BOEING INDIA DEFENSE PRIVATE LIMITED,DELHI vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCL 4(2), C.R. BUILDING, I.P. ESTATE, NEW DELHI, DELHI 110002, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”, NEWDELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITANo.6042/DEL/2024 (AssessmentYear:2021-22) Boeing India Defense Private Limited, vs. DCIT, Circle 4 (2), 3rd Floor, DLF Centre, Sansad Marg, New Delhi. New Delhi – 110 001. (PAN: AACGB0536K) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Sriram Seshadri, CA Ms. Shruti Khimta, AR Ms. Kashish Gupta, CA REVENUE BY : Ms. Anima Barnwal, CIT DR. Date of Hearing : 11.02.2026 Date of Order : 06.05.2026 O R D E R PER S. RIFAUR RAHMAN, AM : 1. This appeal preferred by the assessee is directed against the assessment order dated 29.10.2024passed by the Income Tax Department, Assessment Unit u/s 143(3) read with section 144C(13)/144B of the Income-tax Act, 1961 (for short ‘the Act”) for Assessment Year 2021-22 pursuant to the directions of the Dispute Resolution Panel u/s 144C(5) of the Act raising the following

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grounds of appeal :- “1. On the facts, and circumstances of the case & in law, the final assessment order passed by Ld. Assessing Officer ('Ld.AO') under section 143(3) read with section 144C(13) and section 144B of the Income-tax Act, 1961 ('the Act') is bad in law and barred by time limitation and thus, liable to be quashed. Transfer Pricing adjustment on account of technical fees paid to Boeing Aerospace Operations ('BAO') 2. On the facts and circumstances of the case and in law, the Ld. TPO/ Ld. AO erred in enhancing the income of the Appellant by INR 38,20,29.442 by holding that the international transaction pertaining to availing of technical/training services from its Associated Enterprise (‘AE') does not satisfy the arm's length principle envisaged under the Act. In doing so, the Ld. AO / Ld. TPO erred in: 2.1. not accepting the economic analysis undertaken by the Appellant and undertaking a fresh economic analysis for computation of arm's length price ('ALP') of the aforesaid transaction; 2.2. rejecting the functional characterization determined basis the detailed functional, assets and risk ("FAR") analysis conducted by the Appellant and recharacterizing the Appellant as full risk service provided instead of low risk service provider; 2.3. not appreciating the detailed documentary evidences submitted by the Appellant to support its low risk characterization; 2.4. considering AE as the tested party instead of the Appellant without appreciating the fact that the Appellant is the least complex entity; 2.5. rejecting the remuneration model of the Appellant without appreciating the fact that the remuneration model should be consistent with the FAR analysis of the Appellant; 2.6. questioning the commercial/business decision of sub-contracting substantial part of the services and the associated risks to the AE; 2.7. in undertaking incorrect benchmarking analysis and by selecting agreements which cannot be considered to be comparable in terms of nature of services rendered by the AEs. Other grounds

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2014 and is a subsidiary of Boeing Singapore Pte. Limited, which in turn is a

subsidiary of The Boeing Company (TBC). BIDPL renders marketing,

technical, management and construction related services to TBC, the

ultimate holding company, and its subsidiaries on a cost-plus mark-up basis.

transactions:-

S.no. International transaction Amount Whether challenged by (INR) Ld. TPO 1 Provision of marketing support services 21,12,76,732 No 2 Provision of technical services 50,00,57,958 No 3 Provision of management services 23,15,60,110 No 4 Provision of construction services 17,51,53,922 No 5 Provision of finance related services 1,67,32,848 No 6 Receipt of training and technical 39,67,01,914 Yes services from Associated Enterprise (AE) 7 Reimbursement of expenses 17,60,36,741 No 8 Deemed international transactions 59,27,29,517 No 9 Reimbursement of expenses (restricted 1,20,29,869 No stock units)

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assessee before us that given the highly sensitive nature of defense equipment such as the C17 and BBJ aircraft, involving a local contracting entity was essential, and was also preferred by IAF. Additionally, the presence of a local contracting party helped bridge potential language barriers between the foreign AE and IAF, while also enabling more immediate and responsive support by addressing issues in real-time and within the same time zone. b. To serve the IAF more efficiently, the Appellant and AE i.e. Boeing Aerospace Operations (‘BAO') entered into an agreement governing AE’s support in providing services to the Appellant in connection with the C-17 Training Contract and BBJ contract. c. In this background, the details of the impugned contracts are given below: C-17 Aircraft Training Program (INR 37.5 crores)

d. Under this contract with the IAF, BIDPL is responsible for delivering C- 17 aircrew training. This was only an arrangement to satisfy the needs of IAF for local contracting entity. Given that BIDPLpossesses neither the technical capability nor the assets needed to fulfill the service, and consequently, its role was mainly coordination, and itsubcontracted a substantial portion of the training services to BAO. In other words, while

