KNORR BREMISE SYSTEMS FOR COMMERCIAL VEHICLES INDIA PVT. LTD.,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 14, PUNE

आदेश / ORDER

PER R.S.SYAL, VP :

These three appeals by the assessee relate to the assessment years 2011-12, 2012-13 & 2013-14. Some of the issues raised in these appeals are common. We are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience.

2 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

A.Y. 2011-12

transfer pricing additions on account of international

transactions of `Rendering of Global Sourcing Services’ and

`Reimbursement of expenses’, but those were not pressed by

the ld. AR. These, therefore, stand dismissed as ‘Not pressed’.

In addition, certain other grounds were also not pressed, which

are hereby dismissed.

confirmation of the transfer pricing addition of Rs.2,13,97,960/-

in the international transaction of ‘Allocation of shared service

charges’.

a company engaged in the business of Commercial Vehicles

Systems and a part of Knorr Bremse group. The assessee filed

its return accompanied by the Audit Report in Form No. 3CEB

detailing certain international transactions. The Assessing

Officer (AO) made a reference to the Transfer Pricing Officer

(TPO) for computing the Arm’s Length Price (ALP) of the

international transactions. The international transaction of

3 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

‘Allocation of Shared service charges’ at Rs.2,13,97,960/- was

not benchmarked by the assessee on the premise that it was a

`Cost allocation arrangement’. The TPO observed that the

assessee paid this amount to its Associated Enterprise (AE),

Knorr Bremse Asia Pacific (Holding) Ltd., Hong Kong

(hereinafter called ‘KBAP’). He called upon the assessee to

provide the evidence of availing of the services. The assessee,

referring to the Service Agreement entered on

01-01-2010 with KBAP, submitted that the agreement

provided for provision of Business Development, Marketing,

Project Management services; Human Resource Support

services; Accounting, Financial support and Controlling

services; and IT Support. The assessee gave bifurcation of

Rs.2.13 crore and odd paid for the above services. It was

claimed that KBAP incurred these costs and subsequently

allocated and recovered the same from the assessee along with

other group entities on actual without any mark up. However,

the assessee could not furnish any primary document

substantiating the receipt of services nor any working regarding

the allocation of costs. The TPO considered the nature of

4 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

services so stated in the Agreement one by one and found that

the assessee had, in fact, its own infrastructure for the these

activities. In the absence of any evidence of receipt of services,

the TPO determined Nil ALP of the transaction and accordingly

the AO made the transfer pricing addition. The ld. CIT(A)

affirmed the finding of the AO by primarily noticing that no

evidence of rendition of services by the AE was provided. The

assessee is aggrieved by the confirmation of the addition.

relevant material on record. It is clear from the international

transaction that the assessee paid Rs. 2.13 crore and claimed to

have availed, as per the Agreement, the Business Development

and Marketing services; Human Resource Support service;

Accounting and Financial Support services; and IT support

services. The claim of the assessee that these were shared

services only with no mark-up could not be substantiated before

the authorities below. The assessee has again failed to bring on

record any evidence before the Tribunal to demonstrate that it

was a mere case of allocation of costs by the AE without any

mark-up. In the absence of any evidence, we are not inclined to

5 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

accept the argument advanced on behalf of the assessee in this

regard. We, ergo, reject the contention of the assessee that it

was a mere cost sharing arrangement.

services which have been stipulated in the Agreement. The

TPO, at page 8 of his order, referred to clause 2.2 of the

Agreement dated 01-01-2010 wherein it has been provided that:

‘KBAP will provide the relevant services through

correspondence, telephone, telefax, periodic visits of personnel

and other means agreed on from time to time with the receiving

party.’ Thus, it is evident from the relevant clause that the

KBAP was to render the services through correspondence, fax,

telephone and visits of its personnel etc. The assessee has not

placed on record copies of such correspondence or fax or e-

mails or evidence of the visits by personnel of AE to

demonstrate that any such services were actually provided by

the AE.

