INGERSOLL-RAND TECHNOLOGIES AND SERVICES PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BANGALORE

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ITTPA 815/BANG/2022Status: DisposedITAT Bangalore16 March 2023AY 2018-195 pages
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What did the Tribunal hold?

The Tribunal held that for the cost contribution charges, while the assessee is part of a global group and payments are made for centrally performed activities, there was insufficient evidence on record to conclusively prove the receipt of specific services from its AE for the payment of these charges in AY 2018-19. The Tribunal noted that the proceedings occurred during the COVID-19 period, which hindered the assessee's ability to furnish evidence. Therefore, in the interest of justice and equity, the matter was restored to the file of the TPO to permit the assessee to furnish requisite evidence. Accordingly, the grounds related to cost contribution charges were allowed for statistical purposes. Regarding the additional MAT credit, the issue was restored to the file of the AO, who was directed to examine the assessee's contention and decide in accordance with the law. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, M/s. Ingersoll-Rand Technologies and Services Pvt. Ltd., engaged in manufacturing and providing design and engineering services, filed its return for AY 2018-19. The case was referred to the Transfer Pricing Officer (TPO) due to international transactions with Associated Enterprises (AEs). The TPO proposed an adjustment of Rs. 1,80,18,368/- towards cost contribution charges paid by the assessee to its AEs, holding that the assessee failed to provide evidence of specific services received and treating the arm's length price (ALP) of management and technical consultancy services as Nil. The Dispute Resolution Panel (DRP) upheld the TPO's additions. The assessee's appeal challenges the final assessment order dated 15.07.2022, passed under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961.

What were the issues?

1. Whether the Tribunal can direct the TPO to re-examine the issue of cost contribution charges paid by the assessee to its AEs, considering the COVID-19 pandemic's impact on furnishing evidence? (Question of law and fact, concerning Section 92CA of the Income Tax Act, 1961). Assessee's contention: The issue is covered in its favour by previous Tribunal orders for AY 2011-12 and 2012-13. The inability to furnish requisite evidence was due to the COVID-19 period affecting TP and DRP proceedings. Revenue's contention: The assessee failed to produce sufficient evidence/proof regarding the receipt of services from its AEs for the cost contribution charges. 2. Whether the Assessing Officer (AO) should be directed to verify the additional Minimum Alternate Tax (MAT) credit arising from the difference between normal and MAT provisions? (Question of law and fact, concerning MAT provisions). Assessee's contention: The AO should verify the additional MAT credit arising from adjustments made in the computation of total income under normal and MAT provisions. Revenue's contention: No specific contention is recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 143(2),Section 92CA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENGALURU “B” BENCH, BENGALURU

Before: Shri George George K. & Shri Laxmi Prasad Sahu

For Appellant: Shri K.R. Vasudevan, Advocate
For Respondent: Shri Sunil Kumar Singh, CIT-DR
Hearing: 15.03.2023Pronounced: 16.03.2023

IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU “B” BENCH, BENGALURU Before Shri George George K., Judicial Member and Shri Laxmi Prasad Sahu, Accountant Member IT(TP)A No. 815/Bang/2022 (Assessment Year: 2018-19)

M/s. Ingersoll-Rand Technologies vs DCIT, Circle - 3(1)(1) and Services Pvt. Ltd. 2nd Floor, BMTC Building 12/1, Ground Floor 80 Feet Road, 6th Block Subramanya Arade Koramangala Bannerghatta Road Bangalore 560095 Bangalore 560029 PAN – AAACI2961B (Appellant) (Respondent) Assessee by: Shri K.R. Vasudevan, Advocate Revenue by: Shri Sunil Kumar Singh, CIT-DR Date of hearing: 15.03.2023 Date of pronouncement: 16.03.2023 O R D E R Per: George George K., J.M.

This appeal at the instance of the assessee is directed against the final assessment order dated 15.07.2022 passed under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (the Act). The relevant assessment year is 2018-19.

2.

The brief facts of the case are as follows: - The assessee is a company engaged in the business of manufacturing and trading of pneumatic tools, material handling systems, fluid handling systems, etc. It is also providing design and engineering services to its

2 IT(TP)A No. 815/Bang/2022 Ingersoll-Rand Technologies and Services Pvt. Ltd. customers. For AY 2018-19 return of income was filed on 29.11.2018 declaring total income of Rs.38,59,59,280/-. The assessment was selected for scrutiny and notice under Section 143(2) of the Act was issued on 23.09.2019. During the course of assessment proceedings, it was noticed that the assessee had entered into several international transactions with its Associated Enterprises (AEs) and to determine the arm's length price (ALP) of the same, the case was referred to the Transfer Pricing Officer (TPO). The TPO passed order under Section 92CA of the Act on 22.07.2020 wherein he had proposed a TP adjustment of Rs.1,80,18,368/- being cost contribution charges paid by the assessee to its AEs. The TPO held that the assessee has not been able to give evidence in respect of specific services received by it from the AEs. The TPO treated the ALP of the management consultancy fees and technical consultancy services as ‘Nil’ adopting CUP as the most appropriate method. Hence, the TPO made downward adjustment of Rs.1,80,18,368/- towards cost contribution charges. Pursuant to the TPOs order draft assessment order was passed on 27.09.2021 incorporating the above TP adjustments proposed by the TPO.

