DCIT, CHENNAI vs. AB MAURI INDIA PRIVATE LIMITED, CHENNAI

PER DR. DIPAK P. RIPOTE, AM: These are six appeals filed by assessee and revenue for A.Y.2010-11, 2011-12 & 2012-13 against the common order passed by ld.CIT(A)-4, Chennai vide order dated 18/09/2018 for AY 2010-

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

11, 2011-12, 2012-13 & 2013-14. The grounds of appeal are as

under :

1.1 The assessee in IT(TP)A No.84/CHNY/2018 for A.Y.2010-11

has raised the following grounds of appeal:

“1. The Order of the Commissioner of Income-Tax Appeals -4, Chennai (CIT(A)’) is erroneous and contrary to law, facts and circumstances of the case. 2. Transfer Pricing grounds - Downward adjustment to arm’s length price 2.1 The Commissioner of Income Tax (Appeals) /the Transfer Pricing Officer (hereinafter referred to as the CIT(A) / the TPO) erred in making an adjustment of Rs.40,00,000/- to the value of international transactions being import of goods from AE. 2.2 The CIT(A) TPO erred in not considering customs valuation of imported goods as the Arm’s Length Price (ALP) given that the same is governed by Customs Valuation (Determination of Value of Imported goods) Rules, 2007. 2.3 The CIT(A)/ TPO erred in making downward adjustment to the value of imported goods especially when the import price had not increased from previous year prices. 2.4 The CIT(A)/ TPO erred in making an adjustment to the import price of goods by comparing the unadjusted net margins with that of the comparable companies. 2.5 The CIT(A) ought to have appreciated that the gross margin of the appellant is higher than that of the comparable companies and hence at arm’s length.”

1.2 The assessee in IT(TP)A No.85/CHNY/2018 for A.Y.2011-12

has raised the following grounds of appeal:

The Order of the Commissioner of Income-Tax Appeals -4, Chennai is 1. erroneous and contrary to law, facts and circumstances of the case. Transfer Pricing grounds - Disallowance of management charges paid 2.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

The Commissioner of Income Tax (Appeals) /the Transfer Pricing Officer 2.1 (hereinafter referred to as the CIT(A) / the TPO) erred in law and on facts in making adjustment of INR 128,58,880/- in respect of international transactions of the Appellant u/s 92CA(3) read with section 92C(3) of the Income-tax Act, 1961 (‘the Act’).

The CIT(A) /TPO ought to have appreciated that the amount of INR 2.2 128,58,880/- paid by the Appellant to its AE commensurate with the various services provided by latter.

The CIT(A) / TPO erred in law and facts by rejecting the Transactional 2.3 Net Margin Method (“TNMM”) analysis undertaken by the appellant and sought to analyze the said transaction independently instead of adopting the aggregation approach.

The CIT(A) /TPO ought to have appreciated that Management Services 2.4 availed from AE were inextricably connected with the operational business activity of the Appellant and as such the same had to be aggregated with all other “international transactions” for the purpose of benchmarking

The CIT(A) /TPO ought to have appreciated that separate benchmarking 2.5 of management services is unwarranted and as such unsustainable.

The C1T(A) /TPO erred in law by selecting the Comparable 2.6 Uncontrolled Price (“CUP”) Method as the most appropriate method without providing any comparable data to determine the arm’s length price of the said transaction.

The CIT(A) /TPO erred in not appreciating the nature of management 2.7 services received by the Appellant and treating the same as duplicative and routine in nature.

The CIT(A) /TPO erred in concluding that the services received from the 2.8 AE are in the nature of stewardship activities.

The CIT(A) /TPO erred in his conclusion that the AE has not rendered 2.9 services without appreciating the fact that Appellant had produced documentation to substantiate that the management services were received and the Appellant has actually benefitted from the same.

The CIT(A) /TPO erred in not appreciating the nature of Management 2.10 Services received by the Appellant from its AE.

The CIT(A) /TPO erred in facts and law by questioning the need for 2.11 availing the services from AE specifically when the technology is owned by AE.

The CIT(A) /TPO failed to appreciate the detailed submissions and 2.12 relevant workings submitted by the Appellant justifying the payment of management fees to its AE during the year.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

The CIT(A) /TPO erred in not appreciating the benefits accruing to the 2.13 Appellant owing to such management services provided by its AE during the year.

The CIT(A) /TPO having accepted that Management services were 2.14 received, erred in not comparing the same with external comparable companies instead of simply disallowing the same.

The CIT(A) /TPO erred in arbitrarily making downward adjustment by 2.15 determining ALP of management charges as NIL, without any basis.

