TaxTMI 
TaxTMI 
2026 (7) TMI 777
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....m packing, loading/unloading, trucking, containerization, customs clearance, and other cargo handling activities besides moving the goods via air/sea. The assessee is engaged in the provision of logistics services in the Indian region. The assessee's functions comprise the Indian leg of a logistics contract involving the transportation of consignments from the consignee (or Indian port/airport) to the Indian Port (or consignee), while another Expeditors Group member or third-party agent typically handles the other end of the consignment in their respective region. 2.1 The assessee filed Return of Income on 29.11.2022 declaring total income of Rs. 3,38,03,31,950/-. The return was revised by the assessee on 30.11.2022 declaring total income of Rs. 3,21,77,97,930/-. The revised return was processed by the CPC on 16.03.2023 u/s. 143(1)(a) of the Act at an income of Rs. 3,21,77,97,930/- at the returned income. The revised return filed by the assessee was selected for complete scrutiny under CASS. Notice u/s. 143(2) of the Act dated 01.06.2023 along with a letter on the same date intimating scrutiny assessment proceedings was issued. Notices u/s. 142(1) of the Act dated 27.10.2023, 08....
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.... 2. That on the facts and circumstances of the case and in law, the TPO has erred in making and the AO/DRP have erred in upholding the transfer pricing adjustment of INR 67,31,66,177 in respect of the international transaction pertaining to payment of royalty. 3. That on the facts and circumstances of the case and in law, the AO / DRP/ TPO have erred in disregarding the ALP as determined by the Appellant in the transfer pricing documentation maintained by it in terms of section 92D of the Act and Rule 100 of the Rules on an arbitrary basis without providing any cogent reasoning and have further erred in benchmarking the international transaction of payment of royalty with royalty agreements which are functionally different/ incomparable. 4. That on the facts and circumstances of the case and in law, the AO/TPO/DRP have erred in rejecting the benchmarking analysis and methodology adopted by the Appellant, wherein the aggregated Transactional Net Margin Method ("TNMM") was adopted by the Appellant for benchmarking the international transaction of payment of Royalty and further erred in adopting the Comparable Uncontrolled Price ("CUP") method for benchmarkin....
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....e international transactions pertaining to royalty have been undertaken by the Appellant in earlier years and was accepted to be at arm's length with the application of TNMM by this Hon'ble Tribunal. Transfer Pricing adjustment amounting to INR 9,54,79,472 in respect of the international transactions pertaining to Global Accounts Manager ("GAM") expenses. 13. That on the facts and circumstances of the case and in law, the AO/TPO / DRP have erred in making an upward TP adjustment of INR 9,54,79,472 in respect of payment of GAM charges, alleging that the same were not at arm's length and determining the ALP as 'Nil'. 14. That the TPO completely erred in not appreciating that the services provided in respect of the Global Account were on a reciprocal basis and based on actual costs incurred, without there being any mark-up 15. That on the facts and circumstances of the case and in law, the AO/TPO/DRP have erred in not appreciating that the Hon'ble Tribunal, in previous years, had upheld that the subject transaction is in the nature of pure re-imbursements, not liable for any deduction of taxes. 16. That the TPO/DRP e....
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....by the Appellant in the return of income filed for the captioned assessment year while calculating tax liability in the computation Sheet attached to the final order. 25. That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in levying interest under section 234B and 234C of the Act. 26. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in carrying out computational errors amounting to INR 73,97,040 while arriving the amount of 'Total Interest and Fee Payable' (Sr. No. 42) in the computation sheet attached to the assessment order. Incorrect levy of penalty u/s. 270A of the Act 27. That on the facts and in law, the AO has erred in initiating penalty proceedings under section 270A of the Act." 4. Ld. Authorized Representative for appellant/assessee submitted that Grounds of Appeal No. 1 is general in nature, Ground of Appeal Nos. 2 to 12 are regarding Transfer Pricing Adjustment on account of payment of royalty and Ground of Appeal Nos. 13 to 23 are regarding Transfer Pricing Adjustment on account of Global Accounts Manager (GAM expenses). "This issue is no....
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....sactions are pertaining to Global Accounts Manager (GAM expenses). 8. The assessee benchmarking its logistics services segment, relating to payment of royalty and GAM expenses, whilst adopting the combined transaction approach under the Transactional Net Margin Method ("TNMM"). The cost base i.e., the operating cost for benchmarking the logistic segment included costs incurred towards payment of royalty as well as net GAM charges paid by the assessee (page no. 101 Volume 1 of paper book). 9. The TPO although accepted the assessee's combined transaction approach under TNMM for benchmarking the logistics services segment, however, proceeded to benchmark the international transaction relating to payment of royalty separately. [refer page no. 80 to 84 of the TPO order (page no. 276 -280 of the Appeal Set)]. Whilst segregating the international transaction relating to payment of royalty, the TPO did not make any corresponding adjustment to the cost base of the logistics services segment. Further, the TPO arbitrarily selected six comparables, thereby, restricting the rate of payment of royalty at 2.9% [refer page no. 82 to 84 of the TPO order (page no. 278-280 of the Appeal Set)]. ....
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....esides this, AO/TPO has separately worked out the transfer pricing adjustment on account of Royalty as well as GAM charged paid by using CUP method for Royalty and other method for GAM. Ld.AR submits that DRP though allowed the working capital adjustments however, confirmed the segregation of Royalty payment and GAM charges paid and separate benching for determination for their ALP, however, at the same time has accepted the combined approach taken by the assessee to determine the ALP of logistic services. Ld.AR submits that in the order giving effect, AO/TPO has not given the working capital adjustment and further separately benchmarked worked out the transfer pricing adjustment for Royalty as well as for GAM charges paid. Ld. AR submits that under identical circumstances in the case of Hi-Lex India Pvt.Ltd. vs Assessment Unit vide order dated 28.11.2025 in ITA No.4288/Del/2024 [Assessment Year 2020-21], the Co-ordinate Bench has held that once the combined approach has been accepted, no further adjustment could be made separately for Royalty paid. He prayed accordingly. 14. On the other hand, ld. CIT DR for the Revenue vehemently supported the orders of the lower authori....
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....for working the ALP of sale of logistics services and further determined the ALP separately for Royalty payment as well as for GAM expenses paid. Once the expenses on account of Royalty & GAM expenses have been included in the total operating cost for working out ALP towards sale of logistics services, separate determination of ALP for the cost on account of Royalty and GAM expenses is not permissible. The Co-ordinate Bench of ITAT Delhi in the case of Hi-Lex India P. Ltd. (supra) under identical circumstances by following various judgements of Hon'ble jurisdictional High Court and Co-ordinate Benches of Tribunal has held that such action is not permissible. The relevant observations of Co-ordinate Bench are reproduced as under:- 12. In our considered opinion, once the combined bench marking approach, whose PLI includes payment of royalty is accepted by the TPO to Arm's Length, a separate adjustment pertaining to the concerned international transaction ought not to be made to income of the Assessee. 13. The Jurisdictional High Court in the case of Magneti Marelli Powertrain India Private Ltd. Vs. DCIT (2016) 75 taxmann.com 213(Delhi) held as under:- "17. ....