DY. COMMISSIONER OF INCOME (INT TAX) - 3(2)(1) , MUMBAI vs. MFE FORMWORK TECHNOLOGY SDN. BHD, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.126/MUM/2026 (A.Y. 2022-23) Dy. Commissioner of v/s. MFE Formwork Technology Income Tax (Int. Tax)– बनाम SDN BHD 3(2)(1) Unit 504, Tower 1, Star Hub, 614, Kautilya Bhavan, Airport Road, Behind ITC Bandra Kurla Complex, Maratha, Andheri (East), Bandra (East), Mumbai – Mumbai – 400 099, 400 051, Maharashtra Maharashtra स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No: AAGCM4280M Appellant/अपीलार्थी .. Respondent/प्रतिवादी

Assessee by : Shri P.J. Pardiwala - Sr. Adv./ Harsh Kothari, AR Revenue by : Shri Krishna Kumar, (Sr. DR)

Date of Hearing 20.04.2026 Date of Pronouncement 04.05.2026 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 17.11.2025 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax, Appeal, CIT(A)-57, Mumbai [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3)r.w.s. 144C of the Income-tax Act, 1961 [hereinafter

P a g e | 2 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD referred to as “Act”] dated 25.05.2024 for the Assessment Year [A.Y.] 2022-23. 2. The grounds of appeal are as under:- 1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that once the AE is remunerated at ALP, the assessment cannot be prejudicial to interest of revenue, when the assessee itself has adopted a dual taxpayer approach and attributed profits to its PE in India?” 2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that once assessee has adopted dual taxpayer approach and has PE in India, the profits attributable to it have to be calculated on ALP basis as per the Article 7 of DTAA irrespective of the ALP compensation made to AE in India?” 3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that once dual taxpayer approach is adopted, even if either one of AE or PE are not compensated at ALP, the assessment is not only erroneous but also prejudicial to the interest of revenue?” 4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that profit attribution by DAPE by FAR analysis was carried out because the Indian AE was not remunerated at arm’s length?” 5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there is no finding on the AE not having been compensated at ALP, when the revision order u/s 263 order clearly mentions that functions like collection & receivables management, finance management, R & D, market risk etc, have not been correctly allocated to Indian operation while determining the profits taxable in India?” 6. “Whether on the has erred in not holding that the assessment-order is erroneous in as much as it accepts the assessee’s mode of computation of taxable profit in India wherein the marketing fees paid to PE is reduced after attribution of Gross Profits in India instead of being deducted before attribution of Profits in India?” 3. Briefly stated facts of the case are that the assessee is a non- resident company incorporated under the laws of Malaysia and is a Tax

P a g e | 3 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD Resident assessed to tax there. The group has an Indian subsidiary, MFE Formwork Technology India Pvt. Ltd. (“MFE-India”), which acts as a Dependent Agent Permanent Establishment (DAPE) / business connection in India under Article 5 of the DTAA and Explanation 2 to section 9(1)(i). The assessee company has a Marketing Services Agreement (MSA) and a Technical Services Agreement (TSA) with MFE- India, under which MFE-India performs marketing and technical support services and is remunerated at cost plus 15%, which has consistently been accepted at arm’s length in its own assessments. The company filed its Return of Income declaring total income of Rs. 2,88,94,220/-which was processed u/s 143(1) of the Act. Its case was selected for scrutiny and subsequently, a draft assessment order under section 144C(1) of the Act was issued to it. Against the said order, it requested the AO to pass the final assessment order as per the law as it did not wish to file objections with the Dispute Resolution Panel and reserved it right to file an appeal with the CIT(A).Eventually, the AO passed an assessment order under section 143(3) r.w.s 144C(3) of the Act determining the assessee’s total income at Rs. 11,92,53,651/-, inter alia making certain variation/adjustments to the returned income. The major variation was enhancement of the profit attribution ratio from 24% to 35% and restriction of deduction of marketing/technical fees to

