M/s DRHL India Services P. Ltd., Bangalore V. DCIT, Bangalore

ITA 1031/BANG/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8213 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 04-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO I
• Keywords: Transfer pricing; International transaction; Additional evidence
• Section: 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I T (T P ) A NO S . 1030 , 1031 & 1032 /BANG/2014 ASSESSMENT YEAR S : 2006 - 07 , 2007 - 08 & 2009 - 10 M/S/. DRHL INDIA SERVICES P. LTD., NO.14, 7 TH MAIN, 80 FEET ROAD, SUBBANNAPALAYA EXTENSION, BANGALORE 560 033. PAN: AABCD 5225A VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. APP EL L ANT RESPONDENT APP ELL ANT BY : SHRI KAUSHIK, ADVOCATE RE SPONDENT BY : SHRI C.H. SUNDAR RAO, CIT(DR) - I, ITAT, BENGALURU. DATE OF HEARING : 19 . 12. 201 8 DATE OF PRONOUNCEMENT : 04 . 0 1 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THESE ARE APPEALS BY THE ASSESSEE AGAINST THE CO MMON ORDER DATED 28.05.2014 OF CIT(APPEALS)-IV, BANGALORE RELA TING TO ASSESSMENT YEARS 2006-07, 2007-08 & 2009-10. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF FREIGHT FORWARDING ACTIVITIES. IT IS A WHOLLY OWNED SUBSI DIARY OF DRH LOGISTICS INTERNATIONAL, SRI LANKA. DURING THE PREVIOUS YEAR RELEVANT TO AY 2006-07, THE ASSESSEE PAID A SUM OF RS.3,45,08,976 AND RS.1, 88,86,235 IN AY 2007-08 AND ANOTHER SUM OF RS.1,74,97,984 IN AY 200 9-10. IT IS THE PLEA OF THE ASSESSEE THAT THE PAYMENT IN QUESTION WAS MA DE TO THE HOLDING IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 2 OF 15 COMPANY FOR SERVICES RENDERED BY THE HOLDING COMPAN Y. THE ASSESSEE EXPLAINED THAT THE HOLDING COMPANY HAS A NETWORK AL L OVER SOUTH-WEST ASIA AS WELL AS CONNECTIONS WORLDWIDE WITH AGENCIES AT V ARIOUS LOCATIONS WHO CAN PROCURE ORDERS FROM CUSTOMERS TO AND FROM INDIA . THE FRANCHISEE COMMISSION PAID BY THE ASSESSEE WAS FOR SUCH SERVIC ES RENDERED. SINCE THE PAYMENT IN QUESTION WAS A PAYMENT MADE TO A HOL DING COMPANY WHICH WAS A PAYMENT MADE TO AE, WHO HAPPENS TO BE A NON-R ESIDENT AND THEREFORE UNDER THE PROVISIONS OF SECTION 92 OF THE INCOME-TAX ACT, 1961 [THE ACT], INCOME ARISING FROM SUCH TRANSACTIONS HAD TO BE DETERMINED HAVING REGARD TO ARMS LENGTH PRICE. THE QUESTION B EFORE THE AO IN AYS 2006-07 & 2007-08 WAS WITH REGARD TO THE DETERMINAT ION OF ALP IN RESPECT OF TRANSACTION OF PAYMENT FOR SERVICES RENDERED INT RA-GROUP BY THE ASSESSEE TO ITS HOLDING COMPANY WHICH IS THE INTRA- GROUP PAYMENT SUBSTANTIATES THE ARMS LENGTH TEST. THE QUESTION OF DETERMINATION OF ALP WAS REFERRED TO THE TPO WHO BY HIS ORDER PASSED U/S . 92CA OF THE ACT DATED 30.10.2009 FOR AY 2006-07 CAME TO THE CONCLUS ION THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT SERVICES WERE RENDERED BY THE HOLDING COMPANY TO THE ASSESSEE FOR WHICH PAYMENT WAS MADE. THE TP O SUGGESTED ADDITION TO THE TOTAL INCOME OF THE ASSESSEE ON ACC OUNT OF SHORTFALL IN ARMS LENGTH PRICE OF A SUM OF RS.3,24,20,445. SIMILARLY , IN AY 2007-08, THE ADDITION ON ACCOUNT OF DETERMINATION OF ALP TO THE TOTAL INCOME WAS DETERMINED AT RS.1,88,86,235. 