ACIT (IT)- CIRCLE 1(1)(1), DELHI V. ARIBA INC, GURUGRAM

ITA 5363/DEL/2025

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The case involves Ariba Inc., a US-based company, which provides e-commerce solutions and was assessed for the Assessment Year 2021-22. The Assessing Officer (AO) added a substantial amount to the assessee's income, attributing it to a Permanent Establishment (PE) in India. The Commissioner of Income-tax (Appeals) reversed this decision, leading to the Revenue's appeal to the Income Tax Appellate Tribunal. The Tribunal's decision relied heavily on precedents set in earlier years for Ariba Inc., where similar issues had been adjudicated in favor of the assessee. The Tribunal found that the income from services provided did not constitute FTS as per the DTAA and that the transactions were at arm's length, thus not warranting any further attribution of income to the PE in India.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841903 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Appeal Filed On: 29-08-2025
• Other Referred Cases: DIT v. Morgan Stanley Co [2007] 292 ITR 416 (SC), CIT v. Kotak Securities Ltd. [2016] 383 ITR 1 (SC), CIT v. De Beers India Minerals (P.) Ltd., ADIT v. E-Funds IT Solution Inc. [2017] 399 ITR 34(SC), Honda Motor Co. Ltd vs. ADIT (301 CTR 601)(SC), Adobe Systems Inc. v. ADIT [WP(C)2384, 2385, 2390 of 2013], DIT v.SSC Worldwide Ltd.[2011] 203 Taxman 554(Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SINGH SHARMA
• Assessee Lawyers: ANKIT SAHANI; TARANJEET KAUR
• Keywords: Business income; Transfer pricing; Tax effect; Double taxation relief; Related party transaction
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE MS MADHUMITA ROY, JUDICIAL MEMBER AND SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No.5363/Del/2025 Assessment Year : 2021-22 ACIT (IT), Circle 1(1)(1), Delhi. Vs. Ariba Inc., Building 10-B, DLF Cyber City, DLF Phase-II, Gurgaon. PAN: AAFCA0120K (Appellant) (Respondent) Assessee by : Shri Ankit Sahani, Advocate & Ms Taranjeet Kaur, CA Revenue by : Shri Vikram Singh Sharma, Sr. DR Date of Hearing : 26.02.2026 Date of Pronouncement : 27.02.2026 ORDER PER MADHUMITA ROY, JM: The instant appeal filed by the Revenue is directed against the order dated 18.06.2025 passed by the Ld. Commissioner of Income-tax (Appeals) Delhi-42 [hereinafter referred to as the Ld. CIT(A)] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in appeal arising out of the assessment order dated 23.02.2023 passed by the ACIT, Circle-1(1)(1), Printed from counselvise.com ITA No.5363/Del/2025 2 International Taxation, New Delhi (hereinafter referred to as ‘the Ld. AO’) under Section 143(3) r.w.s. 144C of the Act for Assessment Year 2021-22. 2. The assessee filed its return of income for AY 2021-22 declaring income at nil and claimed refund of Rs.1,12,62,756/-. The case of the assessee was selected for scrutiny and notice u/s 143(2) of the Act was issued on 27.02.2022. The assessee is a company incorporated under the laws of United States of America and provides industry leading e-commerce solution to its various clients globally enabling them to manage their business more effectively and efficiently. After complying all the procedural formalities the assessment was finalized on 23.02.2023 by Circle International Taxation 1(1)(1), Delhi upon making addition of Rs.8,74,17,823/- on account of business income attributable to assessee’s PE in India which was deleted by the First Appellate Authority, hence the instant appeal before us. 3. The assessee has filed the following grounds of appeal:- “1. On the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in not passing a speaking order and holding that it cannot be said that the receipts of the assessee from Ariba India can come within the purview of \"royalty\" as defined under Article 12(3) of the DTAA and the assessee has been merely providing services of online auctions to Ariba India and no exclusive right to use the equipment / process has been granted in favour of either Ariba India or its customers in India to qualify as \"royalty\". 2. On the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in not adjudicating the matter of DAPE in its order and simply stating that the matter of DAPE is of academic interest. Printed from counselvise.com ITA No.5363/Del/2025 3 3. On the facts and circumstances of the case, and in law, the Ld. CIT(A) erred in holding that the case of the assessee company squarely coved by the Honble Apex Court in DIT v. Morgan Stanley Co [2007] 292 ITR 416 (SC) and not the exception, stipulated in the said judgment and hence nothing further is attributable to the assessee's PE in India despite that fact that Ariba India is performing functions which are wider in scope than what is mentioned in the agreement between the two entities the TP Study Report of Ariba India. 