TaxTMI 
TaxTMI 
2025 (10) TMI 474
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....ainst the order dated 29.10.2024 passed under section 143(3) r.w.s 144C(13) rwis. 1448 of the Act by the Assessment Unit, Income Tax Department, on the following grounds, which are independent and without prejudice to each other: General 1. On facts and circumstances of the case and in law, the learned Assessing Officer ('AO')/the learned Transfer Pricing Officer (TPO) under the directions of the Hon'ble Dispute Resolution Panel ('DRP") has erred in computing the total income of the Appellant at INR 42,11,15,313/-as against returned income of INR 31,63,85,208. 2. On facts and circumstances of the case and in law, final assessment order dated 29 October 2024 is barred by limitation, thus bad-in-law and is liable to be quashed in-limine. 3. On the facts and in the circumstances of the case and in law, the notice issued under section 143(2) of the Act is without jurisdiction, bad in law and thus the entire proceedings initiated by the learned AO are void-ab-initio. Transfer Pricing-INR 10,47,30,105 4.On facts and circumstances of the case and in lww, the leamed AO/TPO, under the directions of the Hon'ble DRP, er....
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....nd circumstances of the case and in law, the learned AO erred in not allowing credit of tax deducted at source of INR 5,09,51,916. 12. On facts and circumstances of the case and in law, the learned AO erred in levying interest under section 234A and section 234B of the Act. 13. On facts and circumstances of the case and in law, the learned AO erred in levying interest under section 234C of the Act. 14. On facts and circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under Section 270A of the Act. The Appellant prays that the additions made by the learned AO/TPO under the directions of the Hon'ble DRP be deleted and consequential relief be granted. The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law. Tax Effect: Ground 1: is not calculated. This is a general ground, hence separate tax effect Ground 2: This ground is in relation to limitation, hence sepa....
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....ordingly, the case was referred to the Transfer Pricing Officer ("TPO") under section 92CA(1) of the Act for the determination of the arm's length price of the international transaction entered into by the assessee. During the year under consideration, the assessee entered into the following international transactions with its associated enterprises: - Sr No. Name of Associated Enterprises Description of International Transactions Amount Rupees in lakhs (INR) 1 Armada C7 Payment of bareboat charter hire 418,92,04,225 2 Bumi Armada Engineering Sdn Bhd (BAE) Availing of operational support services 20,23,90,812 3 SP Engineering Services Pte Ltd (SPE) Availing of engineering and consultancy services 6,46,62,185 4 Bumi Armada Berhad (BAB) Reimbursement of IT and support expenses 6,89,361 Total 445,69,46,583 7. During the transfer pricing assessment proceedings, it was observed from the audited financial statements of the assessee that INR 41,892.04 lakhs were paid to the associated enterprise, during the year under consideration, as bareboat charter expense against the FPSO vessel. It was further o....
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....boat charter (dry lease) basis from its associated enterprise. Thus, it was submitted that without the FPSO vessel, the assessee would not have been able to enter into a contract with ONGC. 8. The TPO, vide order dated 27/10/2023 passed under section 92CA(3) of the Act, disagreed with the submissions of the assessee and held as follows:- (a) As per the contract with ONGC, the assessee was bound by the contract to supply a FPSO vessel, install it as required in the FPSO facility, provide project management services, provide design and engineering services, operate the FPSO vessel, provide marine warranty services and provide all the elements of the work in accordance with the execution schedule. Thus, the TPO rejected the assessee's contention that it was merely a pass-through entity and performed no role, bearing no risk associated with the performance of the vessel. (b) The associated enterprise of the assessee is earning revenue on a transaction just because the contract from ONGC was granted to the assessee. Therefore, the TPO held that it was the effort of the assessee that secured him the contract, not the other way around. (c) There are signi....
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.... of INR 10,47,30,105. In conformity with the order passed by the TPO under section 92CA(3) of the Act, the AO passed the draft assessment order dated 18/12/2023 under section 144C(1) of the Act, determining the total income of the assessee at Rs. 42,11,15,317 after making the transfer pricing adjustment of INR 10,47,30,105. 10. The learned DRP, vide its directions dated 30/09/2024 issued under section 144C(5) of the Act, rejected detailed objections filed by the assessee against the findings of the TPO. The learned DRP agreed with the TPO's conclusions that, in the assessment year 2016-17, there was no evidence to suggest that back-to-back transfers were made to the associated enterprise for the entire amount received from ONGC in respect of the FPSO vessel. Thus, the learned DRP held that the findings made in the assessment year 2016-17 are distinguishable on facts. The learned DRP held that the action of the TPO in attributing over 2.5% as brokerage/facilitation fees to be retained by the assessee from the fees paid to the associated enterprise for bareboat charter hire is reasonable and correct. In conformity with the directions issued by the learned DRP, the AO passed th....
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....ll be at arm's length. Thus, the learned AR submitted that there is no basis for making the impugned transfer pricing adjustment by the TPO/AO. 12. On the contrary, the learned Departmental Representative ("learned DR") submitted that the assessee in its books has shown the bareboat charter hire charges separately received from ONGC and the same were being paid to the associated enterprise as it is, without keeping any margin. The learned DR submitted that, as per the FAR analysis, the assessee assumed various risks separately or jointly with the associated enterprise in the execution of the contract with ONGC. Therefore, the assessee is entitled to a certain margin besides the O&M charges, which is nothing but a pure domestic transaction carried out individually by the assessee with ONGC. The learned DR, by referring to the clauses of the agreement entered into by the assessee with ONGC, submitted that it is the assessee's responsibility to maintain it in a stable condition. The learned DR further submitted that it is only due to the efforts of the assessee that the bid was successfully secured, and therefore, the assessee is entitled to a separate margin in that regard. Di....
