Facts of the Case

The present appeal was filed by the assessee, AkzoNobel India Private Limited, before the Delhi High Court challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 28th February 2022 for Assessment Year 2008–09.

The dispute arose from a transfer pricing adjustment of ₹1,94,65,250/- made in respect of international transactions relating to receipt of business support and administrative services from its Associated Enterprise (AE). The Transfer Pricing Officer (TPO) determined the Arm’s Length Price (ALP) of such services at ‘Nil’ on the ground that no evidence was furnished to establish actual receipt of services.

The ITAT upheld the adjustment, leading to the present appeal before the High Court.

Issues Involved

  1. Whether the ITAT erred in upholding the transfer pricing adjustment by determining the Arm’s Length Price of services at ‘Nil’.
  2. Whether application of the Comparable Uncontrolled Price (CUP) method without proper comparables was justified.
  3. Whether absence of evidence for receipt of services can justify ALP determination at ‘Nil’.
  4. Whether findings of fact by lower authorities can be interfered with under Section 260A of the Income Tax Act, 1961.

Petitioner’s Arguments (Assessee)

  • The ITAT erred in confirming the transfer pricing adjustment and determining ALP at ‘Nil’.
  • The CUP method was wrongly applied without demonstrating comparable uncontrolled transactions.
  • The assessee had already conducted an arm’s length analysis which was ignored.
  • Similar administrative services were accepted by the ITAT in subsequent assessment years, and consistency should be maintained.

Respondent’s Arguments (Revenue)

  • The assessee failed to produce any cogent evidence to prove that services were actually rendered by the AE.
  • No documentation, communication, or supporting material was provided to substantiate receipt of services.
  • The findings of the Assessing Officer, TPO, and ITAT were concurrent and based on factual appreciation.
  • No substantial question of law arose for consideration under Section 260A.

Court’s Findings / Order

  • The Delhi High Court observed that all three authorities (AO, TPO, and ITAT) had concurrently held that the assessee failed to establish receipt of administrative services from its AE.
  • The Court noted that even when specifically asked, the assessee could not furnish any evidence and instead requested remand to produce evidence.
  • It was held that each assessment year is a separate unit, and acceptance in subsequent years does not automatically validate earlier claims.
  • Reliance was placed on Principal Commissioner of Income Tax-6 vs Make My Trip India (P) Ltd. (2017), wherein it was held that mere difference of opinion regarding method selection does not give rise to a substantial question of law.
  • The Court concluded that no substantial question of law arose, and therefore, the appeal was dismissed.

Important Clarifications

  • Determination of ALP at ‘Nil’ is permissible where the assessee fails to prove actual receipt of services.
  • Transfer pricing analysis must be supported by documentary evidence demonstrating benefit derived.
  • Selection of method (e.g., CUP vs others) cannot be challenged under Section 260A unless it violates statutory rules.
  • Each assessment year is independent and must be decided based on evidence specific to that year.

Sections Involved

  • Section 92C – Computation of Arm’s Length Price
  • Rule 10B & Rule 10C – Methods for determination of ALP
  • Section 260A – Appeal to High Court

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3998-DB/MMH27092022ITA3702022_195128.pdfTop of Form

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