ELSEVIER LIMITED,UNITED KINGDOM vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE INT TAX 1(2)(2), DELHI, CIVIC CENTRE, MINTO ROAD, NEW DELHI

ITITA 1505/DEL/2025Status: DisposedITAT Delhi01 September 202616 pages
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What were the facts?

The assessee, Elsevier Limited, a UK tax resident and publishing house, is in appeal against an assessment order dated 08.01.2025 for AY 2022-23. The Assessing Officer (AO) determined the assessee had a Dependent Agency Permanent Establishment (DAPE) in India under Article 5 of the India-UK DTAA, attributing profits of Rs.27,46,23,429/- from gross receipts of Rs.125,20,62,742/-. The AO alleged RELX India P. Ltd. was the assessee's DAPE, based on information collected under Section 133(6) and emails exchanged with distributors. The assessee argued that RELX India provided marketing support services at cost plus 17.5%, a markup accepted in an Advance Pricing Agreement (APA) between CBDT and RELX India for AY 2021-22 to 2025-26. The assessee also contended that RELX India's employees did not have the authority to negotiate or conclude contracts, and that RELX India's revenue from the assessee was only about 9% of its total revenue, not 'wholly or almost wholly' working for the assessee.

What did the Tribunal hold?

The Tribunal held that ground no. 1, challenging the validity of the assessment order on limitation, was dismissed as not pressed by the assessee. Regarding the existence of a DAPE, the Tribunal found that it could not be conclusively established that RELX India was a DAPE of the assessee. However, even if it were accepted that RELX India is a DAPE, the Tribunal held, in light of the Hon'ble Supreme Court's decision in DIT vs. Morgan Stanley & Co., that no further attribution of profits was warranted. This was because the transactions between RELX India and the assessee were at arm's length as per the APA. The Tribunal examined the APA and found that the Transactional Net Margin Method (TNMM) was applied to benchmark marketing support services, with RELX India as the tested party. The APA indicated that RELX India did not have the power to fix prices or offer discounts, with the primary responsibility lying with the associated enterprises (AEs) of RELX India, including the assessee. The Tribunal rejected the revenue's objection to the ALP determined under the APA, stating that while a unilateral APA might not bind foreign AEs, it has legal sanctity under Indian tax laws and is a complete process for determining ALP. Consequently, the assessee succeeded on ground no. 5. Grounds no. 4 and 6 became academic and were left undecided. The Tribunal dismissed ground no. 7 regarding levy of interest u/s 234B as mandatory and consequential, and ground no. 8 regarding initiation of penalty proceedings u/s 270A as premature.

What were the issues?

1. Whether the assessment order dated 08.01.2025 is valid on grounds of limitation (Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961)? - Assessee: Not pressing this ground. - Revenue: Not recorded. 2. Whether RELX India P. Ltd. constitutes a Dependent Agency Permanent Establishment (DAPE) of the assessee in India under Article 5 of the India-UK Double Taxation Avoidance Agreement (DTAA)? - Assessee: Contended that RELX India merely provides marketing support services, compensated at cost plus 17.5% (as per APA), and its employees lack authority to conclude contracts or fix prices. Relied on DIT vs. Morgan Stanley & Co. (SC) and the AAR ruling in Specialty Magazines Pvt. Ltd. for the interpretation of 'wholly or almost wholly'. Also argued that the AO used material collected at the assessee's back without opportunity to rebut, and that RELX India's revenue from the assessee was not substantial enough to meet the DAPE criteria. - Revenue: Contended that RELX India is the assessee's DAPE and profits should be attributed. (Implied from AO's order). 3. If a DAPE exists, is further attribution of profits warranted, given that transactions between the assessee and RELX India are at arm's length as per the APA? - Assessee: Argued that if transactions are at arm's length, no further attribution is required, citing Morgan Stanley & Co. (SC). - Revenue: Raised objections to accepting the ALP determined under APA, arguing it's akin to settlement proceedings and not an actual determination of ALP.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 5,Section 133(6),Section 144C(8),Section 144C(11),Section 234B,Section 270A,Section 92CC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI VIKAS AWASTHY & SHRI KRINWANT SAHAY

For Respondent: Dr. Shalini Verma, CIT DR

PER VIKAS AWASTHY, JUDICIAL MEMBER:

This appeal by the assessee is directed against assessment order dated 08.01.2025 passed 143(3) r.w.s.144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), for AY 2022-23. 2. Shri Ravi Sharma, appearing on behalf of the assessee at the outset s

The order continues below.

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