KELLER GROUND ENGINEERING INDIA PRIVATE LIMITED,CHENNAI vs. DCIT CORPORATE CIRCLE 4(1), CHENNAI

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ITTPA 134/CHNY/2024Status: DisposedITAT Chennai20 May 2026AY 2021-227 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the TPO computed the ALP of management services as Nil, stating no services were rendered by the Associated Enterprise (AE). The Tribunal observed that a Coordinate Bench of the Delhi Tribunal, in the AE's case (Keller APAC), had considered whether management services fell under Fees for Technical Services (FTS) as per Article 12(4) of the India-Singapore DTAA. In that case, the rendition of services was not disputed, and the dispute was only about taxability. The Tribunal found merit in the assessee's argument that if service rendition is acknowledged in the hands of the AE, it cannot be held as not received by the assessee. The Tribunal also noted that the AE's case decision was rendered subsequent to the lower authorities' orders in the present case and that the assessee had submitted voluminous documentary evidence that might not have been properly verified. Therefore, the Tribunal decided to remit the issue of determining the ALP of management fees back to the AO/TPO for reconsideration in light of the coordinate bench's decision and the supporting evidence, ensuring the assessee is given a reasonable opportunity of being heard. The issue of whether the management services were shareholder activities or provided benefit was not expressly decided.

What were the facts?

The assessee, Keller Ground Engineering India Private Limited, is appealing against the final assessment order for AY 2021-22, passed by the National Faceless Assessment Unit (AO) under section 143(3) r.w.s 144C(13) of the Income Tax Act, 1961. The dispute centers on a downward adjustment of Rs. 9,30,97,551/- proposed by the Transfer Pricing Officer (TPO) for management service fees paid to Keller APAC. The assessee had declared a total income of Rs. 21,68,80,446/-. The TPO rejected the assessee's aggregation approach and TNMM method, concluding the Arm's Length Price (ALP) of the management services should be NIL, citing failure to substantiate services rendered, lack of benefit, and shareholder activities. The assessee's objections before the Dispute Resolution Panel (DRP) were sustained, leading to the current appeal.

What were the issues?

1. Whether the Transfer Pricing Officer (TPO) erred in determining the Arm's Length Price (ALP) of management services at NIL, by rejecting the assessee's aggregation approach and Transactional Net Margin Method (TNMM)? (Question of law and fact, concerning Section 92C of the Income Tax Act, 1961). Assessee's contentions: The assessee argued that it had substantiated the rendition of services by Keller APAC through a Master Service Agreement (MSA) and various email correspondences. It further relied on a Delhi Tribunal order in the case of Keller APAC (the foreign AE) for the same AY, which held that management services rendered were not taxable in India under the India-Singapore DTAA, and factually concluded that services were rendered. The assessee also cited the Pune Tribunal's decision in Benteler Automotive India Pvt Ltd, stating that if the AO in the foreign AE's case accepts service rendition, the TPO's denial is erroneous. The assessee also argued for consistency in the revenue's stand. Revenue's contentions: The revenue relied on the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 92C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

आदेश / O R D E R

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the final order of the assessment passed by National Faceless Assessment Unit (in short "AO") passed u/s. 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (in short "the Act") dated 25.10.2024 for Assessment Year (AY) 2021-22. The various grounds raised

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by the assessee pertain to the issue of downward adjustment towards management service fees by the Transfer Pricing Officer (TPO) (Ground No.3.1 to 3.6). The assessee has also raised aground with regard to the validity of the assessment proceedings being barred by limitation. However, during the course of hearing the ld. AR submitted that said ground is not pressed. Accordingly, ground No.2.1 is dismissed as not pressed.

2.

The assessee is a private limited company and is geotechnical contractor which cater to local customers across entire construction sector. The assessee is also a specialist in rehabilitation work and protection of soil and ground water from environmental damages. The assessee filed a return of income for AY 2021-22 on 15.03.2022 declaring total income of Rs. 21,68,80,446 /-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to compute the Arm's Length Price (ALP) of the international transactions. The assessee in its TP documentation has independently benchmarked the impugned transaction using the aggregation approach and by adopting the Transactional Net Margin Method (“TNMM”), wherein the impugned payment of management fee has been aggregated with the primary transaction of provision of ground engineering services. Post aggregation, the Appellant earned a profit margin of 5.85% OP/Sales. The assessee identified 16 comparable companies having a profit margin range of 2.73% to 12.35% with a median of 6.04%, OP/Sales. Accordingly the assessee concluded that the primary transaction, including the transaction of payment of management fee, is at arm’s length. Alternatively, the assessee also benchmarked the impugned payment of management fee using the transaction-by-transaction approach

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and, after a detailed benchmarking analysis, concluded that the impugned transaction is at arm’s length [Pg. 46 to 49 of paper book]. However, the TPO adopted the “Other Method” as the MAM to concluded that the ALP of the impugned management services would be NIL based on the following reasons: a. Alleged failure of the Appellant to substantiate that the impugned services have been actually rendered by Keller APAC to the Appellant. Consequential rejection of the aggregation approach adopted by the Appellant. b. Alleged non-satisfaction of need/ benefit test, and non- maintenance of documentation for the specific services provided. Also, contended that the benefits derived by the Appellant are incidental. c. The services provided by Keller APAC are merely shareholder activities and are hence not required to be separately remunerated as per the provisions of the Act. d. E-mail communications submitted by the Appellant cannot be considered as sufficient evidence for substantiating rendition of services by Keller APAC to the Appellant.

Accordingly the TPO proposed an downward adjustment of Rs.9,30,97,551/- towards management fees. The A.O passed the draft assessment order incorporating the TP adjustment. Aggrieved, the assessee filed objections before the DRP and the DRP sustained the TP adjustment. The assessee is in appeal before the Tribunal against the final order of assessment passed by the A.O pursuant to the direction of the DRP.

3.

The Ld. Authorized Representative (AR) of the assessee submitted a detailed argument and also written submissions. The summary of the submissions made by the ld AR is extracted below –

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1.

The primary contention of the Ld. TPO for rejecting the aggregation benchmarking approach adopted by the Appellant and for considering the ALP of the impugned management fee as NIL is that the Appellant has not substantiated that Keller APAC has actually rendered the services to the Appellant. 2. The Appellant has submitted the MSA [refer pg. 87 of the paper book] as well as various email correspondences along with a summary capturing the brief about each mail[refer pg. 102 to 198 of the paper book] before the lower authorities, evidencing that the Appellant has actually received various services from Keller APAC which are in the nature of legal services, IT support services, engineering and technical services etc. 3. Additionally, the Appellant submits that Keller APAC provides a bouquet of services to the Appellant which are utilized by the Appellant in its day-to-day business operations. During Keller APAC’s scrutiny assessment for the impugned AY 2021-22 (this is the same AY that is presently before Your Honours in the Appellant’s case), the Ld. AO in Keller APAC’s case has scrutinized the income received by Keller APAC from the Appellant, amounting to INR 9.30 Crores and vide final assessment order dated October 12, 2023 [refer pg. 229 of the paper book], has concluded that the management services rendered by Keller APAC to the Appellant are in the nature of Fees for Technical Services (“FTS”) and are accordingly liable to tax as per the provisions of India Singapore Double Taxation avoidance Agreement (“DTAA”).Below are the extracts from the final assessment order which indicates the same: “… 8. Even if the copy of the email communication as given below is referred, it becomes clear that the nature of services rendered was technical as well as consultancy in nature and it makes available technical skills to the recipient such that the client does not have to resort back to the assessee for a similar query: (Emphasis Supplied) 4. Pursuant to the order passed by the Ld. AO in the case of Keller APAC, Keller APAC preferred an appeal before the Hon’ble Tribunal, inter alia, contending that the impugned management service fees were not taxable in India in view of the beneficial provisions of the applicable DTAA. The Delhi Bench of the Hon’ble Tribunal, vide order dated 26.08.2025[refer pg. 1 of the additional case law compilation], accepted the aforesaid contention and concluded that such income was not chargeable to tax in India under the beneficial provisions of the DTAA.

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5.