have been received from the AE. In so far as the Business

6 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

Development, Marketing and Project Management services are

concerned, for which the assessee paid 2563 Euros, the TPO

observed that 90% of the assessee’s sales were to single

customer, namely, Tata Motors and further as per the assessee’s

functional analysis in its Transfer Pricing study report, it had its

own Marketing and Distribution network. The relevant portion

of such analysis, which has been reproduced on page 7 of the

TPO’s order, is extracted here as under :

“KB India has its own marketing and distribution network for distributing the manufactured products. It monitors the market conditions and plans the distribution schedules. The major customer of KB India is Tata Motors. Presentations are made by the marketing department of KB India to explain new products, their applications and any developments to the existing line of products. Tata Motors according to its requirements submits a letter of intent specifying the models and the volumes required. Prices are negotiated between the parties and purchase orders are placed on monthly basis based on Tata Motors monthly production schedule. The after sales support team provides replacements and repairs required by Tata Motors.”

5898 Euros. In its TP study report, the assessee submitted that:

‘The management of KB India is responsible for coordinating

its human resource functions including hiring personnel and

7 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

defining compensation and benefits’. Thus, it is again evident

that the assessee was sufficient enough and actually did perform

human resource support activities itself.

Controlling Services for which the assessee paid 140274 Euros,

the assessee’s TP study report mentions as under:

“KB India is responsible for managing its finance, treasury and accounting functions. It is responsible for developing budgets billing, collection, preparation of statistical data and financial reports. KB India also undertakes compliance with the applicable leval/statutory requirements. Furthermore, KB India also undertakes its routine IT and Administrative functions.”

than perceptible that the services for which the assessee claimed

to have been paid to its AE, were, in fact, performed by self, as

emanates from its own TP study report. That apart, the

assessee failed to place on record any evidence worth the name

to demonstrate that its AE rendered any of the above services.

In view of the fact that the rendition of services itself is not

proved, there cannot be any question of allowing any deduction

for such payment.

8 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

Agreement for receipt of services, and that too with its AE, is

not sufficient. The factum of receipt of services needs to be

necessarily established before claiming any deduction. On a

pertinent query, the ld. AR fairly conceded that, as on date also,

he has no evidence in the shape of correspondence, e-mails, fax

or visits of the personnel of the AE to prove that the AE

rendered such services to the assessee. Thus, it is clear that the

authorities below were right in not allowing deduction for this

sum.

to adopt the ‘Combined Transaction approach under the

Transactional Net Marginal Method (TNMM)’ for

benchmarking the international transaction pertaining to

payment of shared service charges as closely linked to its

manufacturing activity.

does not require any fresh examination of facts, we, therefore,

admit the same in the hue of the judgment of Hon’ble Supreme

9 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

Court in National Thermal Power Company Ltd. Vs. CIT

(1998) 229 ITR 383 (SC).

reported by the assessee, as reproduced at pages 2 and 3 of the

TPO’s order, that the assessee applied TNMM in respect of the

transactions reported at Sl. nos. 1 to 8. For international

transaction at Sl. no. 9, the assessee applied the Comparable

Uncontrolled Price (CUP) method. For the instant transaction,

given at Sl. no. 11, the assessee did not carry out any

benchmarking by mentioning that it was only a `Cost

Allocation Arrangement’. Thus the assessee itself did not

combine the transaction of Payment of shared service charges

with other transactions concerned with the manufacturing

activity. Be that as it may, since the assessee has raised the

contention for aggregation of the extant transaction with the

other transactions given under the TNMM linked to the

manufacturing activity, we consider it expedient to deal with

the same.

10 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

from ‘an international transaction’ shall be computed having

regard to the arm’s length price. Section 92C(1) provides for

the computation of the ALP and mandates to follow one of the

prescribed methods as the most appropriate method, which,

inter alia, include the TNM method, as has been applied by the

assessee on aggregate basis and the TPO on segregate basis.

The term ‘transaction’ has been defined in section 92F(v) to

include an arrangement or understanding or action in concert,

whether or not such arrangement etc. is reduced in writing or is

intended to be enforceable by legal proceeding. The

mechanism for determination of the ALP under the TNMM has

been provided in Rule 10B(1)(e) of the Income-tax Rules, 1962.