3. AGAINST THE AFORESAID ADJUSTMENTS, THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP. THE DRP VIDE DIRECTIONS DATED 26.8 .2010 FOR AY 2006-07 DISMISSED THE OBJECTION OF THE ASSESSEE. FOR AY 2 007-08, THE DRP DISMISSED THE OBJECTIONS OF THE ASSESSEE TO THE ORD ER OF TPO. 4. THE ADDITIONS SUGGESTED FOR BOTH THE AYS 2006-07 & 2007-08 WAS INCORPORATED IN THE FAIR ORDER OF ASSESSMENT PASSED BY THE AO. THE IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 3 OF 15 ASSESSEE FILED APPEAL AGAINST THE AFORESAID FAIR OR DER OF ASSESSMENT FOR AYS 2006-07 & 2007-08 BEFORE THE TRIBUNAL. THE TRI BUNAL VIDE ITS ORDER DATED 10.07.2012 IN ITA NO.1211/BANG/2010 FOR AY 20 06-07, SET ASIDE THE ORDER OF THE AO AND REMANDED FOR FRESH CONSIDERATIO N BY THE TPO THE DETERMINATION OF ALP. SIMILARLY, THE TRIBUNAL VID E ORDER DATED 05.10.2012 FOR AY 2007-08 IN ITA NO.1012/BANG/2011 SET ASIDE T HE ORDER OF ASSESSMENT AND REMANDED THE QUESTION OF DETERMINATI ON OF ALP TO THE TPO FOR FRESH CONSIDERATION. CONSEQUENT TO THE ORD ERS OF THE TRIBUNAL, THE TPO PASSED AN ORDER DATED 25.09.2013 FOR BOTH THE A YS 2006-07 & 2007- 08 OBSERVING THAT THE ASSESSEE DID NOT RENDER ANY E VIDENCE TO SHOW THAT SERVICES WERE RENDERED BY THE AE AND THE BENEFIT DE RIVED BY THE ASSESSEE FROM SUCH SERVICES. THE TPO ALSO HELD THAT THERE W AS NO BASIS OF VALUATION OF THE PAYMENTS FOR SERVICES BY INDEPENDE NT ENTITIES. PURSUANT TO THE ORDER OF TRIBUNAL DATED 25.09.2013, THE AO PASS ED ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL AND THE ORDER OF THE A O DATED 11.3.2013, WHEREIN THE ORIGINAL ADDITION SUGGESTED BY THE TPO WAS AGAIN MADE BY THE AO. 5. AGAINST THE AFORESAID ORDERS OF THE AO, THE ASSE SSEE PREFERRED APPEALS BEFORE THE CIT(APPEALS) FOR THE AYS 2006-07 & 2007-08. AS FAR AS AY 2009-10 IS CONCERNED, THE FACTS ARE IDENTICAL. THE PAYMENT FOR INTRA- GROUP SERVICES TO THE HOLDING COMPANY BY THE ASSESS EE FOR AY 2009-10 WAS A SUM OF RS.1,74,97,984. SINCE THE ASSESSEE DI D NOT SUBSTANTIATE THE ALP, THE ENTIRE CONSIDERATION PAID WAS ADDED TO THE TOTAL INCOME BY WAY OF ADJUSTMENT TO THE ALP. AGAINST THE AFORESAID ORDER OF ASSESSMENT, THE ASSESSEE FILED APPEAL BEFORE THE CIT(APPEALS). 6. THE CIT(APPEALS) TOOK UP FOR CONSIDERATION ALL T HE THREE APPEALS FOR AYS 2006-07, 2007-08 & 2009-10 FOR CONSIDERATION. HE NOTICED THE IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 4 OF 15 FINDINGS OF THE TPO IN THE ORDER OF ASSESSMENT AFTE R THE ORDER OF TRIBUNAL WHICH WERE AS FOLLOWS:- 6.3. THE TPO FINDS THAT NONE OF THE DOCUMENTS MENTIONED AT PARA 3 ABOVE, AND ADMITTED BY THE TPO PURSUANT TO T HE DIRECTIONS OF THE ITAT, SHOW (I) THAT SERVICES WERE ACTUALLY R ENDERED BY THE AE (II) HOW' SUCH SERVICES WOULD BE VALUED BY AN IN DEPENDENT ENTITY DEALING IN SIMILAR CIRCUMSTANCES (III) WHAT IS THE TANGIBLE AND SUBSTANTIAL COMMERCIAL BENEFIT THE TAXPAYER DER IVED FOR WHICH IT MADE THE PAYMENT OF FRANCHISEE COMMISSION OF RS. 3,45,08;976/. 