Cost of management services paid to group companies cannot be considered as nil, if documentation is robust: ITAT

 

Lintas India Pvt Ltd vs. ACIT 148 Taxmann.com 482 {Mumbai ITAT}

 

Facts:
Lintas India Pvt Ltd, an Indian entity, engaged in advertising business, paid Global Information Services (GIS), Mulitnational Client Coordination Services and Management Services to its overseas Associated Enterprise (AE) and benchmarked the same using CUP method.

The TP officer refused to accept the benchmarking and concluded that the assessee failed to satisfy the ‘need test’ of services availed and hence determined cost as Nil. The TP officer questioned the commercial wisdom to receive the aforesaid services.

 

ITAT order:
The Mumbai tax tribunal rejected the view of TP officer by reviewing the robust documentation submitted and thus held that:
1. services are required for business of Indian entity and thus was requested to overseas AE;
2. Indian entity has been benefitted on availing the services;
3. adopted reasonableness allocation keys;
4. proper agreement between Indian entity & its AE

 

Conclusion:
Accordingly, the Tribunal instructed to do proper benchmarking by examining the documents placed by Indian entity. Therefore, the tribunal held that cost of intra-group services cannot be considered “Nil” if documentation is robust.

 

The copy of the order is as under:

1671711034-595 MUM 2022 Lintas India Private Limted_SD