Identical Transfer Pricing Adjustments on Management Fees Deleted Following Consistent ITAT Precedents in Assessee’s Own Case

ORDER

Pawan Singh, Judicial Member.- This appeal by assessee is directed against the order of ld. CIT(A)dated 09.10.2024 for Assessment Year (AY) 2020-21. The assessee has raised following grounds of appeal:

1.1. On the facts and in the circumstances of the case and in law, the Hon’ble Dispute Resolution Panel (‘DRP’) / Learned Transfer Pricing Officer (‘Ld. TPO’) / Learned Assessing Officer (‘Ld. AO’) have erred, in making transfer pricing adjustment of INR 112,92,51,158/- to the value of international transactions in respect of payment of management fees to its Associate Enterprise (‘AE’) i.e. NTT Asia Pacific Holdings Pte. Ltd. (‘NTT Asia’).

1.2. The Hon’ble DRP / Ld. TPO/Ld. AO have erred in law by considering management fees paid as a separate class of transaction and segregating it for benchmarking purposes.

1.3. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in rejecting the TNMM analysis adopted by the Appellant to benchmark management fees paid and have also failed to demonstrate how the CUP/Other Method is the most appropriate method for benchmarking the transaction and alleging that the provisions of Rule 10B of the Income Tax Rules, 1962 have been contravened.

1.4. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in facts and law in not considering or ignoring the detailed analysis and evidence presented by the Appellant as regards the benefits received by the Appellant towards the management services availed from its AE and rejecting such detailed analysis of the Appellant without providing proper justification.

1.5. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in rejecting the detailed documentary evidence with respect to various categories of services received by the Appellant, by making a generic comment that the activities were routine in nature, part of shareholder activities, evidence do not lead to availment of services and ignored the breakup of the costs submitted by its AE.

1.6. The Hon’ble DRP/Ld. TPO/Ld. AO have also erred in holding that various evidence submitted by the Appellant in the form of agreement, invoices, director certificate and other documents maintained are self-generated and vague despite these evidence being maintained in accordance with the law.

1.7. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in ignoring the evidence demonstrating that the benefit received by the Appellant was more than the payment made to its AE.

1.8. The Hon’ble DRP / Ld TPO / Ld. AO have erred in holding that the allocations are at the discretion of the Management of the Head Office/Singapore and in stating that the underlying data and information have not been submitted for examination.

1.9 On the facts and in the circumstances of the case and in law, the Hon’ble DRP/Ld. TPO have erred in alleging that the gain in the form of discounts on the purchase price is merely on account of membership of the Appellant in the multinational group and not because of efforts of the AE.

1.10. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in ignoring the fact that the management fee is for the bundle of services and the Appellant has the right to avail any of the services mentioned in the agreement.

1.11. The Hon’ble DRP have erred in disallowing management fee under section 37 of the Act as an alternate ground when the same was not part of the draft assessment order.

1.12. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in not granting any relief on account of the guarantee fee relating to the corporate guarantee extended by the AE which is bundled with management services rendered and also erred in stating that issuance of corporate guarantee by the AE is in the nature of managerial activity/shareholder activity requiring no compensation.

1.13. The Hon’ble DRP / Ld. TPO/Ld. AO have erred in not considering the Mumbai Income-tax Appellate Tribunal’s decision in the Appellant’s own case for AY 2011-12 and AY 2017-18 when the facts relating to the availment of services have remained the same.

2. Ground 3: Additions made in the intimation u/s 143(1) of INR 18,10,83,967/

2.1. The Ld. AO has erred in making an adjustment of INR 18,10,83,967/-for the refund received by the Appellant for Customs and VAT, as it should not be considered as an income under the Income-tax Act.

2.2. The action of the AO has resulted in the addition of an amount not claimed as an expense by the Appellant for the year under consideration.

On the facts and circumstances of the case and in law, the Ld. AO have erred in granting TDS credit of INR 54,38,50,402/- against INR 54,62,85,108/- as claimed in the return of income filed by the Appellant.

The Appellant, therefore, prays the Hon’ble Members to direct the learned AO to grant balance credit for TDS of Rs. 24,34,707/-

On the facts and circumstances of the case and in law, the Ld. AO has erred in levying interest u/s 234A/234B/234C/234D/234F as it will not be applicable.

The Appellant being aggrieved is filing the present appeal. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, to enable the Hon’ble Members to decide this appeal according to law.

2. Rival submissions of both the parties have been heard and the record perused. The learned AR of the assessee submits that the substantial ground of appeal relates to transfer pricing adjustment on account of an international transaction in respect of payment of management fees to its Associate Enterprise, namely, NTT Asia Pacific Holdings PTE Limited (NTT Asia). The lower authorities made the addition/ adjustment on the basis of their findings in earlier years. In earlier years, the same issue has been decided in favour of the assessee. A copy of the order of the Tribunal for AY 2020-21 in NTT India (P.) Ltd. v. Dy. CIT  (Mumbai – Trib.)/ITA No. 5018/Mumbai/2024, dated 05-05-2026, has been filed.The learned AR of the assessee, while explaining the business activities of the assessee, submits that the assessee is engaged in trading of networking products and related services such as training, maintenance, installation, consultancy, facility management, sourcing and systems integration, which has been accepted by the Transfer Pricing Officer (TPO). The TPO, in paras 6.2 and 6.3 of his order, relied upon the orders for earlier years. The Tribunal, in AY 2020-21, after considering the submissions of the assessee and on the basis of the orders of earlier years, deleted the similar adjustment. Thus, this grounds of appeal raised by the assessee are squarely covered in favour of the assessee.

3. On the other hand, the learned Commissioner of Income Tax -Departmental Representative (ld. CIT-DR) for the Revenue supported the order of the lower authorities.

4. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We have also seen the order of the Tribunal in the assessee’s own case for AY 2018-19, which has been followed in AY 2020-21 on a similar set of facts. For completeness of the order, the relevant part of the order of the Tribunal in NTT India (P.) Ltd. (supra) AY 2020-21 in is extracted below.

“2. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that the ld. AR of the assessee submits that substantial grounds of appeal, which is ground No1, is covered in favour of the assessee in its own case for earlier years, wherein similar transfer pricing adjustment has been deleted by Tribunal, copies of such decisions are already placed on record. While explaining the facts, the ld. AR of the assessee submits that Transfer Pricing Officer (TPO) suggested transfer pricing adjustment of Rs. 151,57,42,646/-on account of payment of Management Fees. The appellant-assessee is engaged in the trading of networking products and in providing related services such as training, maintenance, installation, consultancy, facility management, outsourcing and systems integrationthe area of information communications systems, and computer networking. The business activities of the assessee are accepted by Transfer Pricing Officer (TPO) on page 1 of his order.The appellant-assessee has paid an amount of Rs. 166.32 crores as management fee to its Associated Enterprise (AE), in consideration of providing various services in the field of business development, corporate communication, brand management, human resources, information technology, finance etc. The T.P.O. assessing officer (A.O.) has made an adjustment of Rs. 151.57 crores, which has been upheld by the Ld. DRP.The assessee has entered into agreement dated 01^stApril 2014 with its Associated Enterprises (AE) vide which it has availed various management services like corporate communication, brand management, human resources, information technology etc. The assessee has benchmarked this transaction under entity level by adopting Transactional Net Margin Method (TNMM) and since the net margin earned by the appellant is in accordance with the provisions of section 92C(2), the transaction of payment of management fee is considered at arm’s length, such facts are also recorded at page 3 of TPO’s order. The appellant has filed various evidence in support of the management services availed from the AE. According to the TPO and ld. DRP, some services are not being rendered, and some are in the nature of shareholder activity.The appellant has also submitted sample third-party invoices for the services availed from the vendors and paid by the AEs to the tune of Rs. 14,75,29,959/-(proportionate share of the appellant), which was allowed by the TPO. The ld. AR of the assessee submits that similar issue of arm’s length price of management fee received has arose in earlier years,such facts are recorded by TPO in para 6.3 on page 3 of his order. It was also noted that the issue is repetitive in nature and that similar additions were made in earlier years. However, on appeal before Tribunal it was held in favour of assessee, copy of order in appeal for AY 2011-12 in ITA No. 2280/M/2026 is filed. Against the decision of Tribunal,the Departmental filed appeal before Hon’ble Bombay High Court is dismissed. On similar issue the order of Tribunal in AY 2017-18 and AY 2018-19 is also filed on record on record. No further appeal is filed by department in AY 2017-18 & 2018-19 is filed before High Court. Further, the assessee filed applications under Vivad se Vishwas Scheme for A. Y. 2010-11, A. Y. 2012-13 to 2016-17 wherein the identical dispute has been settled by considering it to be covered in favour of assessee by the decision of the Hon’ble Bombay High Court and thereby enabling the assessee to pay only 50% of the disputed tax. The TPO order for the assessment year under consideration (A.Y. 2020-21) is similarly worded as the TPO’s order for A.Y. 2018-19, copy of which is also filed on record. Hence, the matter is fully covered by earlier years’ decisions stated above.

