UNILEVER INDIA EXPORTS LIMITED,MUMBAI V. ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE - 5(3), MUMBAI, MUMBAI

ITA 4301/MUM/2024

AI Insights

The case involves Unilever India Exports Limited (the appellant) appealing against the order of the Assistant Commissioner of Income Tax (the respondent) which proposed a transfer pricing adjustment of Rs. 6,97,76,862 on account of royalty paid for central services. The adjustment was made following the directions of the Dispute Resolution Panel (DRP). The appellant contested that the adjustment was made without proper benchmarking and was based on conjectures. The Tribunal examined the submissions, evidence, and previous rulings in similar cases, concluding that the TPO's approach was not in accordance with the statutory provisions and thus, the adjustment was unsustainable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361266 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: Ineos Styrolution India Ltd. v. DCIT, Goodyear South Asia Tyres (P.) Ltd. v. ACIT, CIT v. EKL Appliances Ltd., CIT v. Merck Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH THAKWANI
• Assessee Lawyers: KARISHMA PHATARPHEKAR AW
• Keywords: Transfer pricing; International transaction; Question of law; Commercial expediency
• Section: 143(3); 37; 92C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J”, MUMBAI BEFORESHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND MISS PADMAVATHY S, ACCOUNTANT MEMBER ITA No.4301/Mum/2024 (Assessment year: 2020-21) Unilever India Exports Limited Unilever House, B.D. Sawant Marg, Chakala, Andheri East, Sahar P & T Colony S.O., Mumbai PAN : AAACI0991D vs Assistant Commissioner of Income Tax, Circle-5(3), Mumbai Kautilya Bhavan, Avenue 3, Near Videsh Bhawan, G Block BKC, Bandra Kurla Complex, Bandra (E), Mumbai-400 051 APPELLANT RESPONDENT Assessee by : Ms. Karishma Phatarphekar a/w Shri Harish Shah & Shri Shreyas Sardesai Respondent by : Shri Mukesh Thakwani (SR DR) Date of hearing : 08/05/2025 Date of pronouncement : 22/05/2025 O R D E R Per Anikesh Banerjee (JM): Instant appeal of the assessee is preferred against the order of the Learned Assistant Commissioner of Income-tax, Central Circle 5(3), Mumbai [in short, ‘Ld.AO’] passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (in short, ‘the Act’) date of order 30/06/2024 for A.Y. 2020-21. The 2 ITA 4301/Mum/2025 Unilever India Exports Limited impugned order was passed pursuant to the order of the Learned CIT DRP-2, Mumbai under 144C(5) of the Act, date of order 31/05/2024. 2. The assessee has raised the following grounds of appeal:- “Based on the facts and circumstances of the case and law, Unilever India Exports Limited ('Appellant') respectfully craves leave to prefer an appeal against the order passed by the learned Assistant Commissioner of Income-tax Central Circle 5(3), Mumbai ('AO') dated 30th June 2024 under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ('the Act') in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel - 2 ('DRP') on following grounds, each of which are without prejudice to one another: Payment of royalty for central services 1. Whether on the facts and circumstances of the case and in law, the learned AO and the learned TPO, under the directions of the Hon'ble DRP, have erred in proposing a transfer pricing adjustment of Rs. 6,97,76,862 on account of royalty paid for central services. 2. Whether on the facts and circumstances of the case and in law, the learned AO and the learned TPO, under the directions of the Hon'ble DRP, have erred in rejecting the benchmarking analysis which demonstrated that the payment made for central services was at arm's length price. 3. Whether on facts the facts and circumstance of the case and in law, the learned AO and the learned TPO, under the directions of the Hon'ble DRP, have erred in rejecting agreements submitted by the Appellant as comparable instances without providing any cogent reasons. 4. Whether on the facts and circumstance of the case and in law, the learned AO and the learned TPO, under the directions of the Hon'ble DRP, have erred in stating that no benefit accrues to the assessee even after providing adequate documentation in support of the claim. 5. Whether on the facts and circumstance of the case and in law, the learned AO and the learned TPO, under the directions of the Hon'ble DRP, have erred in not 3 ITA 4301/Mum/2025 Unilever India Exports Limited following any one of the prescribed methods to determine arm's length price of payment of central services, thus making it unsustainable in law. Interest under section 234C 6. Whether on the facts and circumstances of the case and in law, the learned AO has erred in computing the interest under Section 234C of the Act while computing the assessee's total liability. Initiation of Penalty under section 270A 7. Whether on the facts and circumstances of the case and in law, the learned AD has erred in initiating penalty proceedings under Section 270A of the Act. Order barred by limitation 8. Whether on the facts and circumstances of the case and in law, the final assessment order dated 30th June 2024 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 for AY 2020-21 is void and bad in law as it has been passed beyond the time limit prescribed under section 153 of the Act. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law.” 3. The brief facts of the case are that Unilever Plc. had granted a non- exclusive license to UIEL for(i) using technical documentation, information, technical know-how and improvements and (ii) Central Services vide a common Technology, Trade-Mark License and Central Services Agreement effective from 1stFebruary 2013. Concerning the payment made by UIEL to Unilever Plc. for (i) using technical documentation, information, technical know-how and improvements, the DRP deleted the adjustment made by the TPO and 4 ITA 4301/Mum/2025 Unilever India Exports Limited accordingly, this issue is not in appeal before us. Concerning the payment made by UIEL to Unilever Plc. for (ii) Central Services. The assessee submitted that “Central services” are summarized in Part 8 of the \"Technology, Trademark License and Central Services Agreement' in the following categories: Corporate services Category and category-related services Global Markets Leadership and Global Business Product-related services The assessee had made payments of Rs. 6,97,76,862/- in alleged AY 2020-21 to its AE towards central service charged at the rate of 1% on estimated turnover.The assessee is entitled to receive a cost-plus markup for its contract manufacturing and trading activities, wherein the payment for Central Services is a part of the cost base on which the markup is received. The assessee had provided audited segmental accounts to the TPO and the DRP which reflected that payment for “Central Services” was included in the operating cost base. The assessee had benchmarked the transaction using the CUP method, details of which are as under: Particulars AY 2020-21 FAR and benchmarking discussion in TPSR APB Pg.303 to 304 No. of Comparable instances 4 APB Pg.733 to 766 Mean 4.63% APB Pg.766 Payment by Appellant 1% APB Pg.330 Conclusion At ALP 5 ITA 4301/Mum/2025 Unilever India Exports Limited In the given case, the assessee substantiated before the TPO, with evidence, the various services it received vide submission dated 20/12/2022 (APB Pg. 771 to 821). A summary of the above-detailed submission demonstrating the need, benefit and rendition of central services by Unilever Plc. to the AE and commensurate benefits derived from such services is provided below: Finance Kit (FKIT) - Finance Kit is the Treasury Management System used by Unilever Treasury Team for Risk management and treasury operations. Finance Kit is developed by Wall Street System (a global leader in providing treasury management solutions) and offers immediate visibility, control and simplified compliance throughout the enterprise). The solution combines depth of functionality with seamless integration by enabling all cash management, trading, funding and investment activities to be automated, audited, consolidated, and accounted for, instantaneously and globally. UIEL has been using Finance Kit for the following purposes: Forex Risk Management Tracking exposures at a company and unit level and corresponding foreign exchange contracts with banks. This enables UIEL to manage the foreign exchange risk efficiently and effectively and ensure compliance with the approved forex policy. Accounting-The accounting entries for forex transactions are generated from the finance kit. This is then posted in UIEL'S SAP ERP. It similarly automates the accounting for investment transactions thereby eliminating manual accounting and tracking. Finance Kit also has direct feeds from information service providers such as Reuters and market information such as MTM can be directly accessed from Finance Kit. It also helps generate various accounting reports. APB Pg. 822 to 824 APB Pg. 822 to 824 APB Pg. 822 to 824 6 ITA 4301/Mum/2025 Unilever India Exports Limited Reporting and MIS- The System provides management with various reports on forex and investment transactions and helps the management to have a bird's eye view of the status of the forex exposure and corresponding hedge against the same. Cash flows, investment positions etc. can be directly obtained from the Finance Kit. Counterparty Risk Management-UIEL investments and foreign exchange transactions are subject to overall counterparty risks, hence there is an approved counterparty limit for each bank that UIEL deals with. All transactions with the bank are recorded in Finance Kit and compliance against approved limits is tracked on a real-time basis using Finance Kit. Environmental sustainability - Given the industry and regulatory focus on environmental sustainability, UIEL is following very high standards to ensure minimum impact on the environment through constant improvement in processes and technologies. Unilever's global operations help UIEL to understand the latest trends in environmental sustainability and adopt such technologies. Issue management tools- Due to widespread information available through social media and other mediums, any issue can flare up with lightning speed. To manage such crises, guidelines are provided by Unilever to provide necessary protocols for crisis management and to prevent any mishaps. There are various templates