Income Tax - Sections 143(3), 143C - ITAT Delhi Rules ALP for Royalty on Trademark Must Rely on Comparable Uncontrolled Transactions; Adjustment on āEssarā Royalty Struck Down - The ITATās decision mandates that transfer pricing adjustments to royalty payments for trademarks, or any other related party transactions, must be grounded in a rigorous comparability analysis with uncontrolled transactions. The mere absence of established brand value or perceived benefit is insufficient for setting the ALP at Nil unless supported by evidence of comparable uncontrolled transactions. Tax authorities must provide objective benchmarking and cannot override statutory methods and rules based on subjective assertions.
Income-tax - Section 144C(5) - ITAT Mumbai Rules Indian Sales Prices Cannot Benchmark Overseas AE Transactions Due to Geographical Differences - In this case, the ITAT Mumbai held that sales prices to non-AEs in India cannot be used as a benchmark (CUP) for determining the armās length price of sales made to overseas AEs. The decision reinforced the requirement under Rule 10B(2) for a rigorous comparability analysis that includes geographical market conditions. Accordingly, the upward adjustment proposed by the TPO was set aside, affirming the assesseeās use of the TNMM for benchmarking its export sales to AEs.
Income tax - Sections 92CA(3), 144C(1) - ITAT Mumbai Rules Revision Under Section 263 Invalid When Final Assessment Follows DRP Directions in Carbon Block Manufacturerās Case - The ITATās decision makes it actionable that once an assessment order is finalized strictly as per the DRPās directions, the Principal Commissioner cannot invoke revisionary jurisdiction under section 263. Assessees need not fear revision under section 263 for such assessment orders, provided there is strict compliance with the DRPās directions. Any deviation by the AO from the DRPās directions, however, could render the order invalid and open to revision.
Income-tax - Section 144C(5) - ITAT Mumbai Rules: Notional Indirect Benefit to Foreign Associated Enterprise from AMP Expenditure Not Subject to Transfer Pricing Provisions in Mondelez India Case - Based on the findings in the present case, the ITAT directed the deletion of the transfer pricing adjustment made towards AMP expenses. The ruling reaffirms that only when there is an explicit or implicit arrangement obligating the Indian entity to incur AMP expenditure on behalf of its foreign AEāthus constituting an āinternational transactionāācan such expenses be subjected to transfer pricing analysis and adjustment. In the absence of such an arrangement, incidental or perceived benefits enjoyed by the AE are not covered by transfer pricing provisions.
Income Tax - Section 92CA - ITAT Delhi Rules Integration of Trading and Service Functions Critical for Transfer Pricing Benchmarking in Juniper Networks India Case - The ITAT Delhiās decision in the case of Juniper Networks Solution India Pvt Ltd establishes that, where trading and customer support activities are integrated and functionally inseparable, transfer pricing benchmarking must be conducted on a combined basis. Taxpayers with similar business models should ensure that their TP documentation and benchmarking reflect the integrated nature of their operations rather than accepting artificial segmentations imposed by revenue authorities.
Income-tax - Sections 143(3), 144C(3) - ITAT Mumbai Rules Depreciation on Goodwill and Non-Compete Fees as Non-Operating Costs for ALP Computation in Slump Sale Acquisition - On the basis of the ITAT Mumbaiās decision, it is clear that when an assessee incurs depreciation on goodwill and amortisation of non-compete fees as a result of a one-time acquisition (such as a slump sale), these expenses should not be factored into the operating costs for the purpose of computing the PLI under the TNMM. Instead, they must be treated as non-operating costs for accurate benchmarking and ALP determination. Assessees in similar factual matrices should ensure that such extraordinary items are consistently excluded from operating costs in transfer pricing documentation and computations.
Income tax - Sections 144C(13) - ITAT Delhi Declares Assessment Order Void for Breach of Time Limit Under Section 144C(13) Despite DRP Directions; TPOās Effect Order Cannot Extend Limitation - In light of the above factual and legal analysis, the ITAT concluded that the final assessment order passed by the AO on 20.12.2019, subsequent to the expiry of the statutory limitation period under Section 144C(13), is invalid. The TPOās actions in passing an effect order after the DRPās directions do not extend or revive the AOās time limit for passing the final assessment. The order is therefore declared void ab initio and unenforceable.