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BIDPL remains the prime contractor, it performs limited coordination functions and operates as a limited-risk service provider, with BAO assuming all the risks. BIDPL is compensated on a cost-plus basis, covering value-added expenses excluding cost pertaining to outsourced services. e. Theflow of the transactions is detailed below: Step I - AE undertakes marketing efforts and sells aircraft to IAF. Part A Step II - Pursuant to above sale of aircraft, IAF requires training services for their pilots for which know-how and related technology is owned by AEs only. (refer Clause D of the Addendum No. 1 to Amend C17 Services Agreement Among Boeing India Defense Private Limited & Boeing Aerospace Operations Inc. at Page no 244 of the Paper Book) It is reiterated that given the need for day-to-daycommunication, IAF had a preference to enter into the contract with a local Indian entity for better coordination and support. Step III - Hence, BIDPL entered into an agreement with IAF for the provision of training services. Step IV - BIDPL subcontracts provision of training services to AE

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and employs only one site manager for oversight and coordination functions between AE and IAF(refer Page No. 307-308 of Paperbook). Part B To enable training of IAF aircrew for C17 aircraft, AE sold a simulator to a third party (Mahindra Defense Systems or MDS) in India. MDS operates and maintains the simulator on its own leased premises. Further, AE has engaged MDS to provide training services to aircrew of C17 aircraft through MDS’s own instructors on the simulator. MDS (hired by AE) is responsible for following: i. Leasing premises used for provision of services; ii. Operation and maintenance of simulator used for provision of services; and iii. Provision of trainers for training services f. This contractual arrangement is depicted below for the Hon’ble Bench’s ready reference:

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Remuneration model g. For the limited functions being performed by the For the limited functions being performed by the Appellant, it is being Appellant, it is being remunerated on a cost remunerated on a cost-plus basis. Cost for this purpose includes value plus basis. Cost for this purpose includes value added expenses incurred by Appellant after excluding the cost of services added expenses incurred by Appellant after excluding the cost of services added expenses incurred by Appellant after excluding the cost of services outsourced to AE. The relevant extract from the inter outsourced to AE. The relevant extract from the inter-company outsourced to AE. The relevant extract from the inter agreement is reproduced be agreement is reproduced below:

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(please refer page 249 of Paper Book for the extract of the agreement)

h. The Appellant wishes to highlight that that the intercompany contract extracted above categorically lays down that the liability with respect to any claims, liquidated damages, performance guarantee with respect to services being rendered to customer, will always lie with the AE and shall be adjusted through contract revenue. BBJ Aircraft Support Services (INR 2.2 crores)

i. In a separate engagement, the AE assigned technical and training services for BBJ aircrafts to the Appellant under an addendum to the India Aircraft Support Agreement. The Appellant invoices IAF directly for these services. Again, BAO supports the Appellant through a services agreement, with the Appellant continuing to function as a limited-risk service provider. Despite direct remuneration from IAF, the economic substance remains unchanged—BAO bears the risks and rewards, and the Appellant earns a cost plus 20% return on value-added costs. ii. The flow of the transactions is detailed below: Step I - AE undertakes marketing efforts and sells aircraft to IAF.

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Step II - AEs entered into an Aircraft Support Agreement (ASA) with AEs entered into an Aircraft Support Agreement (ASA) with AEs entered into an Aircraft Support Agreement (ASA) with IAF for provision of technical services. AE agreed with IAF to assign IAF for provision of technical services. AE agreed with IAF to assign IAF for provision of technical services. AE agreed with IAF to assign part of this cont part of this contract to BIDPL. Pursuant to above sale of aircraft, IAF requires technical and training Pursuant to above sale of aircraft, IAF requires technical and training Pursuant to above sale of aircraft, IAF requires technical and training services for which proprietary information and technical material is services for which proprietary information and technical material is services for which proprietary information and technical material is owned by AEs only. IAF had a preference to enter into the contract owned by AEs only. IAF had a preference to enter into the contract owned by AEs only. IAF had a preference to enter into the contract with a local Indian entity for better coordinati with a local Indian entity for better coordination and support. on and support.