and training documents about risk and issuemanagement. This tool also helps in understanding the best practices to be adopted. Further, there are constant improvements to improve the usability and functionality of logging issues. There is guidance available depending on the priority of issues eg, critical, high, low, etc. APB Pg. 822 to 824 APB Pg. 822 to 824 APB Pg. 825 to 827 APB Pg.828 to 829 7 ITA 4301/Mum/2025 Unilever India Exports Limited Personal Care Identity Toolkit - To increase the awareness and position of UIEL's products in a more unique, authentic and different way than its competitors. Unilever has created a special tool which is adopted by UIEL to ensure consistency in the visibility of the products both internally and externally in the market. The toolkit uses techniques like visual identity. photography, graphic styling, etc. Human Resources (HR) services - UIEL has a large workforce, thereby making the HR function extremely important. To help in managing its employees efficiently, Unilever's Global HR team has provided various tools and applications to UIEL, which helps UIEL in the automation of its HR functions. Following are some of the tools and applications used by UIEL: HR Online - An Oracle tool used for managing employee lifecycle actions, like moves/transfers etc. This helps the line managers to initiate such requests for their team. Employees manage their personal information through this application. The home page of the website HR Online is accessed by the employees. Further, it provides various tabs to the employees according to the information to be accessed by the employees. Peoplesoft An Oracle ERP application which manages employee data and their position-related details. A specific requirement is through the request service page and the request status page. Learning Hub-It is a learning application, of different types i.e. web-based, virtual and blended learning modules. This is used for learning and development and capability agendas. The home page, guidelines for the Learning Hub application and the learning calendar. APB Pg.830 to 831 APB Pg. 832 to 886 APB Pg. 833 to 835 APB Pg. 835 to 838 APB Pg. 839 to 858 8 ITA 4301/Mum/2025 Unilever India Exports Limited Unify It is a leave management Module. The employee uses this application to manage their assigned annual leaves. Homepage, request for encashment and the email from Unify Team for leave approval request. Sparkle It is a tool to manage Blue-collar employees capability and performance management. The Sparkle quick reference guide and the screenshot of the Sparkle home page displaying various tabs such as assessment and identification of skill gaps and priority areas for training, track progress and map primary and secondary skills based on standardized jobs. Also, the screenshot of various documents such as sparkle key activities, sparkle training decks, sparkle support model etc Talent Plus Online - Unilever has provided an online tool which is used by UTEL as a recruitment, talent and performance management system for keeping track of one's individual performance development. It allows UIEL employees to manage their Talent Profile, set goals, create Individual Development Plans and conduct mid-year and annual reviews for self-development purposes. Assistance by Unilever for undertaking various business processes: Specification management - UIEL also receives process-related support from the global team. For example, the 'specification management tool is a communication tool between the R&D team and the supply chain team. This tool contains the detailed specification of products including the formulation and manufacturing process (with flow diagrams). The same is used to support the raw material purchasing decision for the procurement team and the manufacturing of a product for the manufacturing team. The tool for creating a specification to display the entire formulation process. APB Pg. 859 to 861 APB Pg. 862 to 863 APB Pg. 864 to 886 APB Pg 887 to 889 9 ITA 4301/Mum/2025 Unilever India Exports Limited Logistic support- Unilever has provided Ultralogistic software (Oracle Transport Management system) to India for tracking its supply chain of products, etc. The software focuses to track the movement of supplies which are transported by sea/ road. Procurement support - The Global Procurement Team helps UIEL Procurement Team by giving timely advice and guidelines by providing market intelligence on Global markets and guidance on commodity pricing to enable UIEL, to take timely decisions. Quality management guidelines:- UIEL has access to the Unilever Global Quality Management System (QMS) which is a one-stop-shop for global quality standards, processes and tools and is accessible to everyone within Unilever. It covers all the business critical quality processes needed to design, manufacture and distribute safe products for use by consumers. Some of the recent quality standard documents issued by the Global QMS Team are on Good Manufacturing Practice (GMP) for the Foods Category, HPC, Refreshments, etc., Cleaning and Disinfection, Consumer relevant quality standards, Disposal of non-conforming products, Foreign matter management and control, Integrated Pest