TaxTMI 
TaxTMI 
2026 (6) TMI 1268
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....n appeal against the Final Assessment Order (the order) passed by the Assessment Unit, Income Tax Department (Ld. AO) dated 26 August 2025 under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (the Act) in pursuance of the directions issued by Hon'ble Dispute Resolution Panel (DRP), Mumbai, dated 12 August 2025 under section 144C(5) r.w.s 254/260A of the Act on the following grounds, which are independent of and without prejudice to each other. 2. On the facts and circumstances of the case and in contrary to law, Ld. AO/Learned Transfer Pricing Officer (Ld. TPO) erred in: 2A.-making a reference u/s 92CA (1) of the Act without having any powers for making such a reference. Accordingly, the Transfer Pricing reference is bad in law, consequently the Transfer Pricing order issued u/s. 92CA, is bad in law and ought to be quashed. 2B.-issuing the Transfer Pricing (TP) order under section 92CA of the Act, dated 22 January 2025 which is bad in law and ought to be quashed. 2C-issuing the final assessment order under section 143(3) of the Act, dated 26 August 2025 beyond the time limit as prescribed under section 153 of the Act. Conse....
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....ns of the Act, the Ld. TPOs role is merely to determine the arm's length nature of the transaction referred to him by the Ld. AO and not to question the commercial rationale of legitimate business expenses incurred by the Appellant. 6. On the facts and circumstances of the case and in contrary to law, Ld. AO / Learned Transfer Pricing Officer (Ld. TPO) erred in: 6A - rejecting the detailed documentary evidence submitted by the Appellant to substantiate the need-benefit-evidence test of the services availed, without providing cogent reasons and erred in concluding that the Appellant is not able to discharge the onus of proving that the services have been availed by the AEs. 6B - summarily rejecting the contentions of the Appellant against the remand report provided by the Ld. TPO. 7. On the facts and circumstances of the case and in contrary to law, Ld. AO / Learned Transfer Pricing Officer (Ld. TPO) erred in not appreciating that the said payment for the services are technical in nature and have direct nexus with the business of the Appellant. 8. On the facts and circumstances of the case and in contrary to law, Ld. AO / Learned Transfer....
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.... 3 Availing of centralized support services 12,54,09,463/- Total 61,22,54,833/- 4. The Ld. TPO determined the ALP of transaction related to this services collectively referred to as intra group services (IGS) at nil and proposed the adjustment Rs. 61,22,54,833/-. The Ld. DRP uphold the proposal made by the Ld. TPO. Finally, the Ld. AO passed the final assessment order after considering the proposal made by the Ld. DRP and confirmed the addition. Being aggrieved the assessee filed an appeal before us. 5. The Ld. AR argued and filed a paper books which have been placed on record. The Ld. AR contended that only issue contested on merits in the present appeal by challenging the addition made by the Ld. AO contended in Ground No.3 in respect of payments made to the AEs towards availing IT services, PTSE services and centralized services of determining ALP of the transaction to nil by disregarding the benchmarking approach and methodology adopted by the assessee in TP study report. The Ld. AR argued and contended that the voluminous evidence established the need of benefit test was duly submitted before the revenue authorities and the evidence were furnishe....
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....eparation for removal of acetic acid from crude Benzyl Acetate with proper lab trails - Preparation of cooling concept for reaction mass, as earlier there was stainless steel DBE route reactor in which directly cooling is possible via reactor jacket but with new MS glass lined reactor there is limitation due to thermal shock due to high temp difference of cooling media & the process media Volume I- Part 3 850-904 c) - HCl Absorption (email communication / presentation /minutes of meetings between the AE and LANXESS India) wherein LANXESS India availed the following technical support: - Selection of feasible MOC for the common absorption process in Nagda - Installation of pipe sections of different MOCS - Performing tests after at least 6 months of exposure - Optimizing the HCl gas chillers to minimize organics in the off-gas (reduction in TOC) - Replacement of the glass absorber to ensure safety Volume I- Part 3 905-936 d) - Benzyl Alcohol (email communication / presentation /minutes of meetings between the AE and LANXESS India) wherein LANXESS India availed the following technical support: - BOH Extractor Reliability improve....