4. On the facts and circumstances of the case, and in law, the Ld. CIT(A) has erred in not following the directions of Supreme Court in case of DIT v. Morgan Stanley Co where onus has been placed on assesse to place the data on the basis of which it had to be determined whether all the risk- taking functions of the PE have been remunerated at arm's length. 5. The appellant craves to add, amend, modify or alter any ground of appeal at any time or before the hearing of the appeal.” Ground No.1 4. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the issue is squarely covered in assessee’s own case by the order of the Tribunal for AYs 2004-05 to 2011-12 in favour of the assessee which has been duly considered by the Ld.CIT(A) and relying upon the same this ground of appeal preferred by the Revenue was allowed. The Ld. DR has not been able to controvert such submissions made by the Ld. AR 5. We have heard the rival submissions made by the respective parties and we have further considered the relevant material available on record. It appears that the Ld.CIT(A) while granting relief to the assessee observed as follows:- “9. Ground no. 4 is against taxability of income received by appellant as Fees for included services (‘FIS’) under Article 12(4) of the India - US DTAA. 9.1 The AO has analyzed law and has concluded in para 40 of his order that services relating to provision of online bidding platform, are ancillary Printed from counselvise.com ITA No.5363/Del/2025 4 and subsidiary to the enjoyment of rights granted and referred in paragraph 3 of the Article 12 of the DTAA and, therefore, are also in the nature of FIS referred in Article 12(4). 9.2 With regard to the finding of the AO that the income earned by the appellant qualifies as FIS under the India-USA DTAA, it is observed that Hon’ble ITAT has in its order dated 17.10.2022 in appellant’s own case for AYs 2004-05 to 2011-12, where identical facts were involved, has decided the issue in favor of appellant that the services of the assessee are standardized services and therefore, the same are not taxable as FIS/FTS. Relevant paragraph of ITAT order is reproduced as below: “29. Further assessee has disputed the CIT(A)’s observation in the common order for AYs 2004-05 to 2006-07 that the assessee provided certain technical/helpdesk services for smooth conduct of online auction market through technical and other personnel. In this regard, assessee’s submission is that the services provided by the assessee arestandardized/ common services which cannot be regarded as FTS under the Act. In this regard, reliance has been placed upon Hon’ble Apex Court decision in the case of CIT v. Kotak Securities Ltd. [2016] 383 ITR 1 (SC). In our considered opinion, it duly supports the case of the assessee. 30. Further, assessee has contended that for FTS to arise under Article 12(4)(a) of the India-US DTAA, the Assessee has to make available technical know-how, skills or experience etc. to Ariba India. In this regard, reference has been made to Hon'ble Karnataka High Court in the case of CIT v. De Beers India Minerals (P.) Ltd. (supra) wherein it is observed that in order to satisfy the requirement of the “make available clause”, technical or consultancy service rendered should be of such a nature that it \"makes available\" to the recipient technical knowledge, know-how and the like; that the service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. Admittedly, this is not the case here. Hence, we agree with the ld. Counsel of the assessee that ld. CIT (A) has erred in not appreciating that no technical knowledge, know-how and the like were transferred by the assessee to Ariba India or its customers in India while rendering the online auction services. Hence, we agree that the services provided by the assessee cannot be characterized as FTS under the India-US DTAA.” [Emphasis supplied] 9.3 Respectfully following aforesaid order dated 17.10.2022 of Hon’ble ITAT in appellant’s own case, it is concluded that the receipts of the Printed from counselvise.com ITA No.5363/Del/2025 5 appellant cannot be characterized as FTS/FIS under the India-US DTAA. This ground is, therefore, allowed.” 6. Considering the order passed by the Coordinate Bench in asessee’s own case for AYs 2004-05 to 2011-12 which is found to have been duly considered by the Ld.CIT(A) while granting relief to the assessee, the impugned order, in our considered opinion is found to be just and proper so as not to warrant interference. Ground fails. Grounds No.2, 3, 4 7. At the time of haring of the matter, the Ld. Counsel appearing for the assessee submitted that the this ground of appeal has not been adjudicated by the Ld.CIT(A) stating the same is of academic interest. Further that the same is found to be squarely covered by the Hon’ble Apex Courts’ decision in the case of Morgan Stanley Co. (2007) 292 ITR 416 (SC) in favour of the assessee which has been duly considered by the Ld.CIT(A) and relying upon the same these grounds of appeal preferred by the assessee was allowed. The ld. DR has not been able to controvert such submissions made by the Ld. AR 8. We have heard the rival submissions made by the respective parties and we have further considered the relevant material on record. It appears that the Ld.CIT(A) while granting relief to the assessee observed as follows:- “5. Determination & Decision:I have carefully considered the facts of the case, the impugned assessment order, written submissions and paper bookof the appellant and arguments of the ARs. Various Grounds of appeal raised by the appellant can be classified into following broad issues: Printed from counselvise.com ITA No.5363/Del/2025 6 (i) Whether Ariba India constitutes DAPE of the appellant in India; (ii) Whether attribution ofincome to PE and its mode of taxation is correct. (iii) Whether the payments received by the appellant from Ariba India/other customersfor rendering online auction services from outside India are taxable as royalty; (iv) Whether the payments received by the appellant from Ariba India/other customersfor rendering online auction services from outside India are taxable as Fee for Included Service (FIS) (v) Whether income can be taxed on notional basis@45% ignoring the actual receipts from Ariba India @12.5%; 6. The AR has informed thatHon’ble ITAT, Delhi has passed a favorable order on 17.10.2022 inown case of the appellant for the AYs 2004-05 to 2011-12 where identical facts and issues were involved. A copy of the Hon’ble ITAT’s consolidated order dated 17.10.2022 inITA No.4582/Del./2010 (AY: 2004-05) ITA No.4583/Del./2010 (AY: 2005-06) ITA No.4584/Del./2010 (AY: 2006-07) ITA No.6090/Del./2010 (AY: 2007- 08) ITA No.3923/Del./2012 (AY: 2008-09) ITA No.1538/Del./2013 (AY: 2009-10) ITA No.1469/Del./2015 (AY: 2010-11) ITA No.1470/Del./2015 (AY: 2011-12) has been submitted. It is further informed that the revenue’s appeal against the aforesaid order of the ITAT before the Hon’ble High Court of Delhi stands dismissed due to low tax effect and, thus, the order of the Tribunal has attained finality. Considering the same, the grounds of appeal are adjudicated as under: 7. Ground no. 1 is general in nature and no separate adjudication is required. 8. Ground no. 2-3, 5-7 and 9-12 are inter-related and challenge the taxability of income received by Ariba Inc. as royalty under Article 12(4) of the India - US DTAA and holding Ariba India as a dependent agent PE of Ariba Inc. 8.1 It is observed that Hon’ble ITAT in the aforesaid consolidated order dated 17.10.2022 has held that as the appellant has been remunerated at arms’ length basis from its subsidiary Ariba India, therefore any further attribution of income is not required. Relevant extract of the order of the Hon’ble ITAT is reproduced below: “21. Upon careful consideration, as pointed out by ld. Counsel of the assessee, we first address the issue of attribution made to the alleged PE of the assessee when the AE has been remunerated at arm’s length. We find that it is undisputed that this ground is without prejudice to the ground that the AE is not a DAPE as held in all the appeals. It has been brought to our notice that in the assessments made for Ariba Inc. for all the AYs in question either no transfer pricing adjustments was done or they were deleted by the TPO pursuant to the direction of ITAT in this regard. Hence Printed from counselvise.com ITA No.5363/Del/2025 7 considering the fact that no transfer pricing adjustment has been done/sustained in case of assessments of the AE, it is the assessee’s plea that no further attribution is permissible on the touchstone of Hon’ble Apex Court decision pronounced in the case of DIT vs. Morgan Stanley and Co. Inc. 292 ITR 416. To the same effect is the order of the ADIT v. E-Funds IT Solution Inc. [2017] 399 ITR 34(SC), Honda Motor Co. Ltd vs. ADIT (301 CTR 601)(SC) and of the Hon'ble Delhi High Court in the 2 case of Adobe Systems Inc. v. ADIT [WP(C)2384, 2385, 2390 of 2013] and DIT v.SSC Worldwide Ltd.