REHAU POLYMERS PRIVATE LIMITED,PUNE vs. ITO CIRCLE-8, PUNE

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ITA 1854/PUN/2024Status: DisposedITAT Pune23 July 2026AY 2020-216 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that on identical facts, the ITAT had previously allowed the assessee's appeal for earlier assessment years. Following these precedents, the Tribunal directed the Assessing Officer to delete the addition made.

What were the facts?

The assessee company made payments to its Associated Enterprises (AEs) for intra-group services. The Transfer Pricing Officer (TPO) determined the Arm's Length Price (ALP) of these services at Nil, leading to an addition of Rs. 10,63,02,114/- to the assessee's income.

What were the issues?

Whether the Arm's Length Price (ALP) of intra-group services was correctly determined at Nil by the TPO, and if the assessee had provided sufficient evidence of services received and benefits derived.

Which sections of the Income-tax Act were involved?

Section 92C,Section 92CA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE

Before: SHRI Dr. DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Nikhil Pathak
For Respondent: Shri Ajay Kumar Keshari

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the Final Assessment Order was passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act for AY 2020-21 on 26.07.2024.

2.

The assessee has raised following grounds of appeal : “On facts and in law, 1. The learned A.O. / DRP erred in making an addition of Rs. 10,63,02,114/- u/s 92C on the basis of the order of the TPO u/s 92CA(3) dated June 14, 2023 in the case of the appellant company. 2. The learned A.O. / DRP erred in determining the Arm's Length Price (ALP) of the international transactions pertaining to payments made to Associated Enterprises (AE) for intragroup services (Product, Marketing and Corporate Support Services) at Rs. Nil and thereby erred in making an addition of Rs. 10,63,02,114/-.

ITA No.1854/PUN/2024

3.

The learned A.O. / DRP erred in not appreciating that the determination of ALP by the learned TPO at Rs. NIL in respect of Intra Group Services paid by the assessee was not justified since he had made the adjustments without adopting any of the prescribed methods and hence, the addition made of Rs. 10,63,02,114/- is invalid in law and the same may kindly be deleted.

4.

The learned A.O. / DRP erred in holding that the assessee had failed to prove the receipt of Intra Group Services and the benefit derived therefrom and hence, the TPO was justified in determining the ALP of the Intra Group Services at Rs. NIL.

5.

The learned A.O. / DRP erred in holding that the assessee had failed the Need Evidence - Benefit Test in respect of Intra Group Services for which payment was made and hence, the determination of ALP at Rs NIL was justified.

6.

The learned A.O. / DRP erred in holding that the determination of ALP at Rs. NIL in respect of Intra Group Services was justified since the assessee had failed to furnish details of the costs incurred by the AEs and the man hours spent by the employees of the AEs and hence, the addition made was justified.

7.

The learned A.O. / DRP failed to appreciate that the appellant company had actually received intra group services in the form of Product, Marketing and Corporate Support Services from its AEs and hence, the payment made by the appellant to the AEs for the Intra Group Services was justified and there was no reason to determine the ALP of the said transactions at Rs. Nil.

8.

The learned A.O. / DRP failed to appreciate that the assessee company had aggregated the transaction of Intra Group Services with other International Transactions entered into with the AEs and had determined the ALP by applying the TNMM and hence, there was no reason to separately benchmark the transaction of Intra Group Services to determine the ALP of the said International Transaction.

9.

The learned A.O / DRP erred in not appreciating that the appellant company had submitted various evidences to prove the receipt of Intra Group Services and the economic and commercial benefit derived by the appellant company and therefore, the determination of ALP of the said intra group services at Rs. Nil was not justified at all and the entire addition made should be deleted.

ITA No.1854/PUN/2024

10.

The learned A.O / DRP failed to appreciate that: a. The appellant company had submitted independent evidences in form of certificate from Independent Accountant regarding the actual costs incurred by the AEs. b. The appellant company had submitted evidences of allocation of the costs by the AE on the basis of man hours spent by the employees of the AEs. c. On the basis of the various evidences submitted by the appellant of receipt of the services, the ALP determined at Rs. Nil was not justified at all and the addition made should be deleted. 11. Without prejudice to the above, the appellant submits that the learned AO has inadvertently considered INR 13,15,923/- twice in the total adjustment amount. It was included in the TP adjustment considered in the final order as INR 10,76,18,037 (which was INR 10,63,02,114 as per TP order) and secondly as separate adjustment under corporate tax matters while computing the total adjustment for AY2020-21. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”

Submissions of Ld. AR :

3.