6.4. IT IS SEEN THAT, THE TAXPAYER HAS NOT BEEN ABL E TO PROVE EITHER AT THE TIME OF THE ORIGINAL TP PROCEEDINGS B EFORE THE THEN TPO NOR IN THE INSTANT PROCEEDINGS TAKEN UP CONSEQU ENT TO THE DIRECTIONS OF THE ITAT, THAT SERVICES WERE ACTUALLY RENDERED BY THE AE, FOR WHICH PAYMENT OF FRANCHISEE COMMISSION OF RS.3,45,08,976/- HAS BEEN MADE BY THE TAXPAYER TO I TS AE. THE TAXPAYER HAS ALSO FAILED TO SHOW WHAT TANGIBLE AND SUBSTANTIAL COMMERCIAL BENEFIT HAS BEEN DERIVED BY IT FROM THE AE, FOR WHICH THE HUGE PAYMENT OF FRANCHISEE COMMISSION HAS BEEN MADE. 6.5. THE TPO IS OF THE VIEW THAT; UNLESS IT IS SHOW N THAT TANGIBLE AND DIRECT BENEFIT IS DERIVED BY SUCH PAYM ENT OR THAT THE PAYMENT MADE IS COMMENSURATE WITH THE BENEFIT THAT IS DERIVED WHEN PARTIES DEAL WITH EACH OTHER ARE AT ARMS LENG TH, THE ALP FOR SUCH PAYMENT FOR INTRA GROUP SERVICES, IS TO BE TRE ATED AS NIL. 6.6. THE TPO THEREFORE HOLDS THAT, AS THE TAXPAYER COULD NOT FILE ANY ADDITIONAL EVIDENCES TO SHOW THAT IT HAD R ECEIVED SERVICES AND DERIVED RESULTANT BENEFIT OUT OF IT, THE CUP OF THE INTERNATIONAL TRANSACTION IS TREATED AS NIL AND THE PAYMENT OF THE ENTIRE AMOUNT OF FRANCHISEE COMMISSION AT RS.3,45,0 8,976/- IS TREATED AS TRANSFER PRICING ADJUSTMENT U/S. 92CA OF THE INCOME TAX ACT, 1961. 7. THE CIT(APPEALS) NOTICED THAT THE ASSESSEE HAD N OT FILED THE EVIDENCE OF REGISTRATION OF TRADE MARKS, LIST OF FR ANCHISEE AGENCIES, FLOW IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 5 OF 15 CHART OF OPERATIONS, BUSINESS MODEL OF THE GROUP, C ORRESPONDENCE BETWEEN THE HSBC AND THE AE WITH RESPECT TO BANKING FACILIT IES OFFERED TO THE AE, POLICY FOR FREIGHT FORWARDERS ISSUED BY SRI LANKA E XPORT CREDIT INSURANCE CORPORATION, AGENCY AGREEMENT BETWEEN THE AE AND TH E FOREIGN GERMAN COMPANY. THE ASSESSEE HAD CLAIMED BEFORE THE CIT(A ) THAT THE ASSESSEE DOES NOT HAVE A MANAGER OR CEO FOR ITS OPERATIONS I N INDIA AND THAT IT WAS HANDLED BY THE AE AND MONITORED BY THE AE. THE CIT (A) AFTER NOTICING THE AFORESAID FACTS NARRATED THE REQUIREMENTS AND THE P ROOF THAT IS EXPECTED OF THE ASSESSEE TO SUBSTANTIATE THE ALP OF PAYMENTS MA DE TO AE FOR INTRA- GROUP SERVICES. THEREAFTER, THE CIT(APPEALS) CONCL UDED AS FOLLOWS:- 8.1. THUS IT IS EVIDENT THAT THE ASSESSEE HAS FAILED TO ESTABLISH WITH COGENT EVIDENCE WITH RESPECT TO THE NATURE OF SERVICES RENDERED AND WHETHER SUCH PAYMENT CAN BE SAID TO BE COMMENSURATE WITH THE BENEFIT RECEIVED. IT HAS NOT BEEN ABLE TO PROVE BEYOND REASONABLE DOUBT WHETHER ANY TANGIBLE BENEFIT HAS BEEN DERIVED FROM SUCH PAYMENTS. SUCH TRANSACTIONS, TO BE COMMENSURATE WITH ARMS LENGTH PRICE, NECESSARILY IN VOLVES THE TEST OF INDEPENDENT PARTIES I.E. TO SAY WHETHER AN INDEPENDENT PARTY UNDER THE COMPARABLE CIRCUMSTANCES WOULD BE W ILLING TO PAY SUCH AN AMOUNT FOR THAT SERVICE TO A THIRD INDE PENDENT PARTY, AS THE PAYMENT WOULD NECESSARILY BE COMMENSURATE WI TH THE BENEFIT DERIVED FOR THE SERVICES OBTAINED. THE ASSE SSEE COMPANY HAS NOT IN ANY MANNER DISCHARGED ITS PRIMARY ONUS W ITH RESPECT TO THE REQUIREMENTS OF THE TPO WHO ON A SOUND BASIS HA S ANALYSED THE INGREDIENTS OF THE ONUS REQUIRED TO BE DISCHARG ED BY THE ASSESSEE. IT HAS NOT ESTABLISHED (I) THAT SERVICES WERE ACTUALLY RENDERED (II) BROUGHT OUT INSTANCES OF SIMILAR PAYM ENTS BY INDEPENDENT PARTIES & (III) FAILED THE BENEFIT TEST . MOREOVER THE QUANTUM OF PAYMENT WAS FIXED ON AD-HOC BASIS WITHOU T ANY SOUND