The term ‘transaction’ has been defined in Rule 10A(d) as

including ‘a number of closely linked transactions’. Whereas

the definition of the term `transaction’ in section 92F(v) is

meant for identifying a transaction, the term `transaction’ in

rule 10A(d) is meant for determining the ALP of international

transaction under the relevant rules.

11 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

definition of `transaction’ as given in rule 10A(d). It, therefore,

boils down that in so far as the determination of the ALP under

the machinery of computation under the methods as given in

Rule 10B is concerned, the term ‘transaction’ also includes a

plural of transactions. However, the caveat is that in order to be

covered within the term ‘transaction’ under Rule 10A(d), it is

sine qua non that such number of transactions must be closely

linked. If they are not closely linked transactions, then there

can be no aggregation for determination of the ALP under the

IT Rules.

of shared service charges on one hand and Import of raw

material and Export of finished goods on the other, namely, the

manufacturing activity, can be construed as ‘closely linked

transactions’? At the cost of repetition, it is mentioned that

whereas the Payment of shared service charges is a claim for

receipt of certain services and other international transactions

covered under the TNMM are in the nature of purchase of raw

material and sale of finished goods from/to the AEs etc. In our

12 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

considered opinion, the two sets of the transactions, can by no

stretch of imagination, be considered as ‘closely linked

transactions’. The mere fact that the assessee claimed to have

availed certain services and utilised the same in the overall

business would not make them as ‘closely linked transactions’,

so as to come up for consideration in an aggregate manner.

alike transactions of purchase or sale etc. of goods or services.

To put it simply, if there are several international transactions

of, say, purchase of similar goods or with minor variations, then

instead of finding the ALP of such international transactions

separately, if these are combined and benchmarked in an

aggregate manner, it satisfies the prescription of closely linked

transactions.

Bremse India (P) Ltd. Vs. ACIT (2016) 380 ITR 307 (P&H)

[the assessee is also a part of Knorr Bremse group, as its name

suggests] considered the question of aggregation of

international transactions in another sense. Their Lordships held

that several transactions between two or more AEs can form a

13 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

single composite transaction if they are closely linked

transactions and the onus remains always on the assessee to

establish that such transactions were part of an international

transaction pursuant to an understanding between various

members of a group. The Hon’ble High Court observed that in

case of a package deal where each item is not separately valued

but all are given a composite price, these are to be taken as one

international transaction. Further, where a number of

transactions are priced differently but on the understanding that

the pricing was dependent upon the assessee accepting all of

them together (i.e. either take all or leave all), then also it is one

international transaction. In that case, it will be on the assessee

to prove that although each is priced separately, but they were

provided under one composite agreement. It still further held

that aggregation can be done when albeit each transaction is

priced differently, but they are so inextricably linked that one

cannot survive without other.

touchstone of the principles enunciated by the Hon’ble High

Court, it becomes overt that the transactions of Payment of

14 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

shared services and normal Manufacturing activities cannot be

clubbed because these are neither under a package deal nor they

are structured in such a manner that the assessee has no option

to accept one and reject the other nor they are so inextricably

linked that one cannot survive without other.

Ltd. vs. DCIT (2016) 389 ITR 469 (Delhi) entered into

agreement with its A.E. for acquiring technology required for

the purpose of manufacturing. It applied the TNMM to

benchmark its international transactions of import of raw

materials, sub-assemblies and components, payment of

technical assistance fees, payment of royalty, payment of

software and purchase of fixed assets. All these were

categorized under one broad head, that is, “Manufacturing of

automotive components” and shown to be at ALP. The TPO

rejected the assessee’s entity level approach applied to

benchmark the international transactions including Technical

assistance fees and proceeded to determine the ALP of the

Technical assistance fees separately. The Tribunal approved the

TPO’s stand on segregation of payment of Technical assistance

15 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

fee. The Hon’ble Delhi High Court admitted the question in this

regard - `Whether the Income Tax Appellate Tribunal was right

in holding that royalty and technical assistance fee did not form

part of a composite transaction and have to be treated as two

separate transactions for the purpose of benchmarking and

computing arms length price?’ Answering this question against

the assessee, the Hon’ble High Court countenanced the view of

the Tribunal that aggregation of the transaction of payment of

Technical fees with other international transactions under the

common TNMM, was not correct. Restoring the matter to the

TPO/AO, it held that the TNMM should be separately applied

for determining the ALP of the international transaction of

payment of Technical fee. The SLP filed against this judgment

has since been dismissed vide DCIT vs. Magneti Marelli

Powertain India (P) Ltd. (2018) 252 Taxman 385 (SC).