Management, Personnel Hygiene & Employee facilities, Prevention of Cross Contamination, Quality Sampling, Monitoring & Testing, Guidelines on Warehouse and Transport, etc. The home page displays various documents such as Supplier Assurance and Audit, microbiological and hygiene issues, customer services, complaint handling and management of errors etc. UIEL gets significant inputs on consumer-relevant quality standards (CRQS) from the global teams, and in addition, there is significant value addition by doing category-specific APB Pg. 890 to 891 10 ITA 4301/Mum/2025 Unilever India Exports Limited deep dives, recommending solutions based on experiences in other Unilever countries and in educating UIEL teams on quality standards for new product innovations. Safety - UIEL gets expert advice from a global centre of excellence in the UK called the Safety & Environmental Assurance Centre (SEAC). They advise on the design of new projects and facilities, safety incident investigation, discussions with internal and external consultants without any cost to UIEL and provide in-depth advice. Process Safety UIEL Team gets training on specialist subjects from Subject matter experts. Group Security- It provides specialized security training via web and face-to-face in addition to site assessments. They also guide security strategy & hardware standards for access control & security surveillance that help UIEL get the right hardware at the right cost without bringing in external consultants. Risk Management - UIEL believes that effective risk management is fundamental to good business management and that the success of an organization like UIEL depends on its ability to identify and then exploit the key risks and opportunities for the business. Successful businesses take/manage risks and opportunities in a considered, structured, controlled and effective way. Unilever shares a lot of Information on risk management with UIEL, which helps UIEL in framing its risk management policies. The risk management homepage displays the principles of risk management, the embedded risk management approach, the risk management policy, global physical security procedures guidance document incorporating the scope and structure. The Unilever Principles of Risk Management are to be implemented by all the APB Pg. 892to 893 APB Pg. 894 to 899 11 ITA 4301/Mum/2025 Unilever India Exports Limited managers. Savings program - Global category supply chain teams provided help by sharing and reapplication of procurement and technical ideas to save costs. They also help in resolving technical issues. This leads to cost benefit savings for UIEL. An example of this is the 5S program that is being championed by the Global Home Care team. This looks at a holistic approach to costs across Formulation /Packaging, Specification, Sourcing, Partnering, and Portfolio / Pricing. An example of this is the 55 program that is being championed by the Global Home Care team. This looks at a holistic approach to costs across Formulation/ Packaging, Specification, Sourcing, Partnership and Portfolio/Pricing. 4. In argument it is place that the TPO had made the benchmarking “Nil”. As per the Ld. AR\"Nil' benchmarking is not permissible even in 'Other Method': Rule 10AB reads as under: \"For the purposes of clause (f) of sub-section (1) of section 92C, the other method for determination of the arm's length price in relation to an international transaction [or a specified domestic transaction) shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts.\" There are three critical aspects of Rule 10AB i.e. the sixth method. This method requires the determination of ALP based on the following parameters: 12 ITA 4301/Mum/2025 Unilever India Exports Limited 1. the price which has been charged or paid or would have been charged or paid. 2. for the same or similar uncontrolled transaction 3. under similar circumstances, considering all the relevant facts Rule 10AB i.e. the sixth method does not empower the TPO to determine the ALP on a best judgment basis or estimation basis but mandates him to arrive at the arm's length price based on the above parameters, read in conjunction with Section 92C. The Ld. AR respectfully relied on the order of coordinate bench of ITAT- Ahmedabad in the case of Ineos Styrolution India Ltd. v. DCIT [2022] 142 taxmann.com 450 (Ahmedabad-Trib.) had held as under: “10.9 Now, we note in the instant facts that the lower authorities claimed to have adopted 'other method\" by applying need, benefit and evidence test for considering the arm's length price of this transaction to be \"NIL\". In this regard it is pertinent to note that the provisions of rule 10AB of the Income-tax Rules, 1962, which provides as under: \"10AB. For the purposes of clause (1) of sub-section (1) of section 92C, the other method for determination of the arm's length price in relation to an international transaction or a specified domestic transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts.\" 11. Thus, as per the provisions of aforesaid Rule, the other method shall be the method which takes into account the price which has been or would have been charged or paid for the same or similar uncontrolled transaction between non-associated enterprises. However, in the present case, the Ld. TPO without searching for similar uncontrolled transaction between non- associated enterprises, straightaway treated the value of the international transaction to be at \"NIL\". 