IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “C”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER Assessment Year : 2018-19 Rehau Polymers Private Limited ACIT, Circle 8, Pune Holewadi, Khed Pabal Road, Khed, Vs.

Pune – 410505 PAN: AAACR7521E (Appellant) (Respondent)

Assessee by : Shri Nikhil S Pathak Department by : Shri Hitendra B Ninawe Date of hearing : 24-12-2024 Date of pronouncement : 04-03-2025

O R D E R

PER R. K. PANDA, VP :

This appeal filed by the assessee is directed against the order dated

30.06.2022 of the Assessing Officer passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to assessment year 2018-19.

2. Facts of the case, in brief, are that the assessee is a company. It is a fully owned subsidiary of Frankische Plastiks, Gmbh and is engaged in manufacturing, trading and marketing of polymer based products in India. It filed its return of income on 30.11.2018 declaring income of Rs.21,77,19,280/-. The case was taken up under CASS for complete scrutiny. Accordingly, statutory notice u/s 143(2) of the Act dated 22.09.2019 was issued to the assessee. Since the assessee company had entered into certain international transactions with its Associated Enterprises (AEs), the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the international transactions entered into by it.

3. The TPO during the course of TP proceedings noted that the assessee company had undertaken the following international transactions:

S. No. Nature of transaction Amt as per 3CEB Method (in Rs)

1 Sale of Goods 96,35,736 TNMM 2 Commission earned 1,73,33,580 TNMM

3 Reimbursement of expenses 27,11,487 CUP received

4 Cost sharing charges 67,158,603 TNMM

5 Purchase of traded goods 32,51,47,883 RPM

6 Purchase of Raw material 5,68,30,646 TNMM 7 Purchase of Fixed Assets 13,92,23,545 TNMM

8 Payment towards consultancy and 0 NA professional services

9 Payment towards technical 11,80,799 TNMM services

10 Purchase of Stores, spares and 81,46,129 TNMM sample

11 Expenditure Reimbursed Paid 47,37,318 CUP

12 Guarantee Commission Paid 78,89,367 OTHER METHOD Total 63,99,95,093/-

4. While the TPO accepted the various international transactions entered into by the assessee with its AEs, however, he did not agree with the ALP of the international transactions relating to Cost sharing charges of Rs.67,158,603/-. He noted that during the year under consideration the assessee has paid the cost sharing charges to its various AEs, the details of which are as under:

5. The TPO asked the assessee to justify the ALP computed in respect of international transactions. From the details / documents / information furnished by the assessee, the TPO noted that the assessee has not been able to specify the services received by it from its AEs and failed to furnish any contemporaneous documentary evidence to substantiate its claim. Regarding furnishing of documentary evidence as to when and how these services were requisitioned from AEs, the assessee submitted that these services are requisitioned from time to time and are billed by AEs in terms of the agreements. The assessee had submitted some sample invoices. The TPO held that the sample invoices only substantiate that the invoice is raised by the AEs to assessee, but it cannot be substantiated by the invoices that the services would have actually received and tangible benefit derived from the services. He, therefore, asked the assessee to furnish the cost benefit analysis (a) with reference to the cost of the services and benefit received therefrom and (b) services received from AEs vis-à-vis independent parties. According to the TPO, any independent person would not avail such kind of services unless it is examined as to what is the payment for each and every services and whether the person can avail of such services at a price lower than what is offered by the group companies.