SEMPERTRANS INDIA PRIVATE LIMITED,MAHARASHTRA vs. INCOME TAX OFFICER, MAHARASHTRA

On the facts and circumstances of the case and in law, the Hon'ble DRP has erred in issuing directions in violation to provisions of section 144C(8), read with the explanation thereto, by directing the AO to make additional disallowance under section 37(1). Accordingly, the directions of the Hon'ble DRP are bad in law and ought to be quashed. Consequently, the final assessment order dated 23 October 2024, is bad in law and ought to be quashed.

On the facts and circumstances of the case and in law, the Ld. AO has erred in not passing the final assessment order dated 23 October 2024 as per the directions of the Hon'ble DRP Panel as prescribed in section 144C (13), thereby rendering the assessment order being null & void and liable to be quashed.

On the facts and circumstances of the case and in law, the final assessment order dated 23 October 2024 is issued beyond the time limit as prescribed u/s 153 of the Act. Consequently, the final assessment order is time barred and deserves to be quashed.

The Hon'ble DRP erred in confirming the action of the AO/TPO ignoring the fact that there was no intention by the Appellant to shift profits outside India.

The Hon'ble DRP erred in upholding/confirming the action of Ld. TPO, in applying Other Method inappropriately and further erred by not bringing on record any comparable data as mandated by section 92C of the Act read with Rule 10B and Rule 10C of the Rules. Factual Grounds: On the facts and circumstances of the case and in contrary to law, Ld. TPO / Ld. AO pursuant to the directions issued by the Hon'ble DRP, erred in:

Making an addition of INR 5,08,88,475 to the Appellant's income in connection with payment by the Appellant to its Associated Enterprises ('AEs'), for availing intra group services and thereby determining a total income of INR 85,13,390 in the order dated 23 October 2024. 7. Upholding/confirming the action of Ld. TPO, by determining the Arm's Length Price ('ALP') of the payment for services as 'NIL' by disregarding the detailed benchmarking approach and the methodology adopted by the Appellant in its TP documentation maintained under section 92D of the Act read with Rule 10D of the Income Tax Rules, 1962 ('Rules').

Upholding/confirming the action of Ld. TPO, in going beyond the scope under section 92CA in questioning the commercial rationale of the legitimate business expenses incurred by the Appellant and further erred in determining the ALP of payment of services to be NIL.

Rejecting the detailed documentary evidences including cost allocation workings, as submitted by the Appellant before the Ld. TPO and Hon'ble DRP during the course of proceedings, to substantiate the need-benefit-evidence test of the services availed, without providing cogent findings and in concluding that the Appellant is not able to discharge the onus of proving that the services have been rendered by the AE.

Making an adjustment without considering the fact that the cost allocation methodology is uniformly and consistently followed by the Semperit Group for charging intra group charges to all the group companies globally.

Summarily rejecting the voluminous evidence submitted by the Appellant to justify provision of services and the benefit derived by the Appellant, without disputing/rebutting or without providing an explicit findings/observation on the voluminous / plethora of evidence filed by the Appellant. Further, the learned DRP has erred in summarily rejecting the contentions of the Appellant against the Remand Report provided by the Learned TPO.

Not appreciating that the services availed by the Appellant are not in the nature of shareholder services nor stewardship, duplicative or incidental services for which no independent entity would agree to make any payment.

Not appreciating that the Appellant duly withheld the taxes on payment made to the AE and that the AE has also duly filed a return of income in India offering such services to taxes, and that disallowing payments made by the Appellant would lead to double taxation.

Not appreciating that the said payment for intra group services of INR 5,08,88,475 has a direct nexus with the business of the appellant. Accordingly, the Ld. AO / Hon'ble DRP have erred in disallowing the said payment u/s 37 of the Act.