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 13 ITA 4301/Mum/2025 Unilever India Exports Limited Appliances Ltd. [2012] 24 taxmann.com 199/209 Taxman 200/345 ITR 241. In our considered view, the assessee has been able to demonstrate, with substantial supporting material that it availed India specific services from its Head Office/Regional Office. The Ld. Transfer Pricing Officer in view has taken a rather restrictive view in coming to the conclusion that no services were rendered for which any independent third party would pay and hence it was not possible to determine arm's length price in the Instant set of facts. As held in various decisions, the TPO cannot stand in judgment on what benefits the assessee has derived from the services and assessee's obligation lies to the extent of demonstrating receipt of services. Once, the assessee has been able to demonstrate receipt of services, in our view, Transfer Pricing adjustment without applying any prescribed benchmarking method is unsustainable and Ld. TPO cannot determine ALP at \"Nil\" and has to determine ALP under any one of the methods prescribed under the Income-tax Act read with the IT Rules. Accordingly, in our view, Ld. TPO has erred in facts and in law in treating the value of the transactions at 'Nil.\" (Emphasis supplied) Similar view was taken by the coordinate bench of ITAT-Pune in the case of Goodyear South Asia Tyres (P.) Ltd. v. ACIT [2021] 123 taxmann.com 259 (Pune Trib.) observed as follows: \"27. Similar is the position with the TPO also, who went on to determine Nil ALP without resorting to any method. Referring to rule10AB applicable from A.Y. 2012-13 providing for adoption of any method other than the five specified methods in section 92C(1), the Id. DR submitted that the TPO adopted any other method. We do not find any substance in the argument of the Id. DR that the TPO applied 'any other method. Firstly, the TPO has nowhere mentioned in his order that he was applying such any other method' in terms of rule10AB. Secondly, the TPO has not determined the ALP in any manner. He simply wrote in para 10.2 of his order that: \"the arm's length price of the balance amount of Rs. 26,87,68,644/- is taken as Nil and accordingly an adjustment of Rs. 26,87,68,644/- is made to the value of international transactions of payment of Regional service charges made to the AE\". This indicates that the TPO did not determine the ALP under any method much less 'any other method. In such circumstances, we cannot countenance the argument of the Id. DR, which is just in the air and does not emanate from the TPO's order.\" In the present case, the TPO has not done anything as envisaged by Rule 10AB, before mentioning that ALP has been determined at \"Nil' based on 'Other Method\". In fact, the TPO's order is substantially the same as the order passed by 14 ITA 4301/Mum/2025 Unilever India Exports Limited him in AY 2015-16 and AY 2016-17, and AY 2017-18 and 2018-19. Even the DRP in its directions for the impugned year, i.e.. AY 2020-21, has stated that facts have remained the same as compared to AY 2013-14 and sustained the TPO's \"Nil' determination of ALP. The Ld. AR argued that the present situation is a case, and continues to be a case, where none of the prescribed methods are followed by the TPO. Hence, the transfer pricing addition is liable to be deleted in-limine in terms of the Hon’bleJurisdictional High Court decisions in the cases of CIT v. Merck Ltd. [2016] 73 taxmann.com 23 (Bombay), held that: - “3. Re: Question (a):- The aforesaid question raises two issues with regard to Arms Length Price (ALP) in respect of import of pigment and import of technical knowhow/consultancy by the Respondent-Assessee from its Associated Enterprises (AE). We shall consider each of them separately. (I) Pigments:- (a) The impugned order of the Tribunal held that no Transfer Pricing Adjustment is required to arrive at the ALP in respect of import of pigment. This, inter alia, on the basis that the consideration paid for import of pigments to its AE was less than the normal consideration as evidenced by imposition of anti- dumping duty on its import of pigment under the Customs Tariff Act, 1975. This anti-dumping duty, the impugned order holds though imposed by order dated 30th November, 2004 was a result of enquiry from period 1st April, 2002 to 30th September, 2003 and thus relevant to determine the ALP. (b) The only grievance of the Revenue urged before us in respect of the ALP of the imported pigments is that it did not deal with the e-mail dated 27th August, 2002 submitted by the Assessee. This e-mail, according to the Revenue evidences the fact that the Assessee was deliberately following a predatory pricing policy in India with a view to finish local competition. This according to the Revenue will establish that the import of pigments is at a price lessor then ALP. Therefore, the question ought to be admitted for consideration. (c) We are unable to understand the grievance