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.... follows: - "1. The Owner shall be responsible for constructing/converting the FPSO as detailed in the basis of design, Scope of Work and technical specifications and all functional/technical specifications set out in the ONGC Charter. 2. During the Construction Phase, the Owner shall be responsible for carrying out all alterations in the designs and Drawings of FPSO as required by ONGC. 3. The Owner shall be responsible for Mobilization of the FPSO to the C7 oilfield offshore, Mumbai, India 4 The Owner shall be responsible for providing design, engineering, procurement and equipment as well as sub-sea designs for the successful Construction of FPSO as set out in the ONGC Charter. 5. The Owner shall be responsible for installation of the sub-sea structures and the mooring system for the FPSO as set out in the ONGC Charter. 6. The Owner shall be responsible for the start-up of the FPSO and for obtaining the final Acceptance Certificate from ONGC certifying the performance of the FPSO and all systems. 7. The Owner shall following grant of the Final Acceptance Certificate, hand over to the Company all documentation, record....
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.... agreed to undertake the project. In such a case, it cannot be said that the roles and responsibilities of one company can be performed by the other company. The purpose of forming the joint venture is only to jointly bid for the project and win the mandate to perform the contract. At this stage, it is pertinent to note that the contract entered into between the assessee joint venture and the ONGC is a composite contract for the supply of the FPSO vessel and the provision of O&M services. Furthermore, it is equally imperative to note that without the unconditional commitment letters issued by Bumi Armada Berhad Group and Armada C7 Pte Ltd for the provision of the FPSO vessel after its conversion to meet the specification and technical requirements of the tender documents, the ONGC would not have signed the contract with the assessee, as the FPSO vessel was a very important aspect of the entire bidding process, which the ONGC required for production, storage and offloading of oil and gas operations conducted in the offshore waters of India. The fact that the contract was entered into between the assessee joint venture and the ONGC does not undermine the expertise of each partner of ....
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....by the sister concerns with third parties for bareboat charter hire of FPSO vessels and O&M activities, the assessee in its transfer pricing study report claimed that the international transaction of payment of charter hire fees to associated enterprise is at arm's length. 20. It is the consistent plea of the assessee that the benchmarking approach of revenue split adopted by the assessee has been accepted by the learned DRP, in the assessee's own case, for the assessment year 2016-17. In this regard, reliance was placed on the following findings of the learned DRP, rendered vide its directions dated 03/11/2020 for the assessment year 2016-17, which forms part of the paper book from pages 91-224: - "It transpires that each offshore oil and gas field is different because of seabed topography, geology, depth etc. Therefore, to explore/produce/store/offload oil and gas from each of them would require separate/ different technically specific set of FPSO equipment/machinery and associated facilities. We have two examples before us, one, the FPSO in the instant case named as Armada Sterling II' and the FPSO for the oil and gas field named as 'D1'in the case of the....
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.... internal comparables in the cases of Mattel Toys (1) (P.) Ltd. 144 ITD 76 (Mum.- Trib.), Birla Soft (India) Ltd 59 SOT 156 (URO) (Delhi-Trib.), Pino Bisazza Glass (P.) Ltd. (2014) 146 ITD 644 (Ahd.- Trib.) We have perused the additional evidence the certificate and the affidavit accompanied by the relevant and redacted (carefully edited to remove confidential references) version of agreement in this regard. The date of agreement is 08.08.2014. The agreement is for 10 years. The hire/lease day-rate paid for the FPSO is USD $ 2,30,000 against the total charter hire/ lease day-rate received for the FPSO and agreed operations at USD $ 2.79.972. Remaining USD $ 49,972 retained towards O & M services. Thus 82.15% (USD $ 2.30,000/ USD $ 2,79,972 x 100) of the total charter hire/lease day-rate received was paid towards hire/ lease day-rate of the FPSO, In the instant case the same payment for hiring/ leasing day-rate of the FPSO works out at 70.97% (USD $1,57,383/ USD $ 2.21.739.0892 x 100) (USD $ 1,57,383 is average day rate] of the total charter hire/lease day-rate received. In the instant case, the outgo for the hiring/ leasing day rate of the FPSO is lower than the comparable....
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.... associated facilities, qua the seabed topography, geology, depth, etc., was also considered by the learned DRP in the assessment year 2016-17. 22. As regards the without prejudice submission made during the hearing that even after imputing 2.5% commission for the bareboat charter hire, the transaction would still be at arm's length, the learned AR placed reliance upon the following computation: - Revenue split after imputing commission as a function: Particulars Ref Comparables SPAOEPL Bareboat charter hire [A] 81.70 79.06 O&M [B] 18.30 20.94 Total time charter [C = A + B] 100.00 100.00 Imputation of 2.5% of Bareboat charter hire [D = A x 2.5%] 2.04 Revised ALP of O&M activities [E = B + D] 20.34 20.94 Revised ALP for BBC activities [F = C - E] 79.66 79.06 Accordingly, revenue split post imputing the sales commission is still at ALP 23. Having perused the aforesaid computation, we find that even after imputing 2.5% commission payable to the assessee for the bareboat charter fees paid to the associated enterpris....