MICHAEL PAGE INTERNATIONAL RECRUITMENT PVT LTD,MUMBAI V. DCIT CIRCLE 14(1)(1), MUMBAI

ITA 6748/MUM/2024

AI Insights

The case involves Michael Page International Recruitment Private Limited (the Assessee), which appealed against the Final Assessment Order passed by the Deputy Commissioner of Income Tax, Mumbai, concerning the Assessment Year 2021-2022. The primary issues revolved around the transfer pricing adjustments made for payments to AEs for Intra-Group Services (IGS) and the disallowance of these payments under Section 37 of the Income Tax Act. The Tribunal examined whether the services were actually rendered, the benefits derived from them, and whether the payments were at ALP. The Tribunal's decision was influenced by previous rulings in similar cases and the comprehensive documentation and benchmarking analysis provided by the Assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779732 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2021-2022
• Appeal Filed On: 23-12-2024
• Other Referred Cases: Michael Page International Pte. Ltd. vs. Assessee, Sulzer Tech India (P.) Ltd vs ACIT, NFAC, CIT v. EKL Appliances Ltd., CIT v. Lever India Exports Ltd., Jabil Circuit India Private Limited v/s ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Set aside; Additional evidence; Transfer pricing; International transaction; Commercial expediency; Period of limitation; Principle of natural justice; Deemed to accrue or arise in india; Wholly owned subsidiary; Time period of passing order
• Section: 143(3); 37; 10B; 92C; 92D

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.6748/MUM/2024 (Assessment Year: 2021-2022) Michael Page International Recruitment Private Limited 5th Floor, 2 North Avenue Marker Maxity, Bandra (East) S.O. Mumbai - 400051 Maharashtra. [PAN:AAGCM8425N] …………. Appellant Deputy Commissioner of Income Tax Circle 14(1)(1), Mumbai Aayakar Bhawan, Maharashtri Karve Road, New Marine Lines, Churchgate, Mumbai - 400020, Maharashtra Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Dhanesh Bafna, Shri Amol Mahajan, Ms. Tejal Saraf Shri Pankaj Kumar Date Conclusion of hearing Pronouncement of order : : 25.07.2025 16.10.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal is directed against the Final Assessment Order, dated 23/10/2024, passed under Section 143(3) read with Section 144C(13) read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], as per directions, dated 25/09/2024, issued by the Commissioner of Income Tax (Dispute Resolution Panel-3), Mumbai - 3 (hereinafter referred to as ‘the DRP’) under Section 144C(5) of the Act for the Assessment Year 2021-2022. Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 2 2. The Assessee has raised following grounds of appeal : “Ground No.1: General Ground On the facts and in the circumstances of the case and in law, the final assessment order (‘final order’) passed under section 143(3) r.w.s. 144C (13) read with section 144B of the Income tax Act, 1961 (‘the Act’) dated 23 October 2024 by the Assessment Unit, Income Tax Department (‘Ld. AO’) and directions issued under section 144C(5) of the Act dated 25 September 2024 by the Ld. Dispute Resolution Panel (‘Ld. DRP’) is erroneous, bad in law and is liable to be quashed. Ground No.2: Time Limit for completion of assessment under section 153 of the Act On the facts and in the circumstances of the case and in law, the final assessment order dated 23 October 2024, passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act, having been passed beyond the limitation period provided in terms of section 153 of the Act, is viod-ab-initio, illegal and band in law and is therefore, liable to be quashed. Ground No.3: General Ground On the facts and in the circumstances of the case and in law, the Ld. DRP/ Ld. AO, Deputy/Assistant Commissioner of Income Tax, Transfer Pricing – 3(2)(1), Mumbai (‘Ld. TPO’) has erred in making a transfer pricing adjustment of INR.19,42,69,527/- in relation to the international transactions pertaining to payment for availing of business support services and business technology services (‘together to be known as ‘Intra group services’ or ‘IGS’). Ground No.4: General Ground On the facts and in the circumstances of the case and in law, the Ld. AO erred in adding back INR 4,38,873/- as deemed income under section 41 of the Act without appreciating that the said amount is already forming part of the total income of the Appellant and any further addition would lead to double disallowance which is not permissible under the Act. The Appellant humbly prays that the aforesaid addition be deleted Ground No.5: No opportunity given of being heard On the facts and in the circumstances of the case and in law, the Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 3 order passed by the Ld. AO/Ld. TPO is in violation of principles of natural justice as the Appellant was not provided with an opportunity of personal hearing as to why the transfer pricing adjustment should not be made, even on specific request of the Appellant. The Appellant therefore prays that the Ld. AO/TPO’s order be quashed and the entire adjustment of Rs.19,42,69,527 made to the total income of the Appellant be deleted. Ground No.6: Disallowance of IGS charges under Section 37 of the Act On the facts and in the circumstances of the case and in law, the Ld. DRP and Ld. AO, erred in disallowing the payment for intra group service charges under section 37 of the Act on the ground that no service have been rendered