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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
The captioned appeal preferred by the assessee is against the order of the Assessing officer, Delhi relating to assessment year 2018-19 passed under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 (in short “the Act”) order dated 28.07.2022 passed in pursuance of directions of the Dispute Resolution Panel (DRP) under S. 144C dated 31.05.2022.
The grounds raised by the assessee are as under :
“Appeal against the order under Section 143(3) read with section 144C(13) of the Income-tax Act ("the Act") dated July 28, 2022 for the Assessment Year 2018-19 passed by the Deputy Commissioner of Income Tax, Circle 4(2), Delhi ("Ld. AO")
1.That on the facts and circumstances of the case and in law, the final assessment order passed by the Ld. AO under Section 143(3) read with section 144C(13) of the Act is bad in law and liable to be quashed.
2.That on the facts and circumstances of the case and in law, the Ld. AO has erred in assessing the total income of the Appellant, assessed under Section 143(3) read with Section 144C of the Act for AY 2018-19, at INR 61,20,82,286, as against the total income reported in the return of income ("ROT") amounting to INR 51,68,49,838.
Transfer Pricing
3.That the Ld. AO/ Learned Deputy/Assistant Commissioner of Income-tax, Transfer Pricing Officer- 1(1)(2) ("Ld. TPO")/Honourable Dispute Resolution Panel ("Hon'ble Panel") have erred in enhancing the income of the Appellant by INR 8,98,01,968 in relation to payment of service charges for Technical Support Services ("TSS"), Business Support Services ("BSS") and Managerial, Administrative and Related Services availed from its Associated Enterprises ("AEs"). In doing so, Ld. AO/ Ld. TPO/Hon'ble Panel have grossly erred in:
3.1.contravening the conditions laid in Section 92C(3)(c) of the Act, by citing incongruous reasons to allege that the Appellant has not derived any tangible or concrete benefit from TSS, BSS and Managerial, Administrative and Related Services and has failed to furnish evidence to demonstrate the actual receipt of such services. Further, the Ld. AO/Ld. TPO/Hon'ble Panel have conveniently overlooked the supporting evidences and arguments that the Appellant filed during the course of the proceedings to support the arm's length nature of aforementioned services;
3.2.erroneously rejecting the aggregation approach adopted by the Appellant to benchmark its international transactions in the TP documentation maintained in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ("the Rules");
3.3.segregating the service charges for TSS, BSS and Managerial, Administrative and Related Services transactions and arbitrarily determining arm's length price as 'Nil' through application of 'Other Method' in contravention of the provisions of Rule 10B of the Rules;
3.4.challenging the commercial/ business wisdom of the Appellant in relation to payment of service charges for TSS, BSS and Managerial, Administrative and Related Services;
3.5.disregarding prior years' favourable TP orders passed in Appellant's own case with respect to payment of service charges for TSS, BSS and Managerial, Administrative and Related Services; and
3.6.disregarding various judicial pronouncements of appellate authorities applicable to the facts of the instant case.
4.That the Ld. AO/Ld. TPO/Hon'ble Panel have erred in alleging/upholding that TSS availed from AEs tantamount to availing duplicate services, based on the argument that Appellant already pays royalty to its AEs under a License Agreement, and thereby erroneously concluding that justification of separate payment for TSS is untenable. In doing so, the Ld. AO/ Ld. TPO/Hon'ble Panel have erred in not appreciating the different nature/ purpose of payment for TSS vis-à-vis payment for royalty as submitted during the course of proceedings before the Ld. TPO/Hon'ble Panel.
Corporate tax
5.That the Ld. AO and Hon'ble Panel have erred in facts and in law in denying the deduction claimed by the Appellant under section 80G of the Act amounting to INR 49,77,078.
6.That the Ld. AO and Hon'ble Panel have erred in facts and in law in holding that contribution by the Appellant towards Corporate Social Responsibility under Section 135 of the Companies Act, 2013 was not 'voluntary', and therefore not eligible for deduction under Section 80G of the Act.
Other Grounds
7.That on the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest under Section 234B of the Act.
8.That on the facts and circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under Section 270A of the Act mechanically on the additions made.
The above grounds are without prejudice to each other.”
The Appellant craves leave to alter, amend or withdraw all or any grounds herein, or add any further grounds as may be considered necessary, either before or during the hearing.”