While arriving at the above conclusion, the Hon’ble Tribunal specifically recorded that the services in question had been rendered by Keller APAC on a recurring basis pursuant to the management services agreement and made a categorical factual finding acknowledging actual rendition of services. The relevant extracts of the Hon’ble Tribunal’s order are reproduced below: “6…..A perusal of Management Service Agreement (supra) would show that the services provided by the assessee can be classified as technical, managerial and consultancy. A perusal of emails placed on record by the assessee also show that the nature of services are technical, consultancy advisory and managerial. No material is brought on record by the Revenue to substantiate that there is transfer of knowhow or technology. Even in the scope of work as detailed in Schedule 1 to Management Service Agreement and in the agreement there is no reference of transfer to knowhow under any category of services. 7…..A perusal of Management Services Agreement would show that there is no specific life time of agreement. That mean the term of said agreement is perpetual unless the same is terminated for the reasons mentioned in clause 7 of the agreement by any the parties to the agreement. Thus, the services are provided by the assessee to Keller India on year on year basis.This itself shows that there is no transfer of any technical knowhow or skill or process or technology. Had it been a case of transfer of knowhow, Keller India would not have entered into such perpetual agreement.Further, from perusal of mails it emerges that Keller India is seeking technical consultancy and advisory services on each of the projects it undertakes. Since, the preconditions for holding any payments as FTS as per Article 12(4) are not satisfied the payments received by assessee from Keller India cannot be held as FTS.” (Emphasis Supplied) 6. This would further demonstrate that, in Keller APAC’s case, the Revenue has accepted the fact that the services have actually been rendered by Keller APAC to the Appellant and has then gone one step ahead to allege that the services so rendered have been made available to the Appellant, thereby being characterized as FTS and therefore becoming liable to tax as per the provisions of the India Singapore DTAA.

7.

The Delhi Bench of the Hon’ble Tribunal(in Keller APAC’s case),after perusing the e-mail communications and the MSA,has factually concluded that the services were in fact rendered by Keller APAC to the Appellant[refer pg. 6 of the additional case law compilation]. In such circumstances, it would be unjustified for the Revenue on one sideto take a stand in the Appellant’s case

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that the services have not been rendered and on the other side, in Keller APAC’s case, an entirely different stand that the services that have been rendered are entirely technical in nature which have been made available to the Appellant, thereby taxable as FTS as per the provisions of the India Singapore DTAA. The above stand of the revenue is highly inconsistent and violates the principles of consistency. 8. The Appellant places reliance on the decision of the Pune Bench of the Hon’ble Tribunal in the case of Benteler Automotive India Pvt Ltd [TS-198- ITAT-2023][refer pg. 69 of the case law compilation], where the Hon’ble Tribunal has held that, once the AO in the case of the foreign AE has held that the foreign AE has provided services to the assessee, the TPO’s finding that services have not been rendered would become entirely erroneous.

4.

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

5.

We have heard the parties, and perused the material available on record. The TPO has computed the ALP of the management services received by the assessee as Nil by stating that no such services are rendered by the AE. On perusal of the decision of the Coordinate Bench of Delhi Tribunal in AEs case, we notice that the Coordinate Bench has considered whether the management services rendered by the AE would fall within the scope of FTs as per Article 12(4) of DTAA between Indian and Singapore. The issue before the coordinate bench emanated from the order of the lower authorities where rendering of services was not disputed and the dispute was with regard to whether the amount received by the AE towards rendering of the impugned services is taxable in India or not. Therefore, we see merit in the argument of the Ld. AR that when rendering of services are acknowledged in the hands of the AE then the same cannot be held as not received in the hands of the assessee. We further notice that the decision of the coordinate bench in the AEs case was rendered subsequent to the orders of the lower authorities in the present case. Further the assessee has submitted voluminous documentary

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evidences before the lower authorities which in our view have not been verified properly. Therefore, in our considered view the issue of the determination of ALP towards management charges have to be examined in the light of the above decision of the coordinate bench and also considering the supporting evidences submitted. Accordingly, we remit the appeal back to A.O/TPO to consider the impugned issue and decide the ALP of the management fee in accordance with law. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly.

6.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 20th day of May, 2026 at Chennai.

Sd/- Sd/- (एबी टी. वक�) (पदमावती यस) (ABY. T. Varkey) (Padmavathy.S) लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य चे�नई/Chennai, �दनांक/Dated: 20th May, 2026. EDN, Sr. P.S आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF Digitally signed by EJTADA DURGA EJTADA DURGA NARESH NARESH Date: 2026.06.01 14:35:09 +05'30'

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