TaxTMI 
TaxTMI 
2026 (1) TMI 1203
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....emand of Rs. 16,42,95,510/-, which has been raised pursuant to the impugned final assessment order. The assessee had earlier approached the Assessing Officer for stay of demand, which was rejected vide order dated 27.11.2025, directing payment of 20 percent of the disputed demand. Aggrieved, the assessee filed the present stay application before us. Since the appeal on merits and the stay application emanate from the same assessment order and involve common facts and issues, both were heard together and are being disposed of by this common order, for the sake of convenience and completeness. 2. Facts in brief 2.1 The assessee, Maersk Tankers India Private Limited, is a resident company and part of the Maersk Tankers Group, operating in the product tanker industry. For A.Y. 2022-23, the assessee filed its return of income on 28.11.2022, declaring total income of Rs. 17,04,70,291/-.The case was selected for scrutiny through CASS on account of (i) refund claim, (ii) international transactions posing transfer pricing risk, and (iii) depreciation. Statutory notices under sections 143(2) and 142(1) were issued, and the assessee furnished details and explanations from time to time. ....
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....sment order passed in conformity with the DRP"s directions, the assessee is in appeal before us raising following grounds of appeal: Transfer Pricing grounds 1. On the facts and in circumstances of the case and in law, the learned Transfer Pricing Officer (TPO) and / or Assessing Officer (AO) and / or Dispute Resolution Panel (DRP) has erred in making the transfer pricing adjustment of INR 46,45,29,035 to determine an arm's length price at INR 53,33,00,000 crores as against the consideration of INR 6,87,70,965 received by the Appellant for divestment of its India Technical Management support business by the Appellant to another resident company i.e., Lionheart Shipping Private Limited (Lionheart). Your Appellant most respectfully prays that the transfer pricing adjustment is bad in law and be deleted. 2. On the facts and in circumstances of the case and in law, the learned TPO and / or AO and / or DRP has erred in ignoring that the Appellant"s transaction of divestment on slump sale basis of its India Technical Management support business to another resident entity i.e., Lionheart, does not qualify as an "international transaction" under Section 92B of th....
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.... in the computation of income attached to the assessment. 9. On the facts and in circumstances of the case and in law, the learned AO and / or DRP has erred in initiating penalty under Section 270A of the Act against the Appellant. All grounds above are without prejudice to each other. The Appellant further craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein above and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per the law. The Appellant therefore prays that the aforesaid additions to the returned income of the Appellant be deleted. 4. During the course of hearing before us, the learned Authorised Representative (AR) of the assessee explained the corporate structure of the assessee and the background of the impugned transaction, and reiterated the factual and legal contentions already placed on record. 4.1 The AR submitted that the assessee, Maersk Tankers India Private Limited (hereinafter referred to as "the assessee"), is a resident company incorporated on 28.09.2017 under the Companies Act, 2013, and is a wholly owned subsidi....
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....n 92B(2) of the Act. According to the AR, section 92B(2) applies only where a transaction is entered into with a third party, pursuant to a prior agreement or arrangement with a non-resident AE. In the present case, the transaction was directly between two domestic associated enterprises, and not with a third party. Hence, the invocation of section 92B(2) by the TPO and the DRP was stated to be legally untenable. 4.7 The AR contended that the TPO and the Assessment Unit grossly erred in concluding that a transaction between two Indian resident group entities, merely because it was not reported as a "Specified Domestic Transaction", becomes an international transaction. It was submitted that the Act does not contemplate such an interpretation, and that absence of reporting as SDT cannot convert a domestic transaction into an international transaction. 4.8 In support of this proposition, the AR placed reliance on the decision of the jurisdictional Co-ordinate Bench in the case of Reach Data Services India Private Limited v. ITO (ITA No. 1842/Mum/2017), wherein it has been held that a transaction between two domestic associated enterprises does not qualify as a deemed internatio....
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....s NIL under Clause 9 and making observations under Clause 18 was purely out of abundant caution, with a categorical assertion that the impugned transaction was between two domestic associated enterprises and that transfer pricing provisions were not applicable. 5. The learned Departmental Representative (DR) supported the orders of the lower authorities and placed reliance on the directions of the DRP. The DR submitted that although section 92B(1) contemplates that an international transaction is one where at least one of the associated enterprises is a non-resident, the DRP has held that section 92B(2) expands the scope by deeming certain transactions as international where the transaction, though structured domestically, is in substance governed by prior agreements or arrangements involving non-resident associated enterprises and the terms are determined in substance by such associated enterprises. 5.1 The DR submitted that the DRP has recorded a categorical finding that, contrary to the assessee's plea, the corporate structure and the surrounding facts establish a deemed international transaction, since both the assessee and Lionheart are ultimately controlled by non-resid....