BASIS, WHICH TARNISHES THE TRANSACTION FURTHE R. BEFORE ME, WRITTEN SUBMISSIONS WERE FILED WHICH SIMPLY PROVIDE D A DESCRIPTION OF THE SERVICES SO RENDERED. NO MATERI AL WAS PLACED BEFORE ME TO REBUT THE FINDINGS AND ASSERTIONS MADE BY THE TPO. IN SUCH CIRCUMSTANCES, AFTER CONSIDERING THE REASON ING AND INFERENCES DRAWN BY THE BANGALORE BENCH OF THE HON BLE IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 6 OF 15 TRIBUNAL, THE ACTION OF THE TPO IN REJECTING THE AS SESSEES METHOD AND DETERMINING ALP UTILIZING THE CUP METHOD IS UPH ELD. 8. THE CIT(APPEALS) IN THE IMPUGNED ORDER NOTICED T HAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO PROVE THAT SERVICES W ERE RENDERED BY THE AE FOR WHICH THE ASSESSEE MADE THE PAYMENT. AGGRIEVE D BY THE AFORESAID ORDER OF CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 9. THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE FOLLOWING SERVICES WERE RENDERED BY THE AE:- 1. PROVIDE THE RIGHTS TO USE OF LOGO OF DRH LOGISTI CS INTERNATIONAL. THE DRHL INTERNATIONAL HAS MADE AVAILABLE TO INDI AN COMPANY TO USE ITS LOGO AND TRADE MARK (DRH LOGISTI CS) (ANNEXURE I) WHICH DRHL INTERNATIONAL ESTABLISHED AND MADE THEIR PRESENCE IN THE CARGO OPERATION AT INTER NATIONAL LEVEL. THE BRAND EQUITY OF THE COMPANY IS VERY VITAL FOR A NY BUSINESS ENTITY TO CAPTURE BUSINESS AT GLOBALLY. 2. PROVIDE ACCESS TO THE AGENT'S NETWORK AVAILABLE WITH DRHL INTERNATIONAL. 3. RENDER ALL SUPPORT TO ITS ASSOCIATES ON WORLDWID E MARKETING EFFORTS AND ROUTE ALL INBOUND CARGO TO INDIA THROUG H THE DRHL INDIA AND CARRY OUT OUTBOUND CARGO FOR AND ON BEHALF OF DRHL INDIA. A. PROVIDES SET OF STANDARDS PROCEDURES/INSTRUCTION S COVERING ALL ASPECTS OF DRHL INTERNATIONAL AND ITS PRINCIPAL OPERATION B. UNDERTAKE THE RESPONSIBILITY TO PROVIDE THE TRAI NING PROGRAM FOR THE EMPLOYEES OF ITS ASSOCIATES. IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 7 OF 15 C. UNDERTAKE TO SUPPLY OF DRH LOGISTICS INTERNATION AL PVT LTD PRINCIPAL STATIONERY, BROACHERS, PROMOTIONAL LI TERATURES AND OTHER COMPANIES BULLETINS ON AN ONGOING BASIS T O ALL ITS ASSOCIATES COMPANIES. D. PROVIDE THE NECESSARY MANAGEMENT EXPERTISE TO IT S ASSOCIATES BY DEPUTIZING SUITABLE QUALIFIED STAFF DRHL INTERNATIONAL HAS FACILITATED AND ENTERED INTO AGREEMENTS WITH OVERSEAS AGENTS (LIST OF OVERSEAS A GENTS ENCLOSED) (ANNEXURE II) TO DO THE OPERATIONS BY THE INDIAN COMPANY ACROSS THE GLOBE. THE ENTIRE, MARKETING ARRANGEMENTS HAVE BEEN ESTABL ISHED BY DRHL INTERNATIONAL AND THE ENTIRE AGENTS NETWORK IS BEING MAINTAINED BY DRHL INTERNATIONAL ONLY. THE FLOW CHART OF DRHL INTERNATIONAL VIZ OVERSEAS A GENTS AND INDIAN COMPANY OPERATIONS ARE ENCLOSED HEREWITH . (ANNEXURE III) 4. RENDERING COORDINATION BETWEEN CUSTOMERS/AGENTS AND DRHL INDIA (ORGANIZATION CHART ENCLOSED)(ANNEXURE ( IV) DRHL INDIA SERVICES DOES NOT HAVE ANY CEOS OR GENER AL MANAGERS FOR THEIR OPERATIONS IN INDIA. THE ENTIRE OPERATIONS FROM MARKETING TO DELIVERY IS HANDLED BY THE INDIAN COMPANY UNDER THE SUPERVISION AND MANAGEMENT OF DRHL INTERNATIONAL THE FINANCE DEPARTMENT IS ALSO HANDLED BY DRHL INTERNATIONAL AND THE ENTIRE ACTIVITY IS BEING REPO RTED AND MONITORED