Without prejudice to the above grounds, the CIT(A)/TPO ought to have 2.16 restricted the disallowance to quantum of mark-up paid to AE instead of disallowing cost plus mark-up.

has raised the following grounds of appeal:

“1. The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

common order.

as lead case and facts are discussed. Assessee for A.Y.2010-11 filed

return of income on 14.10.2010 admitting loss of Rs.10,96,38,333/-.

The case was selected for scrutiny. After giving opportunity to the

assessee, the Assessing Officer(AO) i.e.DCIT, Company Cirlce-1(1),

Chennai passed assessment order for A.Y. 2010-11 on 02.05.2014

making following additions:

1) Disallowance u/s.14A Rs. 1,250/- 2) Depreciation on ETP Rs.3,51,56,694/- 3) Depreciation on Non-complete Fee Rs. 10,90,000/- 4) Transfer Pricing Adjustment Rs. 40,00,000/-

4.1 During the assessment proceedings for A.Y. 2010-11 the AO

observed that assessee had claimed 100% depreciation on Effluent

Treatment Plant(ETP). The AO asked assessee to submit list of all

machineries which were eligible for 100% depreciation. However,

assessee only submitted that the entire ETP machineries are eligible

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

for 100% depreciation. Since the assessee failed to submit the list of

machineries, the AO, therefore, disallowed the assessee’s claim of

100% deprecation.

4.2 The assessee had claimed deprecation @ 25% for the non-

compete fee paid. The AO held that no rights accrued to the

company by paying non-compete fee and nature of non-compete fee

is such it cannot be put to use or transfer to anybody upon

consideration. Therefore, the AO held that non-compete fee cannot

be construed as part of any other commercial rights mentioned under

section 32(1)(ii). The AO further held that since there is no right,

there is no question of depreciation.

4.3 The Transfer Pricing Officer(TPO) made adjustments for the

Management Fee claimed to be paid by assessee to its Associated

Enterprises(AE), only for A.Y. 2011-12 & 2012-13.

We are hereby discussing and adjudicating issue-wise.

First we are discussing Revenue’s Appeal:

Non-Compete Fee:

submitted a paper book and a chart containing issues. The ld.AR

submitted that the issue of depreciation on non-compete fee has been

allowed by ITAT in assessee’s own case for A.Y.2001-02 in ITA

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

No.1520/MDS/2007. The ld.AR submitted the copy of the said

order. The ld.AR further submitted that Department had filed an

appeal against the said order of the ITAT before the Hon’ble High

Court of Madras, however, due to Low Tax Effect(LTE), the said

appeal has been withdrawn by the Department.

relied on the order of the AO.

ITAT Chennai Bench in ITA No.1520/Mds/2007 for A.Y.2001-02

has held as under:

“2. In this ground, it has been contended by the assessee that the CIT(A) erred in confirming the disallowance of depreciation on non-compete fee of Rs.5,30,00,000.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

7.1 Therefore, respectfully following the ITAT Chennai Bench’s

decision in assessee own case for A.Y.2001-02 we hold that assessee

is eligible for depreciation on non-compete fee. Accordingly, as far

as ground regarding non-compete fee is concerned, the Revenue’s

Ground No.5 for A.Y.2010-11, 11-12 and 2012-13 is dismissed.

Depreciation on Effluent Treatment Plant:

to 15 of the order. It is also observed that ld.CIT(A) has admitted

additional evidence. The ld.DR submitted that ld.CIT(A) has

admitted additional evidence without giving opportunity to the AO.

On perusal of the ld.CIT(A)’s order, it is observed that ld.CIT(A) has

not called for any remand report from the AO. It is an admitted fact

by the AR that the assessee had submitted Chartered Engineers

certificate which was not submitted before AO. The said certificate

contains list of machinery. Therefore, the ld.CIT(A) has violated

Rule 46A of the Income Tax Rules. Accordingly, the Ground related

to Deprecation on Effluent Treat Plant is set-aside to the file of

Assessing Officer. The AO is free to conduct necessary enquiries

and assessee is given liberty to file all the documents before the AO.

The AO shall pass order after giving opportunity of being heard to

the assessee. Therefore, Ground No.2, 3 and 4 of the Revenue for

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

the A.Y. 2010-11, 2011-12 & 2012-13 is allowed for statistical

purposes.

Employee’s Contribution towards PF:

disallowed Rs.2,08,834/- us.36(1)(va) of the Act . The AO has

observed that the assessee had not deposited the employee’s

contribution towards Provident Fund within the due date mentioned

in the “The Employees’ Provident Funds and Miscellaneous

Provisions Act, 1952”. Therefore, the AO disallowed the sum of

Rs.2,08,834/- which was employee’s contribution towards PF.

