India vs Akzo Nobel India Pvt Ltd, February 2022, ITAT Delhi, ITA No. 6007/Del/2014

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Category: Disallowed Deduction, Services and Fees | Tag: , , , ,
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Akzo Nobel India Pvt – a subsidiary of Akzo Nobel Coatings International BV – had paid for administrative services purportedly rendered form a group company in Singapore and had claimed a deduction of INR 19,465 250. The price paid for these services had been determined by the group on an aggregate basis using the transactional net margin method to establish that all controlled transactions in Akzo Nobel India had been at arm’s length.

During the audit, the tax authority requested Akzo Nobel India to justify the arm’s length nature of the payment for these administrative services. To that end Akzo Nobel India submitted a copy of the agreement and the allocations keys used. Akzo Nobel India also submitted that the group company in Singapore had provided administrative support services like supply chain management support, marketing and commercial service support, commercial vehicle support, automotive after-market support, supporting R&D, human resource, finance management and general management support.

However, according to the tax authorities, Akzo Nobel India failed to provide any evidence to demonstrate receipt of these services and therefore determined the arm’s length price to be nil.

The Commissioner of Appeals upheld the adjustments made by the tax authority.

Aggrieved with the decision of the Commissioner, Akzo Nobel India filed an appeal before the Income Tax Appellate Tribunal.

Judgement of the Income Tax Appellate Tribunal

The Tribunal dismissed the appeal and noted that the tax authorities had given concurrent findings that Akzo Nobel India failed to furnish even an iota of evidence to demonstrate that administrative services were actually rendered.

During the trial, the Tribunal had asked Akzo Nobel India to demonstrate the receipt of services from the associated enterprise through cogent evidence, including any communication with the associated enterprise in Singapore. In response Akzo Nobel India expressed inability to furnish such evidence and requested restoring the matter back to the assessing officer. To this, the tribunal stated that restoring the case back to the assessing officer would serve no useful purpose.

 

Akzo Nobel India Feb 2022 ITAT Order

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