Step III - BIDPL entered into an agreement with IAF for provision of BIDPL entered into an agreement with IAF for provision of BIDPL entered into an agreement with IAF for provision of these services. BIDPL uses the manuals/bulletins and other material BIDPL uses the manuals/bulletins and other material (IP lies with the (IP lies with the AE)to provide support services to IAF. to provide support services to IAF. The ownership of this The ownership of this information would information would always vest in the AE and is never transferred to always vest in the AE and is never transferred to the Appellant. i. This contractual arrangement is depicted below for the Hon’ble Bench’s ready This contractual arrangement is depicted below for the Hon’ble Bench’s ready reference: This contractual arrangement is depicted below for the Hon’ble Bench’s ready

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Remuneration model j. For the limited functions being performed by the Appellant, it is being the limited functions being performed by the Appellant, it is being the limited functions being performed by the Appellant, it is being remunerated on a cost remunerated on a cost-plus basis. Cost for this purpose includes value plus basis. Cost for this purpose includes value added expenses incurred by Appellant after excluding the cost of services added expenses incurred by Appellant after excluding the cost of services added expenses incurred by Appellant after excluding the cost of services outsourced to AE. The relevant extract fro outsourced to AE. The relevant extract from the inter m the inter-company agreement is reproduced below: agreement is reproduced below:

(please refer page 241 of Paper Book) (please refer page 241 of Paper Book)

k. It is important to note here that the intercompany contract It is important to note here that the intercompany contract categorically It is important to note here that the intercompany contract lay down that the liability with respect to any claims, liquidated lay down that the liability with respect to any claims, liquidated lay down that the liability with respect to any claims, liquidated damages, performance damages, performance guarantee with respect to services being guarantee with respect to services being rendered to customer, will always lie with the AE rendered to customer, will always lie with the AE and shall be adjusted through contract revenue. adjusted through contract revenue. (refer Page no 241 of the Paper Book) (refer Page no 241 of the Paper Book)

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l. It is therefore evident that the AE, is the risk bearing entity, having control over the risks, bears the impact of any materialization of risks through adjustment in contract revenue. The Appellant, being the limited risk service provider, is entitled to only cost-plus remuneration while AE gets residual return.

m. Based on detailed analysis, Transactional Net Margin Method (‘TNMM’) using the ratio of Operating Profits to Operating Cost i.e. OP/OC as the Profit Level Indicator (‘PLI’) was chosen as the most appropriate method (‘MAM’) to determine the arm’s length price (‘ALP’) for the said transactions.

Amounts in OP/OC of the Comparable’s OP/OC Transaction* as per TP study 1 INR Assessee Receipt of training services from AE 11.16% to 16.88% with (Aggregated with 39,67,01,914 20.48% a median of 15.73% provision of training services)

* Receipt of training services from AE (impugned transaction) has been considered closely linked to the transaction pertaining to “Provision of technical services by Assessee to AEs” (refer page 200- 205 of the Paper Book for the TP study)

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n. The Appellant submits that the transaction pertaining to receipt of technical and training services from the AE was analyzed by the Ld. TPO by subjecting it to a detailed audit and scrutiny for previous year i.e. AY 2020-21. o. After the said detailed scrutiny, the Ld. TPO accepted the transfer price of the said international transaction of the Assessee in AY 2020-21. The facts, functions performed, risks assumed and assets employed, remuneration model and approach for benchmarking for the aforesaid transaction has remained same during AY 2021-22(please refer Page 670-689 of the Paper book for copy of transfer pricing order of AY 2020-21). p. In view of the above, it is submitted before the Hon’ble Bench that there being no change in the factual matrix from the previous year, the addition made by the Ld. TPO/DRP in the instant case on account of technical fees paid to BAO is liable to be deleted as the Ld. TPO has nowhere indicated the reasons for departing from the accepted position in the immediately preceding year.

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q. Reliance is placed on the following observations of the Hon’ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. vs. UOI (Writ Petition (civil) 183 of 2003): “Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction.”

r. Similarly, the Hon’ble Supreme Court in CIT vs. Excel IndustriesLtd. ([2013] 358 ITR 295 (SC)) (supra) made the following observations: “31. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather than spend the tax payers' money in pursuing litigation for the sake of it.”

s. The law laid down by the Hon’ble Supreme Court would apply to the Assessee’s case with equal force. It is pertinent to note that this benchmarking approach has been consistently undertaken by the

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appellant in the past and accepted by the Department in the immediately preceding year. The Ld. TPO has not provided any plausible explanation for deviating from the accepted position in the previous years. No distinguishing factors have been brought on record to justify the change in the benchmarking methodology adopted by the Ld. TPO in the current year. t. In view of the principle of consistency, it is humbly prayed that the approach adopted by the Ld. TPO be rejected and the benchmarking analysis adopted by the appellant be accepted. 11. With regard to low risk characterization, Ld AR submitted as under: a. The contracts entered by Appellant with customer are pursuant to arrangement between AEs and the customer for the purchase of C17 and BBJ aircraft by customer and subsequent need for customer to avail training and technical services respectively.All the technology and related intangible properties are owned by AEs. b. The contract was entered into with BIDPL, a local Boeing entity, to facilitate smoother contract administration and provide a direct point of contact within the country for all contractual matters. c. It is reiterated that given the highly sensitive nature of defense equipment such as the C17 and BBJ aircraft, involving a local contracting entity was

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essentialand also demanded for by IAF. Additionally, the presence of a essentialand also demanded for by IAF. Additionally, the presence of a essentialand also demanded for by IAF. Additionally, the presence of a local contracting party helped bridge potential language barriers between local contracting party helped bridge potential language barriers between local contracting party helped bridge potential language barriers between the foreign AE and IAF, while also enabling more immediate and the foreign AE and IAF, while also enabling more immediate and the foreign AE and IAF, while also enabling more immediate and responsive support by addressing issues in real ve support by addressing issues in real-time and within the same time and within the same time zone. d. Accordingly, BIDPL entered into a services agreement with it AE and Accordingly, BIDPL entered into a services agreement with it AE and Accordingly, BIDPL entered into a services agreement with it AE and sub-contracted the substantial part of the services to AE. The Appellant contracted the substantial part of the services to AE. The Appellant contracted the substantial part of the services to AE. The Appellant submits that its role is limited to submits that its role is limited to coordination and liaison between AEs coordination and liaison between AEs and the customer. e. The majority of the functions required to fulfil the obligations under the The majority of the functions required to fulfil the obligations under the The majority of the functions required to fulfil the obligations under the contract with customer are being performed by the AEs. Also, all the contract with customer are being performed by the AEs. Also, all the contract with customer are being performed by the AEs. Also, all the relevant risks pertaining to the functions being performe relevant risks pertaining to the functions being performed by the AEs are d by the AEs are also assumed by them. also assumed by them. f. It is important to note that, It is important to note that, the decision to sell aircraft and engage in the decision to sell aircraft and engage in subsequent provision of services is taken by AE. Further, AE agreed subsequent provision of services is taken by AE. Further, AE agreed subsequent provision of services is taken by AE. Further, AE agreed with the customer that the contract may be subcontracted to a group with the customer that the contract may be subcontracted to a group with the customer that the contract may be subcontracted to a group entity. Hence, decision making power for provision of these services Hence, decision making power for provision of these services Hence, decision making power for provision of these services lies with the AE.

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(The relevant extracts of the agreement between the AE and IAF are enclosed at Page No. 19 of Convenience Compilation (CC)) g. AEs have the financial capacity to assume the risk as it has access to sufficient capital to take on the risk or to lay off the risk, to pay for the risk mitigation functions and to bear the consequences of the risk if the risk materializes. C-17 training services h. It is submitted that AE sold the C17 aircraft to IAF in India. To enable training of IAF aircrew for C17 aircraft, AE sold a simulator to a third party (Mahindra Defense Systems or MDS) in India. MDS operates and maintains the simulator on its own leased premises. Further, AE has engaged MDS to provide training services to aircrew of C17 aircraft through MDS’s own instructors on the simulator(The relevant extracts of the agreement between the AE and MDS in relation to C-17 Indian Aircrew Training Programare enclosed at Page No. 6-7 of CC ). i. The Appellant wishes to highlight that the AEs are responsible for initial sale of the Aircraft and subsequent discussions with the customer for training services. The AEs decide the nature and extent of services that it can provide to IAF depending upon its capabilities, intangibles and resources.

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j. It is reiterated at the cost of repetition that the Appellant has not assumed or realized any risk pertaining to liquidated damages, performance guarantee, non-performance of services, customer claims etc., as substantial work is undertaken by AE and related risks also borne by AE.