Initiating penalty proceedings under section 274 read with section 270A of the Act, without appreciating the fact that the additions made by the Ld. AO are not in accordance with the law. Erroneous addition of income of Rs. 22,47,269 to the loss reported in ITR Form based on Intimation issued by CPC under Section 143(1) of the Act

On the facts and circumstances of the case and in law, the AO has erred in determining assessed income by adopting the starting number as a loss of Rs.4,23,75,087 as per intimation dated 30 May 2022 under Section 143(1) of the Act as against adopting the loss as per return of income of Rs. 4,46,22,364 as the starting number and thereby making an addition of Rs.22,47,269 made by Centralised Processing Center, Bengaluru (CPC) on account of alleged inconsistencies between the ITR-6 and Tax Audit Report.

The AO failed to appreciate that all the adjustments made by CPC in its intimation were based on incorrect facts as there were no such inconsistencies between ITR-6 and the Tax Audit Report as alleged by CPC and further failed to take into account the response filed by the Appellant on 25 May 2022 before CPC and on 15 January 2024 before the AO in this regard and thereby erred in passing the impugned order by adopting assessed income as per the intimation under Section 143(1) of the Act.

The Appellant prays that adjustments of Rs. 22,47,269 made by CPC in the intimation and continued by the AO in the impugned order is grossly incorrect, unwarranted and should be deleted. Without prejudice to the above grounds

On the facts and circumstances of the case and in law, the AO has erred in passing the impugned Assessment Order under Section 143(3) read with Section 144C(13) and 144B of the Act determining total income at Rs. 85,13,390 as against loss of Rs.4,46,60,148 reported as per the return of income filed by the Appellant.

On the facts and in the circumstances of the case and in law, the AO has erred, in raising demand of Rs. 30,95,490 on the Appellant. Set-off of brought business loss and unabsorbed depreciation not granted

On the facts and circumstances of the case and in law, the AO has erred in not granting set-off of brought forward losses and unabsorbed depreciation without specifying any reasons and thereby erred in raising the consequent demand of Rs. 30,95,490 (including interest).

The AO failed to appreciate that the Appellant was having available brought forward business loss of Rs.37,03,90,020 and unabsorbed depreciation of Rs. 10,49,00,828 as on 1 April 2020 as reported in the income-tax return and Tax Audit Report of AY 2021- 22 which were available for set-off against business income, if any, of AY 2021-22 and once the losses are set-off, the total income of the Appellant will be Rs.Nil and there will not be any consequent tax demand.

The Appellant prays that the set-off of eligible brought forward business loss and unabsorbed depreciation be granted and total taxable income be recomputed at Rs.Nil and balance business loss / unabsorbed depreciation be allowed to be carried forward to AY 2022-23. Interest levied under Section 234A and 234B of the Act.

On facts and circumstances of the case and in law, the AO erred in levying interest of Rs. 66,320 under Section 234A and Rs. 7,12,940 under Section 234B of the Act.

The Appellant prays that the charging of interest under Sections 234A and 234B of the Act, is erroneous, unwarranted and be deleted. The Appellant prays that the additions made by the Ld. TPO/Ld. AO under the directions of the Hon'ble DRP be deleted and consequential relief be granted. The Appellant craves leave to add, alter, amend and/or withdraw any of the above grounds of appeal and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per law.”

Under these facts and circumstances, we notice that the alleged Intra Group Services do not fall in the category of shareholder/stewardship activities, they are not duplicate services, they are not services that provide incidental benefits, i.e. the services performed by one Group Member for a particular Group Member or set of Group Members nor it is in the nature of on call services. We therefore are of the considered view that the observations of ld. DRP that assessee has not received any services from its AE is uncalled for. We hold that the assessee has incurred expenditure in the form of services received from its AEs which have been shown under the head Intra Group Services and has the assessee not taken these services from its AE, then it would have incurred cost for making payment to a third party. Since the ALP adopted by the assessee based on TNM method has not been examined by the ld. TPO in light of the prescribed method, the issue therefore needs to be restored to the file of ld. TPO for necessary examination of the ALP. We therefore hold that alleged expenditure have been incurred towards Intra Group Services. Grounds of appeal No.6 to 15 raised by the assessee are allowed for statistical purposes.”