BY DRHL INTERNATIONAL 5. FOLLOWING UP WITH OVERSEAS' AGENTS FOR ENSURING REMITTANCE OF ALL OVERSEAS COLLECTIONS WITHIN 30 DAYS OR AS PER T HE TERMS OF AGREEMENT 6. MAKING THE SETTLEMENT PROCESS FOR THE GROUP AS A WHOLE IN COLLECTION AND REMITTANCES UNDER ONE PLATFORM TO AV OID DELAYS AND CONFUSIONS IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 8 OF 15 THE AGENTS SITUATED OUTSIDE INDIA SENDS THEIR INV OICES FOR ALL THE GROUP COMPANIES OF DRHL INTERNATIONAL TO THE HO LDING COMPANY AND ALSO REQUIRES A CONSOLIDATED STATEMENT OF INVOICES FOR ALL THE GROUP COMPANIES FOR THE SERVIC ES RENDERED. DRHL INTERNATIONAL IN TURN MAKES THE FOLLOW UP FO R EITHER COLLECTIONS ON BEHALF OF ITS GROUP OR MAKES THE PAY MENT ON BEHALF OF ITS GROUP WHICH IS CALLED A SETTLEMENT PR OCESS. AFTER THE SETTLEMENT IT DISTRIBUTES THE COLLECTIO N OR PAYMENT TO THE RESPECTIVE GROUP COMPANIES BY WAY OF DEBIT OR C REDIT NOTES FOLLOWED BY PAYMENT/COLLECTION FEW DEBIT/CREDIT NOTES ARE ENCLOSED FOR REFERENCE (ANNEXURE V)' 7. OVER AND ABOVE THE RISKS ASSUMED BY DRHL INTERN ATIONAL BY PROVIDING THE FOLLOWING SERVICES TO DRHL INDIA SERV ICES P LIMITED A. PERFORMANCE RISK - INSURANCE COVERAGE UNDERTAKEN BY DRHL INTERNATIONAL ON BEHALF OF DRHL INDIA, WHICH COVERS ALL OPERATIONAL LIABILITIES AND THIRD PARTY CLAIM (DOCUMENT ATTACHED)-ANNEXURE VI B. PERFORMANCE GUARANTEE PROVIDE BY DRHL INTERNATIO NAL TO DRHL INDIA DRHL INDIA ENJOYS CREDIT FACILITY O F 2.65 CORES FROM HSBC-INDIA ON THE FINANCIAL GUARANT EE OF USD 625,000 PROVIDE BY DRHL INTL.(DOCUMENT ATTACHED)-ANNEXURE VI C. INSURANCE COVER OF ALL OVERSEAS AGENTS 'DUES' ON MONTHLY BASIS THROUGH THE SRI LANKA CREDIT INSURANCE CORPORATION. ANNEXURE VII. 10. THE LD. COUNSEL FOR THE ASSESSEE DREW SPECIFIC ATTENTION TO ANNEUXRE-VI & VII OF THE WRITTEN SUBMISSIONS FILED BEFORE THE AO, WHEREIN THE ASSESSEE HAS GIVEN INSURANCE COVER UNDERTAKEN B Y THE HOLDING IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 9 OF 15 COMPANY ON BEHALF OF ASSESSEE FOR COVERING OPERATIO NAL LIABILITIES AND THIRD PARTY CLAIM. HE HAS ALSO DRAWN OUR ATTENTION TO AN NEXURE-V WHICH ARE DEBIT AND CREDIT NOTES BETWEEN THE HOLDING COMPANY AND THE ASSESSEE. AS FAR AS ANNEXURES I TO IV ARE CONCERNED, THESE ARE G ENERAL STATEMENT NOT SUBSTANTIATED BY ANY EVIDENCE. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TO THE ORDERS THAT ARE PROCURED BY THE ASSESSEE THROUGH THE HELP OF THE HOLDING COMPANY. THE CHART GIVING LIST OF CONSIGNMENTS IS CONTAINED IN THE CHART. 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE ASSESSEE, WITH REFERENCE TO MATERIAL ON RECORD. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF EKL APPLIANCES LIMITED [(2012) 209 TAXMAN 200] AS WELL AS CUSHMAN & WAKEFIELD INDIA PRIVATE LIMITED ITA NO.47 5/2012 DATED 23.5.2014 367ITR 730 (DEL) , RENDERED DECISIONS ON DETERMINATION OF ARMS LENGTH PRICE IN THE CASE OF PAYMENT MADE TO AN AE F OR INTRA GROUP SERVICES. IN THE CASE OF CUSHMAN & WAKEFIELD (SUPRA) , THE HONBLE DELHI HIGH COURT OBSERVED THAT WHETHER A THIRD PARTY IN AN UNCONTROLLED TRANSACTION WITH THE TAXPAYER WOULD HAVE CHARGED AM OUNTS LOWER, EQUAL TO OR GREATER THAN THE AMOUNTS