weak footing. In that case, the Hon’ble High Court did not

approve the clubbing of `Technical fees’ with other transactions

under the Manufacturing segment as without technical know-

how even the production is not possible. Instantly, we are

16 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

dealing with a situation in which the assessee is trying to club

the transaction of Payment of shared service charges with the

transactions of manufacturing activity, which is a step further

away from the technical know-how in the process of

manufacturing. In view of the foregoing discussion, it is held

that the instant transaction of payment of shared service charges

cannot be aggregated with the international transactions

concerned with the manufacturing activity. We, therefore, reject

the aggregation approach as put forth on behalf of the assessee

and ex consequenti, the additional ground is hereby dismissed.

aggregation or segregation of the transactions can arise only

when it is proved that the assessee actually availed the services

for which it made the payment. We have noted supra that the

assessee has admittedly not proved the receipt of the services.

It has further been admitted by the ld. AR that the assessee has

no evidence to prove the receipt of services through

correspondence or e-mails or visits of the personnel of the AEs.

Once the addition is sustained on the ground that the assessee

17 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

failed to prove the receipt of services at the very outset, there

can be no question of any aggregation.

transaction of allocation of shared service charges is

permissible with the other reported transactions under the

TNMM in the facts as are instantly obtaining nor the assessee

could adduce any evidence either for the cost sharing

arrangement without any mark up or the actual receipt of

services. We, therefore, uphold the disallowance.

confirmation of addition of Rs.19,96,178/- in respect of the

international transaction of ‘Payment of Trademark charges’.

entered into an Agreement with KB-SfN effective from 01-01-

2011 under which KB-SfN granted the assessee a right to use

Contractual Trademarks, i.e. Registered Trademark ‘Knorr

Bremse’ and ‘k encircled’ for its business operations and for all

the products manufactured and sold by it. In consideration, the

assessee agreed to pay Trademark fees of 0.5% on all third

18 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

party gross sales worldwide. During the year under

consideration, the trademark charges paid/payable to KB-SfN

under this agreement amounted to Rs.19,96,178/-. The TPO,

on a perusal of the earlier ‘Technical Transfer Agreement’

(TTA) entered into between KB-SfN GmbH and the assessee

on 06-12-2003, noted that KB-SfN GmbH was already charging

royalty from the assessee, which included consideration for use

of `Contractual Trademarks’ in the manufacture and sale of

Contractual Products. The assessee was asked to explain the

reasons for paying Trademark charges once again vide the later

Agreement effective from 1.1.2011, when payment for such

trademark charges was already being made under the TTA

dated 6.12.2003. In the absence of the assessee furnishing any

plausible explanation, the TPO proposed the transfer pricing

adjustment of Rs.19,96,178/-. The AO made the addition,

which came to be echoed in the impugned order.

inadvertence that the TTA provided consideration, inter alia,

for use of Trademarks, which was actually not a case. Such a

mistake of payment of royalty also for the use of trademarks

19 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

came to the notice of the assessee when the other JVC partner

moved out in the year 2010 and the assessee acquired full

control. It was with a view to correct the mistake in the TTA

that the assessee entered into a Trademark License Agreement

(TLA) dated 01-11-2011 effective from 01-01-2011 to provide

for the payment of consideration for the use of trademarks.