by the service provider to the Appellant without appreciating the fact that sufficient documents were submitted which substantiate that services were actually provided to the Appellant. The Appellant humbly prays that the Ld. AO be directed to delete the disallowance of intra group services charges in full. Ground No.7: TP adjustment on account of IGS – Rs.19,42,69,527: On the facts and in the circumstances of the case and in law, the Ld. DRP erred in upholding the action of the Ld. AO/Ld. TPO to determine the ALP of the Appellant’s international transaction of availing of IGS from its Associated Enterprises (‘AEs’) as NIL instead of Rs.19,42,69,527 as determined by the Appellant. The Ld. AO/Ld.TPO while making TP adjustment on account of payment for availing of IGS erred in:  Disregarding the arm’s length price (‘ALP’) determined by the Appellant in the Transfer Pricing (‘TP’) documentation maintained by the Appellant in terms of Section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (‘Rules’);  Not appreciating that in the case under consideration none of the conditions set out in Section 92C(3) of the Act are satisfied;  Holding that no service have been rendered by the AEs to the Appellant without providing any cogent reasons;  Ignoring the agreements, invoices and robust documentation provided by the Appellant to substantiate need for the services received by the Appellant from its AEs and benefits arising therefrom;  Questioning the commercial expediency in availing the services from the AEs and corresponding payment for IGS, thereby Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 4 exceeding the jurisdiction;  Rejecting the allocation methodology of the Appellant;  Not appreciating that the ALP of international transaction cannot be determined at NIL;  Determining the ALP for the impugned transaction to be Nil by applying ‘Other Method’ in violation of section 92C(1) of the Act;  Not appreciating the fact that during the transfer pricing assessment proceedings of one of the AEs – Michael Page International Pte. Ltd. for subsequent years from whom the Appellant availed such IGS, the Ld. AO and Hon’ble DRP have themselves acknowledged and accepted that such services were in fact being rendered by the AE to the Appellant The Appellant prays that the book value of the international transaction be accepted as ALP of the said transaction and the above adjustment be deleted in total.” The Appellant humbly prays that the Ld. AO be directed to delete the disallowance of intra group services charges in full. Ground No. 6 & 7 3. When the appeal was taken up for hearing the Learned Authorised Representative for the Assessee preferred into service Ground No. 6 & 7 raised by the Assessee. 4. The facts relevant for adjudication of Ground No.6 & 7 are that the Assessee is an Indian company incorporated as a wholly owned subsidiary of the Michael Page Group. The Assessee, at the relevant time, was engaged in the business of providing recruitment services and career advice to clients in India. For the Assessment Year 2021-22, the Assessee filed return of income on 14/03/2022. The case of the Assessee was selected for scrutiny assessment. During the assessment proceedings, the Assessing Officer noted that Assessee had entered into international transactions with Associated Enterprises (AEs) and therefore, made a reference to the Transfer Pricing Officer (TPO) for computation of Arm's Length Price (ALP) under Section 92CA(1) of the Act. Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 5 5. The TPO noted that the during the relevant previous year, the Assessee had paid INR.10,10,66,341/- to its AE (i.e., Michael Page International Pte Ltd (for Short ‘MP Singapore’) towards Business Support Services and INR.9,32,03,186/- to its AEs (i.e., Michel Page Recruitment Group Limited (for Short ‘MPRG’) towards Business Technology Services. Vide notice, dated 25.09.2023, the Assessee was asked to provide information regarding the specific activity performed by the AEs providing the Business Support Services (BSS) and Business Technology Services (BTS) [hereinafter collectively referred to as ‘IGS’/’Intra Group Services’] as well as the specific benefit accruing to the Assessee from the same. In response, the Assessee filed submissions along with details and documents to establish that support services were availed by the Assessee since the Assessee did not have the requisite in-house support staff. To substantiate its contentions as regards the need and benefit accruing to the Assessee from the various services availed from AEs, the Assessee furnished supporting documentary evidence before the TPO. The Assessee provided detailed description of the various services availed; the need & benefits resulting to the Assessee on account of the services availed from AEs; and furnished copy of the relevant agreements, inter-company invoices, cost allocation workings as well as a description of each category of services along with need and benefit derived from each of the said services and thereby supported the contention that the payments made by the Assessee to AEs were at arm’s length. Before the TPO, the Assessee relied upon primary benchmarking study where AEs were considered as tested party; and Transactional Net Margin Method (TNMM) were considered as a Most Appropriate Method with Operating Profit to Total Operating Cost as Profit Level Indicator (PLI). The Assessee also provide corroborative benchmarking taking the Assessee as the tested party; TNMM as the Most Appropriate Method with Operating Profits to Sales as PLI. However, the TPO, not being convinced. Rejecting the contentions of the Assessee, the TPO Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 6 concluded that the Assessee had not been able to substantiate the need for the IGS, the benefits derived from the same and the quantification of service payments in relation thereto. The TPO, vide order dated 18/10/2023 passed under Section 92CA(3) of the Act, determined the ALP of IGS availed by the Assessee as ‘Nil’ and proposed an upward transfer pricing adjustment of INR.19,42,69,527/-. 6. The Assessing Officer passed Draft Assessment Order, dated 12/12/2023, under Section 143(3) read with Section 144C(1) of the Act proposing transfer pricing adjustment of INR.19,42,69,527/-. 7. The Assessee filed objections before the DRP against the Draft Assessment Order. During the DRP proceedings, the Assessee reiterated its submissions made before the TPO and also filed further documentary evidence as additional evidence which was admitted by the DRP. However, vide Order dated 25/09/2024, the DRP rejected the objections raised by the Assessee. Furthermore, the DRP also concluded that the Assessee was not entitled to claim deduction for IGS expenses of INR.19,42,69,527/- under Section 37 of the Act. 8. As a result, the Assessing Officer passed the Final Assessment Order, dated 23/10.2024, under Section 143(3) read with Section 144C(13) of the Act, determining total income of the Assessee at INR.19,47,08,399/- after addition of INR.19,42,69,527/- under Section 92CA(3) of the Act and an alternate disallowance under Section 37 of the Act of the same amount. The Assessing Officer also made an addition of INR.4,38,873/- as deemed income under section 41 of the Act. 9. Being aggrieved, the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced in paragraph 2 above. Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 7 10. During the hearing, the Ld. Counsel for the Assessee submitted that the authorities below had failed to appreciate the Transfer Pricing Study Report (TPSR) and the supporting documentation furnished by the Assessee. Taking us through the through the TPSR and submissions filed before the TPO/DRP, the Learned Counsel for the Assessee submitted that detailed description of services rendered by the AEs as well as the need/purpose/benefit/rendition of the same was established by the Assessee during the assessment proceedings. It was submitted that comprehensive supporting documentation in the form of agreements, invoices, email communications, screenshots of the IT portal demonstrating the receipt of services, and cost allocation workings were furnished to the lower authorities. The services charges paid for IGS were supported by benchmarking analysis. It was submitted that the Assessee had paid INR.10,10.66,341/- to its AEs towards Business Support Services (BSS) and INR.9,32,03,186/-, towards Business Technology Services (BTS) using cost plus 5% markup as the basis. The Assessee had benchmarked the aforesaid international transactions by adopting the Foreign AE as the tested party and based on the said benchmarking analysis, concluded that the IGS (i.e., BSS & BTS) were at ALP. The Assessee had also undertaken a corroborative benchmarking analysis taking Indian entity as the tested party and even based on the said benchmarking analysis the international transactions under consideration were at ALP. The Learned Counsel for the Assessee vehemently contended that IGS under consideration were of a recurring nature and were being received by the Assessee right from the Assessment Year 2013-14. It was submitted that the Mumbai Tribunal had, in Assessee's own case for the Assessment Year 2013-14, deleted the transfer pricing addition and had rejected identical stand taken by the TPO/DRP holding that need, purpose, rendition and benefit tests was duly satisfied in the case of BSS & BTS. For the other years prior to the relevant previous year and the subsequent previous years, there were no transfer Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 8 pricing additions in relation to the BSS & BTS. On the strength of the aforesaid it was contended by the Learned Counsel for the Assessee that the DRP erred in holding that ALP for BSS & BTS was ‘Nil’ and therefore, the Transfer Pricing Addition of INR.19,42,69,527/- should be deleted, and the direction of DRP to disallow IGS payments under Section 37 of the Act should be overturned. 11. Per contra, the Ld. Counsel for the Department supported the orders of the lower authorities and submitted that the no services were rendered and hence the ALP of the impugned services was correctly determined to be ‘Nil’. The Learned Departmental Representative placed reliance upon paragraph 7 of the Order, dated 18/10/2023 passed by the TPO and submitted as under: (a) The Assessee could not identify the precise activity conducted by the AE for the benefit of the Assessee out of the entire range of activities conducted by it along with the cost applicable to it. (b) The Assessee did not produce any primary evidence to show that the services were actually rendered by the AEs. The Assessee had only submitted copy of agreements/invoices, and had described the nature of services. Mere existence of agreement between the Assessee and the AEs cannot lead to a conclusion that the services were actually rendered. (c) Even if the Assessee did not seek any services from the AE, still the Assessee was liable to make payment of cost allocated to the Assessee. This would not be the case in uncontrolled transactions. Further, the Assessee did not have option to exist the agreement and being a subsidiary was forced to enter into agreements with AEs and make payments towards IGS. (d) No adequate evidence was produced to demonstrate that services were rendered, the basis for the costs incurred, the activities for which they were incurred, and the benefit accruing Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 9 to it from those activities. (e) The Assessee failed to produce evidence to show how the IGS payments were at arm’s length. (f) The Assessee could not produce details and quantum of expenditure incurred by the AE for rendering IGS to the Assessee. (g) Discrepancies in the supporting documents/evidence filed by the Assessee were pointed by the TPO which made the same unreliable. In view of the above, it was submitted by the Learned Departmental Representative on consideration of the facts, the TPO/DRP had correctly concluded that the ALP of IGS was ‘Nil’ and an independent entity in a comparable transaction would not have paid any amount. Therefore, the payments for IGS services was, even otherwise, not allowable as a deduction under Section 37 of the Act. 12. We have heard the considered the rival submissions and have perused the order passed by the authorities below, the decision of the Tribunal in the case of the Assessee for the Assessment Year 2013-2014 [ITA No.1190/Mum/2019, dated 26/12/2023] and other the material record including the following: Sr. No. Particulars Paper-book Business Support Service (BSS) 1. Transfer Pricing Study Report Detailed description of the services along with FAR in relation to BSS 78-82 2. Intercompany Agreement for availing BSS between the Assessee and MP Singapore 237-257 3. Inter-company invoices for BSS 378-379 4. Details of Cost Allocation working for each service under BSS 382-401 5. Emails/documentary evidences submitted during TP assessment proceedings - BSS 406-470 5. Emails/documentary evidences submitted during DRP proceedings on 06 June 2024 (additional evidence) - BSS 484-542 6. Details of employees on the payroll of the Appellant along with their local job title 479 Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 10 Business Technology Services (IT Services) (BTS) 1 Transfer Pricing Study Report Detailed description of the services along with FAR in relation to BTS 91-92 2. Intercompany agreement for availing BTS between the Appellant and MPRG 258-294 3. Inter-company invoices for BTS 380-381 4. Details of Cost Allocation working under BTS 402-405 5. Emails/documentary evidences submitted during TP assessment proceedings – BTS 471-478 6. Details of employees on the payroll of the Appellant along with their local job title 479 7. Emails/documentary evidences submitted during DRP proceedings on 06 June 2024 (additional evidence) – BTS 543-586 8. Evidences in the form of Snapshots of the Tickets raised on the Internal IT system requesting assistance from the AEs – submitted during DRP proceedings (additional evidence) on 12 August 2024 – BTS 587-647 13. On perusal of record it emerges that during the relevant previous year, the Assessee had made following payments for the IGS: (a) INR.10,10,66,341/- towards BSS to MP Singapore computed1 as under: Sr. No. Nature of services Total Expenses incurred by the AE (In GBP) Amount charged to India Amount (In GBP) Amount (in INR.) 1 Finance and financial management services 28,78,741 3,14,412 3,06,52,225 2 Human resources related services 23,05,855 1,56,358 1,53,39,500 3 Marketing management services 24,02,174 2,12,083 2,07,18,347 4 Commercial and sales support services 3,03,864 39,835 39,16,827 5 Other services 14,15,179 1,36,146 1,32,96,514 6 Management support services 18,80,038 1,76,351 1,71,42,926 Total 1,11,85,671 10,35,185 10,10,66,341 (b) INR.9,32,03,186/- towards BTS to MPRG computed2 as under: Particulars Amount (INR) Reference 1 Jan to 31 Dec 2020 – Service charges 2,99,17,426 Appendix A 1 Jan to 31 Dec 2020 (Pass through) 5,87,67,405 1 Page 382 to 401 of Paper-Book 2 Page 402 to 405 of Paper-Book Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 11 1 Jan to 31 Dec 2020 – 5% mark up 14,95,871 Total for 1 Jan to 31 Dec 2020 (A) 9,01,80,702 1st Quarter 2020 – Service charges 69,01,817 Appendix B 1st Quarter 2020 (Pass through) 98,42,656 1st Quarter 2020 – 5% mark up 3,45,091 Total 1st Quarter 2020 (B) 1,70,89,564 1st Quarter 2021 – Service charges 79,85,236 Appendix C 1st Quarter 2021 (Pass through) 1,17,27,550 1st Quarter 2021 – 5% mark up 3,99,262 Total 1st Quarter 2021 (c) 2,01,12,048 Total charged in FY 2020-21 (A+B+C) 9,32,03,186 14. Before the TPO it was explained by the Assessee that following cost allocation methodology was followed: (a) For Business Support Services/BSS (i) Service cost: MP Singapore charges a cost-plus mark-up of 5% on cost incurred by them in providing business support services. Such costs include salaries, training, facility cost, etc. The direct costs identifiable to a particular operating company are allocated directly and other common costs (referred to as pool cost) are allocated to all operating companies (including the Assessee) on the basis of average fee earner headcount. (ii) Pass through cost: No mark-up is charged on pass through costs paid by MP Singapore to third parties and is recharged to the Assessee on a cost-to-cost basis. These costs include expenses incurred by employees, travel expenses, post courier charges, etc. (b) Business Technology Services/BTS Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 12 (i) In the process of providing such IT services either directly or through another group company, AE aggregates global IT cost and then allocates the same to the Group companies as follows: - Direct Cost: charged directly to the entity receiving the service; - Regional cost: charged on the basis of headcount (or other relevant allocation key) to the entities for which the cost was incurred; and - Pool Cost: the remaining cost would be allocated to all the entities on the basis of headcount (ii) Attributable costs are again identified as Service Cost and Pass Through Cost and are charged by the AE from the group entities in a manner similar to BSS. The Service Costs are charged on a cost plus mark-up of 5% on cost incurred by the AE in providing such services whereas in case of the Pass Through Cost group entities receiving the services (including the Assessee) are not charged a mark-up on the costs paid by the AE to third parties and the same is recharged to on a cost-to-cost basis. 15. The Assessee also placed before the TPO/DRP the break- up/computation of each of the cost elements which were supported by the Agreement between the Assessee and AE, and invoices raised upon the Assessee. We note it was contended by the Assessee before the TPO/DRP that the AEs render majority of these services over emails, calls or internal software. In support the Assessee had relied upon sample copies of such email correspondences along with the supporting documents. Before DRP the Assessee had filed additional evidence in the form of summary of the emails/correspondences along with the copy of Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 13 emails/correspondences [vide application for admission of additional evidence dated 06/06/2024]. During the course of hearing the Learned Departmental Representative had submitted that the TPO had pointed out some discrepancies in the supporting documents filed by the Assessee. However, in our view the same are not sufficient to reject the entire documentary evidence furnished by the Assessee and conclude that no IGS were rendered by the AEs to the Assessee. 16. Further, we find that explaining the need/purpose/benefit of the IGS, the Assessee had submitted before the TPO the details of employees on the payroll of the Assessee. The Assessee had 175 employees on its payroll for the relevant previous year and out of which 169 employees were engaged in the core activity of recruitment business and only 6 employees were engaged in support function such as receptionist (undertaking front desk activity) and administrative work (undertaking day to day administrative work such as courier, office management etc.). Thus, the Applicant did not have any personnel on its payroll to perform support functions for which services of AEs were taken to provide BSS and BTS. During the course of hearing it was submitted by the Learned Counsel for the Assessee that in the case of MP Singapore the Assessing Officer had accepted that the Assessee did not have the local business support functions and infrastructure. 17. On perusal of record we find that the Assessee had also contended before the TPO that centralization of services have helped the Michael Page Group companies including the Assessee in saving cost on account of achieving economies of scale, minimize the number of people employed to perform the same functions, ensuring consistency in practices increase in efficiency and smooth functioning of overall activities, control over important functions, preventing under-utilisation of staff, ensuring consistency in Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 14 practices and standardization in operations. We find merit in the contentions advanced on behalf of the Assessee that the Assessee could not be required to provide the actual quantification of benefits from receipt of IGS as long as the Assessee is able to show that the services were actually received and some benefit had accrued to Assessee from the same. In our view, Revenue cannot sit in arm chair of the Assessee and challenge the commercial prudence of the Assessee to incur expenditure of IGS. In any case, in the present case, the Assessee has contended that the payments made to the AEs were at ALP. It is admitted position that the Assessee had carried out primary benchmarking analysis taking foreign AEs as tested party and secondary benchmarking analysis taking the Assessee as tested party. The summary of the benchmarking analysis carried out by the Assessee is as under: Nature of International Transaction Name of the Tested Party Most Appropriate Method and PLI Book value of Transaction (INR.) Tested Party Margin Comparable data Type Arm’s length return BSS MP Singapore TNMM3 (‘OP/TC’)4 10,10,55,241 OP/TC – 5% Companies engaged in the provision of business support services in Asia Pacific (‘APAC’) region Range of 5.27% to 10.39% with a median of 6.55% BTS MPRG TNMM (‘OP/TC’) 9,32,03,186 OP/TC – 5% Companied engaged in the provision of IT support services world-wide Range of 4.13% to 13.29% with a median of 8.40% Corroborative Analysis TNMM OP/Sales - OP/Sales -11.17% Range of 1.08% to 7.91% with a median of 3.19% 18. The TPO rejected all the contentions and supporting documents Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 15 submitted by the Assessee holding that the Assessee had failed to satisfy the need, purpose, rendition and benefit test. It was concluded by the TPO that no third party would have made payment to AEs in such situation and therefore, ALP of BSS and BTS was ‘Nil’. DRP also agreed with the view taken by the TPO. We find that identical approach adopted by the TPO/DRP in the case of the Assessee for the Assessment Year 2013-2014 was rejected by the Mumbai Bench of the Tribunal vide Order, dated 26/12/2023, passed in ITA No. 1190/Mum/2019. Relevant extract of the same reads as under: “6. We have heard the parties and perused the material on record. In the given case, the AEs situated in Australia, Hong Kong and Singapore various support services as listed below to the assessee – “Administrative support including finance, personnel, learning and development, legal and information technology services; Marketing and internet support; Local ad hoc IT installations and systems support; Routine ad hoc local level operational support; Any additional services as agreed between the Parties from time to time.” 7. The assessee has entered into agreements with these AEs in this regard (page 169 to 177 of paper book) and as per the terms of the agreement, the AEs would recharge on actual cost incurred towards rendering of services with 10% mark up. The AEs raise invoices on the assessee towards the support services rendered and payments made by the assessee during the year under consideration amounts to Rs.5,98,33,677. The assessee bench marked the said international transactions by adopting Transaction Net Margin Method (TNMM) as the most appropriate method where the AEs are taken as the tested parties. As per the bench marking, the arithmetic mean margin of the comparables (page 110 of paper book) was 11.81%. Since the mark up charged for the assessee is 10%, the amount charged by AEs Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 16 towards rendering of shared services to the assessee was considered to be at arm's length. The TPO proceeded to compute the ALP of the transaction AT Nil, for the reason that the evidences submitted are inadequate, the need to for availing services not substantiated, break up of the cost are not submitted. Before the CIT(A), the assessee submitted further evidences and a remand report was called for. Based on the remand report the CIT(A) confirmed the determination of ALP at Nil by the TPO. We notice that the assessee has submitted substantial documents in the form of agreements with AEs, details of cost recharged, employee wise cost details allocated to assessee, details of employee wise time sheet evidencing the time spent by various employees towards rendering services to various countries including assessee in India, email correspondence in support of nature and benefit of the services rendered (pages 347 to 757 of paper book). From the perusal of these records it is evident that the assessee before the lower authorities have submitted evidences in support of rendering of services, the benefits derived, basis of allocation of cost i.e. allocation key etc. and therefore we are of the considered view that lower authorities were not justified in holding that no services were rendered by the AEs in respect of which payments were made by the assessee. 8. The assessee before the lower authorities submitted that the assessee does not have any local support staff and therefore the HR, Finance, ITes, Legal services etc., are availed from the regional support centres of the AEs and that there is no duplication of services. In this regard we notice that the revenue has not disputed these submissions of the assessee but has determined the ALP at Nil on the basis that assessee has failed to justify/prove rendition, receipt and benefit of this expenditure. This contention of the revenue in our considered view is not tenable since the revenue has not brought anything on record to find any fault in the benchmarking analysis conducted by the assessee i.e. benchmarking of international transactions pertaining to payment of shared services adopting TNMM but has simply determined the ALP at Nil. The TPO also neither undertook any benchmarking analysis by adopting any of the prescribed methods under the Act nor searched any comparable transaction for considering the arm's length price at NIL. The argument of the ld DR is that the TPO has applied CUP method for determination of ALP at NIL cannot be accepted for the reason that for the purpose of determining the ALP by applying the CUP method Rule 10B Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 17 of the Income Tax Rules provides that 10B . (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction [or a specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely :— (a) comparable uncontrolled price method, by which, (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified; (ii) such price is adjusted to account for differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions or between the enterprises entering into such transactions, which could materially affect the price in the open market; 9. However, in the present case, the lower authorities without searching for similar uncontrolled transaction between non associated enterprises just proceeded to treat the value of the international transaction to be at NIL. In this regard, we notice that a similar issue is considered by the coordinate bench in the case of Sulzer Tech India (P.) Ltd vs ACIT, NFAC [2022] 142 taxmann.com 246 (Mumbai - Trib.) where it has been held that 23. As noted above, in the present case, no search was conducted to find out the independent entity in a comparable transaction and the arm's length price of the international transaction was treated to be NIL. In the present case, no doubts about payments made by the assessee have been raised by the Assessing Officer under section 37 of the Act. Further, accrual of benefit to assessee or the commercial expediency of any expenditure incurred by the assessee cannot be the basis for disallowing the same, as held by Hon'ble Delhi High Court in the case of CIT v. EKL Appliances Ltd. [2012] 24 taxmann.com 199/209 Taxman 200/345 ITR 241. 24. We further find that Hon'ble jurisdictional High Court in CIT v. Lever India Exports Ltd. [2017] 78 taxmann.com 88/246 Taxman 133 (Bom.), observed as under: Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 18 \"7. We note that the Tribunal has recorded the fact that the respondent assessee has launched new products which involved huge advertisement expenditure. The sharing of such expenditure by the respondent assessee is a strates to develop its business. This results in improving the brand image of the products, resulting in higher profit to the respondent assessee due to higher sales Further, it must be emphasized that the TPO's jurisdiction was to only determine the ALP of an International Transaction. In the above view, the TPO has to examine whether or not the method adopted to determine the ALP is the most appropriate and also whether the comparables selected are appropriate or not. It is not part of the TPO's jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of section 37 of the Act and/or genuineness of the expenditure. This exercise has to be done, if at all, by the Assessing Officer in exercise of his jurisdiction to determine the income of the assessee in accordance with the Act. In the present case, the Assessing Officer has not disallowed the expenditure but only adopted the TPO's determination 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 le. to determine the ALP of an International Transaction in terms of Chapter X of the Act read with rules 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 POOJA by the TPO. Therefore, the ad hoc determination of ALP by the TPO de hors section 92C of the Act cannot be sustained.\" 25. In view of the above, we are of the considered opinion that TPO as well as learned DRP were not justified in treating the value of international transaction of 'Payment of Corporate IT Support Services' to be NIL, in the present case. Accordingly, ground No. 2, including grounds no. 2.1 to 2.3, raised in assessee's appeal are allowed. 10. In order to justify the cost allocation based on the allocation Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 19 key, the ld AR submitted that that the same is as per the OECD guidelines. In this regard, it is relevant to note the following paragraphs of OECD guidelines:- 9 ITA No. 1190/Mum/2019 Michael Page International Recruitment Pvt. Ltd. “7.23 In such cases, MNE groups may find they have few alternatives but to use cost allocation and apportionment methods which often necessitate some degree of estimation or approximation, as a basis for calculating an arm's length charge following the principles in Section B.2.3.” “7.25 The allocation should be based on turnover, or staff employed, or some other basis. Whether the allocation method is appropriate may depend on the nature and usage of the service. For example, the usage or provision of payroll services may be more related to the number of staff than to turnover etc.” 11. We notice that the coordinate bench of the Tribunal in Jabil Circuit India Private Limited v/s ACIT, [2018] 100 taxmann.com 165 (Mum.), after considering the OECD guidelines upheld the usage of allocation keys for allocation of intra-group services. The relevant findings of the coordinate bench in the aforesaid decisions are as under:- “28. We note that it is the claim of the assessee that the assessee has intra group AEs spread around the length and breadth of the globe. It has been claimed that the intra group services have been allocated on the basis of global agreement among the AEs. Proper allocation keys have been used and that the methodology adopted has the mandate of guiding of the OECD. In this regard, we note that in the OECD guidelines in the Chapter VII relating to special consideration for intra group services has observed that mainly two issues were to be considered, one was whether intra group service have in fact been provided. The other issue is whether the intra group charge for such services for tax purpose should be in accordance with the arms length principle. The OECD guidelines interalia also provide that the allocation of the group cost might be based upon the turnover or staff employed or some other basis. It mentioned that whether the allocation method is appropriate may depend upon the nature and use of the services. A reading of this OECD guidelines makes it abundantly clear that contrary to the Revenue's argument, the using of allocation keys for allocation of intra group services is not alien to international tax jurisprudence. Further, the allocation of concerned group expenses to different accounting units is a duly accepted Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 20 accounting procedure. ….” 12. Considering the facts and circumstances and the perusal of documents submitted in the present case, we are of the view that once availing of various services from the AEs is duly substantiated by the documentary evidence and the cost allocation among the group companies is also on the basis of a well-accepted allocation key method, there is no basis in upholding the transfer pricing adjustment made by the TPO/AO. Accordingly, the AO is directed to delete the transfer pricing adjustment on account of payment of shared service charges paid by the assessee to the AEs. 13. In result the appeal of the assessee is allowed.” (Emphasis Supplied) The Revenue has failed to bring on record any material to distinguish the above decision of the Tribunal either on facts or on law. In the facts of the present case we are not inclined to accept the contention of the Revenue that approach adopted by the TPO can be regarded as equivalent to adopting ‘Other Method’ the Assessee has furnished primary Benchmarking Analysis (taking foreign AE as tested party) as well as the corroborative benchmarking analysis (taking the Indian entity as tested party). Further, on perusal of the Order, dated 25/09/2024, passed by the DRP we find that the DRP had itself recorded as under: \"The Applicant has acted as the recipient of Intra-Group Services. The Services are simple services. Such services can be benchmarked via CUP or Other Method or TNMM of the Indian party.\" (Emphasis supplied) 19. Despite the above observations/directions of DRP, the corroborative benchmarking analysis done by the Assessee by taking the Indian entity as the tested party; with TNMM as Most Appropriate Method; and OP/Sales as PLI was rejected by the TPO/Assessing Officer by simply taking ALP of BSS/BTS as ‘Nil’. During the course of hearing, vide order dated 06/06/2025, clarification was sought from the Revenue in relation to the same and opportunity was granted to the Assessing Officer to file report on the corroborative benchmarking analysis furnished by the Assessee. Availing the said Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 21 opportunity, vide Letter dated 25/09/2025, clarification/report was from furnished by the Revenue which has been taken into consideration. We are of the view that the aforesaid clarification/report does not advanced the stand taken by the Revenue. In the aforesaid clarification/report it has been reiterated that during the assessment proceedings, the Assessee had failed to establish the need/purpose/benefit/rendition of IGS and therefore, ALP of IGS was determined ‘Nil’. Thus, the benchmarking undertaken by the Assessee was liable to be rejected. However, as noted hereinbefore, the DRP itself had accepted that benchmarking analysis taking Indian entity as tested party and TNMM (as opposed to ‘Other Method’) could be considered for determining ALP of IGS payments made by the Assessee to its AEs. In our view, the only reason for the rejection of the corroborative benchmarking analysis of the Assessee is based upon the conclusion of the TPO/DRP that the Assessee had failed to satisfy the need/purpose/benefit/rendition test. Since we have accepted the contentions of the Assessee in this regard and have overturned the aforesaid finding of TPO/DRP by following the decision of the Tribunal in the case of the Assessee for the Assessment Year 2013-2014 [ITA No.1190/Mum/2019, dated 26/12/2023], the stand taken by the Revenue cannot be accepted. We have already concluded hereinabove that the Assessee had discharge the burden to satisfy that the need, purpose, rendition and benefit test for the relevant previous year by furnishing relevant documents and details during the proceedings before the TPO and DRP. Therefore, for the same reasons, even the directions given by the DRP to disallow deduction for IGS payments under Section 37 of the Act cannot be sustained. Accordingly, the Transfer Pricing Addition of INR.19,42,69,527/- is set aside with the directions to the TPO to compute the ALP as per the corroborative benchmarking analysis after verifying the computation of PLI. 20. In view of the above, Ground No. 6 and 7 raised by the Assessee are Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 22 allowed in terms of Paragraph 22 above. Ground No. 2 & 5 21. Ground No.2 & 5 are dismissed being not pressed in view of the statement made by the Learned Authorized Representative for the Assessee during the course of hearing. Ground No. 1 & 3 22. Ground No.1 & 3 are disposed off as being general in nature and not requiring separate adjudication. Ground No. 4 23. Ground No.4 raised by the Assessee pertains to addition of INR.4,38,873/- made by the Assessing Officer invoking provisions contained in Section 41 of the Act. It was submitted by the Ld. Counsel for the Assessee that the said amount has already been offered to tax and forms part of the total income of the Assessee and any further addition would lead to double disallowance. The Assessing Officer is directed to delete the addition after verifying the aforesaid factual averment. In terms of aforesaid, Ground No. 4 allowed for statistical purposes. 24. In result, the present appeal preferred by the Assessee is Partly Allowed. Order pronounced on 16.10.2025. Sd/- Sd/- (Prabhash Shankar) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 16.10.2025 Milan,LDC Printed from counselvise.com ITA No.6748/Mum/2024 Assessment Year 2021-2022 23 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai Printed from counselvise.com "