Corporate Worldwide Stay LLP Vs Assessment Unit (ITAT Mumbai)
ITAT Mumbai: TP Adjustment on Alleged Reimbursement Transactions Set Aside for Fresh FAR Analysis
The Mumbai ITAT (K Bench) dealt with transfer pricing adjustments made in the case of Corporate Worldwide Stay LLP for AY 2020-21, arising from transactions with its Associated Enterprise (AE) in Mauritius. The TPO had treated reimbursement of booking and accommodation expenses as an international transaction, applied the Profit Split Method (PSM), and attributed a substantial portion of AE’s profits to the Indian LLP. The DRP partly reduced the adjustment but sustained an addition of ₹90.45 lakh.
The Tribunal held that:
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The true nature of transactions—whether pure reimbursements or value-adding services—was not conclusively examined.
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The Functions, Assets and Risks (FAR) profile of both the assessee and the AE was inadequately analysed.
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Adoption of the Profit Split Method lacked clear reasoning and justification.
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Profit attribution based on assumptions (such as absence of AE employees or expenses) required verification with proper documentary evidence.
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Key issues including applicability of section 92, definition of international transaction u/s 92B, correct most appropriate method, and penalty u/s 270A were not dealt with in a speaking manner.
Accordingly, the ITAT set aside the assessment order and TP adjustment and remanded the matter to the AO/TPO for de novo adjudication, directing a fresh FAR analysis and a reasoned order after granting due opportunity to the assessee. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