9.1 The Ld.AR submitted that the impugned amounts were

deposited before the due date of filling the return of Income, hence it

is allowable deduction. The LD.AR relied on the decisions of various

Hon’ble High Courts.

9.2 However, the issue of delayed payment of employee’s

contribution of Provident fund has been decided by Hon’ble SC in

the case of Checkmate Services (P.) Ltd. Vs. Commissioner of

Income-tax-1 vide order dated October 12, 2022 as under :

Quote, “ That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others’ income, monies, only deemed to be income,

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date. ” Unquote.

9.3 Thus, the Hon’ble SC has held that the employee’s

contribution towards PF has to be deposited before the due date

mentioned in the respective statute. In this case it is an admitted

position by the assessee in the Audit Report that the amount was not

deposited before the due date mentioned in The Employees’

Provident Funds and Miscellaneous Provisions Act, 1952. Hence, the

impugned amount has been rightly disallowed by the AO.

Accordingly, the Ground No’s.7 & 8 of the Revenue for AY 2012-13

are allowed.

Assessee’s Appeals:

Disallowance on Account of Management Services.

and 2012-13.

10.1 The Assessing Officer had made a reference to transfer Pricing

officer (TPO) for determination of Arm’s length price of the

international transactions. The TPO analyzed the International

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

transaction of Management Services in the Order u/s 92CA for AY

2011 -12.

10.2 The assessee has made payments of Rs.1,28,59,880/- to its

Associated Enterprise (AE) AB Mauri (UK) Limited for AY 2011-12

for “Management Fees”.

10.3 It is mentioned in the TP Order and assessee’s submission that

the Assessee is a wholly owned subsidiary of Mauri Fermentation

India Pty Ltd Australia. Assessee is primarily engaged in

manufacturing and distribution of fresh bakers’ yeast and fresh & dry

bakery ingredients. The assessee company also blends & distributes

herbs & spices, dry sauce mixes and other consumer products. The

assessee company operates in two business segments in India

namely: i) Bakery segment which comprises of yeast & Bakery

ingredients, and ii) Spices segment .

10.4 The assessee has entered into following International

Transactions during AY 2011-12.

S.No Type of service Name of AE Amounts in Rs. 1 Import of raw AB Mauri Malaysia 45,14,346 materials AB Enzymes GmbH 21,90,380 Ohly GmbH 24,25,168 Casteggio Leiviti S.r.l 38,192 Innovating Food Technology 2,66,615 B.V. AB Mauri Vietnam 2,73,920 Harbin Mauri Yeast Co Ltd 7,87,685 2 Export of AB Mauri Lanka (Pvt) Ltd 53,31,133 finished goods AB Mauri South West 1,27,074,579

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Asia(Pty) Ltd AB Mauri Malaysis SDN 38,29,037 BHD AB Mauri Vietnam Pvt Ltd 79,67,742 ACH Food Companies 11,60,53,000 AB World Foods Limited 1,25,11,085 3 Import of AB Mauri Lanka Pvt. 2,44,31,423 finished goods Limited AB Agri Ltd 8,22,61,847 4 Royalty fee for AB Mauri Technology Pty 1,45,87,345 technical know Ltd how 5 Management AB Mauri(UK) Limited 1,28,59,880 fees expense 6 Services AB Mauri South West Asia 78,27,500 rendered (Pty) Ltd AB Mauri Malasia SDN 1,085,93,210 BHD 7 Interest Associated British Foods Plc 86,63,236 expense on ECB loans 8 Reimbursement Associated Britis Foods Plc 70,07,953 receivable AB Enzymes GmbH 33,26,144 AB Mauri Vietnam Pvt Ltd 23,76,276 9 Reimbursement AB Mauri China East Pacific 2,91,610 payable AB Mauri South West Asia 25,36,035 (Pty) Ltd. AB Mauri Malasia SDN 21,12,881 BHD Total 34,80,71,222

The assessee has clubbed all the international transactions and

applied Transactional Net margin Method (TNMM) for

benchmarking the International Transactions.

Gist of TPO’s Order :

10.5 For AY 2011-12 the TPO rejected the TNMM as the Most

Appropriate Method for benchmarking the International Transaction

of “Management Fee” for the reason discussed in the order.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

The TPO in the order has observed that the Assessee has

claimed that the impugned services were provided as per the

Agreement dated 06/03/2006, i.e. four years before the financial

year. The said Agreement has not taken into consideration the

updated capabilities of the assessee company. The assessee has also

not proved whether the AE have capacity to provide such services.