3.

Aggrieved by the TP addition made in the draft assessment order assessee filed objections before the Dispute Resolution Panel (DRP). The DRP, vide its directions dated 17.06.2022, disposed off the objections of the assessee. The DRP upheld the adjustments made by the TPO and confirmed the addition. Subsequent to the DRP directions the impugned final assessment order dated 16.07.2022 was passed.

4.

Aggrieved by the final assessment order the assessee filed the present appeal before the Tribunal. The assessee has raised five grounds. However, only two issues are raised in these grounds. The issues raised and the effective grounds relating to the same are as follows: -

3 IT(TP)A No. 815/Bang/2022 Ingersoll-Rand Technologies and Services Pvt. Ltd. i) Ground No. 3 (3.1 to 3.7) – cost contribution charges ii) Ground No. 4 (4.1) – MAT credit We shall adjudicate the above grounds as under: -

Cost Contribution Charges (TP adjustment ) grounds 5. The learned A.R. submitted that the issue is covered in favour of the assessee by the order of the Tribunal in assessee’s own case for AY 2011-12 in IT(TP)A No. 89/Bang/2018 (order dated 24.03.2022) and for AY 2012-13 in IT(TP)A No. 728/Bang/2017 (order dated 25.07.2022).

6.

The learned D.R. submitted that the assessee for the relevant assessment year had not produced sufficient evidence/proof with regard to receipt of services from its AEs for making the above said cost contribution charges.

7.

In rejoinder the learned A.R. submitted that the proceedings before the TPO and DRP were during the Covid period, hence requisite evidence/proof with regard to receipt of services from the AEs could not be furnished in time.

8.

We have heard the rival contentions and perused the material on record. As per the TP study for the relevant AY 2018-19, the assessee had paid Rs.1,80,18,368/- to is AE in respect of the cost contribution charges. It is stated that the cost contribution charges are paid by the assessee towards services received from the AE in the areas of Administration, Finance, Treasury, Tax and Strategy, etc. It is submitted that the assessee is part of the global group having subsidiaries in various countries across the world and all of these entities are integrated by means of group’s information system operations platform. The various activities/services which are centrally performed can be rendered only by the personnel from the AE who are fully integrated with group’s business. It was stated that the charges for the services rendered by the AE are allocated to all subsidiaries across the world and this

4 IT(TP)A No. 815/Bang/2022 Ingersoll-Rand Technologies and Services Pvt. Ltd. allocation is done using a uniform allocation policy/key. It was submitted that the assessee makes payment to the AE for the direct and indirect services available as management consultancy charges which are linked and related to the core business of the assessee.

9.

Unlike the earlier assessment years 2011-12 and 2012-13, on perusal of material on record, we find that there is insufficient evidence/material to conclusively prove that the assessee was in receipt of specific services from its AE for the payment of aforesaid cost contribution charges. When this was specifically pointed out by the learned D.R., the learned A.R. submitted that the assessee was precluded from furnishing the same since the TP and DRP proceedings were during the Covid period. Therefore in the interest of justice and equity we are of the view that the matter needs to be examined by the TPO afresh. Accordingly, the issue of cost contribution charges is restored to the file of the TPO. The TPO is directed to permit the assessee to furnish requisite evidence/material to prove its case that the assessee was in actual receipt of specific services from its AE for payment of this cost contribution charges. It is ordered accordingly.

10.

Hence, Ground Nos. 3.1 to 3.7 are allowed for statistical purposes.

Grant of Additional MAT Credit (corporate tax issue) Ground No. 4 (4.1) 11. In the above ground the assessee is seeking a direction to the Assessing Officer to verify the additional MAT credit to the extent of difference arising out of adjustment made in computation to final assessment order under the normal provisions and MAT provision. The above issue raised in ground No 4.1 is restored to the file of the AO. The AO is directed to examine the contention of the assessee and take a decision in accordance with law.

5 IT(TP)A No. 815/Bang/2022 Ingersoll-Rand Technologies and Services Pvt. Ltd. 12. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 16th of March, 2023.

Sd/- Sd/- (Laxmi Prasad Sahu) (George George K.) Accountant Member Judicial Member Bengaluru, Dated: 16th of March, 2023 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) - 4. The CIT - DRP 5. The DR, ITAT, Bengaluru 6. Guard File By Order //True Copy// Assistant Registrar ITAT, Bengaluru n.p.

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