relevant material on record. It is an undisputed position that the

assessee, as a joint venture company (JVC), under the TTA

dated 06-12-2003, copy placed at page 143 onwards of the

paper book, acquired Intellectual Property Rights (IPRs) for the

manufacture, use and sale of brake products for Commercial

Vehicles and know-how for Design Engineering Development,

Marketing and after-sales services for such brake products as

well as certain trademarks relating to such products. Article 2

of the TTA provides that ‘KB-SfN grants the JVC the exclusive

right to use the Intellectual Property Rights, the Know-how and

Technical Documentation supplied by KB-SfN to manufacture

and sell the Contractual Products in India, Pakistan and Sri

Lanka ...’. Article 3 of the TTA provides that ‘KB-SfN shall

20 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

make available to the JVC any Technical Documentation for

the product-related, manufacturing, quality assurance,

marketing, sales and after sales services of the Contractual

Products according to the provisions set forth in Article 3.2 to

3.4 below’. The later paras of the Article deal with the

provision to the JVC of a complete set of product related

Technical Documentation etc. Article 6 of the TTA provides

for the provision of training to the personnel of the JVC by KB-

SfN. Similarly, Article 7 deals with the Consultation to be

provided by KB-SfN to the assessee in the fields of Production,

Engineering, Purchasing and Manufacturing. Article 9, which

is significant in the present context, has the heading

‘Trademarks, Type and Identification Numbers’. Para 1 of

Article 9 provides that: ‘KB-SfN grants to the JVC, the non-

exclusive right to use the Contractual Trademarks in the

manufacture, use and sale of the Contractual Products’. Para 2

of the Article 9 further provides that ‘JVC shall affix the

Contractual Trademarks to the Contractual Products ……….’.

Article 12, which is equally crucial for our purpose, deals with

‘Compensation’. Para 1 of Article 12 reads as under:

21 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

“For the right to use the Intellectual Property Rights and Know-how according to Article 2, the transfer of know- how and Technical Documentation according to Article 3, the provision of training according to Article 6, the consultation according to Article 7 of this Agreement, and the right to use the Contractual Trademarks according to Article 9 the JVC shall pay to KB-SfN. In addition to the costs separately invoiced hereunder, a running royalty amounting to 4% (four percent) of the Net Sales Volume of the JVC. However, such royalty shall not exceed 3% (three percent) of the net ex-factory sales price of the Contractual Products exclusive of excise duties.”

abundantly clear that the assessee agreed to pay running royalty

at 4% of Net Sales Volume as a quid pro quo for the right to

use the Contractual Trademarks as per Article 9 in addition to

the right to use Intellectual Property Rights and know-how etc.

Thus, it is overt that the assessee paid royalty under the TTA at

4% to KB-SfN which also enveloped the right to use the

Contractual Trademarks as per Article 9. Except for a bald

contention, nothing has been brought on record to demonstrate

that there was a mistake to this effect in the TTA, which the

parties to the Agreement also admitted. On a specific query, it

was admitted that during the currency of TTA, that is, from

06-12-2003 till the date of entering into the TLA effective from

22 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

01-01-2011, the assessee was actually using the Contractual

Trademarks and there was no separate payment made for the

same. How the assessee could use the trademarks without any

agreement for use is anybody’s guess. Thus it is held that the

Agreement correctly provided that royalty at 4% was, inter alia,

for use of the trademarks. Ergo, the contention of the ld. AR

that there was a mistake in the TTA in mentioning the

Compensation at 4% of Net Sales Volume as also including

payment for use of the Contractual Trademarks, is jettisoned.

Venture partner in the company, it entered into TLA effective

from 01-01-2011. A copy of the TLA has been placed at page

186 onwards of the paper book. Clause 4 of the TLA deals

with ‘Trademark Fee’. It provides that the assessee: `shall pay

to KB-SfN a Trademark Fee of 0.5% on all third party Net sales

worldwide without IC Sales to KB locations’. It is pursuant to

the TLA that the assessee paid 0.5% for 3 months of the

previous year relevant to the assessment year under

consideration amounting to Rs.19,96,178/-, which became

subject matter of disallowance by the authorities below on the

23 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

premise that: `...considering the fact that the fees for use of

trademark is already a component of Royalty charges paid by

the assessee, an adjustment of Rs.19,96,178/- is made to the

international transaction pertaining to payment of Trademark

charges.’