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....rption project Volume I- Part 3 922-925 l) Email containing the discussion for the issues faced in BOH project Volume I- Part 3 940--942 m) Minutes of meeting for discussion conducted for regular updates on the BOH project Volume I- Part 3 956-960 963-971 n) Back to Back invoice for purchase of Trendminer software in 2021 and 2022 Volume I- Part 3 976-977 7 Technical studies/inputs Volume I- Part 3 a) Presentation prepared for Process optimization in Benzyl Chloride &Benzal Chloride Volume I- Part 3 839-849 Process Flow Blueprint for BACE Cycle Volume I- Part 3 876 b) Presentation highlighting major findings from mass balance analysis and overall process monitoring of benzal acetate project Volume I- Part 3 877-900 c) Summary file for current status on Nagda HCL along with next steps for success of the project Volume I- Part 3 927-936 d) Summary for the testing and sampling Volume I- Part 3 943-956 e) Document containing memo for Experimental support for analysis of BOH-plant extraction and phase separation process Volume I- Part 3 961-962 f....
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....; Global Infrastructure Management services (email communications / presentation between the AE and LANXESS India) wherein the AE: - Provision and maintenance of server and data storage system, as well as active support of the virtualization software, operating system and other system software - Operation, maintenance and management of data backups. - Management of mobile device management solutions. Volume I - Part 3 981-1045 Management of Active Directory Infrastructure/List b) MDM Platform (email communications / presentation between the AE and LANXESS India) wherein the AE assisted in: Maintaining master for customer data, vendor data, material data, bank data etc. Centralized managing the administration of SAP modules / platform Volume 1-Part 3 1046-1161 c) SAP LXP Platforms / Operations (email communications /presentation between the AE and LANXESS India) wherein the AE: - SAP installation 24x7 availability - SAP Helpdesk -Incident Management, Software Deployment Management Support, monitoring/alerts/reporting and periodical tasks. - Authorization support in LXP system ....
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....lations; - GBS; - GPL; - LEX; etc. Summary of documents submitted Sr No. Document Type Paper book reference Page No. 1 Cost allocation working Volume I- Part 4 1713-1717 2 AE invoices Volume II- Part 1 1860-1865 3 Inter-company agreement Volume II- Part 1 1780-1859 4 Case studies a) Accounting services (email communications/presentation between the AE and LANXESS India) wherein the AE assisted in: - Settlement of process orders - Extending of customer code and updating bank details in the MDM Platform - Creation of material code for sideline invoice - Updating / changes in material, cost centre and cost element in SAP system - Creation of sideline invoice in SAP system - Settlement of process orders Volume I- Part 4 1243-1440 b) Treasury & Investor Relations (email communications/presentation between the AE and LANXESS India) wherein the AE: - Provided guidance to LANXESS India staff for recording accounting entries in entity's as well as in the group's accounting system ....
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....al principles along with global framework. Volume I - Part 4 1675-1712 6. The Ld. AR contended that the Coordinate Bench of ITAT Mumbai has considered this identical issue in assessee's own case bearing ITA No.4632/Mum/2024 the date of pronouncement 20.01.2025 for AY 2020-21 the relevant part of observations of the Bench is reproduced as below: "7. The assessee entered into agreement with Lanxess GmbH for availing these services, placed at pages 2090, 3886, 4902, 4935 and 4952 of the paper book. The assessee also explained that how the charges are raised on the assessee by providing the time cost allocation working placed at pages 2102, 3930, 4907 of the paperbook. The payments towards services rendered by the AE's, grouped under three category of PTSE services, IT Services and Centralised Services was as per the terms of the agreement with AE's. 7.1. With respect to the rendition of the services, assessee submitted the details of emails/ correspondences between the AE's and the assessee received. Thus, the claim of the assessee is that based on agreement, emails and invoices of the associated enterprise....