Brief facts of the case are that the assessee is a company engaged in the business of the manufacturing and marketing of EGR Systems for the automotive industry. The company also provides technical support services to its customers in relation to EGR systems and its components.
During the previous year under consideration, the assessee has entered into International Transactions with its AEs while making payments towards Technical Support Services, Business Support Services and Managerial, Administrative and related services to its AEs which the TPO has considered for making adjustment u/s 92CA(3). The final adjustment u/s 92CA(3) of the I. T. Act, 1961 in the case is as under:
| SI. no | Description of transaction | Value of transaction Rs. | Arm's -Length Price -Rs. | Adjustmentu/s 920A(3) Rs |
| 1 | Technical Support Services | 2,03,31,642 | Nil | 2,03,31,642 |
| 2 | Business Support Services | 5,14,44.133 | Nil | 5,1444,133 |
| 3 | Managerial, Administrative and Related Services | 1,80,26,193 | Nil | 1,80,26,193 |
| Total | 8,98,01,968 |
The core issue involved in this case is arm’s length price adjustment in relation to payment of service charges for Technical Support Services (‘TSS’), Business Support Services (‘BSS’) and Managerial, Administrative and Related Services availed by assessee from its Associated Enterprises.
At the very outset, the learned Counsel of the assessee submitted that the ITAT in A.Y. 2013-14 in ITA No.2015/Del/2022 vide order dated 29.08.2024 has held that the aggregation approach, as against transaction by transaction approach, is correct and following the principle of consistency, the TPO should have adopted the same approach in the instant year when there is no change in facts and circumstances. The ld AR submitted that ITAT further held that rendering of services stands proved as regards payment of Technical Support Services (‘TSS’), Business Support Services (‘BSS’). It was pointed out by the learned Counsel that Hon’ble Delhi High Court has upheld the decision of ITAT, vide its order in ITA No.750/2025 dated 16.12.2025.
It is submitted that in the instant A.Y. 2018-19, the facts and issues are identical, therefore, the decision of ITAT covers the case of the assessee in its assessee’s favour. Learned AR pointed out that there is no adjustment made on transaction of royalty in A.Y. 2018-19. However, the issue of Technical Support Services (‘TSS’) & Business Support Services (‘BSS’) for A.Y. 2018-19 is identical/common as in AY 2013-14. The learned Counsel of the assessee submitted that the TPO has benchmarked each transaction of Technical Support Services (‘TSS’) & Business Support Services (‘BSS’) by adopting the segregation approach whereas the assessee’s case is, as approved by the ITAT and High Court, that benchmarking should be made by adopting the aggregate approach. The learned AR submitted that the TPO should adopt aggregation approach, and as the margin of the assessee is high as compared to comparable cases and therefore, no adjustment in the arm’s length price is called for.
Explaining the history of the case, the learned AR stated that for A.Y. 2011-12 & 2012-13, the TPO has accepted the aggregation approach, which was only disturbed in A.Y. 2013-14. The learned AR pointed out that for A.Y. 2014-15 to 2018-19, no scrutiny assessment were made wherein the assessee had adopted aggregation approach. It was only in A.Y.2018-19, the case was scrutinized and segregation approach was adopted by the AO. Since the aggregate approach has been accepted by the ITAT and approved by the Hon’ble Delhi High Court, it was submitted that for A.Y. 2018-19 also the aggregate approach be adopted and arm’s length price of two services Technical Support Services (‘TSS’) & Business Support Services (‘BSS’) be considered as valid arm’s length price.
Per contra, learned DR submitted that for A.Y. 2014-15 to 2018-19, the facts are different wherein the TPO has not used CUP approach. The learned DR submitted that Technical Support Services (‘TSS’) & Business Support Services (‘BSS’) as well as Managerial Services are not of the nature which should be aggregated. The Managerial Services Transactions should not be aggregated as its nature is different. It is submitted that there is no mention of markup and relied on the decision of Bombardier Transportation India Private Limited case in ITA 1626/Del/2025 dated 04.11.2015. The learned DR stated that the value may be assigned and hence, it may be set aside to the TPO for fresh evaluation. The learned DR referred to the case Bombardier Transportation India Private Limited at para 69 at page 47 to argue that each year is different and where in a year facts are different or not established, rule of consistency may not be applied. The learned DR also relied on the case of UCB Pvt. Ltd. (2009) 121 ITD 131(Mumbai)at para 75 and Petro Araldite (P.) Ltd. (2013) 31 taxmann.com 281(Mumbai-Trib.) at para 25 submitting that the assessee has not provided details. Hence, the TPO order for A.Y. 2013-14 is not applicable in A.Y. 2018-19.
