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| The Tax Publishers2019 TaxPub(DT) 8091 (Mum-Trib) INCOME TAX ACT, 1961
Section 92C
TPO agreed to the fact that services were indeed rendered by AE to assessee, but concluded that services rendered were routine in nature. Having accepted the fact that services were rendered by AE, there was no reason to disbelieve payment incurred thereon by applying benefit test as TPO could not question commercial expediency of transaction carried out by assessee as it fell within the exclusive domain of AO. Further, payment of e-connectivity charges form part of cost base (i.e., operating cost in both marketing support services and distribution activity) and entire operating costs had been recovered with arm's length margin from AE. Hence, there was no reason to determine ALP of said international transaction at NIL especially when TPO had not resorted to any of the methods prescribed under section 92C read with rule 10B.
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Transfer pricing - Determination of ALP - Payment of e-connectivity charges to AE - TPO applied benefit test and determined nil ALP without resorting to any of the methods prescribed under section 92C read with rule 10B
Assessee-company engaged in providing marketing support services to its AEs in the nature of assisting AEs in providing information about customers, assistance in maintaining customer relationships and information about markets made payment for e-connectivity charges. TPO determined ALP thereof at nil on the ground that services rendered by AE were of routine in nature and there was no need to make any payment for the same and also assessee had not elaborated that how much benefit it had derived from the nature of such applications provided by AE.Held: TPO agreed to the fact that services were indeed rendered by AE to assessee, but concluded that services rendered were routine in nature. Having accepted the fact that services were rendered by AE, there was no reason to disbelieve payment incurred thereon by applying benefit test as TPO could not question commercial expediency of transaction carried out by assessee as it fell within the exclusive domain of AO. Further, payment of e-connectivity charges form part of cost base (i.e., operating cost in both marketing support services and distribution activity) and entire operating costs had been recovered with arm's length margin from AE. Hence, there was no reason to determine ALP of said international transaction at NIL especially when TPO had not resorted to any of the methods prescribed under section 92C read with rule 10B.
Followed:CIT v. Johnson & Johnson Ltd. ITA No. 1030 of 2014, dt. 7-3-2017 : 2017 TaxPub(DT) 1277 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
IN THE ITAT, MUMBAI BENCH
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