of the Revenue. Chapter X of the Act provides for computation of income arising from an International Transaction on the basis of the ALP in respect of transactions between AEs. Section 92(3) of the Act, which is part of Chapter X of the Act provides that the Transfer Pricing provisions will not apply where it results in reduction of income chargeable to tax. The result of accepting the Revenue's contention that the import of pigments is at a price lower than the ALP, would increase the import price of pigments, resulting in a reduction in income chargeable to tax. This is not permitted. Therefore, 15 ITA 4301/Mum/2025 Unilever India Exports Limited the reliance upon the e-mail dated 27th August, 2002 submitted by the Assessee establishes a pricing policy with a view to finish local competition, does not in any manner have any impact on determining the ALP on import of pigment. The finding arrived at by the Tribunal on the basis of imposition of anti- dumping duty by the Customs is not challenged before us. The finding of the Tribunal that no adjustment is called for in the price paid by the Assessee for import of pigments for its AE's is a finding of fact which is not shown to be perverse and/or arbitrary. (d) In the above view, question as formulated in respect of import of pigment does not give rise to any substantial question of law. Hence, not entertained. (II) Technical knowhow/Consultancy Fee:- (a) The Respondent-Assessee had entered into an agreement with its AE to provide technical knowhow/consultancy in 12 fields as indicated therein for a consideration of Rs. 1.57 Crores. During the subject Assessment Year, the Respondent-Assessee availed services of its AE during the subject Assessment Year only in three out of twelve fields listed in the agreement. The TPO, therefore, proceeded to hold that the entire consideration of Rs. 1.57 Crores is attributable to the three technical services which the Respondent- Assessee availed of and held that no consideration was payable in respect of nine services provided for in the agreement. Thus the entire payment of Rs. 1.57 Crores was attributable only to the three services availed out of the twelve listed out in the Agreement. It further held that only Rs. 40 lakhs could be considered as ALP attributable to three services and made adjustment of Rs. 1.17 Crores resulting in its addition to the taxable income. In appeal, the CIT (A) upheld addition of Rs. 1.17 Crores made and taxable income consequent to the adjustment made on the account of technical knowhow/consultancy agreement. (b) On further appeal, the impugned order of the Tribunal upheld the submission of Respondent-Assessee that in terms of the Agreement, the AE was obliged to provide technical assistance in the 12 areas listed in the Agreement. There was no obligation upon the Respondent-Assessee to obtain technical assistance in all the 12 areas listed in the Agreement . The Respondent-Assessee could ask for assistance in the areas required and the AE was obliged to give it. It is for the availability of the assistance in all twelve areas that the consideration was paid. Thus, no adjustment was required. It further held that the entire Transfer Price Adjustment was done by the Revenue without having been applied any of the methods prescribed under Section 92C of the Act to determine at the ALP. Consequently, the determination of ALP done by the Assessing Officer/TPO could not be justified. It further recorded the fact that no transfer pricing exercise was done by the Assessing Officer/TPO to determine the value of the services received by the Respondent-Assessee in respect of the three services which it had availed of from its AE before holding that the ALP in this case is Rs. 40 lakhs. This was became no exercise to bench mark it with comparable cases was done. Therefore, the consideration payable for the services availed of by the Respondent- Assessee to determine the ALP was not carried out. In the above view, the Tribunal allowed Respondent-Assessee's appeal on the above issue. 16 ITA 4301/Mum/2025 Unilever India Exports Limited (c) The grievance of the Revenue before us is that services only in three areas had been availed of by the Respondent-Assessee from its AE out of the twelve areas listed in the Agreement. Therefore, the consideration paid to the AE is only attributable to the services received/availed. (d) The finding of the Tribunal that the TPO has not applied any of the method prescribed under Section 92C of the Act to determine the ALP in respect of fees for technical knowhow/consultancy fee paid by the Respondent-Assessee to its AE is not disputed before us. Further, the finding of the Tribunal that even in respect of three fields where Respondent- Assessee had availed the services, no exercise to bench mark the same with similar transactions entered into between independent parties was carried out before holding that the ALP in the three areas availed is Rs. 40 lakhs, is not disputed. The finding of the Tribunal that the agreement for technical knowhow/consultancy was in respect of all the twelve services and Respondent-Assessee could avail of all or any one of these twelve areas listed out in the agreement as and when the