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....these services were too general, or just because the assessee did not need these services from the outside agencies in the perception of the authorities below, cannot be the reason enough to hold that the services were not rendered at all. We have perused the material before us, and, in our considered view, the assessee reasonably established rendition of services. The assessee may not have received all the services under the agreement but essentially the assessee had right to receive all these services, as and when required, under the agreement. The payments are made by the assessee for all the services agreed to be provided by the AE under the agreements. We also note that the assessee had filed the financials of the AE's to establish that the payment received from assessee were subjected to taxation in their respective jurisdiction which has not been looked into by the authorities. The observations of the Ld. TPO/DRP are therefore without any basis and de hors any analysis of the activities or evidences 7.5. Further, there are various decisions that observed that, benefit test do have much relevance in determining the ALP of such transactions. While determining the ....
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....reversed, or modified by a superior judicial forum, the same continues to hold the field and remains binding upon all subordinate authorities, including the DRP. It was argued that the Ld. DRP committed a grave error in refusing to follow the decision of the Coordinate Bench solely to "keep the issue alive" for protecting the interests of the revenue. The Ld. AR further contended that the observations of the Ld. DRP regarding the inability of the Department to file an appeal against directions issued under section 144C and the possibility of loss of revenue are wholly extraneous considerations. The Ld. DRP is a quasi-judicial authority and is required to decide the objections before it strictly in accordance with law and binding judicial precedents. It cannot decline relief to an assessee merely because the revenue may face procedural difficulties in pursuing further remedies. Such an approach, according to the Ld. AR, amounts to substituting legal adjudication with administrative expediency. The Ld. AR submitted that the reliance placed by the Ld. DRP on the judgment of the Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. (supra) is misconceived. The s....
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....on'ble High Court. Further, for the Department it would also amount to giving up the issue, which is under litigation before the Hon'ble High Court. This Panel hastens to observe here that the Hon'ble High Court of Bombay in the Writ Petition No. 1877 of 2013 in the case of Vodafone India Services Pvt. Ltd. v. Additional Commissioner of Income Tax (2014) 221 Taxman 166 (Bom.); wherein with regard to functioning of the DRP, the Hon'ble jurisdictional High Court of Bombay held that: *47... The process before the DRP is a continuation of the assessment proceedings as only thereafter would a final appealable assessment order be passed. Till date there is no appealable assessment order. The proceeding before the DRP is not an appeal proceeding but a correcting mechanism in the nature of a second look at the proposed assessment order by high functionaries of the revenue keeping in mind the interest of the assessee. It is a continuation of the Assessment proceedings till such time a final order of assessment which is appealable is passed by the Assessing Officer. This also finds support from Section 144C(6) which enables the DRP to collect eviden....
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.... submitted that the assessee failed to conclusively establish the actual rendition of services by its AEs and the tangible economic benefits derived there from. The Ld. DR contended that mere production of agreements, invoices, email correspondences, and cost allocation workings cannot automatically establish that independent and value-adding services were in fact rendered to the assessee. According to the revenue, the documentary evidence furnished by the assessee was largely general in nature and did not adequately demonstrate the necessity, quantum, or commercial value of the services allegedly received. The Ld. DR further submitted that the DRP had elaborately examined the issue and consciously followed its earlier directions for AY 2020-21. It was argued that the issue is recurring in nature and is presently pending adjudication before the Hon'ble Jurisdictional High Court. Therefore, the DRP was justified in maintaining the adjustment in order to protect the interests of the revenue until the controversy attains finality before the higher judicial forums. The Ld. DR placed reliance upon the observations of the DRP that the proceedings before the DRP are merely a continuation ....