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....ny), both being domestic associated enterprises, can at all be brought within Chapter X by treating it as an "international transaction", including as a "deemed international transaction" under section 92B(2). 6.1 Since the jurisdictional foundation itself is in dispute, we first adjudicate that issue. Only if Chapter X is found to apply, the remaining contentions on reference to TPO, method, valuation assumptions, Rule 11UAE, etc., would arise for consideration. 7. The undisputed factual position relevant to section 92B is such that - i. The Business Transfer Agreement dated 28.10.2021 is between the assessee (Maersk Tankers India Private Limited) and Lionheart Shipping Private Limited, both incorporated and resident in India. This is expressly noted as the assessee's case before the DRP. ii. The DRP also records that the assessee's primary objection is that the transaction is between "two Indian resident associated enterprises (AEs)" and therefore does not meet section 92B(1). iii. he DRP"s approach is that, though the transaction is between two resident AEs, it can be treated as a deemed international transaction, because both entities are ultima....
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.... Foreign Holding Company... A bare reading of section 92B... would show that there is no such condition that the transaction between two resident companies, subsidiary of a Foreign Holding Company shall be deemed as international transaction... Since, the asset purchase agreement is between two resident companies such transaction cannot be regarded as "international transaction."" (page 11, para 10) 7.7 The ratio applies on all fours to the jurisdictional limb under section 92B(1) in the present case, because here too the transaction is admittedly between two resident entities, though within a foreign-headed group. 7.8 Accordingly, the transaction cannot be treated as an "international transaction" within the meaning of section 92B(1). 8. Section 92B(2) begins with a condition precedent: it contemplates "a transaction entered into by an enterprise with a person other than an associated enterprise...". 8.1 The coordinate bench in Reach Data Services India Pvt. Ltd. (ITA No.1842/Mum/2017) has explained this requirement in clear terms. The Bench held: "Now, adverting to the extended meaning of an international transaction, as is envisaged in sub-section (2) of Sec....
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....stance cannot cure the absence of the statutory condition that the assessee's transaction must be with a non-AE third party to invoke section 92B(2). 10. The DRP states that Reach Data is distinguishable because there was "no evidence of prior non-resident AE influence" in that case. This distinction does not hold in law, because the decisive ratio in Reach Data is not founded on absence or presence of influence. It rests on the statutory prerequisite that section 92B(2) "presupposes a transaction... with a person other than an associated enterprise" and that where the transaction is "between two AEs", the prerequisite is not satisfied. Hence, the DRP"s attempt to keep Reach Data out on facts does not address the governing legal test. 10.1 For the aforesaid reasons, section 92B(2) has no application to the present transaction. Consequently, the transaction between the assessee and Lionheart, being a transaction between two resident associated enterprises, cannot be deemed to be an international transaction. 11. The DRP holds that because the assessee reported the transaction in Form 3CEB (Clause 18) at Rs. 6,88,00,000/-, it "implicitly admitted" that it is an international....
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....dered view, once we hold that the impugned transaction is not an international transaction under section 92B(1) and cannot be deemed so under section 92B(2), the very assumption of jurisdiction by the TPO to determine ALP in respect of this transaction fails. Consequently, the debate on the procedural validity of the reference becomes academic for adjudication in this appeal. 14. The DRP upholds the TPO"s adoption of DCF under "Other Method" and its modifications to projections, growth, and terminal value. Since the transaction itself is held to be outside Chapter X, we do not enter into the merits of valuation and method, and we expressly keep all such issues open. 15. The assessee contends that the transaction is taxed as slump sale under section 50B and FMV determined under Rule 11UAE, accepted for capital gains purposes, should be treated as ALP. The DRP rejects this. Again, in view of our finding on non-applicability of Chapter X, this issue does not survive for decision. 16. The DRP lists penalty initiation as one of the objections. This also becomes consequential and does not call for separate adjudication once the underlying adjustment is deleted. 17. Before par....