need arose. We find the Agreement is similar to a retainer agreement. Consequently, the finding of the Assessing Officer attributing nil value to nine of the services listed in the agreement which were not availed of by the Respondent-Assessee in the present facts was not justified. Moreover, not adopting one of the mandatorily prescribed methods to determine the ALP in respect of fees of technical services payable by the Respondent-Assessee to its AE, makes the entire Transfer Pricing Agreement unsustainable in law. (e) In view of the above, the finding of fact arrived at by the Tribunal that Rs. 1.57 Crores paid by it to its AE is in respect of its right to avail and the obligation of the AE to provide technical assistance in any of the twelve services listed out in the technical knowhow agreement entered into between Respondent-Assessee with its AE is not shown to be perverse. The view taken by the Tribunal in the present facts is a possible view. (f) Accordingly, question as framed for our consideration, does not give rise to any substantial question of law. Thus, not entertained.” 5. The Ld.AR stated that the said issue is squarely covered by the order of the Tribunal in assessee’s own case for AY 2017-19 & 2018-19 reported in (2023) 152 taxmann.com 60 (Mumbai - Trib.), date of order 11/05/2023. The relevant paragraphs of the said order are reproduced as below:- “14. We heard the parties and perused the material on record. We notice that the co-ordinate bench of the Tribunal has been consistently holding the impugned issue in favour of the assessee. The co-ordinate bench in assessee's own case (supra) while considering the issue of payment of inter group services has held that - 17 ITA 4301/Mum/2025 Unilever India Exports Limited “16. It has been further submitted that the Tribunal in assessee's own case for AYs. 2012- 13 and 2013-14 have decided this issue in favour of the assessee. The relevant observation of the Tribunal reads as under- \"30. We have considered rival submissions and perused the material on record. Undisputedly, the assessee has benchmarked the payment of royalty under central service agreement by applying CUP method. Whereas, the Transfer Pricing Officer has determined the arm's length price of the royalty payment at nil on purely conjecture and surmises without following any prescribed method. In fact, the observations of the Transfer Pricing Officer on the issue are very cryptic and non-speaking. Therefore, simply for the reason that the determination of arm's length price by the Transfer Pricing Officer is not in accordance with the statutory provisions, the adjustment made deserves to be deleted. In any case of the matter, it is noticed by us that under the very same agreement, the AE is paid royalty by Hindustan Unilever Ltd. for domestic sales and by the assessee in respect of export sales. While examining the royalty payment in case of Hindustan Unilever Ltd in assessment year 2013-14, the Transfer Pricing Officer has accepted royalty paid to the AE to be at arm's length. Similarly, in the order passed under section 92CA(3) of the Act in respect of AE, the Transfer Pricing Officer has accepted the royalty payment to be at arm's length. That being the case, the arm's length price of royalty payment at the hands of the assessce cannot be determined at nil. In any case of the matter, it is not disputed that the assessee is remunerated by the AE on cost plus mark-up basis. That being the case, royalty paid to the AE forms part of the cost hase of the assessee on which it has charged mark-up @ 9%. In the aforesaid circumstances, if the payment of royalty to the AE is disallowed by determining the arm's length price at nil, then logically the income of the assessee also should be reduced. This is the view expressed by the Co-ordinate Bench in Mercer Consulting Pvt. Lid. (supra). Thus, considering the overall facts and circumstances of the case and keeping in view the ratio laid down in the decisions cited before us, we are of the view that the adjustment made by determining the arm's length price of royalty payment at nil deserves to be deleted. Accordingly, we do so. Grounds are allowed.” 17. Thus, in sum and substance, the observation of the Tribunal is summarized as under:-  The Assessee had benchmarked this transaction using CUP method, whereas the TPO has determined the ALP as Nil on purely conjectures and surmises without following any prescribed method. 