P a g e | 4 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD 35%, resulting in an addition of Rs.10,53,80,213/- to business income. It is observed that the entire action of the AO is based solely on the Revision order passed u/ s 263 of the Act by the CIT (International Tax), Mumbai. Here, it would be relevant to reproduce the relevant parts of appellate order passed by the ld.CIT(A) which is self-speaking as under: “6.2 For AY 2017-18, the Assessing Officer (“AO”) completed the assessment under section 143(3) accepting the assessee’s computation of profits attributable to the DAPE. In that year, the assessee adopted the so-called dual taxpayer / Authorised OECD Approach (AOA) for profit attribution, by treating the non-resident enterprise and the DAPE as distinct for attribution purposes. It attributed a share of global profits to Indian operations based on a detailed FAR (functions, assets, risks) analysis and deducted the arm’s length remuneration paid to MFE-India (cost plus 15%) to arrive at the residual taxable profits of the DAPE in India. 6.3 The AO noted that the 24% attribution ratio was consistent with earlier years, examined the FAR analysis and accepted it. Importantly, the AO made no transferpricing adjustment to the marketing fee, thereby implicitly accepting the cost-plus15% remuneration to MFE-India as at arm’s length. 6.4 The CIT (International Tax), Mumbai-3 invoked section 263 mainly on the grounds that: (a) the AO had allegedly conducted “no enquiry” as to how the 24% attribution was arrived at and had simply accepted the FAR analysis furnished by the assessee; and (b) according to the Commissioner, various factors suggested that a higher proportion (35%) ought to have been attributed to India. Proceeding on this basis, the Commissioner purported to invoke Rule 10 of the Income-tax Rules and, relying upon the Delhi High Court decision in Rolls Royce Plc v. DIT (339 ITR 147), adopted 35% as the appropriate attribution benchmark, effectively re-writing the entire attribution exercise undertaken by the appellant. 6.5 He then set aside the assessment and directed the AO to re-compute the profitswith 35% attribution, resulting in a substantially higher taxable income – an order which was challenged before the ITAT. 6.6 It may be noted that the assessment order for AY 2022-23 was passed by the AO on same lines as the directions given by CIT in his order dated 25.03.2022 passed in respect of AY 2017-18 and followed for AY.2019-20,

P a g e | 5 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD which was reproduced in the assessment order dated 25.05.2024 passed for AY.2022-23. 6.7 The directions given in the 263 order dated 07.06.2022 followed by the AO are reproduced in para: 6 to 9.9 of the assessment order and is not being extracted below to avoid making this order bulky and repetitive. 7.1 It is pertinent to mention that the ITAT vide its order dated 30.08.2022 passed in ITA No. 890/Mum/2022 in Appellant’s own case for AY 2017-18 not only quashed the Order dated 25.03.2022 as the same was held not to be prejudicial to the interest of the Revenue but also deliberated upon the merits of the issues involved . 7.2 When the appeal came up before the ITAT, it reframed the controversy in more fundamental terms and noted that: • It was accepted on all sides that the appellant had a DAPE in India through MFE-India. • It was also accepted that MFE-India had been remunerated at arm’s length, inasmuch as no transfer-pricing adjustment was made to its cost-plus-15% remuneration and the Commissioner had not alleged that such remuneration was below ALP. 7.3 Against that backdrop, the Tribunal posed the legal question, whether in view of the binding judgment of the Hon’ble Bombay High Court in Set Satellite Singapore Pte Ltd v. DCIT (307 ITR 205), can any further profits be attributed to a DAPE in India once the dependent agent has been remunerated at arm’s length for all its functions, assets and risks. 7.4 The assessee contended that, following Set Satellite (supra) and the Supreme Court’s ruling in Morgan Stanley & Co. Inc.[292 ITR 416 (SC)], once the dependent agent’s remuneration is at ALP, the taxing rights of the source State in respect of that DAPE are fully exhausted; any DAPE-level attribution thereafter is purely academic. The Departmental Representative did not dispute that MFE-India was at ALP; rather, he argued that since the assessee itself had adopted the dual-taxpayer approach, the Commissioner was justified in correcting the FAR and attribution percentage within that framework. 7.5 The Tribunal reiterated the settled law that section 263 can be invoked only where both of the following conditions are fulfilled (Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83): (i) the order of the AO is erroneous; and (ii) it is prejudicial to the interests of the revenue. If either limb fails, the assumption of section 263 jurisdiction is bad.