The assessee has claimed that it has received services in Finance,

Human resources, taxation, manufacturing, strategic sourcing,

marketing, however, the assessee has not submitted any evidence

separately for each services and also not proved that the services are

not duplicate or stewardship services. The assessee has also not

submitted how much amount was paid for receiving services under

various heads. The assessee itself have qualified account managers,

supported by independent auditors. The assessee company is in

existence since 2002 and having Managing Director, Vice President

Operation, Chief Finance Officer, Vice President HR. The assessee

failed to prove how the AE has provided services when assessee

itself have qualified experienced officers. The assessee merely

submitted emails but these are general in nature and does not prove

that services were provided. Most of the emails contain various

reports. At the most it can be assumed that these various reports were

required by AE as shareholder, hence at the most it can be treated as

shareholder activity, which does not need any payments as decided

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

by European Joint transfer Pricing Forum in its report. Even OECD

has opined that such activity does not need any payments by

receiver.

10.6 Finally in Para 6 of the TPO’s order it is held as under :

“The ALP for the management fees calculated on an international transaction has not been determined by the assessee company in accordance with Section 92C(3). Hence, the arms length price has been calculated as per the provision of sub sections (1) and (2) of 92C and determined as NIL. ”

10.7 The Ld.CIT(A) upheld the TPOs order on this issue.

10.8 Before us the Ld.AR submitted as under :

“TPO erred in concluding that since assessee company had a qualified accounting manager and supporting staff, there is no need to avail any support from AE as regards to Finance operations. It is pertinent to note that apart from qualification, relevant experience is very critical for each type of work. It can be seen that no assistance was availed from AEs for routine accounting entries. Assistance was availed only With respect to specialised services like capital budgeting analysis for NOW Plant, assistance in identifying the feasibility of setting up of new plant in India, preparation of capex documents, analysis of financial implications of Sikandarabad ETP plant etc.

Human Resources does not merely include employee training on soft skills. It also includes support with respect to recruitments, rolling out HR. policy documents (including safety alerts) etc. In this regard, it is pertinent to note that evidence regarding employee safety alerts were produced as sample evidence.

TPO erred in concluding payment towards professional and consultancy charges is entirely towards TAXATION. Professional and consultancy

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

charges includes various services like statutory audit, internal audit, tax services, certifications, legal services like drafting of agreements etc. The payment of INR 183,54,000 in India relates to services availed from local professional relating to Statutory audit, Tax filing, representation, tax audit, legal support etc. This is entirely different from services received from AEs. Hence there is no duplication of services.

It is factually wrong to state that no evidence was submitted with respect to Manufacturing services. In fact, the following sample evidences were submitted before TPO:

• Assistance in setting up, maintenance and operation of NDW plant in India • Assistance in installation of margarine plant in India • Assistance in procuring gable top machines from Evergreen • Assistance in upgradation of Sikahdarabad ETP plant

A lot of marketing support was provided by AEs with respect to securing clients in India Eg. Britania. The relevant sample mail is attached for easy reference.

We will arrive early Monday morning, like 4am ish and leave Thursday morning. I will put an outline Agenda together in the next few days. If it were possible for you and I to get to see Britannia to get some projects under way that would be ideall”

OUR Discussions and FINDINGS :

Services’, we deem it fit to reproduce the relevant provisions of the

so called “Agreement” which is the basis of the fee payment. The

assessee has submitted copy of the same at page 47 to 75 of the paper

book.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

This agreement is made on …………. 2006. Between

1) AB Mauri (UK) Ltd (the providing party) 2) The companies whose names and registered offices are set out in schedule 1 to this agreement.

B. The providing party has provided such services to the Receiving

Parties on a regular basis since the later Date of Acquisition of the

group by Associated British Foods Ple on 30 September 2004 on an

informal basis which is now reflected in the terms and conditions of

this Agreement which will govern the future supply of services from

the providing party to receiving party.

Cost means value of the expenses incurred in providing the services

2.

2.1 From the effective date, the providing party shall at the request of

a receiving party provide the receiving party with all or any of the

services under the terms set out in this agreement.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Our Analysis :

observed that the Agreement is between AB Mauri UK Ltd

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

(providing party) and 16 (receiving parties).All pages of this

agreement are not signed by any party. Only the second last page

contain signature of Providing party and last page contain signature

of some person on behalf of Indian entity. The said Agreement is not

registered nor it is notarized. There are no page numbers. The

assessee has not produced any original agreement before us to prove

the genuineness of this agreement.