18 ITA 4301/Mum/2025 Unilever India Exports Limited  Under the very same agreement, Hindustan Unilever Ltd. pays royalty on domestic sales and the Assessee pays for export sales. In HUL's case for AY 2013-14, the TPO had accepted the payment to be at ALP  Even in the case of Unilever Pic, the TPO had accepted the transaction to be at ALP for AY 2013-14  The Assessee is remunerated by the AE on cost-plus and the royalty paid to the AE forms part of the cost base of the Assessee on which it has charged mark-up. In such a case, disallowance of royalty would reduce the income of the Assessee, which is not given the overall facts and circumstances, the Tribunal deleted the adjustment 18. After considering the facts and material on record and the relevant finding given in the impugned order as well as the order of the Tribunal in earlier years, we find that before the authorities below, the assessee has given all the detailed submission and analysis not only demonstrating the rendition of central services but also commensurate benefits derived from such services to the assessee. This is evident from the details discussed above has called upon by us during the course of hearing. Accordingly, it cannot be held that either there was no rendition or no benefit as observed by the Id. TPO. Apart from that the CUP analysis done by the assessee by taking four comparables in both the assessment years in providing advisories, management advisory, strategic planning, business administration services, marketing plan, protocols, procedures, etc., wherein mean margin determined was 2.75% in A.Y.s 2015-16 and 5.75% in A.Y.s 2016-17; whereas the assessee has made payment at 0.50% in A.Y.s 2015-16 and 0.75% in 2016-17. Thus, the payment made by the assessee for Central services are at ALP and the adjustments made by the Id. TPO is deleted.\" 15. For the year under consideration, on perusal of records, we notice that the assessee has submitted evidences not only demonstrating the rendition of central services but also commensurate benefits derived from such services to the assessee. Further the assessee has done the benchmarking analysis similar to AYs 2015-16 and 2016-17 for the year under consideration also and therefore the impugned issue is squarely covered by the above decision of the co-ordinate bench and therefore respectfully following the same we direct the AO/TPO to delete the addition made towards inter group services.” 6. The Ld.DR relied on the orders of the revenue authorities. But unable bring any contrary judgment against the submission of the Ld. AR. 19 ITA 4301/Mum/2025 Unilever India Exports Limited 7. We have heard the rival submissions and perused the material available on record. The grievance of the assessee pertains to the action of the Transfer Pricing Officer (TPO) in proposing an ad-hoc transfer pricing adjustment of Rs.6,97,76,862/- on account of royalty payments for central services. The assessee has appropriately benchmarked the intra-group service payments by adopting the CUP method, which is one of the prescribed methodologies under the Income-tax Rules, and has furnished documentation substantiating the rendition of services for both assessment years under consideration.The TPO, although claiming to have applied the “Other Method,” has not brought on record any comparable transaction to substantiate the determination of the arm’s length price. Instead, the TPO has resorted to an ad-hoc benchmarking approach, which is contrary to the mandate of section 92C of the Act. The Hon’ble Bombay High Court has, in several decisions, categorically held that ad-hoc transfer pricing adjustments unsupported by any of the prescribed methods are legally unsustainable. We respectfully rely upon the decision in the case of Merck Ltd. (supra). For AYs 2012-13 and 2013-14, in the assessee’s own case in ITA Nos. 2096 & 6648/Mum/2017, order dated 31/07/2019, the Co-ordinate Bench of the ITAT, Mumbai (J-Bench) deleted the transfer pricing adjustment arising from an identical determination of the arm’s length price by the TPO. As the facts in the present appeals are materially identical, the ratio laid down in the said decision would apply mutatis mutandis to the assessment years under consideration. Similarly, for AYs 2015-16 and 2016-17, in the assessee’s own case reported at [2023] 151 taxmann.com 250 (Mumbai-Tribunal) by order dated 31/03/2023, the ITAT, Mumbai (J-Bench) deleted the transfer pricing addition made on 20 ITA 4301/Mum/2025 Unilever India Exports Limited identical grounds. Again, as the facts are identical, the findings therein shall equally apply to the present appeals. Furthermore, for AYs 2017-18 and 2018-19, the Tribunal has also deleted the transfer pricing additions arising from identical determinations of the arm’s length price. In light of the factual parity with earlier years and the consistent view taken by the Co-ordinate Benches in the assessee’s own cases (supra), we find merit in the assessee’s contention. Accordingly, the ad-hoc transfer pricing adjustment of Rs.6,97,76,862/- made by the Ld. AO/TPO on account of royalty for central services is deleted. The assessee's appeal on Ground Nos. 1 to 5 stands allowed. 8. Ground No. 6 relates to the levy of interest under section 234C of the Act, which is consequential in nature. Ground No. 7 pertains to the imposition of penalty under section 270A of the Act, which is also consequential. Both grounds are therefore dismissed as infructuous. Ground No. 8 raises a legal issue; however, since the appeal of the assessee has been allowed on merits, this ground is rendered academic and is accordingly kept open. 9. In the result, appeal filed by the assessee bearing ITA No.4301/Mum/2024 is allowed. Order pronounced in the open court on 22nd day of May, 2025. Sd/- sd/- (MS. PADMAVATHY S.) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 22/05/2025 Pavanan 21 ITA 4301/Mum/2025 Unilever India Exports Limited Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai "