TPO has to look overall business scenario to prove rendering of services by AE

Case Details: United Breweries Ltd. v. DCIT - [2022] 142 taxmann.com 176 (Bangalore-Trib.)

Judiciary and Counsel Details

• • N. V. Vasudevan, Vice President & Ms Padmavathy S., Accountant Member
  • K.R. Vasudevan, Adv. for the Appellant.
  • Sumer Singh Meena, CIT(DR)(ITAT) for the Respondent.

Facts of the Case

The assessee was engaged in the manufacture and sale of beer. During the previous year, the assessee had paid a sum to its AE (HIBV) as consideration for HIBV providing know-how through its personnel to the assessee. The assessee also paid a sum to HBBV for use of technology and trademark viz., royalty towards technology and trademark.

The Transfer Pricing Officer (TPO) held that the provision of services was general in nature and no benefit was derived by the assessee and there was no material to prove the rendering of any technical services. The TPO held that ALP should be treated as NIL and the entire payment was to be added to the total income of the assessee on account of the determination of ALP.

The DRP upheld the order of the TPO. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that the plea of the assessee had been that documentary evidence furnished by it had not been examined by the TPO. There was force in the arguments of the assessee, inasmuch as the TPO as well as the DRP ignored the documentary evidence filed by the assessee and had proceeded on the assumption that these details were general in nature and did not prove the rendering of services by the AE.

It was also equally true that the bulk of evidence filed by the assessee had to be correlated with type of services rendered and the assessee needed to explain how these e-mails showed that services were rendered by the AE. It was only on such analysis being provided by the assessee, could the TPO proceed to examine the rendering of services as well as the benefit that the assessee might derive.

In the matter of coming to the conclusion on the benefit that the assessee received, clear evidence cannot be insisted upon and the overall business scenario and type of services rendered have to be looked into. Therefore, it would be just and appropriate to set aside the issue with regard to determination of ALP to the Assessing Officer/TPO for fresh consideration in the light of law as explained above and the other observations in the order.

List of Cases Reviewed

• • Pr. CIT v. Texport Overseas (P.) Ltd. [2020] 114 taxmann.com 568/271 Taxman 170 (Kar.) (paras 31, 32) followed.

List of Cases Referred to

• • Volvo India (P.) Ltd. v. Dy. CIT, LTU [2018] 89 taxmann.com 79 (Bang. – Trib.) (para 14)
  • Dresser Rand India (P.) Ltd. v. Addl. CIT [2011] 13 taxmann.com 82/[2012] 53 SOT 173 (Mum.) (para 15)
  • CIT v. EKL Appliances Ltd. [2012] 24 taxmann.com 199/209 Taxman 200/345 ITR 241 (Delhi) (para 16)
  • CIT v. Cushman & Wakefield (India) (P.) Ltd. [2014] 46 taxmann.com 317/367 ITR 730 (Delhi) (para 16)
  • Texport Overseas (P.) Ltd. v. Dy. CIT [IT (TP) Appeal No. 1772 (Bang.) of 2017, dated 22-4-2021] (para 30)
  • Pr. CIT v. Texport Overseas (P.) Ltd. [2020] 114 taxmann.com 568/271 Taxman 170 (Kar.) (para 31)
  • CIT v. Smifs Securities Ltd. [2012] 24 taxmann.com 222/210 Taxman 428/348 ITR 302 (SC) (para 35)
  • Cheminvest Ltd. v. ITO [2009] 121 ITD 318 (Delhi – Trib.) (para 39)
  • South Indian Bank Ltd. v. CIT [2014] 49 taxmann.com 100/226 Taxman 130/363 ITR 111 (Ker.) (para 39)
  • GMR Enterprises (P.) Ltd. v. Dy. CIT [IT Appeal No. 2310 (Bang.) of 2019, dated 28-10-2021] (para 40)
  • Dy. CIT v. Ozone India Ltd. [2021] 126 taxmann.com 192/189 ITD 476 (Ahd. – Trib.) (para 62)
  • ITO v. Kyal Developers (P.) Ltd. [2014] 42 taxmann.com 70/63 SOT 93 (URO) (Kol. – Trib.) (para 63).