2024 (6) TMI 1146 - HC - Income Tax

TP Adjustment - International Transaction in respect of Management Support services - whether Tribunal was justified in law in not appreciating the fact that the benefit test for intra group services ought to be evaluated every year and that reliance on subsequent years APA agreement to hold that the alleged services meet the benefit test criteria ? - whether the Tribunal was justified in law in not appreciating the fact that the assessee is making payment to its foreign AE for those alleged services which are stewardship in nature and therefore the arm s length price for such services should be Nil ? - functional comparability of the company as identified by the TPO and affirmed by DRP holding inter alia that the principle laid down in the APA for the subsequent year should be followed ? HELD THAT - In the light of the certain subsequent developments the substantial questions of law raised in this appeal are not required to be considered and answered. The order passed by the learned Tribunal in 2020 (12) TMI 551 - ITAT KOLKATA have been given effect to and an order has been passed on the said effect. In the light of the same nothing further survives to adjudicate in this appeal. Accordingly the appeal stands disposed of and substantial questions of law are left open.

Summary

Issues:
1. Revision of adjustment made by the Assessing Officer/Transfer Pricing Officer for International Transaction in respect of Management & Support services.
2. Evaluation of benefit test for intra group services and reliance on subsequent years APA agreement.
3. Payment to foreign AE for stewardship services and determination of arm's length price.
4. Functional comparability of the company as identified by the TPO and following the principle laid down in the APA for the subsequent year.

Analysis:

1. The appeal was filed under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the assessment year 2009-10. The substantial questions of law raised included whether the Tribunal was justified in revising the adjustment made by the Assessing Officer/Transfer Pricing Officer for International Transaction in Management & Support services.

2. The Tribunal was also questioned on whether it was correct in not appreciating the need to evaluate the benefit test for intra group services annually and whether reliance on subsequent years APA agreement was justified in determining if the alleged services met the benefit test criteria.

3. Another issue raised was regarding the payment made to the foreign Associated Enterprise (AE) for stewardship services. It was contended that since the services were stewardship in nature, the arm's length price for such services should be Nil.

4. The Tribunal's decision on distinguishing the functional comparability of the company as identified by the Transfer Pricing Officer (TPO) and affirmed by the Dispute Resolution Panel (DRP) was also challenged. It was argued that the Tribunal should have considered the principle laid down in the Advance Pricing Agreement (APA) for the subsequent year.

5. However, due to subsequent developments and the order passed on the effect of ITAT 633 and 442/Kol/2016, the substantial questions of law raised in the appeal were not required to be considered further. Consequently, the appeal was disposed of, and the substantial questions of law were left open for future adjudication.

6. The application GA/2/2024 was closed as a result of the decision, and the appeal was concluded based on the developments and orders passed in related matters.