TaxTMI 
TaxTMI 
2025 (5) TMI 2293
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....f the Act and thereafter the case of the assessee was selected for scrutiny. Since, international transactions with its Associated Enterprises (in short 'AE') are involved, the reference was made by the Assessing Officer to the ld. Transfer Pricing Officer (in short 'TPO'). The TPO vide its order dated 30.10.2023 made certain adjustments to the Arm's Length Price (in short 'ALP') of the international transactions of the assessee with its AE and then the Assessing Officer passed the draft assessment order. 3. Against the draft assessment order, the assessee filed its objections before the Learned Dispute Resolution Panel (in short 'DRP'). The Ld. DRP, while confirming the order of the TPO has also enhanced the income of the assessee by making the disallowance of royalty payments to AE vis-a-vis sales made with third parties. Thereafter, the Ld. Assessing Officer framed the assessment and passed the order in accordance with directions of the DRP. 4. Aggrieved with the said order, the assessee has come up in appeal before us by raising the following grounds of appeal:- "1. That on the facts and circumstances of the case and in law, the final assessment order passed ....
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.... and circumstances of the case and in law, the Ld. TPO/ Ld. AO/ Ld. DRP have erred in enhancing the income of the Assessee by INR 3,74,76,635 on account of payment of royalty in relation to sales made by the Assessee to its AEs. In doing so, Ld. TPO/ Ld. AO/ Ld. DRP have grossly erred in: 5.1. rejecting the aggregation approach adopted by the Assessee to benchmark its international transactions in the TP documentation maintained in terms of section 92D of the Act read with Rule 10D of the Rules; 5.2. disregarding that the Assessee operates as a licensed manufacturing entity, bearing entrepreneurial risks with respect to its business, and frivolously holding that the characterization of the Assessee in respect of manufactured goods sold to the AEs is that of a 'contract manufacturer'; 5.3. ignoring the fact that functional, asset and risk ("FAR") profile of the Assessee is similar for sales made to unrelated parties as well as AEs; 5.4. not appreciating the substance on ground in terms of the fact that the sales made by the Assessee to its AEs are on a principal-to-principal basis, and also driven by open market conditions just as sales ma....
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....djustment for outstanding receivables is not warranted; 7.2. re-characterization of overdue receivables amount as a deemed loan and treating it as a separate international transaction; 7.3. not appreciating the fact that arm's length price determination for outstanding receivables is subsumed within the arm's length price determination of the principal international transaction itself; 7.4. not appreciating the fact that the Assessee has a consistent policy of not charging any interest on receivables from AEs as well as third parties; and 7.5. ignoring various judicial pronouncements around the issue of imputed interest on outstanding receivables. 8. That similar issue in respect of 'interest on outstanding receivables', in Appellant's own case for Assessment Year 2018- 19, has been adjudicated in favour of the Appellant by the Hon'ble Delhi Bench of ITAT. 9. That on the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest under Section 234A, 234B and 234C of the Act. 10. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initi....
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....h the cost allocation as well as the benefits accrued to the assessee as a result of these services. 12. With respect to the disallowance of royalty payments vis-à-vis sales to AEs, the assessee has argued that observations of the TPO that the assessee was a contract manufacturer is patently wrong in as much as the transactions of the assessee with its AE are on principal-to-principal basis. Further, the ld. Counsel for the assessee pointed out that the similar royalty has been paid by the assessee in previous year also and the same has not been disturbed by the TPO in the previous year order. The ld. Counsel for the assessee also relied upon the agreement in pursuance to which the royalty has been paid and contended that the same agreement was enforceable in the previous year also. He drawn the Bench to the copy of the agreement of royalty which is at page no.490 of the paper book. 13. The ld. CIT-DR appearing on behalf of the Revenue relied upon the orders of the authorities below. 14. With respect to the disallowance of royalty payments vis-à-vis sales made to third parties, the ld. Counsel for the assessee argued that the ld. DRP has made this enhancement....
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....val submissions and perused the materials available on record. With respect to the issue of intra group services(management fees paid), we are of the firm view that the assessee has successfully demonstrated before the lower authorities about the rendition of services from its parent company to the assessee. We have seen the invoices raised by the parent company with respect to the rendition of services. After perusing these invoices it is observed that the assessee has also deducted TDS on these payments made to its AE, for which, no adverse inference has been drawn by the Assessing Officer during the finalization of the assessment proceedings. We next observed that the assessee has also filed a chain of email exchange with respect to the discussion took place while rendition of services, no adverse material has been brought on record by the TPO in contrast to these mails. We further observed that the similar issue has come up in appeal before the Co- ordinate Bench in assessee's own case in ITA No. 2379/Del/2022, wherein, the Tribunal has observed in para 20 to 24 are as under: - 20. In the light of the delineations made above, we find considerable merit in the plea....