ITAT Mumbai Confirms Working Capital Adjustment in Transfer Pricing for Software Subscription Distributor - On the basis of the facts and consistent judicial precedents, the ITAT ruled that the assessee is entitled to working capital adjustment and other proportionate adjustments to neutralize differences in working capital deployment vis-à-vis comparables. This ensures that the profit level indicators truly reflect armās length conditions, in accordance with Rule 10B(1)(e)(iii) and Rule 10B(3) of the Income Tax Rules, 1962. The TPOās adjustment, having ignored this principle, was set aside.
Income Tax - Sections 139, 119(2)(b) - Madras High Court Directs Condonation of Delay in ITR Filing, Orders Refund Processing Despite Late Return Where Tax Was Duly Deducted and Remitted - This decision reinforces that where an assessee has already paid the due taxes and is otherwise entitled to a refund, procedural delays in filing the ITR should not operate to unduly deprive them of relief. The High Courtās order mandates the revenue authorities to prioritize substantive justice over procedural technicalities, provided the assessee fulfills any remedial directions issued by the Court, such as payment to a charity and prompt manual filing of the return.
Income Tax - Sections 144C, 153 - Mumbai ITAT Rules Network Fees for Group Support Services Not Taxable as FTS or Royalty under IndiaāNetherlands DTAA; No "Make Available" of Technical Knowledge - On the basis of established legal interpretation and Tribunal precedents, the network fees received by the assessee from its Indian group company for group support services do not qualify as fees for technical services or royalty under either the Income-tax Act, 1961 or the IndiaāNetherlands DTAA. The absence of any āmake availableā of technical know-how or transfer of proprietary rights is decisive. The Tribunalās decision mandates that such standardized intra-group services, in the absence of transfer of technology or knowledge, are not taxable in India as FTS or royalty.
ITAT Mumbai Rules: No Fixed Place PE for Irish Aircraft Lessor; Lease Rentals to IndiGo Not Taxable in India under Article 8(1) of India-Ireland DTAA - The ITAT Mumbai has definitively held that mere physical presence of leased aircraft in India does not constitute a Fixed Place Permanent Establishment for the foreign lessor under Article 5(1) of the India-Ireland DTAA, where the lessor does not have operational control, personnel, or infrastructure in India, and the business is conducted from abroad. Lease rentals earned by the Irish lessor from IndiGo are not taxable in India, as they are protected under Article 8(1) of the DTAA, provided the aircraft form part of an integrated fleet engaged in international traffic. The ādisposal testā for PE requires more than asset presence; it demands that the foreign enterprise be able to conduct business in India through the place in question, which is not satisfied here.
Income Tax - Section 234D - ITAT Mumbai Rules Reinsurance and Support Services Income Not Taxable in India Absent PE or Technical Knowledge Transfer: Swiss Re Asia Pte Ltd v. DCIT - The ITAT Mumbai held that, in the absence of a Permanent Establishment in India, business profits from reinsurance and retrocession services rendered by Swiss Re Asia Pte Ltd are not taxable in India. Similarly, support service income cannot be taxed as fees for technical services under the India-Singapore DTAA unless technical knowledge is made available to the Indian recipient. The Tribunal, therefore, directed deletion of additions by the AO pertaining to these heads, affirming the principles established in the earlier assessment year. The assesseeās appeal was partly allowed.
Income tax - Sections 9(1)(vii) - ITAT Mumbai Rules IT Support Service Fees and Software Access Revenue Not Taxable as FTS or Royalty Under India-Netherlands DTAA - In view of the established judicial position and the Revenueās acceptance of facts in earlier years, the ITAT ruled that the payments received for IT support services do not constitute FTS or royalty under the Income-tax Act or Article 12 of the India-Netherlands DTAA. Similarly, software access revenue is not royalty. The additions made by the Assessing Officer in the draft assessment order were thus deleted.
Income Tax - Sections 143(3), 144C(3) - ITAT Mumbai Upholds Depreciation on Intangible Business Rights from Manufacturing, Supply, and Maintenance Contracts in Slump Sale Acquisition - The Mumbai ITAT, in line with its prior decision in the assesseeās case, has reaffirmed that business/commercial rights, including those arising from manufacturing, supply, and maintenance contracts acquired as part of a slump sale, qualify as intangible assets under Section 32(1)(ii) and are eligible for depreciation. The AO is, therefore, directed to allow the claimed depreciation for AY 2015-16.