Assets employed

k. The AEs manufactured the C17 aircraft and provided simulator and related platforms to MDS. It also owns the related non-routine intangible property. l. On the contrary, BIDPL does not have proprietary knowledge for rendering training services and does not own the C17Simulator. BIDPL employs routine assets such as communication equipment, office premises, furnitureand fixtures etc. for rendering the coordination support services for C17 training. m. Thus, it does not have the wherewithal to render the training services required under the impugned contracts. The relevant portion of its audited financials of BIDPL for AY 2021-22 is extracted below:

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(refer Page no 13 of the Paper Book for the annual report) (refer Page no 13 of the Paper Book for the annual report)

(refer Page no 32 of the Paper Book for the annual report) (refer Page no 32 of the Paper Book for the annual report)

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n. The Appellant submits that the actual training services are provided by a third party (hired by AEs), at premises leased by third party, using a simulator received by it from Appellant’s AE and not the Appellant. The Appellant neither employs the trainers, nor owns the simulator or the premises being used for provision of such training services. o. The Appellant employs only one person whose role with respect to provision of such training services is limited to coordinating and managing the training being imparted by AE through MDS. BBJ training and technical services p. In relation to BBJ contract, the Appellant employed 3 FSRs. The FSRs are stationed directly with the customer at the aircraft hangar, serving as the primary point of contact for all daily communications. q. The Appellant does not have any proprietary knowledge or technical know-how for rendering technical services for aircrafts on a standalone basis. Such proprietary knowledge or technical know-how are owned by AEs. The AEs are also responsible for rolling out e-mails in the form of technical bulletins, maintenance procedures, troubleshooting guidance, updates on other technical aspects of BBJ aircrafts etc. on a regular basis to customer.

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r. When customers raise specific technical queries, the FSRs, as the initial point of contact, engage with the customer to understand the technical issues. If the problem can be resolved using standard troubleshooting steps from the AEs’ technical bulletins, the FSRs will point out to the customer these solutions contained in those bulletins, and the actual repairs are carried out by qualified IAF technical personnel. s. However, if the issue is not covered by the available technical materials or bulletins, the FSRs, after discussing and understanding the problem, submit a service request through Boeing’s portal, which is also accessible to the customer. The AE would analyze the issue and provide a solution on the portal, which is in turn communicated by the Appellant it to the customer. Based on this, the IAF’s technical staff carry out the necessary repair work. The Appellant merely acts as a facilitator in this process. t. In this regard, the Appellant has placed on record the e-mail correspondences highlighting the coordination and liaison function performed by BIDPL in relation to technical services for BBJ Contract (please refer to page 316-319 of Paper Book). u. In relation to the technical services, the typical process followed by BIDPL for resolving the technical queries of customer is as follows:

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(‘CBDT’) in Circular 6/2013 Circular 6/2013. Hence, the characterization of Appellant . Hence, the characterization of Appellant should be accepted as a limited risk service provider. should be accepted as a limited risk service provider. 13. It is the respectful submi It is the respectful submission of the Appellant that the entire case of the Ld. ssion of the Appellant that the entire case of the Ld. TPO hinges on the fact that the Appellant has not provided copies of the TPO hinges on the fact that the Appellant has not provided copies of the TPO hinges on the fact that the Appellant has not provided copies of the contracts between the IAF and the Appellant/AE. In this regard, it is contracts between the IAF and the Appellant/AE. In this regard, it is contracts between the IAF and the Appellant/AE. In this regard, it is respectfully submitted that the Appellant is bound by the respectfully submitted that the Appellant is bound by the Confidentiality Confidentiality Clause extracted below entered extracted below entered with the IAF,the Ministry of Defense (MoD) IAF,the Ministry of Defense (MoD) with regard to the C- -17 Training Contract. The Appellant is contractually 17 Training Contract. The Appellant is contractually precluded from sharing extracts or the entire agreement with any third party precluded from sharing extracts or the entire agreement with any third party precluded from sharing extracts or the entire agreement with any third party except with the specific approval from MOD. specific approval from MOD.