CLAIMED BY THE AES, HAS TO PERFORCE BE TESTED UNDER THE VARIOUS METHODS PRESCRIBED UNDER THE INDI AN TP PROVISIONS. IN THE CONTEXT OF COST SHARING ARRANGEMENT, THE HONBL E HIGH COURT OPINED THAT CONCEPT OF BASE EROSION IS NOT A LOGICAL INFER ENCE FROM THE FACT THAT THE AES HAVE ONLY ASKED FOR REIMBURSEMENT OF COST. THIS BEING A TRANSACTION BETWEEN RELATED PARTIES, WHETHER THAT COST ITSELF I S INFLATED OR NOT ONLY IS A MATTER TO BE TESTED UNDER A COMPREHENSIVE TRANSFER PRICING ANALYSIS. THE BASIS FOR THE COSTS INCURRED, THE ACTIVITIES FOR WH ICH THEY WERE INCURRED, AND THE BENEFIT ACCRUING TO THE TAXPAYER FROM THOSE ACT IVITIES MUST ALL BE PROVED TO DETERMINE FIRST, WHETHER, AND HOW MUCH, O F SUCH EXPENDITURE WAS FOR THE PURPOSE OF BENEFIT OF THE TAXPAYER, AND SEC ONDLY, WHETHER THAT IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 10 OF 15 AMOUNT MEETS ALP CRITERION. IN THE PRESENT CASE HO WEVER, THE ARRANGEMENT BETWEEN THE AE AND THE ASSESSEE IS NOT A COST SHARING ARRANGEMENT BUT A PAYMENT FOR SPECIFIC SERVICES REN DERED. TO THIS EXTENT THE ABOVE OBSERVATIONS OF THE HONBLE HIGH COURT MA Y NOT BE RELEVANT TO THE PRESENT CASE. THE FOLLOWING ASPECTS WOULD RE QUIRE CONSIDERATION IN ORDER TO IDENTIFY INTRA GROUP SERVICES REQUIRING AR MS LENGTH REMUNERATION: * WHETHER SERVICES WERE RECEIVED FROM RELATED PART Y. * NATURE OF SERVICES INCLUDING QUANTUM OF SERVIC ES RECEIVED BY THE RELATED PARTY. * SERVICES WERE PROVIDED IN ORDER TO MEET SPECIFIC NEED OF RECIPIENT OF THE SERVICES. * THE ECONOMIC AND COMMERCIAL BENEFITS DERIVED B Y THE RECIPIENT OF INTRA GROUP SERVICES. * IN COMPARABLE CIRCUMSTANCES AN INDEPENDENT ENT ERPRISE WOULD BE WILLING TO PAY THE PRICE FOR SUCH SERVICES? * AN INDEPENDENT THIRD PARTY WOULD BE WILLING AN D ABLE TO PROVIDE SUCH SERVICES? WHETHER PAYMENT MADE TO AE MEETS ALP CRITERION WILL BE DETERMINED, KEEPING IN MIND ALL THE ABOVE FACTORS, AS WELL. 12. KEEPING IN MIND THE PRINCIPLES EMANATING FROM THE AFORESAID DECISIONS, WE SHALL NOW PROCEED TO EXAMINE THE MATE RIAL ON RECORD TO SEE THE NATURE OF SERVICES RECEIVED BY THE ASSESSEE AND AS TO WHETHER THE PAYMENT MADE FOR SUCH SERVICE WERE AT ARMS LENGTH. IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 11 OF 15 13. THE FIRST EVIDENCE THAT NEEDS ANALYSIS IS THE AGREEMENT DATED 1.6.2002 WHEREBY DRH LOGISTICS INTERNATIONAL (DRH I NTERNATIONAL) THE PARENT COMPANY AT SRI LANKA AGREED TO THE ASSESSEE. THE AGREEMENT WILL BE IN FORCE INDEFINITELY FROM 1.6.2002. DRH INTERN ATIONAL UNDER THIS AGREEMENT (I) UNDERTOOK TO PROVIDE THE ASSESSEE WIT H RIGHT TO USE THEIR LOGO IN PREMISES, VEHICLES, SIGNBOARDS ETC. (II) UNDERTO OK TO TRAIN THE ASSESSEES EMPLOYEES; (III) INCLUDE THE ASSESSEE IN DRH INTERN ATIONALS WORLD WIDE MARKETING EFFORTS AND RENDER ALL POSSIBLE SUPPORT T O THE ASSESSEE IN ITS OVERSEAS MARKETING EFFORTS. (IV) INCLUDE THE ASSESS EE MANAGEMENT IN ALL ITS REGIONAL AGENCY MEETING. (V) PROVIDE THE ASSESSEE WITH A SET OF STANDARD PROCEDURE INSTRUCTION COVERING ALL ASPECTS OF DRH I NTERNATIONALS OR ITS PRINCIPALS OPERATION (VI) SUPPLY STATIONARY, BROCHU RE, PROMOTIONAL LITERATURE AND OTHER BULLETIN ON AN ONGOING BASIS; (VII) PROVI DE NECESSARY MANAGEMENT EXPERTISE TO THE ASSESSEE BY DEPUTING QU ALIFIED STAFF; (VIII) EXTEND WORLD WIDE NETWORK COVERAGE TO THE FRANCHISE COMPANY THROUGH ITS AFFILIATES WORLD WIDE. (IX) ENSURE REMITTANCE OF AL L OVERSEAS COLLECTIONS WITHIN 30 DAYS. 14. THE ASSESSEE AGREED TO REMUNERATE DRH INTERNAT IONAL AT 50% OF ITS NET TRANSACTION PROFIT I.E., TOTAL BILL OUT OF THE SHIPPER AND OR CONSIGNEE LESS DIRECT TRANSPORTATION COSTS. 