Intra-Group Services Not Stewardship: ITAT Deletes ₹28.74 Cr TP Adjustment for Corteva Agriscience [Read Order]

Corteva Agriscience India filed its return of income declaring a total income of ₹27.46 crore for Assessment Year (AY) 2009-10. The case was selected for scrutiny and referred to the Transfer Pricing Officer (TPO) under Section 92CA of the Income Tax Act, 1961, to determine the Arm’s Length Price (ALP) of international transactions with its Associated Enterprises (AEs).

The company had availed various Intra-Group Services (IGS), including Product Technical and Marketing Services, Accounting and Financial Services, Sourcing, Logistics, Human Resources (HR), and Business Support Services, aggregating to ₹28.74 crore.

The assessee benchmarked these transactions using the Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM), with a profit level indicator (PLI) of 5%, asserting that the related-party transactions were conducted at arm’s length.

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The TPO rejected TNMM and applied the Comparable Uncontrolled Price (CUP) method, holding that the assessee had not proved the tangible benefit derived from the services. The TPO determined the ALP of the services as nil, resulting in a transfer pricing adjustment of ₹28.74 crore in the final assessment order.

On appeal, the CIT(A) partly upheld the adjustment, disallowing 20% of the total expenditure on the ground that part of the services were “stewardship” in nature. Aggrieved, both Corteva and the Revenue filed cross-appeals before the ITAT.

The assessee’s counsel argued that the intra-group services were legitimate and essential to its Indian operations. The company produced extensive evidence, regional billing agreements, cost allocation workings, cost-benefit analyses, segmental profitability statements, and sample correspondences to demonstrate that it had actually received the services and derived commercial benefits.

The counsel argued that the TPO erred in discarding the TNMM approach and adopting the CUP method without identifying any external comparable data as required under Rule 10B of the Income Tax Rules.

The Department, supporting the CIT(A)’s order, argued that several of the claimed services, such as group supervision, policy formulation, and oversight were shareholder functions and therefore not chargeable to the Indian entity.

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After examining the evidence and rival contentions, the two-member bench comprising S. Rifaur Rahman (Accountant Member) and Vimal Kumar (Judicial Member) observed that the assessee had provided comprehensive documentation demonstrating both actual rendition of services and corresponding business benefits.

Detailed cost-benefit analyses, travel records, and internal communications substantiated that employees of the AEs had rendered specialised services across various functions. The tribunal held that the TPO’s approach of fixing the ALP at nil was legally untenable, as it substituted commercial judgment with subjective opinion.

Citing judicial precedents, the tribunal reiterated that tax authorities cannot disregard the taxpayer’s chosen method merely because the benefit is not measurable in monetary terms. The Tribunal held that the transfer pricing adjustment of ₹28.74 crore was unsustainable. It ruled that the payments for intra-group services were at arm’s length and fully deductible.

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