In his rejoinder, the learned AR stated that the TPO has accepted overall TNM Method. The TPO has not done any variation in all other transactions. The learned Counsel of the assessee stated that the claim of the learned DR that no markup is given while adopting aggregate approach, is incorrect as markup details are available and submitted to the TPO which is at page 118 of the paper book which the TPO did not reproduce in its order. The assessee had provided to the TPO the cost allocation of each services which were in accordance with the agreement entered with the AE’s. The assessee has filed evidences for the services received. The evidence for technical services are at page 380, and for the Managerial services at page nos. 460 and 459. It is submitted by the learned Counsel of the assessee that TPO did not analyse these evidences and instead questioned the rendering of services to the assessee. The learned AR also pointed out that the DRP itself which has recorded at page 68 para 4.2 of its order that facts of the A.Y. 2018-19 is identical to the facts of A.Y. 2013-14 and since A.Y. 2013-14 has been decided in favour of the assessee, there is no reason that the decision should not apply for A.Y. 2018-19.
We have heard the rival submissions and have carefully perused the materials on record. We find that the ITAT in assessee’s own case for AY 2013-14 at para 52 & 53 has accepted the assessee’s view that two types of transactions are to be benchmarked at aggregate level and that the factum of rendering of services by the AEs to the assessee is proved, as under:
“52.It is significant to note that when the matter came up before Co-ordinate Bench of ITAT in the first round, it was observed that with respect to the transaction by transaction approach v. aggregation of the transaction for subsequent year as well as in the earlier year. Learned TPO had accepted the aggregation approach adopted by the assessee. Learned Co-ordinate Bench also observed that it was not disputed that for AY 2011-12 and 2013-14, Learned TPO had accepted the aggregation approach; and further that following the principle of consistency, where there is no change in the facts and circumstances of the case for this year, Learned TPΟ should have followed the same approach; and even further that if for any reason, Learned TPO wanted to deviate from the same, he should also give a detailed reason as to why he was deviating, but in the order passed by Ld. TPO, the Co-ordinate Bench did not find any such discussion.
Herein, Ld. TPO was of the view that the three type of transactions are to be benchmarked at segregate level. The main ground for arriving at this view was that the assessee had failed to prove factum of rendering of services.
53.As discussed above, the factum of rendering of said services stands proved. Therefore, there is merit in the contention raised on behalf of the assessee that TPO has passed orders ignoring the earlier orders pertaining to AYs 2011-12 and 2012-13, passed by the TPOs in the case of the assessee itself as regards payments of TSS, BSS and Royalty, and that the principle of consistency stands violated in this matter.”
We also note that the above decision of the ITAT has been approved by the hon’ble Delhi Court in its decision in ITA 750/2025 dated 16.12.2025.
We also note that the DRP itself has recorded in their order that the facts obtaining in AY 2013-14 is identical to the facts of AY 2018-19. In such factual matrix, once the facts for both the assessment years are identical, the rule of consistency demands that the aggregation approach is to be adopted for AY 2018-19 as well, as directed by the ITAT in AY 2013-14. Further, once the rendering of service by the AEs to the assessee stands proved in AY 2013-14, and the facts being identical in the instant year to that of AY 2013-14, there is no occasion which warrants the adjustment made in the transaction related to TSS, BSS and Managerial and Administrative services. We also find that the markup details are available at page 118 of the paper book and was submitted to the TPO which ignored. The adjustment made by the AO relating to TSS, BSS and Managerial and Administrative services is accordingly deleted. Ground 3 and its sub-grounds are allowed in the aforesaid terms.
On the ground disallowance of CSR expense, the learned Counsel of the assessee stated that the CSR expenditure may be allowed under section 80G of the Act. We find that the assessee is eligible for deduction under section 80G on account of CSR funds. The assessee only has to show that it has met the conditions enumerated in the provision of section 80G. To that extent, the issue of allowability of CSR expenses is remitted back to the file of the AO to determine the evidences for allowability of such expense under section 80G of the Act.
Ground 7 regarding charging of interest u/s 234B is consequential and ground 8 regarding penalty is premature.
In the result, appeal of the assessee in ITA No. 2016/DEL/2022 is allowed.