P a g e | 6 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD 7.6 On the profit-attribution aspect, the Tribunal revisited Set Satellite (Bom HC) and Morgan Stanley (SC) and noted that: • Where the dependent agent is remunerated at arm’s length and such ALP correctly captures all relevant functions and risks, no further profits are attributable to the PE. • Only if the ALP analysis is defective or incomplete (e.g. certain functions or risks are not priced) can there be scope for additional attribution. 7.7 The Tribunal further held that the Commissioner’s reliance on Rolls Royce (Del HC) was misplaced, for two reasons: (a) Rolls Royce concerned a fixed- place PE, not a DAPE, and the profit-attribution context was materially different; and (b) the Mumbai Bench is bound by the jurisdictional High Court (Set Satellite), which specifically supports the proposition that in DAPE cases, once the dependent agent is at ALP, the DAPE becomes tax-neutral. 7.8 Crucially, the Tribunal noted that neither the AO nor the Commissioner had ever held that MFE-India’s cost-plus-15% remuneration was below ALP. There was no transfer-pricing adjustment and no finding that any functions or risks had escaped pricing at the DA level. In these circumstances, and following Set Satellite and Morgan Stanley, the Tribunal held that no further profits were legally attributable to the DAPE. Consequently, even if the AO’s dual-taxpayer attribution at 24% could be said to suffer from methodological infirmities, such infirmities did not lead to any real “prejudice to the revenue”, because – in law – there was no additional profit that could have been attributed to the DAPE beyond what was already captured in the DA’s ALP remuneration. 7.9 On this reasoning, the Tribunal concluded that the Commissioner’s order failed the second limb of section 263 (prejudice to revenue) and, therefore, was without jurisdiction and liable to be quashed. 7.10 The Tribunal, however, observed that the assessee itself had voluntarily adopted the dual-taxpayer approach and had offered a small positive DAPE profit to tax in its return, which was accepted in the original assessment. Relying on Carborundum Co. v. CIT (108 ITR 335, SC), the Tribunal held that quashing the section 263 order does not enable the assessee to withdraw the self-assessed liability it had already accepted in the original assessment, which had otherwise attained finality. 7.11 Thus, while the section 263 order was set aside, the original assessment including the assessee’s own DAPE profit offering remained intact. 7.12 The relevant part of the ITAT’s order is reproduced below:

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“6. We have heard the rival contentions, perused the material on record and duly considered the facts of the case and in the light of the applicable legal position. 7. We find that section 263 of the Income Tax Act, 1961 provides that “The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment” (Emphasis, by underlining, supplied by us). It is, therefore, a condition precedent for invoking the revisionary powers under section 263 that in order to invoke the revision powers of the Commissioner, the order sought to be revised must be “erroneous in so far as it is prejudicial to the interests of the revenue”. In other words, even if an order is erroneous but is not prejudicial to the interest of the revenue, the provisions of Section 263(1) cannot be put into service. In the case of Malabar Industrial Co Ltd Vs CIT [(2000) 243 ITR 83 (SC)], the Hon’ble Supreme Court has elaborated upon this point and observed that “A bare reading of this provision makes it clear that the pre- requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order ofthe Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1)”. In the light of this legal position about the scope of revisionary powers of the Commissioner, the question that we need to put to ourselves is whether the taxability of an arm’s length remuneration to the dependent agent, in the hands of the dependent agent, exhausts the tax liability of the dependent agent permanent establishment, because if it does, non-levy of tax on the hypothetical profits of the DAPE, independent of the taxability of profits of the dependent agent, cannot be said to be prejudicial to the interests of the revenue. In view of Hon’ble jurisdictional High Court’s judgment in the case of Set Satellite (supra), the answer is in affirmative. That is the view the coordinate benches of the Tribunal are taking, such as in the case of ADIT Vs Asia Today Ltd [(2021) 129 taxmann.com 35 (Mum)]. Clearly, therefore, the non-levy of short levy of taxes on the hypothetical profits of the DAPE, independent of the taxability of the dependent agent, cannot be said to be prejudicial to the interest of the revenue- as long as the dependent agent has been paid an arm’s length remuneration for the services performed. In the present case, it is not even the case of the Assessing Officer at any stage that the dependent agent has

