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2025 (1) TMI 965 - AT - Income TaxProtective addition made concerning the payments made under the head information technology fees - HELD THAT - Since the assessee has already settled its dispute with competent authority under MAP and has also accepted the adjustments made by the TPO on account of information technology fees protective addition made by the AO in the present year is not tenable and hence deserves to be deleted. It is settled position of law that when substantial addition has been confirmed/ settled as in this case then protective addition has no legs to stand. In assessment year 2011-12 also the amount has been paid by the assessee on account of information technology fees. This amount has also been accepted by the assessee in MAP proceedings before the competent authority. Therefore in this year also no further disallowance u/s 37 of the Act on protective basis is required to be sustained. Addition made under the head commission on sales - For AY 2013-14 is concerned the amount in dispute is payment on commission made by the assessee on sales. Perusal of page A2 of the paper book which is the part of communication made by competent authority would show that amount as also been accepted by the assessee under the head commission on sales . It is relevant to mention here that this addition was in fact made by the ld. DRP during proceedings before the dispute resolution panel. Be that as it may since the assessee has already offered this amount in MAP no protective addition as made by the ld. DRP deserve to be sustained. Appeals of the assessee are allowed. 1. ISSUES PRESENTED and CONSIDERED The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Protective Addition on Information & Technology Fees (AY 2010-11 and 2011-12) Relevant Legal Framework and Precedents: The protective addition was made by the AO under the Income Tax Act, 1961, specifically concerning the payments made by the assessee to its Associated Enterprises (AE) under the head "information & technology fees." The addition was made on a protective basis, pending the final outcome of the transfer pricing adjustments. Court's Interpretation and Reasoning: The court noted that the assessee had already settled the dispute with the competent authority under the MAP. The MAP proceedings culminated in the acceptance of the adjustments made by the TPO, which rendered the protective addition by the AO untenable. Key Evidence and Findings: The court referred to the communication from the competent authority, which indicated that the amount of Rs. 2,13,24,188/- for AY 2010-11 and Rs. 1,91,02,847/- for AY 2011-12 had been settled and accepted by the assessee under the MAP proceedings. Application of Law to Facts: The court applied the principle that when a substantial addition has been confirmed or settled, any protective addition has no legal standing. Since the amounts were settled under MAP, the protective additions were deemed unnecessary. Treatment of Competing Arguments: The court considered the arguments from both the assessee and the Departmental Representative (D.R.). The D.R. relied on the orders of the authorities below, but the court found the MAP settlement to be decisive. Conclusions: The court concluded that the protective additions for AY 2010-11 and 2011-12 should be deleted, as they were already covered by the MAP proceedings. Issue 2: Addition on Commission on Sales (AY 2013-14) Relevant Legal Framework and Precedents: The addition was made under the head "commission on sales" during the proceedings before the Dispute Resolution Panel (DRP). Court's Interpretation and Reasoning: The court observed that the amount of Rs. 22,62,95,388/- had been accepted by the assessee under the MAP proceedings, indicating that the dispute was resolved. Key Evidence and Findings: The court referred to page A2 of the paper book, which contained communication from the competent authority showing the acceptance of the amount by the assessee. Application of Law to Facts: The court applied the same principle as in the previous issue, noting that the acceptance of the amount under MAP negated the need for a protective addition. Treatment of Competing Arguments: Similar to the previous issue, the court considered the D.R.'s reliance on lower authorities' orders but found the MAP settlement to be conclusive. Conclusions: The court concluded that the protective addition for AY 2013-14 should not be sustained, as the amount was already offered in the MAP proceedings. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "It is settled position of law that when substantial addition has been confirmed/ settled as in this case, then protective addition has no legs to stand." Core Principles Established:
Final Determinations on Each Issue:
In conclusion, the appeals of the assessee were allowed, and the court pronounced the order in the open court on 16th December 2024.
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