M/S. TENOVA INDIA PVT. LTD.,,CHENNAI vs. DCIT, CC-3(1),, CHENNAI

आयकर अपीलीय अिधकरण, ‘‘डी’ �यायपीठ,चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI �ी महावीर �सह, उपा�य� एवं �ी मनोज कुमार अ�वाल, लेखा सद�य के सम� BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपीलसं./IT(TP)A No.: 78/CHNY/2019 िनधा�रण वष�/Assessment Year: 2015-16 TENOVA India Pvt. Ltd., The DCIT, No.94/3, Lakshmi Chambers, vs. Corporate Circle 3(1), TTK Road, Alwarpet, Chennai. Chennai – 600 018. PAN: AAMCS 6453Q (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : ShriN. Ashik Shah, CA ��यथ� क� ओर से/Respondent by : Shri V. Nandakumar, JCIT सुनवाई क� तारीख/Date of Hearing : 06.02.2023 घोषणा क� तारीख/Date of Pronouncement : 06.02.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the Commissioner of Income Tax (Appeals)-11, Chennai in ITA No.70/18-19 dated 19.08.2019. The assessment order was passed by the DCIT, Corporate Circle 3(1), Chennai for the assessment year 2015-16 u/s.143(3) r.w.s. 92CA(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 11.01.2019.

2 IT(TP)A No. 78/Chny/2019 2. The first issue in this appeal of assessee is against the order of CIT(A)-11, Chennai confirming the action of the AO / TPO in determining the value of services availed at ‘nil’. For this, the assessee has raised various grounds, which need not be reproduced because all those are argumentative in nature. 3. Brief facts are that the assessee Tenova group is a worldwide supplier of advanced technologies, products and services for the metal and mining industries, providing innovative, integrated solutions for complete process areas. Combined process, automation and metallurgical know-how enhance its position in the market. With about 4,800 people, Tenova group operates through more than 49 companies located in 26 countries on 5 continents. During the year under consideration, TIPL has undertaken various activities such as manufacturing and installation of cold rolling mills, manufacturing and supply of thermal process equipment, manufacturing and supply of specialized engineering equipment, providing project engineering services, design, manufacture and supply of plants, systems and equipment in the area of open-cast mining and bulk material handling, etc. The TPO noted that the assessee for benchmarking the governance expenses i.e., management service expenses adopted TNMM method. The TPO

3 IT(TP)A No. 78/Chny/2019 has noted that considering the specialized nature of expense and lack of its close linkages with other expenses as show-cause notice was issued requesting the assessee to explain as to why ALP of management expenses should not be determined at ‘nil’. The assessee submitted screen shots of ERP cost centers and email correspondences. The TPO noted that the assessee email projected that its AE has adequate infrastructure and prowess to render the service whereas the assessee did not have the same. It was also argued by assessee that there is no need to prove the necessity to avail services under Indian transfer pricing guidelines. The TPO rejected the explanation of the assessee by noting that the services specified in the agreement claimed to be received are generic in nature and it does not need an infrastructure or intangibles like knowledge gathered through experience more than the assessee have. Moreover, according to TPO, independent enterprise would not pay without benefit any amount. The TPO noted that the argument of the assessee that there is no need to prove the necessity of availing services itself show that without necessity of benefit, the assessee made these payments. Accordingly the TPO determined the ALP of management service charges at ‘nil’ and downward adjustment of Rs.3,68,96,881/- was made. The AO

4 IT(TP)A No. 78/Chny/2019 giving effect to the order of TPO made the above addition. Aggrieved, assessee preferred appeal before CIT(A). 4. The CIT(A) after considering the submissions of the assessee and considering the earlier years management / governance service charges for and from assessment years 2011-12 to 2015-16 noted that the assessee paid management service charges to M/s. Tenova Spa for all earlier years up to assessment year 2014-15 but in the relevant assessment year 2015-16, the assessee paid governance charges apart from M/s. Tenova Spa also to Tenova Mining and Minerals (Pty) Ltd and M/s. Takraf GmBH. Hence, he noted that there is difference in facts from earlier years. He noted that the services claimed to have received by assessee are towards financial administration, legal services, HR services, IT services, management services and marketing services. He noted that these are general in nature and would not vary from year to year. The CIT(A) noted that the assessee company has not submitted any contract for any services received from these two Associated Enterprises, namely M/s. Tenova Spa also to Tenova Mining and Minerals (Pty) Ltd and M/s. Takraf GmBH. It was noted that the invoices submitted by the assessee are also very general in nature without giving any specific services received or specific deliverables.