It is a self serving document as it is prepared by parent company and

the subsidiaries had to agree.

13.1 As mentioned there are 16 receiving parties located at different

geographical locations. However, it is presumed in the agreement

that all of them have requirement of the so called services mentioned

in the agreement irrespective of the geographical difference.

13.2 The services provided were to be billed at a fee Calculated at

Budgeted Cost plus 5% mark up.

provided any documents to prove the budgeted cost. Rather the

assessee has not provided “ What was the budgeted cost for various

services separately”

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

We have gone through the invoices which are enclosed in the paper

book, none of the invoices mentions the Budgeted Cost.

more than one AEs, and what was the Budgeted cost of these

services, and what was the turnover of all these AEs and how these

were allocated. We have gone through the invoices and these

invoices does not contain any of these details. Rather all the invoices

are vague.

The onus is on the assessee to prove it. Therefore, the TPO was right

in holding the value at NIL.

Discussion about the Emails- the so called evidence :

of the paper book of the assessee:

“Thanks and Regards Apoorv Verma AB MAURI INDIA PVT LTD. Plot no. 218 & 219, Bommasandra Jigani Link Road, Bangalore - 560105, India,

Venue - Hotel Radha Regent Electronic City, Cangalore On 11 th, Cab will move from the factory at 1:15pm. Hence pi have your lunch early. On 12th, the regular cab will be dropping the people in the Hotel and then come to office and in the evening, it wiU pick you up from the hotel and drop in your respective points.

Thanks and Regards Apoorv Verma

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Hello Vijayan K C, Ina Fullerton cancelled the following Web seminar.

I will be in the Chennai office on Friday 8th-I can collect and docs then

Geoff, Thanks. I am on travel next week, so I am marking this to Vijayan, who will arrange for advance payment also. Vijayan will also arrange to have this signed by Binu at Chennai next week. (should this be returned to you at Malaysia ............................. or can this be sent to supplier) ............................... Please confirm this again to Vijayan. regards Anand

Anand Please find attached a proposal to conduct an Cogeneration study and a contract for same

The contract needs to be signed by an officer of AB Mauri India The cost is INR 150,000 plus costs of travel to Chiplun, as per offer Can you please get the someone to sign this contract and return to me so that we can proceed with the work asap

Thanks Regards Geoff

Dear Sir, Please find attached in first attachment the policy cover details I am aiso sending the signed copy of contract document. I would like to request you to remove or change the yellow marked area in contract and send us the final copy after your signatures

Vijayan Please advise the status of this Has it been signed and issues to the consultant? I want to get this work going

Thanks Regards

Geoff, Thanks. I am on travel next week, so I am marking this to Vijayan, who will arrange for advance payment also. Vijayan will also arrange to have this signed by Binu at Chennai next week. {should this be returned to you at Malaysia .............................. or can this be sent to supplier) ............................... Please confirm this again to Vijayan.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

regards Anand

Anand

Please find attached a proposal to conduct an Cogeneration study and a contract for same The contract needs to be signed by an officer of AB Mauri India The cost is INR 150,000 plus costs of travel to Chiplun, as per offer Can you please get the someone to sign this contract and return to me sc that we can proceed with the work asap Thanks Regards

Dear Sir,

Please find attached in first attachment the policy cover details,

I am also sending the signed copy of contract document. 1 would like to request you to remove or change the yellow marked area in contract and send us the final copy after your signatures

Waiting for your mail received confirmation and the work order

Thanks Bageshri Energetic Consulting Pvt. Ltd. TMA House, Plot No. 6, 2nd Floor, Main Road, Wagle Industrial Estate,

Dear Sir, Kindly ignore the payment terms part from the submitted proposal.

The payment terms will fee same-as previous i.e, 50% against advance and 50% against submission of satisfactory Excel sheets. So, requesting you to instruct Mr. Vijayan accordingly, please find attached herewith the proposal with changed payment terms.

Waiting for your mail received confirmation

Thanks Bageshri Energetic Consulting Pvt. Ltd. TMA House, Plot No. 6,2nd Floor, Main Road, Wagle Industrial Estate, Thane-West 400 604 Tel: 022-32437023 / 25805126

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Bageshri I accept your proposal, subject to the signing of a contract similar to that we signed for the co-gen work setting our brief confidentiality and deliverables etc. This can be the techno commercial work order

Due to the urgency of the work, please proceed without waiting for the detailed contract Vljayan,, please pay the deposit of 35% upon receipt of invoice

I will prepare the contract this week

Thanks.

