TaxTMI 
TaxTMI 
2026 (4) TMI 1524
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut taking cognizance of the fact that AE does not own any shareholding in Assessee company. 2.3 The AO / TPO / DRP erred in not appreciating the benefit received by the Assessee on account of business and management consultancy services availed from AE. 2.4 The AO / TPO / DRP erred in not appreciating the email evidences produced by the Assessee to substantiate that the Business and Management consultancy services were received. 2.5 The AO / TPO / DRP erred in not adopting the correct method as prescribed in Rule 10B of the income tax rules, 1962. 2.6 The AO / TPO / DRP erred in not appreciating the fact the Business and Management Consultancy services are inextricably linked to the core operations of Assessee and as such be aggregated and benchmarked using Transactional Net Margin Method ('TNMM') Upward adjustment towards Interest income from outstanding receivables 3.1 The AO / TPO / DRP erred in not providing any cogent reasons for adopting LIBOR plus 350 BPS for computing notional interest on outstanding receivables. 3.2 The AO / DRP erred in in law and on facts by adding a spread of 100 basis points over an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional 100 basis points over and above LIBOR plus 350 basis points, which had earlier been adopted by the TPO, for the purpose of computing interest on outstanding receivables. Pursuant to the DRP's directions, the TPO recomputed the filters and included the comparables proposed by the Assessee, resulting in the Assessee's margin of 12.04% falling within the arm's length range of margins earned by comparable companies, which ranged from 5.92% to 28.56%, with a median of 19.36%. Consequently, the entire adjustment proposed in the original transfer pricing order in respect of the overall entity stood deleted. 3.4 However, the adjustment on account of interest on outstanding receivables was enhanced to Rs. 56,554/-. Thereafter, the final assessment order dated 25.10.2023 was passed by the Assessing Officer confirming the adjustment of Rs. 17,16,82,565/-. Aggrieved by the said final assessment order, the Assessee has preferred the present appeal before us. 4. The first issue raised by the Assessee in grounds of appeal Nos. 2.1 to 2.6 pertains to the disallowance of business and management consultancy charges. The Learned Authorized Representative (Ld. AR) submitted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs or regulatory authorities. * Technology-Related Strategic Services: This involves providing strategic guidance on acquiring, allocating, and managing technology resources to meet business objectives and customer needs. It includes identifying and addressing the Assessee's technology requirements, benchmarking against industry best practices, and supporting the conversion of leads into business opportunities. 4.2 The Learned Authorized Representative (Ld. AR) for the Assessee reiterated that the business and management consultancy services received are high-value, core management services that significantly contribute to the Assessee's business growth, revenue, and profitability. The Associated Enterprises (AEs) leverage their global reputation and customer/vendor relationships to identify new clients and share their expertise, thereby helping the Assessee secure projects and enhance financial performance. The Ld. AR argued that, since these services are closely integrated with the Assessee's operations, determining the Arm's Length Price (ALP) on an aggregate basis using TNMM is more appropriate, and therefore, these services cannot be segregated and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nology-related services. Additionally, the Assessee has submitted substantial additional evidence before us to further substantiate the receipt of management services. In the interest of justice and fairness, we remit this issue to the file of the TPO to examine the additional evidence, seek further details if necessary, and benchmark the transaction based on the methodology outlined by us below. The TPO shall provide the Assessee with adequate opportunity to submit the required details or documents. 6.1 Regarding the methodology for benchmarking the management charges, it is noted that the Assessee has aggregated this transaction and benchmarked it under TNMM. The Ld. AR strongly contended that payments for business and management consultancy services are closely linked to the Assessee's business operations and therefore cannot be segregated and benchmarked independently. To support this view, the Ld. AR relied on the jurisdictional decision in M/s. Doowon Automotive Systems India Private Limited vs DCIT [IT(TP)A No. 88/Chny/2024], which held as follows: "24.0 We have noted that the facts of the present case are akin to those available in judicial precedence discus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....observations. Consequently, all grounds of appeal Nos. 2.1 to 2.6 are allowed for statistical purposes. 7. The next issue for consideration, raised in grounds Nos. 3.1 to 3.2 of the Assessee's appeal, pertains to the recharacterization of outstanding trade receivables as a separate international transaction. The Assessing Officer treated the outstanding receivables from the Associated Enterprise (AE) as a distinct international transaction under the Explanation to section 92B of the Act and imputed interest at LIBOR plus 450 basis points on an ad hoc basis as the arm's length interest rate. 7.1 The Ld. AR for the Assessee submitted that this issue covered by various decisions of ITAT Chennai benches wherein it has been held that outstanding receivables is an international transaction, however when it comes to benchmarking, this Tribunal has held that Average LIBOR was to be adopted as the appropriate rate for benchmarking the delayed receivables. Relying upon the same, the Ld. AR pleaded that Average LIBOR may be adopted for imputing interest. 7.2 Per contra, the Ld. DR strongly supported the orders and directions of the lower authorities. 7.3 We have heard the ....