ACIT CIR-4(3) (1) , MUMBAI vs. M/S. JEFFERIES INDIA PVT. LTD, MUMBAI

ITA 1668/MUM/2022Status: DisposedITAT Mumbai21 September 2026AY 2012-1311 pages
AI SummaryDismissed

What were the facts?

The Revenue filed an appeal and the assessee filed a cross-objection against the order of the Ld. CIT(A) for Assessment Year 2012-13. The Ld. CIT(A) had deleted an adjustment of Rs. 4,73,87,382/- made by the Ld. AO on account of intra-group services. The Ld. AO's order was passed under Section 143(3) r.w.s. 144C(3) of the Income Tax Act, 1961, and the Ld. CIT(A)'s order was passed under Section 250 of the Act. The assessee, engaged in merchant banking, investment advisory, and stock broking services, had received administrative services from its Associated Enterprises (AEs). The Transfer Pricing Officer (TPO) had recommended an adjustment to the Arm's Length Price (ALP) of these services. During appellate proceedings, the assessee presented an Advance Pricing Agreement (APA) with the CBDT, effective from AY 2018-19 to AY 2022-23, with rollback years from AY 2014-15 to AY 2017-18, which covered similar administrative support services.

What did the Tribunal hold?

The Tribunal upheld the order of the Ld. CIT(A) in deleting the transfer pricing adjustment of Rs. 4,73,87,382/-. The Tribunal noted that while the impugned AY 2012-13 was not within the APA years or rollback years, the Ld. CIT(A) found that the cost allocation methodology for the impugned year was the same as contemplated under the APA. The Tribunal observed that the Ld. TPO, in remand proceedings, suggested the 'Other Method' but failed to determine the ALP using it, instead setting it at Nil on an ad-hoc basis. The Tribunal found no material brought on record by the Revenue to demonstrate any difference in the Function, Asset, and Risk (FAR) analysis or the nature of activities between the impugned year and the APA years. Relying on the ratio laid down by the Hon'ble Delhi High Court in Springer India Private Limited and the Hon'ble Bombay High Court in J.P. Morgan Services India (P.) Limited, the Tribunal held that it would be inappropriate to allow the Revenue to argue to the contrary when no material distinction in FAR or underlying activities was demonstrated. The grounds raised by the Revenue were dismissed. The Cross Objection filed by the assessee was dismissed as infructuous as the Revenue's appeal was disposed of on merits.

What were the issues?

1. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) was justified in rejecting the necessity of the benefits test, ignoring the provisions of Section 92F of the Income Tax Act, 1961, and OECD guidelines on intra-group services? (Question of law) 2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred by holding that the TPO had not followed any approved method to determine the ALP, despite Rule 10AB of the Income Tax Rules, 1962 providing for 'Any other method' applicable from AY 2012-13 onwards? (Question of mixed law and fact) 3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in placing reliance on future year's APA, ignoring the principle of res-judicata and factual inconsistencies highlighted by the TPO? (Question of mixed law and fact) Assessee's Contentions: The Ld. AR argued that the Ld. CIT(A) correctly relied on the APA, citing the cases of Ranbaxy Laboratories Ltd. and JP Morgan Services Pvt Ltd. The Ld. AR highlighted that the methodology for cost allocation in the APA remained the same for AY 2012-13 and that the TPO failed to quantify the ALP using the 'Other Method' he suggested, determining it at NIL on an ad-hoc basis. The Ld. AR also referred to the ITAT Mumbai Bench decision in M/s CLSA India Private Limited. The assessee also submitted that the CBDT, in a later assessment year, accepted that the consideration in the Mutual Agreement Procedure (MAP) would also apply to non-US based transactions. Revenue's Contentions: The Ld. DR argued in favor of the Ld. AO's order, stating that the administrative services were duly paid to the AEs. The Ld. DR contended that the assessee was unable to submit relevant documents during remand proceedings to support its claim and that the Ld. CIT(A) erred in relying on the APA for the impugned assessment year. The Ld. DR argued that the APA was for later assessment years and could not be accepted for the present year.

Which sections of the Income-tax Act were involved?

Section 92F,Section 143(3),Section 144C(3),Section 250,Section 92CA(1),Section 92CC

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Income Tax Appellate Tribunal, MUMBAI

Before: SHRI ANIKESH BANERJEE & MS. RATNA DASGUPTA

For Respondent: Shri Ajay Uke, SR.DR

Heard together (2 matters)

ITA 1668/MUM/2022
CO 114/MUM/2022

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