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materials. 15. Furthermore, the contract as can be seen from the clause extracted above, Furthermore, the contract as can be seen from the clause extracted above, Furthermore, the contract as can be seen from the clause extracted above, strictly prohibits its circulation beyond designated government agencies or circulation beyond designated government agencies or circulation beyond designated government agencies or authorized personnel. In light of the foregoing, it is submitted that the authorized personnel. In light of the foregoing, it is submitted that the authorized personnel. In light of the foregoing, it is submitted that the production or submission of defense contracts before any authority is ission of defense contracts before any authority is ission of defense contracts before any authority is impermissible, as it would constitute a breach of confidentiality obligations impermissible, as it would constitute a breach of confidentiality obligations impermissible, as it would constitute a breach of confidentiality obligations and contravene applicable laws designed to safeguard sensitive government and contravene applicable laws designed to safeguard sensitive government and contravene applicable laws designed to safeguard sensitive government information. 16. The Hon’ble DRP took cognizance of this The Hon’ble DRP took cognizance of this limitation and directed the Ld. limitation and directed the Ld. TPO to not hold its inability to file back to back contracts with the MOD to TPO to not hold its inability to file back to back contracts with the MOD to TPO to not hold its inability to file back to back contracts with the MOD to its disadvantage.

(refer para 7.11.1 at Page no 56 of the Appeal Set (refer para 7.11.1 at Page no 56 of the Appeal Set for the DRP Directions)

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(refer Page no 245 of the Paper Book for the C (refer Page no 245 of the Paper Book for the C-17 training contract) 17 training contract)

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(b) BBJ contract

(refer Page no 24 (refer Page no 241 of the Paper Book for the C-17 training contract) 17 training contract) 19. Your Honours would appreciate that the Ld. TPO/DRP have not doubted the Your Honours would appreciate that the Ld. TPO/DRP have not doubted the Your Honours would appreciate that the Ld. TPO/DRP have not doubted the veracity of these contracts but have only concluded that in the absence of the veracity of these contracts but have only concluded that in the absence of the veracity of these contracts but have only concluded that in the absence of the parent agreement, the shifting of risk cannot be ascertained. The Department parent agreement, the shifting of risk cannot be ascertained. The Department parent agreement, the shifting of risk cannot be ascertained. The Department has not brought any evidence has not brought any evidence on record to substantiate the change in on record to substantiate the change in characterization. 20. Finally, Ld AR submits that it has sub submits that it has sub-contracted substantial part of the contracted substantial part of the services to be performed under the contract with IAF to its AEs along services to be performed under the contract with IAF to its AEs along-with services to be performed under the contract with IAF to its AEs along the associated risks. The majority of the funct the associated risks. The majority of the functions required to fulfil the ions required to fulfil the obligations under the contract with IAF are being performed by the AEs. obligations under the contract with IAF are being performed by the AEs. obligations under the contract with IAF are being performed by the AEs. Also, all the relevant risks pertaining to the functions being performed by the Also, all the relevant risks pertaining to the functions being performed by the Also, all the relevant risks pertaining to the functions being performed by the AEs are also assumed by them. These AEs are also assumed by them. These facts are evident from the evident from the

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documentary evidencesin the form of agreements, emails etc. submittedduring the course of assessment. 21. Hence, the characterization of the Appellant as limited risk service provider is liable to upheld and benchmarking analysis carried out in TP documentation ought to have been accepted. 22. Further, the Appellant submits that the Ld. TPO had analysed the aforesaid transaction pertaining to receipt of technical / training services from AE by subjecting it to a detailed audit and scrutiny for previous year i.e. AY 2020- 21. After the said detailed scrutiny, the Ld. TPO accepted the transfer price of the said international transaction of the Appellant in AY 2020-21. The facts, functions performed, risks assumed and assets employed, remuneration model and approach for benchmarking for the aforesaid transaction has remained same during AY 2021-22. Hence, the principle of consistency should be adopted. Appellant’s contentions against the benchmarking approach adopted by Ld. TPO

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This is in line withthe less complex functional profile of the Appellant. BIDPL's role is limited to coordination and liaisonbetween AEs and IAF. The Appellant has not done any business development and not undertaken any marketrisk. Hence, it operates as a limited risk service provider and retains a fixed mark-up of 20% onits value-added expenses ('VAE'), and BAO is entitled to residual return. 24. It is imperative to measure value adding expenses (costs associated with the Appellant’s ownfunctions) separately since the value of the functions performed by a service provider can bemeasured by the adequacy of the margin earned over value adding expenses. The return on valueaddingexpenses is an appropriate measure for companies where little or no value is added by thecompany in respect of the controlled transaction. A variation in value-adding expenses reflectsdifferent types of functions being performed by the company. 25. The Appellantwould like to submit that for the service providers such as the Appellant, the ratio ofreturn on value added expenses i.e. OP /VAE, also known as Berry Ratio, is the appropriate yardstickto judge its profitability. Conceptually, the Berry Ratio represents a return on the company's internalfunctions and assumes that those functions are captured in VAE. The detailed submission is placed on Page no 332-336 of the Paper Book.

