2021 (9) TMI 1025 - AT - Income Tax

TP Adjustment - determination of Arm's Length Price (ALP) in respect of an international transaction of rendering Information Technology enabled Services (ITeS) by the assessee to its Associated Enterprise (AE) - US AE transactions and non-US AE transactions - Appellant prays for the application of the mark-up agreed in the Mutual Agreement Procedure with respect to the international transaction of provision of Information Technology enabled Services ('ITeS') to the Associated Enterprises ('AEs') based in the United States of America ('US') to the international transaction of provision of ITeS to the AEs based outside the US, which amounts to less than 6% of the total revenue - HELD THAT - In GLOBAL E-BUSINESS OPERATIONS P. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -11 (3) , BENGALURU 2017 (1) TMI 1618 - ITAT BANGALORE remanded the issue to the TPO for considering afresh. The Tribunal reasoned that the percentage of transaction with the AE for which MAP proceedings were concluded and the transactions with the other AEs were not available and only if the percentage is less, the plea of the Assessee could be accepted. In the light of the findings available with regard to percentage of US AE transactions and non-US AE transactions, it may not be necessary to remand the issue for fresh consideration as held in the case of Amazon Development Centre India Pvt. Ltd., 2018 (5) TMI 343 - ITAT BANGALORE - The parties did not make any distinction between US AE transactions and non-US AE transactions. In such circumstances, we are of the view that the margins accepted in the MAP proceedings with the US AE will offer a valuable guide and can be adopted as the margin to non-US AE transactions also. We hold and direct accordingly. In view of the conclusions of the preliminary issue on the additional ground, we are of the view that the grounds raised by the assessee in this appeal may not require any consideration.

Summary

Issues:
Appeal against CIT(A) order on TP adjustment for international transaction of ITeS. Admission of additional ground for applying MAP resolution to TP adjustment. Application of MAP resolution to non-US AE transactions. Comparison of decisions by ITAT Bengaluru Bench.

Analysis:
The appeal pertains to a TP adjustment made by the TPO on the ALP determination for an international transaction of providing ITeS to an AE. The CIT(A) partly allowed the appeal, leading to the assessee challenging the order. An additional ground was filed seeking application of the MAP resolution to the TP adjustment, specifically for transactions with non-US AEs. The MAP request was resolved for transactions with the US AE, covering 94% of the TP adjustment. The assessee requested to extend this resolution to transactions with non-US AEs, constituting 6% of the adjustment. The Tribunal admitted the additional ground for adjudication based on established legal principles.

The assessee's argument was supported by the factual background where 94% of ITeS revenue was from the US AE, resolved under MAP. The remaining 6% revenue was from AEs in the UK and domestic parties. The assessee sought to apply the ALP rates accepted in the MAP proceedings for US AE transactions to non-US AE transactions. Citing precedent in Amazon Development Centre India Pvt. Ltd. case, the Tribunal found merit in the assessee's claim due to the absence of distinctions in accounts or TP analysis.

The ITAT considered the decisions in various cases cited by the parties. While the DR relied on remanded cases for fresh consideration, the Tribunal differentiated the present case due to the lack of distinction between US and non-US transactions. It was held that margins accepted in MAP proceedings with the US AE could guide the ALP for non-US AE transactions as well. Consequently, the appeal was partly allowed based on the application of MAP resolution to non-US AE transactions. The Tribunal concluded that the grounds raised by the assessee may not require further consideration in light of this decision.