15. THE FIRST EVIDENCE TO SUBSTANTIATE EVIDENCE OF SERVICES RENDERED IS ANNEXURE-I WHICH IS A POLICY OF INSURANCE DATED 17. 3.2008 TAKEN BY DRH INTERNATIONAL TO COVER FREIGHT FORWARDERS LIABILITY OF THE ASSESSEE. THIS HAS NO RELEVANCE BECAUSE IT DOES NOT COVER THE PERIOD R ELEVANT TO PREVIOUS YEAR RELEVANT TO AY 2006-07 & 2009-10 WITH WHICH WE ARE CONCERNED IN THESE APPEALS BUT THEY ARE RELEVANT TO AY 2007-08. IT IS NOT CLEAR AS TO WHO PAID THE INSURANCE PREMIUM AND HOW IT BENEFITTED TH E ASSESSEE. THESE IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 12 OF 15 ASPECTS WERE NEITHER EXPLAINED NOR IS DISCERNIBLE F ROM MATERIAL ON RECORD AND HAS NOT BEEN SPELT OUT BY THE ASSESSEE. 16. ANNEXURE-II IS A REQUEST FOR ISSUE OF PERFORMA NCE GUARANTEE DATED 11.4.2008 BY DRH LOGISTICS INTERNATIONAL ON BEHALF OF THE ASSESSEE TO HSBC, COLOMBO FOR AVAILING SOME BANKING FACILITIES TO INTERNATIONAL AIR TRANSPORT ASSOCIATION, MUMBAI. THIS IS NOT RELEV ANT AS IT DOES NOT PERTAIN TO ANY OF THE PREVIOUS YEAR RELEVANT TO THE AYS IN APPEAL BEFORE THE TRIBUNAL. THE RELEVANCE OF THIS DOCUMENT AND THE L ETTER DATED 10.4.2008 GIVEN IN ANNEXURE-II HAS NEITHER BEEN EXPLAINED BY THE ASSESSEE NOR IS IT DISCERNIBLE FROM THE CONTENTS OF THIS LETTER. 17. ANNEXURE-III IS A COMPREHENSIVE SERVICES POLIC Y DATED 27.1.2004 FOR FREIGHT FORWARDS TAKEN OUT BY DRH LOGISTICS INTERNA TIONAL. THE ASSESSEES NAME IS ALSO FOUND IN SCHEDULE-E TO THIS AGREEMENT. AS TO WHAT IS THE RELEVANCE OF THIS AGREEMENT FOR THE PREVIOUS YEARS RELEVANT TO AY 2005-06, 2007-08 AND 2009-10 HAVE NEITHER BEEN EXPLAINED NOR IS IT DISCERNIBLE FROM THE SAID AGREEMENT. IT IS AT BEST EVIDENCE RELEVAN T TO OTHER AYS NOT TO THE AYS IN THESE APPEALS. 18. ANNEXURE-IV IS AN AGREEMENT DATED 20.11.2003 BETWEEN DRH INTERNATIONAL AND ITG-GMBH INTERNATIONAL SPEDITION (ITG). AS PER THIS AGREEMENT ITG AGREED TO ACT AS EXCLUSIVE AGENT OF D RH INTERNATIONAL IN GERMANY/AUSTRIA TO HANDLE AIR AND OCEAN BUSINESS OR IGINATING FROM INDIA, PAKISTAN, SRI LANKA, BANGLADESH, NEPAL, KENYA AND M ADAGASCAR. THERE IS ANOTHER AGREEMENT DATED 15.10.2002 BETWEEN K LINE A IR SERVICE LTD., JAPAN, DRH INTERNATIONAL AND THE ASSESSEE AND OTHER DRH GROUP ENTITLES IN BANGLADESH, PAKISTAN, MAURITIUS AND NEPAL. THE ASSESSEE IS APPOINTED AS AGENT OF THE JAPANESE COMPANY IN INDIA TO PERFOR M FUNCTIONS CUSTOMARILY PERFORMED BY CONSOLIDATORS AND FORWARDE RS IN CONNECTION WITH IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 13 OF 15 AIR CARGO SHIPMENTS ORIGINATING IN EACH COUNTRY. T HERE ARE OTHER AGREEMENTS BETWEEN THE ASSESSEE AND NON-RESIDENTS B UT THEY DO NOT RELATE TO ANY OF THE AYS IN THESE APPEALS. WE CONCL UDE THAT ANNEXURE-IV DOCUMENTS NEITHER PROVES THAT DRH INTERNATIONAL REN DERED SERVICES TO THE ASSESSEE. 