Transfer Pricing

CIT vs. M/s Max India Limited, ITA No. 186 of 2013 (P&H HC) dated 06.09.2016

The assessee, M/s Max India Limited, had incurred expenditure to the tune of `1.25 Crores on account of legal and professional charges paid to M/s Max UK Ltd., the associated enterprise (“AE”) of the assessee, in pursuance of agreement dated 10.07.1999. Further in response to the queries raised by the assessing officer, the assessee contended that it had benefitted from the aforementioned services as it had realised an export sale in excess of `29 Crores and that it had also benefitted in the area of Health Care Services pursuant to the notification received from the AE.

The assessing officer and the commissioner of income tax (appeal) (“CITA(A)”) alleged that the assessee had not furnished any details to establish that the services were infact rendered and that there was no material on record to establish that the AE was involved in any manner in obtaining the export orders for the assessee or in facilitating the exports.


Aggrieved by the order of the CIT(A) the assessee preferred an appeal with the ITAT wherein the hon’ble tribunal observed that the nature of services provided by M/s Max UK Ltd. were such that it was difficult to provide evidence of the services having actually been rendered. The tribunal further accepted that assessee’s contention that the fact the assessee was able to achieve an export turnover of `29 Crores was sufficient to prima-facie demonstrate that the services were infact rendered by the AE. The tribunal’s observation was further upheld by the Hon’ble High Court wherein the court observed that services such as the nature mentioned in the agreement would not necessarily be recorded in writing and may well be communicated orally. Thereby, concluding that the tribunal has taken a possible view.

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Posted on: 22-12-2016