SAS Institute (India) Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Mumbai ITAT: Commercial Dependence Alone Does Not Create an Associated Enterprise Relationship Under Section 92A
The Mumbai ITAT held that commercial dependence or exclusivity in a distribution arrangement, by itself, does not establish an Associated Enterprise relationship under Section 92A of the Income-tax Act, 1961. In appeals for A.Ys. 2008-09 and 2010-11, the dispute principally concerned transfer pricing adjustments relating to royalty paid for software distribution and compensatory payment transactions. The Tribunal held that Section 92A(1) lays down the foundational requirement of participation in management, control or capital, while Section 92A(2) specifies circumstances relevant for determining such participation and cannot be read wholly independently. Since the Revenue had not demonstrated ownership, voting rights, management participation, appointment of directors or financial control over MIA Computers Ltd., Israel, it could not be treated as an AE merely under Section 92A(2)(g). Consequently, its distribution agreement could not be rejected as an uncontrolled transaction on that ground alone. However, the Tribunal directed the TPO to examine CUP comparability under Rule 10B(3), including contractual differences and reasonably accurate adjustments. The appeals were allowed for statistical purposes.
The Mumbai Bench of the Income Tax Appellate Tribunal, Bench H, comprising Smt. Beena Pillai, Judicial Member, and Shri Jagadish, Accountant Member, heard ITA Nos. 6671 & 6672/MUM/2019 concerning Assessment Years 2008-09 and 2010-11. The hearing concluded on 29.06.2026 and the order was pronounced on 17.08.2026. The appeals arose from final assessment orders dated 23.08.2019 passed by the ACIT-1(3)(1), Mumbai.