[2011] 203 Taxman 554(Delhi), once a transfer pricing analysis has been undertaken in respect of the Indian AE, nothing further would be left to be attributed to it as the alleged PE of the assessee and that, accordingly, would automatically extinguish the need for attribution of any additional profits to the alleged PE. 21.1 In all these cases, it has been submitted by the assessee that the transactions have been found to be at Arm's Length by the Transfer Pricing Officer in the Transfer pricing order of the AE or the adjustment stood deleted pursuant to appellate order. This is not disputed by the Revenue. In such a situation, the decision 0.r Hon'ble Apex Court as above applies on all fours in these cases. 22. In the background of the aforesaid discussion and the precedents, we hold that it is undisputed that in the assessment of the AE, the transfer pricing adjustments do not survive. Hence, attribution of income to the alleged PE is not sustainable. Hence, we decide this ground in favour of the assessee. 23. Since we have allowed without prejudice ground, the issue whether AE is DAPE is only of academic interest now, hence we are not engaging into the same.” [Emphasis supplied] 8.2 It is observed that the appellant has during the year under consideration, received fee for services from Ariba India in accordance with the terms of the agreement effective from April 1, 2006. The said consideration is at arm’s length price as per the transfer pricing certificate (Form 3CEB) of Ariba India for AY 2021-22. A copy of the Form 3CEBs issued by an independent Chartered Accountant has been filed. The appellant has informed that for the AY 2021-22 under consideration, there was no regular scrutiny assessment in the case of Ariba India and, thus, no TP reference was even made to the TPO. It has been further shown that the transfer pricing study of Ariba India has been accepted by the department in AYs 2020-21, 2018-19 and earlier years as no adverse inference on the related party transactions, has been drawn by the AO in the assessment proceedings of Ariba India. Further, it is observed that all the transfer pricing additions made by the TPO / AO in AYs 2004-05, 2006-07, 2007-08 have been deleted by the CIT(Appeal). It has been submitted that the related party transactions of the current year are similar as in these earlier Printed from counselvise.com ITA No.5363/Del/2025 8 years. Accordingly, it is contended that the transactions of the appellant in the year under consideration are at arm’s length. 8.3 It is observed that the related party transactions of the current year are similar as in these earlier years. No adverse inference regarding the arm’s length price of such transactions has been made by the AO or in the case of Ariba India. It is also a fact that the related party transactions were found to be at arm’s length in past as the transfer pricing additions made by the TPO / AO in AYs 2004-05, 2006-07, 2007-08, 2010-11 have been deleted by the CIT(Appeal)/ITAT. Accordingly, it is to be inferred that the transactions of the appellant with Ariba India in the year under consideration are also at arm’s length in the absence of any Transfer pricing adjustment made for this year. 8.4 On such facts & circumstances, respectfully following aforesaid order dated17.10.2022 of Hon’ble ITAT in appellant’s own case, it is concluded that as the appellant has been remunerated at arms’ length basis from its subsidiary Ariba India, no further attribution of income is required.Since it has been held that no further attribution is required in this case, respectfully following aforesaid order of Hon’ble ITAT in appellant’s own case, it is concluded that the issue whether AE is DAPE or not is rendered merely academic in nature.The same is, therefore, not being adjudicated.” 9. Having regard to the order passed by the ITAT in appellant’s own case for AYs 2004-05 to 2011-12 dated 17.10.2022, the observation rendered by the Ld. CIT(A) is found to be just and proper not warranting any interference. Grounds raised by the Revenue are, therefore, dismissed. 10. Ground No 5 is general in nature and, therefore, not required to be adjudicated. 11. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 27.02.2026. Sd/- Sd/- (RENU JAUHRI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27th February, 2026. Printed from counselvise.com ITA No.5363/Del/2025 9 dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "