-III, Gurgaon PAN :AABCA0197Q (Appellant) (Respondent)
Appellant by Sh. Vishal Kalra, Advocate Ms. Sumisha Murgai, AR Respondent by Sh. Surender Pal, CIT (DR) Date of hearing 20.01.2022 Date of pronouncement 28.02.2022 ORDER PER SAKTIJIT DEY, JM:
This is an appeal by the assessee against order dated
22.08.2014 of learned Commissioner of Income Tax (Appeals)-XX,
New Delhi, for the assessment year 2008-09.
At the outset, we must observe, this appeal was earlier
disposed of vide order dated 24.07.2018 along with Revenue’s
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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:
The learned CIT (Appeals) erred in considering the payment of INR 19,465,250 by the Appellant towards the administrative services received from the Associated Enterprises (“AEs”) to be ‘Nil”, and in doing so grossly erred in law and in facts for the following reasons: 3.1. applying the Comparable Uncontrolled Price method and rejecting the application of Transactional Net Margin Method as most appropriate method for determination of arm’s length price in case of payment of administration fee. 3.2. drawing conclusion as regards to no economic value was derived and that no tangible and substantial commercial benefit was derived out of services for which the admin fee was paid. 3.3. disregarding the collective evidences provided in justification of the arm’s length nature of international transactions pertaining to the payment of administration fee. 3.4. the support services are in the nature of stewardship as it result into benefit to the AEs and such coordination activity is required to be carried out by the parent companies to improve its global presence and global profit.
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.
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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.
During the year under consideration, the assessee entered into
various international transactions with its overseas AEs. During
the year under consideration, the assessee, inter alia, entered
into international transaction relating to provision of
administrative services by the AE. From the report filed in From
No. 3CEB, the Transfer Pricing Officer (TPO) noticed that the
assessee has paid an amount of Rs.1,94,60,588/- towards
payment of administration fee to the AE. Noticing the nature of
payment, the TPO called upon the assessee to justify arm’s length
nature of such payment. In response to the query raised, the
assessee furnished its reply stating therein that it has entered
into a service agreement with another group company, viz., Akzo
Noble Car Refinishes, Singapore, wherein Akzo Noble Car
Refinishes has provided administrative support services in the
nature of supply chain management support, marketing &
commercial services support, commercial vehicle support,
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automotive aftermarket support, supporting R & D, human
resources, finance management and general management
support.
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
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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.
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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
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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.
Order pronounced in the open court on 28th February, 2022
Sd/- Sd/- (G.S. PANNU) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER
Dated: 28th February, 2022. RK/-
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