5 IT(TP)A No. 78/Chny/2019 Hence according to CIT(A), the assessee failed to establish the requirement of services as well as receipt of any specific charges for the year. Therefore he noted that the claim of management service charges is nothing but clearly profit sharing by assessee concern to its foreign AE. Therefore, he confirmed the action of AO. Aggrieved, now assessee is in appeal before the Tribunal. 5. We have heard rival contentions and gone through facts and circumstances of the case. Before us, the ld.Counsel for the assessee relied on the order of CIT(A) for assessment year 2014-15 which is enclosed at assessee’s paper-book at page 376 and he read out from the order of CIT(A) and argued that the order of CIT(A) has not been challenged by Revenue and it has become final on the same set of facts as is in the present case. The ld.counsel for the assessee stated that the CIT(A) for assessment year 2014-15 has discussed the list of services rendered, nature of services rendered i.e., managerial and support services. He argued that even Tribunal i.e., Mumbai Bench of ITAT in assessee’s sister concern Tenova Hypertherm Pvt. Ltd., in ITA No. 7460/Mum/2014, order dated 09.10.2019 has considered the management service charges and services received from the Associated Enterprises as genuine and the Tribunal held in para 11 to 13 as under:-

6 IT(TP)A No. 78/Chny/2019 11. In this view of the matter in our considered opinion action of the authorities below in holding that the arm's-length price of the services received from the associated enterprise be taken as nil is not sustainable and accordingly the order is set aside. 12. Another aspect of learned CIT(A) adjudication is that apart from his decision that the services did not entail any benefit to the assessee, he has also held that in the facts of the case CUP would be most appropriate method. In our considered opinion the summary assertion of the learned CIT(A) is also not sustainable. He has not pointed out any defect in the TNMM method adopted by the assessee. Hence the observation of the learned CIT(A) in this regard is also not sustainable. 13. Furthermore we hold that learned CIT(A) has held that the evidences submitted do not show that any service has been received by the assessee. We find that this view of the authorities below is also not sustainable. The learned CIT(A) has also erred in not admitting the further evidences which the assessee has submitted in support of its assertion that it has received services from the associated enterprise. Be as it may since we have already held that the arms length price in this case cannot be computed as nil on account of the authorities below view that there was no benefit to the assessee this aspect of adjudication is only of academic interest. In view of the above, the ld.counsel for the assessee also drew our attention to various e-mails enclosed in assessee’s paper-book from pages 290 to 363. The assessee also filed e-mail reference in chart consisting of 4 pages and contents of e-mail by virtue of which services rendered were provided.

7 IT(TP)A No. 78/Chny/2019 6. On the other hand, the ld. Senior DR read out the order of CIT(A) and stated that the assessee could not submit any evidence before CIT(A) in regard to two new companies to whom assessee has paid management service charges i.e., Tenova Mining and Minerals (Pty) Ltd and M/s. Takraf GmBH. He stated that the CIT(A) has categorically denied the assessee having submitted any contract for services received from these two AEs and even invoices submitted were of general nature. He stated that the assessee before CIT(A) could not establish the requirement of services and services rendered. Hence, he requested that all these evidences now submitted before the Tribunal in its paper-book could be referred back to the file of the CIT(A) for fresh adjudication. As regards to the argument of ld.counsel for the assessee that the issue is covered by the order of CIT(A) for assessment year 2014-15, the ld. Senior DR stated that the TP adjustment and addition made was to the tune of Rs.1,41,53,431/- and this was a low tax effect case and hence, Revenue could not file appeal in view of CBDT circular for not filing of appeal in case of below prescribed tax limit. 7. Having heard rival contentions and going through the facts of the case, the assessee could not establish that the contract for services received from the other two AEs i.e., Tenova Mining and

8 IT(TP)A No. 78/Chny/2019 Minerals (Pty) Ltd and M/s. Takraf GmBH, the assessee could not submit before the CIT(A). Even the assessee could not submit invoices and could not establish receipt of specific services from its AEs. Hence to examine the documentary evidences including the contract with these two AEs, we remit this issue back to the file of the CIT(A), who will examine the contracts as well as invoices / e- mails enclosed in assessee’s paper-book at pages 290 to 363. In term of the above, we restore this issue back to the file of CIT(A) and direct him to reconsider the issue without being influenced by earlier order. 8. Coming to second issue that the lower authorities have not granted TDS credit amounting to Rs.3.30 crores while passing the final assessment order. It was contended that the lower authorities failed to grant credit for taxes paid aggregating to Rs.9.40 crores while determining the tax payable by the assessee. After hearing both the sides and going through the above issue, we direct the AO to verify the TDS credit appearing in Form No.26AS as well as the evidences of prepaid taxes amounting to Rs.9.40 crores while computing the taxes payable by the assessee. The AO will allow credit for the same while giving appeal effect to the order of this

9 IT(TP)A No. 78/Chny/2019 Tribunal. Hence, this issue is partly referred back to the file of the AO. 9. The next issue in this appeal of assessee is as regards to charging of interest u/s.234A of the Act amounting to Rs.9 lakhs. 9.1 At the outset, the ld.counsel for the assessee stated that the assessee has filed its return of income on 30.11.2015 for the relevant assessment year 2015-16 within the due date as prescribed u/s.139(1) of the Act. Once the return of income is filed within the due date, no interest u/s.234A of the Act can be charged. When this fact was brought to the notice of ld. Senior DR, on principle, he agreed but he stated that the matter can be referred back to the file of the AO for verification whether the return is filed within the due date of filing of return as prescribed u/s.139(1) of the Act. We direct the AO accordingly. 10. The next two issues i.e., charging of interest u/s.234B & 234C of the Act, which are consequential in nature and AO will recompute the interest after granting credit of TDS and prepaid taxes. We direct the AO accordingly.

10 IT(TP)A No. 78/Chny/2019 11. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 6th February, 2023 at Chennai. Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 6th February, 2023 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.