Goodyear South Asia Tyres Pvt.Ltd, Aurangabad vs Asst. CIT
The assessee is an Indian company engaged in the manufacturing of Goodyear branded Medium, Commercial truck tyres, Wire built tyres, Road tyres and Rear farm tyres. The assessee reported 17 international transactions in Form No.3CEB. The AO made a reference to the Transfer Pricing Officer (TPO) for determining the arm’s length price (ALP) of the international transactions. The extant dispute relates to the international transaction of “Payment of Regional Service Charges (RSC)”.
The TPO did not accept the benchmarking done by the assessee under the CUP method because the assessee made comparison of the actual transaction (controlled transaction)
with the same transaction itself conducted between the assessee and its Associated Enterprise (AE). TPO held that the payment was not at ALP. He adopted Nil value as ALP of the international transaction and accordingly recommended transfer pricing adjustment of equal amount. Simply because the assessee was found to have availed services in the preceding year, the same per se would not lead to inference that the services were also received in the current year. The factum of availing services needs to be established
independently every year. To sum up, the findings of the TPO on Nil ALP determination
are founded either on the ground that there was no evidence of receipt of services by the assessee; or it was a case of duplicate services; or the assessee did not receive any benefit from such services; or there was no need for services; or these were shareholder services; or though the certificate by the auditor on cost allocation was correct but there was no documentary evidence for establishing the ALP.
The determination of ALP primarily requires examination of three factors as to
(i) Whether the services were actually availed?
(ii) Whether the costs are rightly allocated to the assessee?
(iii) Whether the payment by the assessee is at ALP?
In the result, the appeals are partly allowed.