Dear Sir,

Please find attached herewith the proposal for Zero discharge system evaluation and Excel based modeling for your perusal and consideration.

Waiting for your mail received confirmation

Thanks Bageshri

The views expressed in this e-mail are the views of the individual and may not reflect the views of the organisation. AB Mauri accepts no liability for any losses or damages arising from reliance on the information contained in this e- mail.

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Andrea - Confirmation for KC Vijayan.doc

Dear all Please can we use these conference call details for our call later today. I will be

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

the leader

Kind regards Ian

Thanks and Regards Apoorv Verma AB MAURI INDIA PVT LTD.

Plot no. 218 & 219/ Bommasandra Jigani Link Road, Bangalore - 560105, India,

Hi Vijayan Please find the attachment this time, many apologies. Kind regards, Andrea

Hi

Please find attached car booking confirming for 19 July 2011. You will be picked up at 1755pm and dropped off at Marriott Hanbury Manor Hotel where a room has been booked for you.

I hope that this is okay. Kind regards Andrea – Confirmation for KC Vijayan.doc

Thanks and Regards Apoorv Verma AB MAURI INDIA PVT LTD. Plot no. 218 & 219/ Bommasandra Jigani Link Road, Bangalore - 560105, India, Dear all

Please can we use these conference call details for our call later today. I will be the leader

Kind regards Ian

Alix – Please can you furnish the attendee’s with conference call details Time – 15.00 (Delhi time) To resove AB Mauri India payment terms

Thanks and Regards Apoorv Verma AB MAURI INDIA PVT LTD. Plot no. 218 & 219, Bommasandra Jigani Link Road, Bangalore-560105, India,

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Hi Vijayan Can you please “break down the'irtterco call account balance with FIL to show the draw downs of the AUD 7.2m loan with FIL, to confirm thratall of the draw downs have been included within the 9+4 forecast. I was expecting it to follow the table in the loan documentation but cannot see this clearly as there is already an additional call balance with them. Annex A- Schedule of loan draw down Month Amount

(AUDk) April 2011 820 May 2011 1,690 June 2011 810 July 2011 1,360 August 2011 1,490 September 2011 1,030 Total 7,200 Can you also explain why this has been moved from intercompany loans to the intercompany call account as I can see no reference to this in the loan documentation and Daniel Roth is still recording this as an intercompany loan for FIL.

Kind Regards Debbie Thompson Group Finance Manager AB_Mauri_Logo_CMYK_minl Telephone: +44 (0)1733 871519”

16.1 We have carefully studied all the emails. We are discussing

each email here onwards.

16.2 The email at page 95 and 97 are regarding ‘TIPS training’

From these emails one can only infer that there was some training.

We fail to understand who were the trainers, what was their

specialization, has the assessee requested for the training? What was

the cost of the said training to the AE, if at all it was provided by the

AE.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

In the absence of these details, we ask ourself how can we consider

these emails as an evidence of service provided by the AE.

16.3

This email number 3 is regarding cancellation of some “ABF

Training” This is definitely not an evidence for the services provided

by the AE.

16.4 ,

In this email one Mr.Geoff said that he will be in Chennai Office on Friday 8th and can collect any documents.

Assessee has not explained who is Mr.Geoff. At best we understand

that he may have collected some document. So it is a courier service

which is easily available everywhere.

Any way the Assessee has not explained the cost of these services of

collecting some documents.

These emails at page number 101 to 116 are related to some Services

to be provided by Energetic Consulting Pvt Ltd, Thane Maharashtra

India to the assessee. The assessee has not explained the role of the

AE in this context. This particular service contract is with an Indian

local entity. Assessee is Indian. Contract is with Indian entity.

Assessee failed to explain role of AE situated in UK for this contract

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Therefore, we are of the opinion that these emails are not evidence of

the services provided by AE.

16.6 Emails at page 117, 118, 119, 120 are saying only “Chiplun

debottle necking and ETP”

This sentence does not give any evidence of any service provided by

AE to the assessee.

16.7 Page 124 is regarding car booking. We do not understand for

whom the car was booked. Anyway this does not explain any service

provided by AE to the assessee.

16.8 Page 121, 122 are not legible.

16.9 Email at page 123 talks about some attachment. The responded

has replied that there are no attachments. This is definitely not an

evidence for the services provided by the AE.

16.10 Email at page 125, 126,127,128 are instruction for some

conference call and how to join the conference. From this email we

fail to understand what was the subject of conference, who

participated in the conference, etc .This is definitely not an evidence

for the services provided by the AE.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

16.11 Email at page 129 and 130 is about some intercompany

loan being shown as intercompany call account. This is definitely not

an evidence for the services provided by the AE.