19. ANNEXURE-V IS TRADE MARK REGISTRATION CERTIFIC ATE EVIDENCING REGISTRATION OF DRH LOGISTICS GROUP IN FAVOUR OF TH E ASSESSEE. ANNEXURE-VI IS A LIST OF OVERSEAS AGENTS. ANNEXURE-VII IS A FL OW CHART OF OPERATION BY DRH INTERNATIONAL TO THE ASSESSEE. NONE OF THE ABO VE DOCUMENTS PROVE THAT ANY SERVICES WERE RENDERED BY DRH INTERNATIONA L TO THE ASSESSEE OR AS TO HOW DRH INTERNATIONAL ALLOWED USE OF TRADEMAR K BY THE ASSESSEE. 20. ANNEXURE-VIII IS FRANCHISE AGREEMENT DATED 1.6 .2002 BETWEEN DRH INTERNATIONAL AND THE ASSESSEE. THIS AGREEMENT IS FOR INDEFINITE PERIOD OF TIME. THIS AGREEMENT BY ITSELF DOES NOT PROVE ANY SERVICES HAVING BEEN RENDERED BY DRH INTERNATIONAL TO THE ASSESSEE. ANN EXURE-XI IS EXPENSES INCURRED BY DRH INTERNATIONAL ON BEHALF OF THE ASSE SSEE. THIS ANNEXURE MERELY SETS OUT IN THE FORM OF A STATEMENT NAMES OF CERTAIN CONSULTANTS TO WHOM PAYMENTS WERE MADE, INSURANCE CHARGES AND BANK CHARGES. THIS DOCUMENT BY ITSELF DOES NOT PROVE ANY RENDERING OF SERVICE BY DRH INTERNATIONAL TO THE ASSESSEE. ANNEXURE-XII IS AGA IN A STATEMENT WHICH GIVES A LIST OF CARGO OPERATIONS WITH ASSOCIATE ENT ERPRISES AND OVERSEAS AGENTS. THIS BY ITSELF DOES NOT PROVE ANY SERVICES HAVING BEEN RENDERED BY DRH INTERNATIONAL TO THE ASSESSEE. THUS THE EVI DENCE FILED BY THE ASSESSEE DOES NOT EVEN PRIMA FACIE ESTABLISH THAT S ERVICES WERE RENDERED BY DRH INTERNATIONAL TO THE ASSESSEE. THEREFORE TH E OTHER REQUIREMENTS OF JUSTIFICATION AND ESTABLISHING ALP OF PAYMENT FOR I NTRA GROUP SERVICES, DOES NOT ARISE FOR CONSIDERATION AT ALL. IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 14 OF 15 21. AS DISCUSSED IN THE EARLIER PARAGRAPHS, THE MAT ERIAL BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE DO NOT S UBSTANTIATE THE NATURE OF SERVICES RENDERED BY THE HOLDING COMPANY TO THE ASS ESSEE FOR WHICH THE ASSESSEE MADE THE PAYMENT. IN OTHER WORDS, A MERE EXPLANATION OF THE PROCESS BY WHICH THE BUSINESS OF ASSESSEE IS CONDUC TED AND THE PLACEMENT OF HOLDING COMPANY IN SUCH CHART DOES NOT ESTABLISH THAT SERVICES WERE INDEED RENDERED BY THE HOLDING COMPAN Y. THE FACT THAT THERE WERE AGREEMENTS BETWEEN THE ASSESSEE AND THE HOLDING COMPANY FOR RENDERING OF CERTAIN SERVICES, AGAIN IS NOT SUFFICI ENT TO DISCHARGE THE ONUS THAT LIES ON THE ASSESSEE. MERE FURNISHING OF DETA ILS OF CONSIGNMENT WITHOUT EVIDENCE OF PARTICIPATION OF HOLDING COMPAN Y IN PROCURING THOSE BUSINESS WOULD NOT BE SUFFICIENT TO DISCHARGE THE B URDEN THAT LIES WITH THE ASSESSEE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THE CONCLUSIONS OF THE REVENUE AUTHORITIES THA T ASSESSEE FAILED TO DISCHARGE THE BURDEN TO ESTABLISH THE ALP OF THE TR ANSACTION IS JUSTIFIED. WE FIND NO GROUNDS TO INTERFERE WITH THE ORDER OF T HE CIT(APPEALS). THEREFORE, THESE APPEALS BY THE ASSESSEE ARE DISMIS SED. 22. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 04 TH DAY OF JANUARY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 04 TH JANUARY, 2019. / D ESAI S MURTHY / IT(TP)A NOS.1030, 1031 & 1032/BANG/2014 PAGE 15 OF 15 COPY TO: 1. THE APP ELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.