that the assessee was already paying royalty/fees for the use of

Trademarks, which is embedded in 4% under the TTA and

hence further payment of 0.5% under the TLA was not

warranted. On considering the position in entirety, what

transpires is that the assessee was already paying royalty at 4%

towards use, inter alia, of the Contractual Trademarks and after

the acquisition of the share of other Joint Venture partner, a

fresh understanding was arrived at between the assessee and

KB-SfN as per which it agreed to pay 0.5% for use of

Trademark. The authorities below have disallowed 0.5% by

holding that the assessee was earlier paying for use of

Contractual Trademarks and there was no need to pay a further

amount for use of the Trademarks. In our considered opinion,

such an approach is erroneous. One way of looking at the

24 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

scenario is that the assessee was already paying 4% royalty

pursuant to the TTA and it agreed to pay further 0.5% under the

TLA, thereby raising the rate of royalty to 4.5% for use of

technical know-how etc. including the use of Contractual

Trademarks. Once it was found that the assessee actually paid

royalty at total of 4.5% under the international transaction, then

the course open to the TPO should have been to determine the

ALP of the international transaction of payment of royalty

including use of Contractual Trademarks by considering total

payment at 4.5%, instead of shutting the door by holding that

there was no need to pay further 0.5% of Net Sales Volume

when the assessee was already paying 4% towards royalty. The

fact that the assessee did pay royalty at 4.5% clearly

demonstrates that the payment of further 0.5% ought to have

been considered as increase in the rate of royalty from 4% to

4.5%, being the international transaction to be benchmarked by

considering total payment of royalty at 4.5%. As the authorities

below have proceeded with the disallowance of 0.5%

translating into an addition of Rs.19,96,178/-, we set-aside the

impugned order on this score and remit the matter to the file of

25 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

AO/TPO for determining afresh the ALP of the international

transaction of payment of royalty including towards use of

Contractual Trademarks by considering the transacted value of

the transaction at a combined rate of 4.5%, consisting of

Payment of royalty at Rs.1,99,62,183/- and Payment of

Trademark charges at Rs.19,96,178/-. If in such a fresh

processing of the total royalty transaction under the transfer

pricing provisions, some adjustment is called for, the same be

made. Needless to say, the assessee will be allowed a

reasonable opportunity of hearing.

purposes.

A.Y. 2012-13 :

the making of transfer pricing addition amounting to

Rs.77,68,369/- towards 0.5% paid by the assessee as

Compensation for Contractual Trademarks under the TLA.

26 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

circumstances of this issue are mutatis mutandis similar to those

raised in the appeal for the A.Y. 2011-12. We, therefore, set-

aside the impugned order on this issue and remit the matter to

the file of the AO/TPO for a fresh determination of the ALP of

the international transaction of payment of royalty including

towards use of Contractual Trademarks in conformity with the

directions given hereinabove.

A.Y. 2013-14 :

of the transfer pricing addition of Rs.16,38,962/- at 0.5% of

payment made by the assessee towards use of Contractual

Trademarks under the TLA.

and circumstances of this issue are mutatis mutandis similar to

the ground raised in appeal for the earlier years. Following the

view taken hereinabove, we set-aside the impugned order and

27 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

remit the issue to the file of AO/TPO for determining the ALP

afresh of the international transaction.

addition of Rs.26,22,597/- being payment of Shared service

charges.

circumstances of this ground are similar to those of the A.Y.

2011-12. For this year also, the assessee could not produce any

evidence to demonstrate the receipt of shared services. Further,

the assessee also could not point out that the payment was on

cost allocation basis without any mark up. Since the facts and

circumstances for the instant year are admittedly similar to

those of the assessment year 2011-12, we uphold the addition.

This ground is not allowed.

of Combined Transaction approach qua this transaction with

the transactions under the manufacturing activity, under the

TNMM is also hereby rejected by following our reasoning

given above in relation to the assessment year 2011-12.

28 Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

purposes.

Order pronounced in the Open Court on 20th December, 2019.

Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 20th December, 2019 सतीश

आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-13, Pune 4. The Pr. CIT -5, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “सी” / DR ‘C’, ITAT, Pune गाड� फाईल / Guard file 6. आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Knorr Bremse Systems for Commercial Vehicles India Pvt. Ltd., A.Yrs.2011-12 to 2013-14

Date 1. Draft dictated on 18-12-2019 Sr.PS 2. Draft placed before author 19-12-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.

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