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not been paid arm’s length remuneration, even though there is repeated reference to the FAR analysis of the DAPE. Learned Commissioner has made reference to the Rolls Royce decision (supra) in this context of profit attribution to the PE, but then this is a decision in the context of a fixed place PE as evident from question number 2 before Hon’ble Delhi High Court, i.e. whether the office of Rolls Royce India Limited at New Delhi constituted a permanent establishment of the assessee under Article 5 of the Double Taxation Avoidance Agreement between India and the United Kingdom. The profit attribution to the DAPE and fixed place PE are, in the light of Hon’ble jurisdictional High Court judgment in the case of the Set Satellite (supra), on a materially different basis. On a conceptual note, PE, whether a fixed base PE, DAPE or any other type of PE, provides for threshold limits to trigger taxation in the source state, but then if as aresult of a DAPE, no additional profits, other than agent’s remuneration in the source country - which is taxable in the source state anyway dehors the existence of PE, become taxable in the source state, the very approach to the DAPE profit attribution may indeed seem clearly incongruous, but then as is the settled legal position as long as the dependent agent has been remunerated, on an arm’s length basis, for the functions performed, assets employed and risks assumed, that is the end of taxability of profits so far as the profits attributable to the DAPE are concerned. As a matter of fact, the very reference to the Rolls Royce decision (supra) shows that the aspect of the distinction between profit attribution to a fixed place PE and a DAPE has been lost sight of. While the learned Commissioner has disputed the FAR analysis, there is clearly mix-up of the FAR analysis of the agent with the FAR analysis of the DAPE. Learned Commissioner, in the impugned order, has proceeded on the basis that the profit attribution of a fixed place PE and the DAPE are in pari materia- a proposition which has been specifically rejected in the binding judicial precedents discussed above. We may, in this regard, refer to the following observations of Hon’ble jurisdictional High Court in the Set Satellite decision (supra): ……….At this stage we may note that on behalf of the assessee learned Counsel has produced an order passed by the Additional CIT (Transfer Pricing-II), Mumbai in the matter of determination of arm’s length price with reference to all the transactions reported in Form No. 3CEB filed by the assessee. The assessee is SET India, the depending agent. The order records that the assessee is engaged in the business of providing audio- visual television content and also acts as an advertising agent of Set Satellite Singapore Pvt. Ltd. The assessee distributes these channels to the Indian cable operators and that the assessee has applied the TNM method to determine the arm’s length price for its international transaction. It, however, clarified that the order is in respect of reference received for the assessment year 2002-03 and not for subsequent assessment years.12. We may now consider the judgment inMorgan Stanley & Co. Inc’s case (supra). The Appeals dealt with the Double Tax Avoidance Agreement (DTAA) between India and United States. That treaty advocated application of the arm’s length principle or provided a mechanism for avoiding double taxation on income. The issue involved, Morgan Stanley and Company (for

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short, "MSCo.") and one of the group companies of Morgan Stanley, Morgan Stanley Advantages Services Pvt. Ltd. (for short "MSAS"). An agreement was entered into for providing certain support services to MSCo. MSCo. outsourced some of its activities to MSAS. MSAS was set up to support the main office functions in equity and fixed income research, account reconciliation and providing IT enabled services such as back office operations, data processing and support centre to MSCo. On 5-5-2005 MSCo. filed its advance ruling application . The basic question related to the transaction between the MSCo. and MSAS. The advance ruling was sought on two counts (i) whether the applicant was having PE in India under Article 5(1) of the DTAA on account of the services rendered by MSAS under the services agreement dated 14-4-2005 and if so (ii) the amount of income attributable to such PE. It was ruled that MSAS should be regarded as constituting a service PE under Article 5(2)(1). On the second question the AAR ruled that the transactional net margin method (TNMM) was the most appropriate method for the determination of the Arm’s Length Price (ALP) in respect of the service agreement dated 14-4 2005 and it meets the test of arm’s length as prescribed under section 92C of the 1961 Act and no further income was attributable in the hands of MSAS in India. The said ruling ofAAR on the question of income attributable to the PE was the subject- matter of challenge by the Department. Insofar as the issue of PE is concerned the Supreme Court was pleased to hold that it agreed with the Ruling of the AAR that stewardship activities would fall under Article 5(2)(1). Dealing with the question of deputation, the Court held that on the facts that there is a service PE under Article 5(2)(1) and as such held that the Department was right in its contention that there exists a PE in India. Considering Article 7 of that treaty the Court observed that what is to be taxed under Article 7 is income of the MNE attributable to the PE in India and what is taxable under Article 7 is profits earned by the MNE. Under the Income-tax Act the taxable unit is the foreign company, though the quantum of income taxable is income attributable to the PE of the said foreign company in India. The Court observed that the important question which arises for determination is whether the AAR is right in its ruling when it says that once the transfer pricing analysis is undertaken there is no further need to attribute profits to a PE. The Court further noted that the computation of income arising from international transactions has to be done keeping in mind the principle of arm’s length price. The Court further reiterated that the main point for determination is whether the AAR was right in ruling that as long as MSAS wasremunerated for its services at arm’s length, there should be no additional profits attributable to the applicant or to MSAS in India. After considering the various methods by which arm’s length price can be determined the Court observed as under :— "As regards determination of profits attributable to a PE in India (MSAS) is concerned on the basis of arm’s length principle we have quoted Article 7(2) of the DTAA. According to the AAR where there is an international transaction under which a non resident compensates a PE at arm’s length price, no further profits would be attributable in India. In this connection, the AAR