Income Tax - Section 92C - Delhi ITAT Directs Fresh TP Analysis for Infrastructure Service Fees and Reimbursements, Rejects Blanket Benchmarking with Core Services - The Delhi ITAT has categorically held that each international transaction identified under Section 92B of the Income Tax Act must be independently benchmarked as per Section 92C, even where aggregate benchmarking has been accepted for the main business segment. Assessees cannot rely solely on consolidated profit-level benchmarking to cover ancillary transactions such as infrastructure fees and reimbursements. Where new material evidence is produced, the appropriate course is remand for fresh adjudication.
Income-tax - Section 144C(5) - ITAT Bangalore Rejects Adhoc LIBOR Benchmark for Interest on Delayed AE Receivables: Orders Transaction-Specific Currency Benchmarking - The ITATās decision makes it clear that benchmarking interest on delayed receivables between AEs cannot be based on arbitrary or ad hoc adoption of benchmark rates like LIBOR or SBI PLR without a cogent analysis of the currency, the period of delay, and the risk profile of the transaction. The armās length price must be determined with reference to the actual transaction terms, the currency in which the receivable is denominated, and current market benchmarks such as SOFR, with appropriate mark-ups or reductions reflecting the real risk borne by the parties. The AO must provide a reasoned determination and allow the assessee to raise all relevant contentions, including working capital adjustment claims.
Income Tax - Sections 144C & 147, 148A - Delhi ITAT Annuls Reassessment on Offshore Software Sales: No Taxable Income in India Without Permanent Establishment - The ITAT Delhi decisively quashed the reassessment proceedings, holding that offshore receipts from the sale of software and telecom equipment are not taxable in India in the absence of a Permanent Establishment, as per the DTAA and Supreme Court precedent. The Tribunal also underscored the criticality of following due process in issuance of notices for reassessment, emphasizing that a mere suspicion or general inquiry does not satisfy the statutory requirements for reopening under section 147. The appeal of the assessee was allowed and the connected stay application was dismissed as infructuous.
Income tax - Section 9 - ITAT Ahmedabad Upholds Transfer Pricing Adjustments: Indian Project Office of Chinese Entity Deemed Associated Enterprise with Head Office under Section 92A(2)(g), Offshore and Onshore Contracts Scrutinized - This ITAT decision establishes that where an Indian PEās business is wholly dependent on the intellectual property, know-how, or technical documentation of its foreign head office, the PE and head office are to be treated as associated enterprises under Section 92A(2)(g). Consequently, all transactions between the twoāincluding reimbursements, service contracts, and supply activitiesāare liable to transfer pricing scrutiny and ALP adjustments in accordance with Sections 92CA and 92F(iiia), as well as the relevant provisions of the India-China DTAA. Assessees in similar situations must treat their branch/head office transactions as international transactions and ensure proper transfer pricing documentation and compliance, including filing Form 3CEB.
Income Tax - Sections 143(3), 144C(13) - Mumbai ITAT Rejects Ad-Hoc Transfer Pricing Adjustment on Central Services; Emphasizes Strict Adherence to Section 92C Benchmarking Methods - The ITAT ruled in favor of the taxpayer, holding that the TPOās ad-hoc approach to benchmarking the central services payment at "Nil" violated the requirements of Section 92C and the established jurisprudence of the Bombay High Court. The Tribunal directed that ad-hoc or arbitrary adjustments, unsupported by recognized transfer pricing methods and without the support of comparable data, are impermissible under the law.
ITAT Chennai Directs Partial Relief on Transfer Pricing Adjustment for Corporate Guarantee Fees to Associated EnterpriseāAdjustment Restricted to 0.5% of Loan Value - The ITAT Chennai has clarified that while transfer pricing adjustments are indeed applicable on corporate guarantees provided to AEs, the rate at which these adjustments are made must be in consonance with judicial precedents and industry benchmarks. Accordingly, the adjustment is to be confined to 0.5% of the guaranteed amount, offering partial relief to the assessee.