Lintas India Private Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai decided the cross appeals filed by the assessee and the Revenue for Assessment Year 2010-11 arising from the order of the Dispute Resolution Panel (DRP). The disputes related to transfer pricing adjustments for intra-group services comprising Global Information Services (GIS), Management Service Fee (MSF) services, Multinational Client (MNC) services, and an addition on account of mismatch in Form 26AS (AIR data).
The assessee had entered into various international transactions with its Associated Enterprises (AEs), including payments for GIS, MSF, and MNC services. The Transfer Pricing Officer (TPO) proposed adjustments of Rs. 62,95,226 for GIS services, Rs. 7,88,90,157 for MSF services, and Rs. 19,29,008 for MNC services, after determining that only part of the services had been rendered. The DRP upheld the GIS adjustment but deleted the adjustments relating to MSF and MNC services, leading to cross appeals by both parties.
The Tribunal first examined the transfer pricing issue and held that Section 92C of the Income-tax Act mandates that the Arm’s Length Price (ALP) must be determined by applying one of the prescribed methods. It observed that the TPO had not adopted any prescribed method while determining the ALP and had instead made ad hoc estimations, accepting only a portion of the payments for the services. The Tribunal held that there is no statutory provision empowering the TPO to determine the ALP on an estimation or ad hoc basis. Relying on the judgment of the Bombay High Court in CIT v. Johnson & Johnson Ltd., the Tribunal held that an arbitrary restriction of payments without applying the prescribed transfer pricing methods was not sustainable. Consequently, it directed deletion of the transfer pricing adjustments relating to GIS services, MSF services, and MNC services. Since the matter was decided on this technical ground, the Tribunal stated that the elaborate arguments on the merits of the services became academic and expressed no opinion on those issues.
