Gemplus India Pvt. Ltd. is a part of the Gemplus group, engaged in providing smart card solutions for the telecommunications industry, financial services industry and other e-businesses. The company entered into a intra group management services agreement for receipt of services in marketing and sales support, customer service support, finance, accounting and administration support and legal support.
The tax administration found there was no clear proof that such services had actually been rendered. There was no specific benefit derived by the Indian company. Gemplus India Pvt. Ltd. had not established the benefit of these services and had already incurred expenses towards professional and consultancy services and employed qualified personnel in India for rendering similar services.
The Appellate Tribunal decided the case in favour of Revenue. To satisfy the arm’s-length standard, a charge for intra group services or intangibles must at least meet the following conditions:
• The need for intra group services or intangibles is established.
• The intra group services or intangibles have actually been received.
• The benefit from intra group services or intangibles is commensurate with the charge.