16.12 The email at page 131 is about Intercompany Loan

agreement. The sender of the email has just stated that he is

submitting two signed copies of Intercompany Loan Agreements by

courier. This is definitely not an evidence for the services provided

by the AE

the copies of emails submitted by the assessee as evidence of the

“So-called” services provided by the AE to the assessee. We have

observed that none of the emails establish any service being provided

by the AE to the assessee. Therefore, we are of the opinion that the

assessee has failed to substantiate by documentary evidence, any

services provided by the AE to the assessee. Therefore, on facts and

circumstances of this case we are of the opinion that no services were

provided by the AE to the assessee. Since, there are no services, there

is no question of benchmarking them. One can analyze the ALP if

there are any services, but in the case of the assessee there is no

service by the AE to the assessee. Hence, the TPO has rightly held

value of the so called services as NIL because there are no services.

We find the ITAT Bangalore on identical facts in the case of Taegu

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

Tec India Pvt. Ltd.,v/s DCIT ITA(TP)1337 Ban 2010 vide order

dated 24/05/2017 have held as under :

Quote, “But onus lies on the assessee to furnish the proof of actual receipt of the services by the appellant from the AE. The Hon’ble Bombay High Court in the case of Umakant Vs. DCIT 369 ITR 220 held that proof of rendition of services is a sinequanone for allowability of expenditure in the hands of the recipient of the services……………… The coordinate bench of this Tribunal in the case of Volvo India Pvt. Ltd., of which the Hon’ble AM is the author, held as follows:

“12. Thus in the light of the above legal position, the ALP of services of AE cannot be determined at Nil by questioning the necessity of benefits of expenditure incurred. But the matter does not end there. The onus lies on the assessee to prove that the services are actually rendered by the AE. But the assessee had failed to discharge this onus lying upon it despite being asked to do so by the TPO. The TPO had especially invited the assessee company to produce the proof in support of the services rendered by AE. The appellant only had tried to prove this by producing some correspondence which does not prove that the services are actually rendered. The failure by the assessee to discharge the onus can be presumed that the assessee had no evidence to establish that services of management support are rendered by its AE in consideration to payment of Rs.26,22,19,000/-. This presumption can be drawn even as per the provisions under section 86 of Indian Evidence Act. The submission that the TPO had impliedly accepted the rendition of services cannot be accepted as there was no finding given by the TPO that services are actually rendered. In fact, the TPO while summarizing this observation vide page No. 30 of his order vide column No.6 had specifically mentioned that the assessee had failed to prove that the services are actually rendered

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

by AE. Furthermore the finding of the TPO that the invoice was raised much after the closure of the accounting year and the payment of management fee in nothing but siphoning of the profits from India with the intention of avoiding tax are serious enough to doubt the genuineness of transactions. The appellant had made no effort to controvert the findings of the TPO. Therefore, in our considered opinion the TPO/AO is justified in adopting ALP at Nil.”

India Private Limited Vs. Addl.CIT has dismissed the appeal of the

company on the identical issue, as under :

Quote, “ Upon a perusal of the paper book, this Court finds that all

the three authorities below have given concurrent findings of fact that the Appellant had failed to furnish evidence to demonstrate that administrative services were actually rendered by the AE and

the assessee had received such services. In fact, the ITAT has noted

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

in the impugned order “….On a specific query made by the Bench to demonstrate the receipt of services from AE through cogent

evidence, including, any communication with the AE, learned counsel for the assessee expressed his inability to furnish any evidence and repeated his submission to restore the matter back to

the Assessing Officer for enabling the assessee to furnish evidence, if any.”. 6. This Court is also of the view that every Assessment Year is a separate unit which is governed by its own peculiar facts.

Further, the ITAT in the impugned order has clarified that its decision would not prejudice the assessee’s claim in any other assessment year, as it has to be decided based on the evidences produced to establish the claim of receipt of services from AE.

and ITAT Bangalore, we uphold the order of the TPO on the issue of

“Management Services”.Thus, the Ground No.2 in IT(TP)A No.85 of

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

2018 for the A.Y.2011-12 is dismissed. Ground No.1 in IT(TP)A

No.85 of 2018 is general in nature and does not need any

adjudication hence dismissed as not adjudicated.

19.1 Our findings in IT(TP)A No.85 of 2018 regarding Ground

No.2 Management Charges paid shall apply mutatis-mutandis to the

Ground No.2 in IT(TP)A No.86 of 2018 for the A.Y.2012-13 for

Management Charges paid of Rs.2,43,07,267/-. Accordingly,

assessee’s Ground No.2 for the A.Y.2012-13 is dismissed. Ground

No.1 in IT(TP)A No.86 of 2018 is general in nature and does not

need any adjudication hence dismissed as not adjudicated.

