INTERNATIONAL CENTER FOR LIVING AQUATIC RESOURCES MANAGEMENT,CUTTACK vs. ASSISTANT COMMISSIONER OF INCOME TAX, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHIBENCH ‘D’, NEW DELHI Before Sh. Ramit Kochar, Accountant Member & Sh. Raj Kumar Chauhan, Judicial Member IT(IT)A No. 1090/Del/2025 :Asstt. Year: 2018-19 International Center for Living Vs ACIT, Aquatic Resources Management, Circle Intl. Tax-(2)(1), Worldfish Project Campus of Civic Centre, Directorate of Animal Husbandry New Delhi-110002 Mangalabag, Odisha-751001 (APPELLANT) (RESPONDENT) PAN No. AAAJT2597D Assessee by: Sh. Prakash Sinha, Adv. & Sh. Ayush Kumar, Adv. Revenue by: Sh. M. S. Nethrapal, CIT-DR Date of Hearing: 17.04.2026 Date of Pronouncement: 27.04.2026 ORDER Per Raj Kumar Chauhan, Judicial Member: This appeal is filed by the appellant/assessee against the assessment order dated 30.01.2025 passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (‘the Act’), in pursuance to the direction of ld. Dispute Resolution Panel-2, New Delhi (Ld. DRP) u/s 144C(5) of the Act dated 13.12.2024 wherein the addition made in the draft assessment order dated 27.03.2024 were confirmed on account of disallowance of excessive and unreasonable payment made to the head office to the tune of Rs.27,77,193/- along with addition of income on account of head office to the tune of Rs.1,07,08,585/-.

2 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

3 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

4 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

Grants received are classified in the following categories for which the recognition and measurement advice is provided below: i) Restricted grants a. Grants related to assets: Grants for which the primary condition is to purchase, construct, or otherwise acquire long-term assets, b. Grants related to income: Grants with specific conditions to be fulfilled by the beneficiary to cash them. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed. Where the grant relates to a non-current asset, it is recognized as deferred grant revenue in the statement of financial position and transferred to income in equal amounts over the expected useful life of the related asset.” 3. Because the Ld. DRP erred to appreciate that the grant received from India were restricted grant and in such restricted grant revenue is recognized to the extent of cost incurred only and resulting thereby no profit. In case the grant received exceeds the cost incurred than, such excess grant is refundable/returnable to such grantors and similarly in case the grant received is less than the cost incurred than such amount is shown receivable from the grantor. Exhibit-1 of the Audited Global Annual Financial Statement gave the agreement wise such accounts and all are restricted grounds. The detail of grants from India are also shown in Exhibit-1 (supra). 4. Because the Ld. DRP erred in appreciating paragraph 12 of the Annual Financial Statement which is as follows: a. ACCOUNTS PAYABLE - ADVANCE RECEIVED FROM DONORS Accounts payable to donors as of December 31 consist of grants which conditions are yet to be met and excess grants to be reimbursed to donors as follows: 2022 ($) 2021 ($) W3 and Bilateral 6,981 9,692 Donors

b. Thus, excess grant if any received was due for return to the grantor and hence, there was no case of earning any profit/income.

5 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

6 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

7 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

policies relevant to small-scale rural subsistence and market fisheries, fourthly, through research regarding development of labor- intensive systems to aid employment, fifthly, publishing and disseminating research findings and lastly organizing and conducting periodic conferences, forums and seminars whether international, regional, local or otherwise for the purposes of discussing current problems relevant to the management of living aquatic resources.

8 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

Memorandum Annexure-V. It has also agreement with Fisheries & Animal Resources Development Department (F & ARD), Odisha, Bhubaneswar. Further agreement are with the Assam Rural Infrastructure and Agriculture Society for providing the technical assistance for the fisheries under the Assam Agribusiness and Rural Transformation Project (APART). The assessee is having agreement with Rajiv Gandhi Centre for Aquaculture (RGCA), Tamil Nadu for the collaborative research program for the genetic improvement of farmed Tilapia in India. RGCA is functioning under the Marine Project Development Authority (MPEDA) which is a statutory authority under the Ministry of Government of India with mandate of research in Aquatic & Biotechnology.