3. On the other hand, the ld. CIT-DR for the revenue supported the order of TPO/AO and DRP.

4. We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. We have also deliberated on the decisions of Tribunal in assesses own for earlier assessment years. On careful consideration of the facts, we find that this issue is repetitive in earlier various assessment years. In AY 2011-12, similar adjustment / additions were suggested by TPO, which were confirmed by DRP and on further appeal before Tribunal in ITA No. 2280/Mum/2016, entire additions were deleted vide order dated 16.08.2017. The order of Tribunal in AY 2011-12 was followed in AY 2017-18 in ITA No. 722/Mum/2022 dated 04.09.2023. we find that on similar issue/ adjustment in AY 2018-19 in ITA No. 2491/Mum/2022 dated 24.06.2025, it was argued on behalf of the assessee that Bombay High Court in Merk Limited (389 ITR 70) held that the payment of management fee does not require separate benchmarking and therefore, if overall profit margin of assessee at entity level is comparable under TNMM with the comparable no adjustment is required. Even, if the management services fee requires separate benchmarking, no adjustment is required for the reasons that the assessee received services under umbrella agreement of intra group services. We also find that such stand of the assessee was accepted in earlier years on the basis of High Court decision. We find that Tribunal by following orders in assesses case for earlier years allowed the appeal after detailed discussions, and also extracted the relevant part of decision of Tribunal in AY 2017-18 dated 04.09.2023. Thus, considering the consistent decisions of Tribunal, which has been followed in earlier years. Thus, following the principal of consistency and the decisions of coordinate benches of Tribunal on same grounds of appeal, ground No. 1 of the appeal is allowed with similar directions.”

5. Thus, considering the consistent decision of the Tribunal, which has been followed in earlier years, and respectfully following the same, Ground No.1 of appeal is allowed with similar observations. In the result, Ground No. 1 of the appeal of the assessee is allowed.

6. Ground No. 2 relates to addition made in the intimation under section 143(1) of Rs. 18.10 crore.

7. The learned AR of the assessee submits that the AO/CPC made the addition by way of adjustment in the intimation under section 143(1). The assessee received refunds from customs and VAT/GST during the year under consideration, which has been treated as income by the assessee while processing the return. The refund of taxes does not bear the character of income under the provisions of the Income-tax Act, as the same are balance sheet items as per the recognised method of accounting, which has been followed by the assessee. Thus, the amounts were never claimed as expenses and there was no question of treating the refund thereof as income. The action of the CPC has resulted in an incorrect addition, inasmuch as the amounts are not debited to the Profit and Loss Account and are causing prejudice to the assessee. The learned AR of the assessee submits that the jurisdictional Assessing Officer may be directed to verify the same and allow relief to the assessee. The learned AR further submits that a similar issue has been decided by setting aside the relevant ground of appeal in AY 2020-21 vide order dated 05-05-2026. Therefore, similar directions may be given to allow relief to the assessee.

8. On the other hand, the learned CIT-DR submits that similar directions may be given to the AO as were given in AY 2020-21.

9. We have considered the submissions of both the parties and have gone through the orders of the lower authorities and the relevant record placed before us. We find that the parties have not disputed the facts. The CPC made an adjustment on account of refunds from custom and VAT/GST and treated the same as income of the assessee. We find that refund of tax does not partake the character of income, being a balance sheet item. Thus, we direct the jurisdictional Assessing Officer to verify the facts and allow relief to the assessee in accordance with law.In the result, Ground No. 2 is allowed for statistical purposes.

10. Ground No. 3 relates to short grant of TDS credit of Rs. 24,347.07.

11. The learned AR of the assessee submits that the Assessing Officer has not allowed credit of TDS aggregating to Rs. 24,34,707. The AO may be directed to verify the facts and allow credit thereof. The learned CIT-DR has not objected to such directions.Considering the fact that the parties are not in dispute so far as the short credit of TDS is concerned, we, therefore, direct the AO to verify the TDS and allow credit thereof. Needless to direct that, at the time of allowing the credit, the AO shall provide an opportunity to the assessee.In the result, Ground No. 3 of the assessee’s appeal is allowed for statistical purposes.

12. Ground No. 4 relates to levy of interest under sections 234A, 234B, 234C and 234D/234F.The learned AR of the assessee submits that the AO levied interest aggregating to Rs. 1.84 crore and directly included the same in the total interest levied without providing bifurcation thereof under the respective sections under which the interest was charged. In the absence of a section-wise breakup, the assessee is unable to verify the correctness of the computation of income. Therefore, the jurisdictional Assessing Officer (JAO) may be directed to provide a section-wise breakup of the interest levied and to recompute the same in accordance with law.The learned CIT-DR submits that, if the Bench thinks appropriate, directions may be given to the JAO. Considering the submissions of the learned AR of the assessee, the JAO is directed to recompute the consequential interest under the various sections and provide a clear bifurcation thereof to the assessee.In the result, Ground No. 4 is also allowed for statistical purposes.

13. In the result, appeal filed by assessee is partly allowed.