The Ld. AR filed paper book containing 1283 pages. The Ld. AR submitted that the Transfer Pricing Officer (TPO) has made adjustments with reference to intra group services. The TPO held that value of Arm’s Length Price of intra group services to be at Nil. The Ld. AR submitted that the assessee had filed elaborate submissions during the Transfer Pricing proceedings wherein the assessee had filed copies of agreements entered with Associated Enterprises (AEs) regarding intra group services. The Ld. AR submitted that copies of these agreements are at page Nos. 185-324 of the paper book. The Ld. AR also filed a cost allocation certificate issued by the independent Chartered Accountant which is at page 356 of the paper book.

ITA No.1854/PUN/2024

The Ld. AR submitted that the assessee has carried out proper benchmarking as per the Indian Pricing guidelines to decide the Arm’s Length Price of these intra group transactions. The Ld. AR submitted that during the Transfer Pricing proceedings and before the Dispute Resolution Panel (DRP), the assessee had filed copies of emails, copies of invoices to substantiate that the services were duly rendered.

3.1 The Ld. AR submitted that on identical set of facts, the ITAT in assessee’s own case for AYs 2009-10 to 2013-14 has allowed the assessee’s appeal. Therefore, the Ld. AR submitted that the assessee’s appeal may be allowed.

Submissions of Ld. DR :

4.

The Ld. DR read out the relevant paragraphs of the TPO’s order. The Ld. DR strongly relied on the order of the Assessing Officer and Dispute Resolution Panel. The Ld. DR submitted that the benefit has not been proved by the assessee. Therefore, the TPO was right in determining the Arm’s Length Price of intra group services at Nil.

Findings and Analysis :

5.

We have heard both the parties and perused the records. In this case, the TPO had passed an order u/s 92CA(3) of the Act for AY 2020-21 on 14.06.2023. As per the TPO’s order in para 8.1, there were following intra group services : Sr. Name of AE Nature of Amount (in INR) No. transaction 1 REHAU Pte. Ltd., Singapore Intra group services 2,83,71,653 2 REHAU Polymers (Suzhou) charges 2,54,51,742

ITA No.1854/PUN/2024

Co. Ltd. 3 REHAU AG 4,24,66,519 4 REHAU Verwaltungszentrale 1,00,12,200 AG Sub Total 10,63,02,114

5.1 In the TPO’s order at para 11, the TPO has accepted that the assessee had submitted invoices and emails. However, the TPO alleged that no cogent evidence for receipt of services has been filed by the assessee. Then, the TPO in para 20.5 arrived at Arm’s Length Price of intra group services at Nil using other method as most appropriate method. The TPO in para 22 has recorded following facts : “22. In view of the facts of the case, submissions of assessee and discussion made, the Arm’s Length Price of transactions as reported by the assessee is being altered and an adjustment of Rs. 10,63,02,114/- with respect to international transaction pertaining to cost sharing arrangement for intra- group services is made. 22.1 W.r.t. assessee's contention that Hon'ble ITAT has deleted the adjustments to intra group services in AY 2009-10 till AY 2013-14, it is clarified that the Income Tax Dept. has filed appeal against the said orders of Hon. ITAT in Hon. High Court of Bombay. Since the appeal is pending before, Hon. Jurisdictional high court, the adjustment has been made taking stand consistent with previous AYs in order to keep the issue alive.”

5.2 Thus, TPO in the order has admitted that on identical set of facts, the ITAT in assessee’s own case has allowed the assessee’s appeal from AY 2009-10 till AY 2013-14. No distinguishing facts have been brought on record. We have perused the ITAT orders for AYs 2009-10 to 2013-14 in assessee’s own case which are at pages 158 to 184 of the paper book. It is observed that ITAT has given a findings that the services were rendered and Arm’s Length Price decided by the assessee was most appropriate. In these facts and

ITA No.1854/PUN/2024

circumstances of the case, we respectfully following the ITAT orders in assessee’s own case (supra). We direct the AO to delete the addition of Rs.10,63,02,114/-. Accordingly, ground Nos. 1 to 10 raised by the assessee are allowed.

6.

In ground No. 11, the assessee has pleaded that inadvertently the AO has considered an amount of Rs.13,15,923/- twice. However, we have directed the AO/TPO to delete the entire addition of Rs.10,63,02,114/-. Therefore, ground No. 11 becomes academic in nature and dismissed as un-adjudicated.

7.

In the result, the appeal of the assessee is allowed for statistical purpose.

Order pronounced in the open Court on 23rd July, 2026

Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/Pune; दिन ांक/Dated : 23-07-2026 Ravi Kumar आदेशकीप्रतितितिअग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘C’ Bench, Pune 5. ग र्डफ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकरअपीलीयअदिकरण, पुणे / ITAT, Pune

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