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Facts
The assessee challenged the tax authorities' rejection of its economic analysis for transfer pricing documentation, including the selection of the Most Appropriate Method for intra-group services. The tax authorities determined the Arm's Length Price of these services as nil, which the assessee disputed, arguing a failure to appreciate commercial expediency and a lack of opportunity to present full evidence. The assessee contended that the authorities questioned its commercial decisions regarding intra-group services.
Held
The Tribunal admitted additional evidence (Annexure I) under Rule 29, finding it crucial for a conclusive determination and acknowledging the assessee's lack of sufficient opportunity to furnish it earlier. Subsequently, the impugned orders of the tax authorities were set aside. The issue on merits was restored to the files of the TPO/AO for fresh determination in accordance with the law, considering the admitted additional evidence.
Key Issues
Rejection of assessee's transfer pricing analysis for intra-group services and determination of ALP as nil; admissibility of additional evidence under Rule 29 for fresh determination.
Sections Cited
Section 143(3) of the Income Tax Act, 1961, Section 144C(13) of the Income Tax Act, 1961, Section 144B of the Income Tax Act, 1961, Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963
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Income Tax Appellate Tribunal, DELHI BENCHES : H : NEW DELHI
Before: SHRI M. BALAGANESH & SHRI ANUBHAV SHARMA
This appeal is preferred by the assessee against the order dated 25.01.2022 of the National Faceless Assessment Centre, Delhi (hereinafter referred to as the Ld. AO) passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2017-18.
On hearing both the sides, it comes up that primarily the assessee has challenged the finding of the ld. tax authorities below rejecting the economic analysis including selection of Most Appropriate Method as undertaken by the assessee in its transfer pricing documentation. The case of the assessee is that the ld. tax authorities below have failed to appreciate the commercial expediency for availing intra group services and the contention of the assessee is that the ld. tax authorities could not have questioned the commercial decisions of the company to take the intra group services requiring the assessee to satisfy net benefit receipt test. The case of the assessee is also that determination of arm’s length price of the transaction as nil by applying CUP method without providing any information on Comparable Uncontrolled transactions wherein service providers have charged nil price for providing similar services.
The ld. AR has made a case before us that the manner in which the proceedings were conducted by the transfer pricing officer and before the DRP, the assessee did not have sufficient time to submit contemporaneous documentary evidences to establish the intent and use of the services. We are of the considered view that the chronology of the events cited before us justify this contention.
The ld. AR has accordingly stressed for disposal of application under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 for admission of additional evidences.
We have gone through the Annexure I, which contains the additional evidences and primarily the same are for the purpose of establishing that intra group services were availed by the assessee for accomplishing business of the assessee providing customized packing solutions to its customers in India. The intention is to establish that said services are an integral part of the business of the assessee for achieving operational efficiency and to be benefitted from the best practices followed by various group entities. 6. Thus, we are of the considered view that the evidence will be helpful for determination of the issue conclusively and the assessee did not have sufficient opportunities before the ld. tax authorities to furnish these