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submitted that the Ld. TPO has distorted the entire arrangement and proceeded on assumptions. 31. It is submitted that the AEs possess the requisite technical know-how and are themselves exploiting such know-how in the provision of services. The AEs are performing majority of the functions, employing the necessary assets and assuming the corresponding risks. Hence, Appellant is considered to beoperating as a limited risk service provider and retains a fixed mark-up of 20% on its value-added cost, and AE is entitled to residual return. 32. The reliance on royalty/license agreements as comparables is misplaced, as the underlying facts and contractual arrangements in the Appellant’s case are fundamentally different. The Appellant is not engaged in the exploitation of any licensed intangible property, nor does it derive revenue from the use of such intangibles. Instead, the Appellant’s role is limited to providing coordination and support services, for which it is compensated on a cost-plus basis. The use of unrelated royalty/license agreements as benchmarks fails to reflect the economic realities of the Appellant’s business model and the actual nature of the intercompany transactions. 33. Without prejudice to above, the Appellant would like to submit that the comparable agreements selected by the Ld. TPO for benchmarking the international transaction pertaining to payment of technical fees to AE cannot be considered as comparable due to below mentioned reasons. In this

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regard, summary of the Appellant’s objections against the comparables is tabulated below:

Effective Licensor Licensee Tenure Scope of services Assessee's remarks year  Functionally non-comparable: agreement for patent, know-how and Letter of intent for an technology license for exclusive patent, know- sale of products while how and technology the Appellant is not selling any product but license to is rendering services commercialize and sell products up to the level (refer Page No. 510 of of a battery pack the Paperbook) Axion Power consisting of groups or International, strings of PbC batteries  Agreement did Inc. and battery management LCB not commercialize (as systems using carbon International 2015 15 per Form 10-K negative electrodes, for Inc. available in public e-energy storage (refer Page No. domain) solutions for motive and 509-518 of the stationary applications Paperbook)  The agreement such as e-scooters, also requires the commercial vehicles, licensor to purchase light vehicles, off-road convertible senior vehicles and grid preferred stock of the storage, with formation licensor. No similar of joint venture to right/ option available exploit the technology. to the Appellant in its agreement with the AE. (refer Page No. 511of the Paperbook)  Insufficient qualitative Korea Delphi information – tenure of Nonexclusive Automotive the agreement is technology license to Systems Jingzhou unknown manufacture, make, Corporation Henglong Unkno assemble and sell Automotive 2005  Functionally non- wn manual gear assemblies Parts Co., comparable: agreement for GM-Daewoo's Matiz Ltd (refer Page No. for transfer of for incorporation into 538 - 555 of the technology license to motor vehicles. Paperbook) manufacture, make, assemble and sell

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Effective Licensor Licensee Tenure Scope of services Assessee's remarks year manual gear assemblies for incorporation into motor vehicle while the Appellant is not undertaking any assembling or manufacturing (refer Page No. 545of the Paperbook)  Functionally non- comparable: agreement for research and development project and technology license to distribute the products related to homeland security applications while the Appellant is not Research and engaged in R&D and Institut für development project, distribution Umwelttechnolo with nonexclusive Isonics gien GmbH patent, know-how and (refer Page No. 520- Homeland 521 of the Paperbook) technology license to Security & 2006 20 distribute the Defense  The agreement "NeutroTest I, II and (refer Page No. Corp contemplates ongoing, III" products related to 519 - 537 of the work-in-progress homeland security Paperbook) development activities applications. for the purpose of creating intellectual property. As part of the impugned arrangement, Appellant is not engaged in development of any intellectual properties. (refer Page No. 522 - 523 of the Paperbook)

wherein the various international transactions reported by the assessee and

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the relevant financial information considered by the TPO. He also brought to our notice that gap of 4 crores in the segmental revenue and there is no explanation offered by the assessee. Further brought to our notice the revenue sharing mechanism adopted by the assessee and its AE. He submitted that the fees paid by the assessee to its AE is equal to 72.2% of the total contractual revenue from IAF. He supported the findings of TPO since there is huge difference between the technical fees paid and the ALP of technical fees determined by the TPO. In this regard he heavily relied on the detailed findings of TPO and further submitted that the TPO had rightly followed the directions of DRP. 35. Considered the rival submissions and material placed on record. We observed that the assessee is a step-down subsidiary of ultimate holding company i.e., The Boeing Company (TBC) and TBC sells the Boeing flight to the IAF, in order to provide the after sales services, TBC appointed the assessee to perform the various technical services. The group companies are set up in such a way that they service the ultimate customer i.e., IAF, TBC appointed the assessee for liaison and intermediary services. The assessee was appointed to directly interact with the requirements of IAF. The assessee collects the service charges from IAF and the various services are renderedby TBC through the intermediaries including the assessee. The

