ACIT, Circle- 5(1), New Delhi V. BSI Group India Pvt. Ltd., New Delhi

ITA 1086/DEL/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9649 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘I’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Anubhav Sharma, Judicial Member ITA No. 6276/Del/2017: Asstt. Year : 2009-10 ITA No. 1085/Del/2018: Asstt. Year : 2012-13 ITA No. 1086/Del/2018: Asstt. Year : 2013-14 ACIT, Circle-5(1), New Delhi Vs BSI Management Systems India Pvt. Ltd, A-2, The Mira Corporate Suites, Plot No. 1 & 2, Ishwar Nagar, Mathura Road, New Delhi (APPELLANT) (RESPONDENT) PAN No. AABCB3790L ITA No. 6326/Del/2017: Asstt. Year : 2009-10 ITA No. 563/Del/2018: Asstt. Year : 2012-13 ITA No. 564/Del/2018: Asstt. Year : 2013-14 BSI Management Systems India Pvt. Ltd, A-2, The Mira Corporate Suites, Plot No. 1 & 2, Ishwar Nagar, Mathura Road, New Delhi Vs ACIT, Circle-5(1), New Delhi (APPELLANT) (RESPONDENT) PAN No. AABCB3790L Assessee by : Shri Mahesh Bawa, CA Revenue by : Shri Mrinal Kumar Das, Sr. DR Date of Hearing: 27.09.2022 Date of Pronouncement: 29.09.2022 ORDER Per Bench 1. Heard and perused the records. These are the appeals filed by the revenue and Assessee against the order of the ld. CIT(A)- 42, New Delhi dated 12.07.2017 for Assessment Year 2009-10, and of ld CIT(A)-44, New Delhi dated 13.11.2017 for Assessment Year 2012-13 and 2013-14 respectively. As issues involved are common the facts of AY 2009-10 are taken up for together. Page | 2 2. Brief facts of the case are that the Assessee incorporated in 1999, is a Certification Body. It is part of British Standards Institution (BSI) Group which develops standards, provides international registration and assessment services as well as offering training courses regarding management systems. Within the Group, the assessee provides a wide gamut of services in the field of management systems regulations and product registration in India. It also provides training on ISO standards, quality and other management systems. The certification and training services are provided mainly in connection to the following schemes/ standards: • Quality Management (ISO 9001); • Environmental Management (ISO 14001); • Information Security (BS 7799); • Food Safety (ISO 2200, HACCP); • Health and Safety (OHSAS 18001); and • Social Accountability (SA 8000). 3. During the previous year ended March 31, 2009, the assessee entered into the following international transactions with its associated enterprises ("AEs"): s. No. International Transactions Amount (in INR) 1. Provision of Professional Services to AEs 67,75,386 2. Receipt of Professional Services from AEs 33,35,232 3. Reimbursement of Expenses to AEs 33,78,768 4. Recovery of Expenses from AEs 98,69,318 5. Receipt of Management Services from AEs ("Management/ Business Support Services") 2,37,03,121 4. During the year under review, BSI India provided/ availed various professional services in the nature of training, review and assessment to/ from its group companies. For the purposes of benchmarking international transactions from serial no. 1 to 4 Page | 3 in Table above, the CUP method was selected as the Most Appropriate Method (MAM). 5. Based on the price at which similar services were provided to unrelated parties in the assessee claimed that the international transactions were at arm's length. AO has not disputed the claim of the assessee in this regard. As regards the international transactions at Serial no. 5 in Table above, the assessee applied Cost Plus Method (CPM) as the most appropriate method for the purpose of benchmarking. Further, the assessee selected AE, which is simpler of the entities to the said international transaction, as the tested party. The Appellant relied upon a detailed search on FAME, a publicly available database, to identify companies that perform similar functions and bear similar risk as the AE. Owing to the unavailability of the current year financial data i.e. data pertaining to FY 2008- 09 at the time of executing abovementioned search, the assessee used multiple year data used to arrive at the arithmetic mean of the cost plus markups of the comparable companies. The arithmetic mean cost plus markup of the identified comparable companies was 7.50 percent. 6. During the A.Y. 2009-10, the assessee paid a cost plus mark-up of 5 percent to its AE as a consideration towards Management/ Business Support Services which was lower than the arithmetic mean of the comparables. Based thereon, the assessee claimed that its international transaction pertaining to Management/ Business Support Services was at arm's length. However, the AO held that the arm's length price of the management services to be “Nil” on application of CUP method as no uncontrolled enterprise would have paid any amount for Page | 4 service which do not tantamount to intra group services with demonstrable benefits. 7. The ld. CIT(A) held that the Intra Group Corporate Services rendered in this case do satisfy need test, rendition test and duplication test except for specific instances and found it appropriate to hold 20% of the payments for corporate services in the nature of “stewardship activities” and allowed the amounts paid on account of marketing services, non technical services and human resource services. 8. Aggrieved, the revenue filed appeal against the allowing of management services and the Assessee is in appeal against the disallowance of stewardship functions. 9. At the outset, it was brought to our notice that this matter has been considered by the coordinate bench in the earlier years in ITA No. 152/Del/2015 and 108/Del/2015 for A.Y. 2008-09, 104/Del/2015 and 80/Del/2014 for A.Y. 2007-08 wherein the matter has been referred back to the file of the ld. CIT(A) for deciding afresh as the ld. CIT(A) has not discussed the reasons for reaching the conclusion that except for 20% of the expenses by the remaining 80% of the ALP adjustment deemed to be deleted. Keeping in view, the direction given in the order for A.Y. 2007-08 in ITA No. 104 & 80/Del/2014 and since this fact before us has not been disputed by either of the parties, following the earlier orders of this Tribunal, we restore the matter back to the file of the ld. CIT(A) for adjudication de novo. Page | 5 10. In the result, the appeals of the assessee as well as the revenue are allowed for statistical purposes. Order Pronounced in the Open Court on 29/09/2022. Sd/- Sd/- (Anubhav Sharma) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 29/09/2022 *Ajay Kumar Keot, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR