PORTESCAP INDIA PRIVATE LIMITED,MUMBAI V. DCIT CIRCLE 2(3)(1), MUMBAI

MA 248/MUM/2025

AI Insights

The case involves Portescap India Private Limited, which filed a Miscellaneous Application concerning the Income Tax Appellate Tribunal's earlier decision on the disallowance of sales commission/agency fees paid to associated enterprises in Switzerland. The Tribunal acknowledged that their previous order inadvertently omitted specific findings on these grounds. Upon review, the Tribunal found that the assessee had provided sufficient documentation and evidence to justify the payments made to the Swiss AE, which included details of services rendered and the benefits derived from them. The Tribunal's decision emphasized the need to evaluate intra-group services based on their nature, necessity, and benefit, rather than summarily disregarding them without exact quantification.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 831298 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: misc
• Appeal Filed On: 26-09-2025
• Laws Referred To: OECD Transfer Pricing Guidelines (2020)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN
• Assessee Lawyers: CHANDNI SHAH AW. KINJAL
• Keywords: Transfer pricing

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SHRI GIRISH AGRAWAL (ACCOUNTANT MEMBER) MA No.248/Mum/2025 (Arising out of I.T.A. No.6749/Mum/2024) Assessment Year: 2021-22 Portescap India Private Limited Portescap India Private Limited, Unit No. 2 SDFI Seepz Sez Andheri East, Seepz, Mumbai 400096 PAN:AAACK4869K Vs. DCIT Circle 2(3)(1) Aaykar Bhavan, M.K. Road, Mumbai 400020 (Appellant) (Respondent) Appellant by Ms. Chandni Shah a/w. Ms. Kinjal Patel & Shri. Yogesh Malpani Respondent by Shri Surendra Mohan Sr. DR Date of Hearing 28/11/2025 Date of Pronouncement 21/01/2026 ORDER Per: Smt. Beena Pillai, J.M.: Present Miscellaneous Application is filed by the assessee in the order passed by this Tribunal dated 28.07.2025 passed in above referred appeal. Printed from counselvise.com P a g e | 2 MA 248/Mum/2025 Arising out of ITA No.6749/Mum/2024 AY:2021-22 2. Ld. AR submitted that while deciding the Ground 3 to 5 raised by the assessee in its appeal, this Tribunal inadvertently did not give findings in respect of the issue pertaining to Sale Commission/Agency Fees paid to the associated enterprises located in Switzerland raised in the Ground No.3 and 4. 2.1. She referred to para 1 to 6.1 of the Tribunal order wherein facts relating to all the three grounds are narrated in detail. Referring to para 9 of the Tribunal’s, orders she submitted that various arguments advanced by Ld. AR as well as the Ld. DR regarding Grounds 3 to 5 are considered. However, In para 10 to 10.5, this Tribunal gave findings, in respect of ground no. 5 only. It is submitted that entire discussion is regarding the payment made by assessee to the China AE towards marketing support and procurement services. 2.2. The Ld. AR submitted that, no specific finding are given regarding transaction pertaining to payment of Sales Commission/ Agency Fees to the Swis AE raised by the assessee in Ground No. 3 and 4. The Ld. AR thus, prayed for categorical finding in respect of the issues raised by the assessee in Ground No. 3 and 4. 2.3. Ld. DR did not object to the submissions raised by the Ld. AR We have perused the submissions advance by both sides in respect of the records place before us. Printed from counselvise.com P a g e | 3 MA 248/Mum/2025 Arising out of ITA No.6749/Mum/2024 AY:2021-22 3. It is noted that the facts pertaining to grounds 3 to 5 are narrated as submitted by the Ld. AR in the preceding part of the order passed by this Tribunal. The arguments advanced by both sides in respect of all three grounds are also narrated. However, categorical finding regarding issue contested in Grounds 3 and 4 are inadvertently not given. We are therefore, recording the findings in respect of Ground No. 3 and 4. Following paras shall be read after para 10.5 of the order passed by this Tribunal: “10.6. It is noted that the assessee had submitted documentary evidences justifying the need benefit and rendition of services along with the functions performed by the Switzerland AE. The assessee before us has furnish a chart, wherein the details of the submissions reflecting various functions performed by the AE and the correspondence in respect of the same showing the benefit derived by the assessee has been filed. It is noted that these details were placed before the Ld. TPO as well as the DRP as a consequent of which the Ld. TPO DRP accepted the 50% of the payment of sales commission paid to Switzerland AE. It is also noted that there is increase in the profit on year to year basis from FY 2016-17 to the year under consideration. There is an increase in the turn over as well as profit margin that supports the benefit derived by the assessee due to the service availed from the Switzerland AE. The assessee is contesting only the 50% of the amount that was disallowed by submitting that such disallowance does not have any basis and is arbitrary without any authority of law. At this juncture we referred to Chapter- VII of the OECD Transfer Pricing Guidelines (2020) prescribed a tow- step analysis for intra-group services. 10.7 The OECD Guidelines clarify that shareholder or duplicative activities do not constitute chargeable services. However, they also recognise that routine managerial, administrative, and support services, even if not directly revenue-generating, can provide legitimate value to the recipient. For such low value-adding services, the Guidelines advocate a simplified cost-based approach with a reasonable mark-up, provided that the allocation keys are rational and the benefits reasonably demonstrable. Printed from counselvise.com P a g e | 4 MA 248/Mum/2025 Arising out of ITA No.6749/Mum/2024 AY:2021-22 10.8 In the present case, while the Ld. TPO was though justified in scrutinising the sufficiency of evidence, the blanket determination of ALP at NIL does not fully align with the OECD framework, particularly when the assessee furnished documentation suggesting that services were rendered at the cost-allocated. The inclusion of management support fees within the TNMM cost base does not, by itself, prove benefit, but it is a relevant corroborative factor indicating that these costs formed an integral part of the business operations. 10.9 In the present case, it is pertinent to note that the Ld. TPO accepted part of the management service payment as being at arm's length, which implicitly acknowledges that the Associated Enterprise rendered certain managerial and support services to the assessee. This factual finding indicates that the benefit test is satisfied at least in part and that the assessee did derive value from the intra-group arrangements. 10.10 In this backdrop, a complete determination of the remaining portion of management charges at NIL appears inconsistent with the OECD's balanced framework, which emphasises that intra-group services must be evaluated on their nature, necessity, and benefit, and not summarily disregarded in the absence of exact quantification. The OECD Transfer Pricing Guidelines (2020) recognise that routine or low value- adding services, such as managerial, HR IT, or legal coordination may not yield direct measurable outcomes, but nonetheless provide economic or operational advantages warrariting appropriate compensation, provided that allocation keys are reasonable and documentation demonstrates the context of benefit. 10.11 Accordingly, while the TPO's cautious approach in verifying the evidentiary sufficiency is justified, an outright disallowance of the disputed amount is not fully aligned with the OECD framework or with the TPO's own acceptance of partial services. We therefore direct the ld. TPO/AO to delete the disallowance made which is without any basis. 3.1. It is noted that the conclusion regarding of Grounds 3 to 5 below para 10.5 of in the Tribunal order also deserved to be accordingly amendment. Following line shall be replaced along with extended findings below para 10.5 of the Tribunal order reproduced hereinabove. Printed from counselvise.com P a g e | 5 MA 248/Mum/2025 Arising out of ITA No.6749/Mum/2024 AY:2021-22 “Accordingly, Ground No. 3 and 4 raised by the assessee stands allowed and Ground No. 5 raised by the assessee stands allowed for statistical purposes.” In the result, the Miscellaneous application filed by the assessee stands allowed. Order pronounced in the open court on 21/01/2026 Sd/- Sd/- (GIRISH AGRAWAL) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 21/01/2026 Divya Ramesh Nandgaonkar, Stenographer Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "