ITAT Invalidates TPO's ALP Adjustment for Non-Qualifying Transactions Post-Agreement; Upholds No Tax on Hypothetical Income.

The ITAT held that the TPO erred in deeming international transactions and determining arm's length price (ALP) for the period after cessation/expiry of the service agreement between the assessee and its associated enterprise (AE). The assessee carried out international transactions only during the service agreement period. TPO cannot determine ALP on presumption or notional income for transactions not technically qualifying as international transactions. Comparables selected by TPO were rejected as the assessee's financials were prepared on a non-going concern basis, unlike the comparables. ALP adjustment was deleted as tax cannot be levied on hypothetical income, relying on Supreme Court's decisions in Excel Industries Ltd. and Ravi Kumar Sinha cases. .....

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