TaxTMI 
TaxTMI 
2026 (9) TMI 1795
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....CA(1) of the Act for computation of the arm's length price in relation to the international transactions entered into by the assessee during the previous year relevant to AY 2022-23. 2. On the facts and circumstances of the case and in law, the Ld. TPO erred in using Other Method as the most appropriate method for determining the arm's length price for reimbursement of operational expenses incurred by the assessee in respect of which payment was made to its Foreign Associated Enterprises. 3. On the facts and circumstances of the case and in law, the Ld. TPO erred in going beyond the mandate of reference for computation of arm's length price by disallowing reimbursement of operational expenses made by the assessee to its Foreign Associated Enterprises on the ground that the assessee failed to provide the breakup of the transactions and third-party back-to-back invoices. 4. On the facts and circumstances of the case and in law, the Ld. AO, Ld. TPO and Ld. DRP erred in making an upward adjustment of Rs. 46,84,955/- to the international transactions of the assessee, alleging non-submission of supporting evidence for reimbursement of operational ex....
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....total income of Rs. 44,22,60,280/-. The case was selected for scrutiny and a reference was made to the Ld. TPO. The Ld. TPO passed the order u/s 92CA(3) on 27.01.2025, followed by the draft assessment order. The Ld. DRP issued directions dated 25.11.2025 and thereafter the final assessment order u/s 143(3) r.w.s. 144C(13) r.w.s. 144B was passed determining total income at Rs. 46,38,13,860/-. The surviving disputes are challenged before us which comprise: (i) TP adjustment of Rs. 46,84,955/- relating to reimbursement of operational expenses; (ii) disallowance of foreign withholding tax of Rs. 94,97,323/-; (iii) disallowance of Rs. 17,58,082/- u/s 40(a)(i); and (iv) foreign exchange loss of Rs. 64,053/-. Additional Evidence 4. The assessee has filed paper books which have been placed on record. The Ld. AR has also filed a detailed written note. In addition, an application under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 has been filed along with an Additional Evidence. The additional evidence comprises three categories: first, agreements, TRCs, no-PE certificates, invoices and Form 15CA concerning the payments involved in the ....
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....aimed as deduction, we are also alive to the possible burden an assessee would be subjected to during the assessment proceedings in case such a direction is issued to the assessee. However, in cases where the bills and/or supporting documents called for during the assessment proceedings are not furnished, or have been furnished but the same are not found to be sufficient or satisfactory by the assessing officer, the assessing officer would, in our view, be justified in calling for any/all details and/or bills & supporting documents as the Assessing Officer may deem fit. We note that the Appellant is under obligation to maintain proper books of accounts including voucher and documents to support the claim of expenditure. The Appellant has been subjected to statutory as well as tax audit for the relevant assessment year, and no qualifications regarding accounting systems followed by the Appellant or the books of accounts maintained by the Appellant have been made by the Auditors in the audit report and has certified the financial statements to be true and correct after carrying out verification on test check basis. Further, the TPO/Assessing Officer has not pointed out any defect/dis....
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....etermination of ALP of the advertisement expenses. Therefore, the issue for examination in this appeal is only the issue of ALP as determined by the TPO in respect of advertisement expenses. The jurisdiction of the TPO is specific and limited i.e. to determine the ALP of an International Transaction in terms of Chapter X of the Act read with Rule 10A to 10E of the Income Tax Rules. The determination of the ALP by the respondent assessee of its advertisement expenses has not been disputed on the parameters set out in Chapter X of the Act and the relevant Rules. In fact, as found both by the CIT (A) as well as the Tribunal that neither the method selected as the most appropriate method to determine the ALP is challenged nor the comparables taken by the respondent assessee is challenged by the TPO. Therefore, the ad-hoc determination of ALP by the TPO dehors Section 92C of the Act cannot be sustained." (Emphasis supplied) 8. The Ld. AR respectfully relied on CIT v. Cushman and Wakefield (India) (P.) Ltd. reported in [2014] 367 ITR 730 (Delhi). It was submitted that the jurisdiction of the Ld. TPO is confined to determination of ALP and does not extend to disallowance of expendit....
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....t transaction relates to reimbursement of operational expenses of an NVOCC. Considering the totality of facts and circumstances, the impugned TP adjustment of Rs. 46,84,955/- cannot be sustained. Accordingly, Ground Nos. 1 to 5 are allowed. Grounds Nos. 6 to 8 - Foreign Withholding Tax of Rs. 94,97,323/- 11. The Ld. AR submitted that foreign tax of Rs. 94,97,323/- was withheld from the assessee's income. The gross receipts were offered to tax in India and the withholding tax was carried in the books as a receivable. The assessee could not utilise the credit, inter alia, because there was no Indian tax payable against which the credit could be adjusted, and the receivable was ultimately written off on 31.03.2022. The assessee has also placed withholding certificates and party-wise ledgers on record. The Ld. AR respectfully relied on the order Hon'ble Bombay High Court in case of Reliance Infrastructure Ltd vs. CIT reported in [2016] 76 taxmann.com 257 (Bom). 12. The Ld. DR, through a detailed written note, opposed the claim. It was contended that Explanation 1 to section 40(a)(ii) applies to foreign tax eligible for relief under sections 90/91; that Rule 128 of the I....
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....navailable. In those circumstances, the Hon'ble jurisdictional High Court held that the foreign tax, to the extent not eligible for relief under section 91, was not hit by section 40(a)(ii) and was deductible in computing business income. The factual and statutory setting of the present case is distinguishable because the assessee itself treated the impugned amount as foreign tax eligible for relief under sections 90/91 and had claimed/reported it as FTC in the relevant return, though the credit could not ultimately be utilised on account of absence of sufficient Indian tax liability. This distinction has also been specifically urged by the Ld. DR in the written submissions. 16. We have also considered Lubrizol India Ltd. (supra), relied upon by the Revenue. The principle emerging there from is that the expression employed in section 40(a)(ii) is not to be read narrowly so as to permit, in computing business income, deduction of a tax falling within the statutory prohibition. The Revenue has further relied upon this authority to contend that a payment retaining the character of income-tax cannot be converted into deductible business expenditure merely because the statutory m....
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....ices in Brazil; Rs. 4,48,892/- paid to Logitrade for legal and extrajudicial services rendered in Brazil; and Rs. 1,85,998/- paid to Distribution Publications Inc., USA, towards filing/publication of the assessee's freight tariff pursuant to U.S. Federal Maritime Commission requirements. The Ld. AR contended that none of these payments was chargeable to tax in India. The recruitment payment was argued to be ordinary placement service and not FTS; the payment to Logitrade represented legal/professional services rendered abroad; and the DPI payment represented tariff-publication charges and did not satisfy the "make available" requirement under Article 12(4)(b) of the India-USA DTAA. 20. The Ld. DR supported the findings of the revenue authorities. 21. We have considered the nature of the three payments and the supporting documents admitted on record. The obligation to deduct tax u/s 195 arises only where the sum paid to the non-resident is chargeable to tax in India. The material placed before us supports the distinction between these services and managerial/technical/consultancy services contemplated by section 9(1)(vii). In particular, in relation to the U.S. tariff fili....