SI. Grant received fr om- Expenses Revenue/grant Payment Payment no. incurred in recognized as received received FY 21-22 per IND AS 20 during FY 21- during FY 22- (INR) (INR) 22 (INR) 23 (INR) 1 Assam Infrastructure & 1,84,31,881/- 1,84,31,881 /- NIL 1,19,47,339/- Agricultural Service Society - Restrictive Bilateral grants 2 Fisheries and Animal 6,50,86,812/- 6,50,86,812/- 2,91,46,590/- 4,85,05,660/- resources Development Department, Odisha- Restrictive Bilateral grants 3 Rajiv Gandhi Center for 42,49,510/- 42,49,510/- 28,77,808/- 21,96,162/- Aquaculture, Tamil Nadu- Restrictive Bilateral grants

9 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

4 Indian Council for 1,13,72,118/- 1,13,72,118/- NIL NIL Agricultural and Min. of Agriculture Dept of Agri Research and Education. - Restrictive Bilateral grants

10 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

from payment of tax in India on account of being covered under United Nation (Privilege and Immunity) Act, 1947. The ground Nos. 2 to 6 pertains to the two addition made out of amount of indirect cost of Rs.1,33,85,731/- and the ground No. 7 pertains to the addition of Rs.45,66,519/- regarding the disallowance of expenditure for not following the TDS provisions. We now proceed to decide the grounds in above manner as under:

Ground No. 1:

11 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

United Nation (Privilege and Immunity) Act, 1947. During arguments, the ld. AR for the assessee has referred one notification dated 30th November 2000, Ministry of Home Affairs, No. S.O.S.L.1014(e), issued under sub-clause (ii) of clause (e) of sub-section 1 of section 2 of the Foreign Contribution (Regulation Act, 1976) which stipulates that the following organizations shall not be treated as foreign source for the purpose of said Act. The assessee i.e. International Centre for Living Aquatic Resource Management (ICLARM), Philippines, has been shown at serial No. 69 (C)(iii) of the said notification. Ld. AR tried to impress upon the bench that this notification would show that the assessee is exempted from tax under the United Nation (Privilege and Immunity) Act, 1947.

12 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

respectively addition has been made for non- following the provision of TDS deduction as required under Section 40A(2)(a) of the Act. It was further argued on behalf of the Revenue that for exemption to an international organization under the United Nation (Privilege and Immunity) Act, 1947, a notification is required by the Government of India which admittedly has not been issued to the assessee. The ld. DRP has dealt this issue in its directions at page 9 & 10 from para (d) to (g) extracted below as under: d. Before the Panel, the assessee has taken an objection that it is not liable to tax in India since it is covered under United Nations Privileges, and Immunities Act, 1947 and is exempt from Income Tax. Hence, it was contended that any income of the assessee in India is not liable to tax. However, in this regard, the Panel finds that as per Section 7 of the Schedule to the United Nations (Privileges and Immunities) Act, 1947 ("UNPI Act") the asset, income and other property of the United Nations have been made exempt from all direct taxes. The relevant extract of the Section is as under: “Section 7. The United Nations, its assets, income and other property shall be: (a) exempt from all direct taxes; it is understood, however, that the United Nations will not claim exemption from taxes which are, in fact, no more than charges for public utility services; Thus, on perusal of the above section of the UNPI Act, 1947, it is observed that only the United Nations has been exempted from direct taxes in countries for instance India. However, in the present case, the assessee is a private entity based in Malaysia which was founded and controlled by Rockefeller Foundation, a private philanthropist group and it was only co-sponsored by the United Nations. Hence, the assessee company cannot be equated to the United Nations in order to grant benefit of the UNPI Act. Furthermore, Section 3 of UNPI Act, confers power to extend certain privileges and

13 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

immunities on other international organizations and their representatives and officers. e. Further, the benefit of UNPI Act has been extended with certain modifications to the following organisations by various notifications: 1) International Civil Aviation Organisation. 2) World Health Organisation. 3) International Labour Organisation. 4) Food and Agriculture Organisation of rhe United Nations. 5) United Nations Educational, Scientific and Cultural Organisation 6) International Monetary Fund. 7) International Bank of Reconstruction and Development. 8) Universal Postal Union. 9) International Telecommunication Union. 10) World Meteorological Organisation. 11) Permanent Central Opium Board. 12) International Hydrographic Bureau f. On perusal of the above, it is noted that the name of the assessee company is nowhere mentioned in the list of organizations to which benefit of UNPI Act has been extended. Further, no such notification pertaining to the assessee company extending the benefit of UNPI Act to it has been brought on record during the course of DRP proceedings. g. Thus, in view of the above discussion, the Panel is of the view that the assessee company was not covered under UNPI Act and is liable to be taxed in India as per the provisions of Income Tax Act, 1961.” 11. We have noticed that the notification of Ministry of Home Affairs referred and relied by the assessee before the Tribunal has not been produced during the assessment proceeding either before the AO at the time of framing of the draft assessment order or no objection in that regard has been filed before the Ld. DRP regarding relying upon the said notification. Moreover, if the assessee is in possession of any notification having been