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has relied upon Circular No. 23 of 1969 issued by the Central Board of Direct Taxes. This is the key question which arises for determination in these civil appeals." After discussing the various issues the Court in its conclusion held as under :— "As regards attribution of further profits to the PE of MSCo. where the transaction between the two are held to be at arm’s length, we hold that the ruling is correct in principle provided that an associated enterprise (that also constitutes a PE) is remunerated on arm’s length basis taking into account all the risk-taking functions of the multinational enterprise. In such a case nothing further would be left to attribute to thePE. The situation would be different if the transfer of pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a case, there would be need to attribute profits to the PE for those functions/risks that have not been considered. The entireexercise ultimately is to ascertain whether the service charges payable or paid to the service provider (MSAS in this case) fully represent the value of the profit attributable to his service. In this connection, the Department has also to examine whether the PE has obtained services from the multinational enterprise at lower than the arm’s length cost." In our opinion, considering the judgment, if the correct arm’s length price is applied and paid then nothing further would be left to be taxed in the hands of the Foreign Enterprise. 8. In the present case, there does not appear to be any dispute with respect to the ascertainment of the arm’s length price of the services rendered by the dependent agent to the assessee, as no ALP adjustment is made in the remuneration paid by the assessee to the MFE India, i.e. the dependent agent. There are also several indications to suggest that DA and DAPE are being treated as distinct taxpayers, inasmuch as while the arm’s length payment to the agent is not being questioned, the FAR analysis for the PE has been called into question. The two taxpayer approach adopted by the assessee has been accepted, and, taking it further, the profit attribution on the basis of the two taxpayer approach is enhanced. Even if that computation of profit attribution, on the basis of the two taxpayer approach, is erroneous, in view of Hon’ble jurisdictional High Court decision, it cannot be said to be prejudicial to the interest of the revenue unless there is a categorical finding that the payment to the dependent agent is not an arm’s length price vis-à-vis functions performed, assets employed and risks assumed by the dependent agent. While doing so, one also has to bear in mind that DAPE is not anything distinct from the DA, in the light of the binding judicial precedents holding the field as of now, and the taxability of the dependent agent’s remuneration in the hands of the DA brings an end to the taxability of the DAPE also. There is no such finding about the payment to the dependent agent being less than the arm’s length price of services rendered by the dependent agent, in the present case, even though there is a finding about questioning the DAPE’s FAR analysis. The Commissioner ought to have examined the arm’s length price determination in respect of

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the services rendered by the dependent agent, in this context. That exercise has also not been done. 9. In view of the above discussions, as also bearing in the entirety of the matter, we are of the considered view that unless the order sought to be revised cannot be said to be prejudicial to the interest of the revenue, its being erroneous, even if that be so, cannot be said to reason enough to invoke section 263 of the Act, and the order cannot be said to be prejudicial to the interests of the revenue unless there is a categorical finding that the dependent agent has not been paid arm’s length remuneration for the functions performed, assets employed and risks assumed by the dependent agent. The order being prejudicial to the interest of the revenue, inasmuch as the payment to the dependent agent not being at an arm’s length, is a sine qua non for holding that the order is prejudicial to the interest of the revenue. This exercise has clearly not been done on the facts of this case. For this short reason alone, we must set aside the impugned revision order. 10. As we part with the matter, we may add that once the assessee has accepted the dual taxpayer approach in its computation of income, it cannot be open to the assessee to deny the tax liability that it has already accepted under the said computation. We may, in this regard, refer to a materially similar situation dealt with by the Hon’ble Supreme Court in the case of Carborundum Co Vs CIT [(1977) 108 ITR 335 (SC)], wherein, even while Their Lordships held that the assessee had no tax withholding obligation in respect of technical know-how paid by the assessee, and, as such, revision order under section 263, holding the assessee liable to tax withholding treating 75% of such technical know-how is taxable in India, is unsustainable in law, Their Lordships also made clear that the 5% tax withholding liability accepted by the assessee cannot be negated as a result of the revision order being quashed. The same will be the position here. The impugned revision order being quashed would not affect the tax liability accepted by the assessee, under dual taxpayer approach, in the original assessment proceedings. As a matter of such adjustments being made in the course of normal assessment proceedings would have been, on jurisdictional point, perhaps in order, and the question, in that case, would have remained confined to the merits and the quantum of the adjustments. That, however, is not the situation before us. Learned counsel has also pointed out that there is a glaring error in the computation of profits inasmuch as the Commissioner has computed 35% of the gross figures of profit, whereas the computation of profit allocable to the permanent establishment can at best be for 35% of net profits. That aspect of the matter, as of now, is purely academic, and we leave it at that. Similarly, we see no need to deawith the other aspects of the matter raised by the assessee-appellant. All those issues are academic as of now. 11. In the result, the appeal is allowed.”

P a g e | 12 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD 7.13 Since there is no change in the facts and circumstances of the present case under appeal, and the profit attribution controversy is materially identical, the ITAT’s decision for AY 2017-18(which was followed by the Coordinate Bench for setting aside the 263 Order for AY 2018-29 and 2019- 20) is directly applicable and determinative of the present appeal. 8. Findings and decision 8.1 With this background, the grounds raised by the appellant are being taken up for adjudication, and reliance will be placed on the relevant discussion made by the ITAT in its order dated 30.08.2022 passed for AY 2017-18. Moreover, considering the fact that all the grounds are emanating from the core issue - whether can any further profits be attributed to a DAPE in India once the DependentAgent has been remunerated at arm’s length for all its functions, assets and risks - all the grounds are taken up for simultaneous adjudication. 8.2 Appellant’s Submission: The appellant vide its letter dated 06.10.2025 filed ground wise written submissions which are perused and it is observed that the same are in some way or the other already discussed in the earlier parts of the order either by way of the submissions made during the revisionary proceedings or by way of reliance made on the ITAT’s decision for AY 2017-18, the operative parts of which are already reproduced above. 8.3 It is also observed that out of the 8 grounds raised by the appellant Ground no 1-5 are on the quantum addition on account of higher percentage of profit attribution and Grounds 2-5 are raised on a without prejudice to the 1st Ground . 8.4 Vide Ground No. 1, the Appellant has contended that the AO erred in relying on the CIT’s order for AY 2019-20 passed under section 263 order, which had been quashed by ITAT; therefore assessment order is bad in law. The submissions made by the appellant can be summarised as to state that the AO has lifted and reproduced verbatim the entire 263 order for AY 2019-20 in the assessment order and has based the 35% attribution solely on that order. 8.5 The appellant pointed out that the 263 order dated 7 June 2022 was quashed by ITAT Mumbai on 24 January 2023 (ITA No. 1578/Mum/2022).The AO’s assessment order dated 25 May 2024 is thus founded on a non-existent and invalid order, showing complete lack of application of mind. The 263 order being quashed, no reliance could be placed upon its reasoning, and any attribution flowing from it is9. Findings 9.1 The AO has indeed based the core attribution adjustment exclusively on the 263 order for AY 2019-20. As on the date of the present assessment order (25.05.2024), the 263 order did not survive, having been quashed by ITAT on 24.01.2023, following the coordinate Bench’s decision dated 30.08.2022 for AY 2017-18. Relying on a quashed order is jurisdictionally fatal to the assessment. The AO has neither independently carried out any study of the