19.2 Thus, assessee’s appeal number in IT(TP)A No.85 of 2018 for

the A.Y.2011-12 and IT(TP)A No.86 of 2018 for the A.Y.2012-13

are dismissed.

Discussion on the case laws relied by the Assessee:

to Management Fee.

20.1 EKL Appliances Ltd Vs. CIT 24taxmann.com 199 :- In this

case the services were never doubted . However, in the case under

consideration, the issue is that assessee failed to establish that the

Services were actually received. Therefore, the case law is not

applicable in the case of the assessee.

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

20.2 Dresser Rand India ITA No.8753/Mum/2010: In the case of

Dresser Rand issue was of benefit test. Here in the case under

consideration, we have not applied benefit test. We are on the basic

fact that assessee failed to prove receipt of Services. Hence the case

law is not applicable.

20.3 AWB India P Ltd Vs Addl. CIT ITA 4454/Del/2011: This

case is again distinguishable on the facts. We are on the basic fact

that assessee failed to prove receipt of Services. Hence the case law

is not applicable.

20.4 The assessee has also relied on some other decisions. But all

the case laws relied are distinguishable on the fact that in the case of

the assessee the assessee failed to demonstrate that the Services were

actually received.

IT(TP)A No. 84/CHNY/2018 for AY 2010-11:

value of the International Transaction for AY 2010-11. The Assessee

and TPO both applied TNMM. The TPO rejected the TNMM

analysis carried out by the assessee, not agreeing to the filters applied

by the assessee, and three years weighted average considered by

assessee for comparable. The TPO carried out fresh analysis after

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

giving opportunity to the assessee. The TPO arrived at following

comparable:

Name % PLI Kothari Fermentaion & Biochem Ltd 3.73 Anmol Biscuits Ltd 4.70 Average 4.23

The assessee’s PLI for Bakery Segment was (-1.67%).

Since the assessee’s PLI (OP/OI) was less than the average of

comparable, the TPO held that the transaction was not at Arm’s

Length and proposed adjustments.

21.1 Before, us the Ld AR submitted that the loss was due to

expansion and it was not operative loss. The Ld.AR also submitted

that the TPO failed to consider the Foreign exchange gain. The

Ld.AR submitted that the Foreign exchange gain/loss was part of

operating profit as it was related to Packing credit.

21.2 However, it is observed that the TPO has not discussed these

issues in the order properly. The TPO has vaguely mentioned that the

Foreign exchange gain is related to ECB. However, TPO has not

specified how much was the foreign exchange gain, how much was

related to ECB, how much was related to packing credits or any other

operative activity. Therefore, in the interest of Justice, we set aside

this issue to the file of the AO/TPO for proper working of PLI.

Opportunity shall be granted to the assessee. Assessee shall provide

IT(TP)A No.84 to 86/CHNY/2018 [A] & ITA No’s.3315 to 3317/CHNY/2018 [R] for A.Y.2010-11, 11-12 & 12-13 AB Mauri India Private Limited (06 Appeals)

all the details. Accordingly the assessee’s grounds of TP adjustments

in A.Y.2010-11 in IT(TP)A No.84/CHNY/2018 are allowed for

statistical purpose.

IT(TP)A No’s.84, 85 & 86/CHNY/2018 (Assessee) :

Allowed for statistical purpose, appeals for A.Y.2011-12 and for

A.Y.2012-13 are Dismissed.

ITA No’s.3315, 3316 & 3317/CHNY/2018 (Revenue):

A.Y.2011-12 and for A.Y.2012-13 are Partly Allowed.

Order pronounced in the open Court on 23rd November, 2022.

Sd/- Sd/- ( MAHAVIR SINGH) (DR. DIPAK P. RIPOTE) ACCOUNTANT MEMBER VICE-PRESIDENT पुणे / Pune; �दनांक / Dated : 23rd Nov, 2022/ SGR* आदेशक��ितिलिपअ�ेिषत आदेशक��ितिलिपअ�ेिषत / Copy of the Order forwarded to : आदेशक��ितिलिपअ�ेिषत आदेशक��ितिलिपअ�ेिषत अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. िवभागीय�ितिनिध, आयकर अपीलीय अिधकरण, चे�ई “डी” ब�च, 5. चे�ई / DR, ITAT, “D” Bench, Chennai. गाड�फ़ाइल / Guard File. 6.