In ITA No.7960/Del./2019 - ITAT - ITAT (Delhi) rules in favour of Avery Dennison (P) Pvt. Ltd., holds entire agreement for services should be considered as a whole; Transfer Pricing adjustment on account of intra group services deleted
Members Shamim Yahya (Accountant) & Challa Nagendra Prasad (Judicial) [06-06-2023]

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Read Order: Avery Dennison (India) Pvt. Ltd v. DCIT, Circle 3 (2), New Delhi

 

Chahat Varma

 

New Delhi, June 7, 2023: The Delhi bench of the Income Tax Appellate Tribunal has ruled that where there is an agreement for services and certain services within that agreement are undisputedly rendered, the entire agreement should be considered as a whole and whether the services have actually resulted in a benefit to the assessee or not is immaterial.

 

Brief facts of the case were that Avery Dennison (P) Pvt. Ltd. (assessee), was a subsidiary of Avery Dennison Corporation, USA. The Transfer Pricing Officer (TPO), referring to the order passed by the DRP, applied the Comparable Uncontrolled Price (CUP) method to benchmark the international transactions related to intra-group services and thereby proposed an adjustment of Rs. 23,02,71,861/-. The assessee contended that the AO / DRP / TPO erred in making an adjustment to the appellant's international transaction of receipt of intragroup services with its Associated Enterprises (AEs) alleging that it did not satisfy the arm's length principle envisaged under the Act.

 

The bench of Shamim Yahya (Accountant) and Challa Nagendra Prasad (Judicial) noted that the assessee had furnished enormous evidences which pointed out that intra group services had in fact been received by the assessee. Moreover, the agreement was a composite one and authorities below had allowed part of the same and treated part of the same not allowable. The bench further noted that on similar facts, in assessee’s own case in ACIT, Circle-3(2), New Delhi v. Avery Dennison (I) P. Ltd [LQ/ITAT/2021/3382], the ITAT had deleted the adjustment for several years and the Revenue’s appeal against them had been dismissed by the Delhi High Court.

 

Here also from the composite agreement, some have been accepted at arm’s length price and some have been treated as not acceptable at arm’s length price. Huge details of intra-group services have been furnished by the assessee. Respectfully following the precedent from the ITAT and Hon’ble High Court, we uphold the contention of the assessee and delete the TP adjustment,” observed the bench.

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