P a g e | 13 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD FAR analysis of the appellant nor has he referred the matter to the TPO to analyse the arm’s-length markup of the remuneration paid to the DAPE of the appellant, for the functions performed in Indiaas confirmed from the assessment order passed in the case of MFE Formwork Technology India Pvt. Limited. for A.Y. 2022-23, obtained and placed on record. in fact, the appellant has received favorable orders in the past assessment years, wherein the methodology adopted by the appellant has been accepted in its favour. 9.2 In Set Satellite Singapore Pte Ltd (Bom HC), the Hon’ble High Court, relying on Morgan Stanley & Co. Inc. (SC),held that where the dependent agent is remunerated at arm’s length, and that ALP correctly reflects all functions performed and risks assumed, then no further profits are to be attributed to the PE (whether fixed place or service PE; and, by extension, DAPE).In other words, taxing the agent’s ALP remuneration exhausts the source-state taxing right over the enterprise’s profits linked to that PE. Only if the ALP analysis fails to capture all functions/risks would there be scope for additional attribution. 9.3 This conclusion is fortified by the binding ITAT ruling in the appellant’s own case for AY 2017-18 (ITA 890/Mum/2022), wherein the Tribunal reaffirmed and applied the binding legal principle from Set Satellite Singapore Pte Ltd v. DCIT (Bom HC) and Morgan Stanley & Co. (SC), and held that a DAPE is not an independent profit center separate from its dependent agent. 9.4 If the dependent agent’s remuneration is at arm’s length, then the foreign enterprise’s Indian profits are fully exhausted by the DA’s taxable income, and nothing further remains to be attributed to the DAPE. Thus, DAPE is tax- neutral, unless the DA has been under-remunerated. No Further Attribution is legally sustainable without Showing That ALP Is Incorrect. In view of the above discussion and findings, the profit attribution of 35% made by the AO for the AY 2022-23 in the absence of any finding that the payment to the Dependent Agent, MFE India, is not at arm’s length, is held to be incorrect. 9.5 But the Tribunal also added an important caveat that even though the revision order is quashed, the assessee cannot now negate the tax liability it has already accepted and been assessed on. For this proposition, the Tribunal relied on Carborundum Co v. CIT (108 ITR 335, SC). In Carborundum, the Supreme Court quashed a section 263 order on the ground that no tax withholding was legally required on certain technical know-how fees, but it still held that the 5% withholding voluntarily undertaken by the assessee could not be undone merely because the revision order failed. 9.6 For the AY under appeal, the appellant had voluntarily adopted the dual taxpayer approach and offered Rs.17,30,504/- as DAPE profit in India in its return. The AO is hence directed to accept the profit attribution of 24% as offered by the appellant.

P a g e | 14 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD 9.7 Consequently, the addition of Rs.10,53,80,213/- made to the appellant’s income is hereby deleted.” 4. Before us, the ld.AR reiterated the same facts already narrated in details by the ld.CIT(A) in the preceding paras. It was contended that the AO while framing the assessment order for the impugned assessment year has followed the directions of ld.CIT vide order dated 7 June 2022 for AY 2019-20. He erred in placing reliance solely on the said Revision order dated 7 June 2022 under section 263 of the Act in the revision proceedings for AY 2019-20 which did not survive as on the date of passing the impugned assessment order as the same was already quashed by the Hon’ble Mumbai ITAT vide its order dated 24 January 2023 in ITA No. 1578/MUM/2022. The action of by the AO shows lack of application of mind since the said assessment order had quoted the entire order under section 263 of AY 2019-20 in verbatim and had been passed on a basis of an order of CIT which was non-existent and quashed by ITAT. Thus, the impugned assessment order should be held as infructuous and should be declared as bad in law and voidabinitio and therefore, consequently, the additions of Rs 10,53,80,213/- to the income attributable to the PE should be deleted. 5. Per contra the ld.DR relied on the assessment order though he admitted that the impugned appeal had been filed by the Revenue to

P a g e | 15 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD keep the matter alive as further appeals before the hon’ble High Court were pending. 6. On careful consideration of above facts, we find no infirmity in the conclusion drawn by the ld.CIT(A) in allowing the appeal of the assessee in this regard as the very basis for the addition, being the Revision orders u/s 263 of the Act no longer exist. Moreover, as for the relevant year under appeal, the assessee had voluntarily adopted the dual taxpayer approach and offered Rs.17,30,504/- as DAPE profit in India in its return, the ld.CIT(A) correctly directed the AO to accept the profit attribution of 24% as offered by the assessee. As a result, grounds of appeal of the Revenue are dismissed.

Sd/- Sd/- SAKTIJIT DEY PRABHASH SHANKAR ( (उपाध्यक्ष/ VICE PRESIDENT) (लेखाकार सदस्य/ACCOUNTANT MEMBER)

Place: म ुंबई/Mumbai ददनाुंक /Date 04.05.2026 Lubhna Shaikh / Steno

P a g e | 16 ITA No. 126/Mum/2026 A.Y. 2022-23 MFE Formwork Technology SDN. BHD आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण/ ITAT, Bench, Mumbai.