14 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

issued in its favour by the Government of India for granting benefit of exemption from tax under the United Nation (Privilege and Immunity) Act, 1947, the end of justice requires that the assessee be given opportunity to present this necessary notification before the ld. DRP. The ld. DRP may consider as per law, the law and its provisions applicable on the issue including the notification of Ministry of Home Affairs mentioned (supra) along with any other notification issued in favour of the assessee for granting exemption to it under the United Nation (Privilege and Immunity) Act, 1947. Hence, the ground No. 1 is restored to the file of the ld. DRP who shall decide the same afresh after giving effective opportunity of hearing to the assesse who shall be obliged to present the requisite notifications/details for claiming exemption under United Nation (Privilege and Immunity) Act, 1947.

Ground Nos. 2 to 6:

15 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

“ISSUE 2: Indirect costs worth Rs. 1,33,85,731 paid to Head Office 8. In this regard, it was seen that out of total sundry expenses of sundry expenses worth Rs. 6,84,27,241, assessee has incurred indirect costs worth Rs.1,33,85,731/- which is paid to head office in Myanmar. These expenses were in addition to direct costs of Rs.2,00,824 for Allocated MIS Cost, Rs. 4,48,122 for Allocated Facilities and Rs. 18,35,731 for CGIAR Cost Sharing Percentage (CSP). It appeared that such indirect costs are being paid to the head office without receiving any services and many such expenses are duplication of payment made for direct costs. 8.1 In this regard, assessee in its reply dated 20.03.2024 submitted that there are various expenses which can be directly allocable on the India project, such as, Salaries, allocated MIS Cost, allocated facilities, research services, consultancy, other professional services etc. The cost which are not directly allocable such as accommodation and laundry charges, bank charges, books and periodicals, computer accessories, computer software and license, cost of external audit services, cost of internal audit services, staff training cost, recruitment related expenses, publication expenses, etc are charged under indirect cost. This is reimbursement of cost. These expenses are all covered in the agreement with the doners. These agreements are all cost reimbursement agreements i.e. the doner is also aware that the assessee has to meet other costs also which cannot be itemized and quantified in numbers. So, doners agreed for a certain percentage to be given as overhead. The breakup of agreements and the overhead cost are as below: Doner's Clause no. of the Percentage of Amount of Name agreement overhead as overhead per agreement claimed as an expenditure. F & ARD Summary budget 15% 85,76,547 table, page-28 APART Brak down of 16% 24,85,436 reimbursable expenses - Page 52 RGCA Clause 7 of 25% 6,07,423 Annexure-1 ICAR Window 3 fund 18% 17,16,325 1,33,85,731

16 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

8.1.1 Assessee further states that in the agreement itself it says reimbursement of expenses in all the agreements. There is no question of profit element is there and both doner and assessee agrees for this. 8.2 Further, with regard to these costs, assessee has stated that Indirect costs are generally recovered through charging a fixed percentage on direct project expenses. This percentage is what is referred to as the Indirect Cost Rate (ICR). 8.2.1 Assessee has stated that the following are an example of World fish Indirect costs or Overheads: Personnel Personnel cost of general management and Costs administrative support personnel, such as executive team (Director General, Research Director & Director of Corporate Services) or support services functions (Business development & partnership, Project Management Unit, Finance, Human Resources, Administrative Procurement, Corporate Communication & Marketing etc.) Travel Travel not directly related to a project Staff Training All necessary cost to provide training for staff & Workshop professional development Consultancy Costs for services outsourced to external organizations, service providers or consultants contracted specifically for general administrative functions, such as accounting, auditing, Corporate Communication & Marketing Supplies & Includes all supplies such as printing, stationery, Services small equipment, recruitment costs, memberships etc. Capital Cost for equipment or depreciation on equipment Equipment incurred by World Fish's operational functions Other Indirect This includes: Costs  Board of Trustees  External and Internal audits  Intellectual property management  Legal services  Corporate communication and marketing  Risk management  Environment health/safety  Security services  General insurance  Business development & partnership (BDP)  Strategy implementation  Country office management & support  CGIAR sharing percentage  Other shared resources not directly attributable to the project or activity

*HQ Facility & MIS costs are excluded from indirect costs calculation.