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main services rendered by the TBC through the assessee to the IAF are training simulators for the C17 and BBJ aircraft sold by TBC and the technical services at the customer station. These services are directly controlled and handled by the TBC with the close assistance of the assessee, being the facilitator. In order to address the findings of the lower authorities, what is relevance is the presence of technical know-how for rendering services and relevant simulator with the assessee. On careful analysis of the financial statements of the assessee, we observed that the assessee does not own or have any assets relevant for giving training to the IAF nor it has invested in any of the know-how relevant to cater to the requirement of the customers. The assets held by the assessee are regular assets for running the liaison office, coordination and assistance. It clearly establishes that the assessee is only service provider with the complete assistance of the TBC, who have all the facilities to render the training simulators and technical knowledge to provide necessary services of training and technical services to the IAF. 36. The abovefindings clearly indicate that the assessee is only providing assistance to provide services through TBC or BAO to the IAF. As per the service agreement entered by the assessee with TBC, they have clearly undertake to provide the relevant services to IAF and how they will share the

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financials based on the work allocated between them. Based on clear demarcation of services rendered by them, they have agreed to share the service charges collected from IAF. They have also agreed to share the same in the agreed formula as indicated in the mutual service agreement, the agreement to include the addendum to it. As per the above, contract revenue is being shared between them, the assessee retains the cost exclusively incurred against the contract revenue or for the period and agreed Arm’s length return, the rest are passed on to the TBC or BAO. This is the exact fact on record and the financials clearly reflect the above aspects. We noticed that the TPO had rejected the above submissions and proceeded to treat the assessee as the main provider of training and technical services. There is no doubt the assessee has entered service agreement directly with the IAF and provides services thru BAO, the assessee agrees to share the relevant cost of providing training and technical services to the BAO/TBC. 37. Further we observed that the TPO had rejected the submissions and claim of the assessee that it only functions with limited risk factor and all the required risk to provide the training and rendering the technical services are taken over by the TBC/BAO. On careful consideration of various materials available on record, we noticed that the assessee invested neither in the stimulator or any technology to carry out the required services to the IAF. It

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completely depended on the execution of various services by the BAO. Therefore, we are inclined to agree with the submission made by the assessee that it is only limited risk service provider and the TPO had not brought on record any material to show that the assessee retains the business risk since the assessee does not possesses any capacity to provide such technical and training services on its own. We noticed that the assessee had submitted various evidence to substantiate its claim to be employing limited risk in execution of various services and does not employ business risk. Further it is brought to our notice that inter company contract entered by the assessee with the BAO specifically lays down the risks with respect to any claims like liquidated damages, performance guarantees etc. are borne by the BAO/AE. It clearly discloses the fact that the whole risk vests with the AE. Based on the above aspect and total risk factor held by the AE, the assessee had chosen the TNMM as the MAM and determined the ALP of OP/OC at 20.48%, at the same time, it is compared with the comparable entities selected by it and determined the average OP/OC at 15.73%. It is also fact on record that the assessee had followed the same international transaction with the same risk factor, functions performed and assets employed, the revenue had accepted the same bench mark in AY 2020-21, pages 670 to 689 of the paper book, since there is no change in the factual matrix for the

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AY 2020-21, as the facts are exactly same in the present year, we are inclined to accept the findings, considering the fact that risk matrix are exactly same, following the principles of consistency, we direct the AO/TPO to accept the bench marking conducted by the assessee. In our view, the non- disclosure clause in the agreement should not be a hindrance to accepting the detailed bench marking conducted by the assessee, we also observed that the TPO had proceeded with the belief that the assessee provides all the necessary training and technical services whereas the actual facts are divergent. Hence, we are inclined to accept the bench marking submitted by the assessee for the simple reason that the DRP had directed the TPO to benchmark independently but he failed to follow the directions. Hence, we are inclined to allow the grounds raised by the assessee. 38. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on this 6th day of May, 2026.

Sd/- sd/- (CHALLA NAGENDRA PRASAD) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 06.05.2026 TS

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