17 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

18 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

19 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

Personnel Personnel cost of general management and Costs administrative support personnel, such as executive team (Director General, Research Director & Director of Corporate Services) or support services functions (Business development & partnership, Project Management Unit, Finance, Human Resources, Administrative Procurement, Corporate Communication & Marketing etc.) Other Indirect This includes: Costs  Board of Trustees  External and Internal audits  Intellectual property management  Legal services  Corporate communication and marketing  Risk management  Environment health/safety  Security services  General insurance  Business development & partnership (BDP)  Strategy implementation  Country office management & support  Other shared resources not directly attributable to the project or activity

10.3 Assessee has not proven that the said costs are indeed reimbursement nor has assessee given any reasonable allocation key by which it can definitively be proven that these costs represent simple reimbursement without any profit element. 10.4 Therefore, payment for indirect cost is being held as "other income" of the head office under Article 23 of India-Malaysia DTAA which is as follows: OTHER INCOME 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. 2. The provisions of paragraph 1 shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case, the

20 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

provisions of Article 7 or Article 15, as the case may be, shall apply. 3. Notwithstanding the provisions of paragraphs 1 and 2, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other Contracting State may also be taxed in that other State. 10.5 In this regard, assessee's contention that such income is effectively connected with the PE and hence not taxable in India has been considered but not found tenable since PE and H.O. are separate entities for both DTAA and Act. Any transaction between them has two facets - expenditure for one and income for the other. Payment for indirect costs is an expenditure for PE but it is an income arising in India for H.O. The said income has arisen from an Indian source and just because it has arisen from the PE does not "effectively" link the income to the PE. The PE has booked it as expenditure as a separate legal entity and therefore, the HO should book it as income arising from an Indian source which is taxable in India as a separate entity. Therefore, assessee's argument is rejected. 10.6 In view of the above, the income of Rs. 1,07,08,585 is being added to assessee's income from other sources of the head office arising or accruing in India and taxed at the rate of 40% +surcharge +cess as applicable.” 13. The ld. AR has argued that the indirect cost amount of Rs.1,33,85,916/- is nothing but reimbursement by the PE in India of the head office expenses by the head office about the expenses spent by it towards the projects in India. It was further argued that, assessee is a non-profit organization and the source of fund is restricted grants by the individual state/ country where the project is undergoing and in this case, the source of fund was restricted grants by government of India which is operating as reimbursement basis requiring the assessee to first make expenses and then adjust the same

21 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

against the restricted grant and the balance amount unutilized has to be returned to the donor state (India).

22 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

is not related to any project should not be incurred by the assessee as there was no business reason for the assessee to make payment for personnel of head office in Malaysia, who are not working for its business needs in India. With respect to the claim of the assessee that out of total indirect cost of Rs.26,21,22,774/- incurred by the head office, only Rs.1,33,85,916/- was allocated to PE in India. The AO rejected the said stand on the ground that no scientific basis of said fact has been provided by the assessee and the “the indirect cost treat method” provided by the assessee does not appear sensible because the direct cost and indirect cost do not have any relation with each other as the nature of these costs are different. Accordingly, the AO held that it was reasonable to disallow the 20% of the expenditure borne towards indirect cost and accordingly, addition of Rs.26,77,183/- was proposed as addition to the income of the assessee u/s 40A(2)(a) of the Act. On this issue, the Ld. AR has also relied upon certain case law. The first case referred is ITA No. 5337/Del/2011, order dated 11.05.2012, Delhi bench, wherein para 5.15, it was held that in the absence of any evidence on record in respect of commercial activity having been undertaken by the assessee in India, its local office cannot be treated as a PE. The ld. AR has further relied upon the case of Delhi Tribunal in ITA No. 5147/Del/2010, order dated 02.09.2013, wherein it was held

23 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

that there has to be evidence on record that the assessee has carried on some essential activities of business from the local office and if the court found find that no such evidence was coming from the side of the Revenue, hence there cannot be held to be permanent establishment in India of the entities. Hence the provisions of section 195 are not attracted and consequently the disallowance made u/s 40(a)(ia) of the Act are bad in law. The ld. AR has further relied on the case of Hon’ble Karnataka High Court in Karnataka Municipal Data Society vs. ITO, Bangalore (2016) 76 taxmann.com 167, it was held that when the funds from the Central and State Governments will flow directly to the specialised institutions/ nodal agencies as grant, and nodal agency will constitute a revolving fund with the help of central and state shares, out of which finance could be provided to various agencies, the objective is to create and maintain a fund for the development of infrastructural assets on continuing basis and therefore the assessee being a nodal agency created by the government, there is no profit body because the entire fund are entrusted and interest accrued there from in deposits in the bank though in the name of the assessee has to be applied only for the purpose of welfare of the nation/state as per guidelines. The entire money in question is received for implementation of scheme which is for public purpose as per guidelines of the

24 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

central government, therefore, the assessee is only acting as a nodal agency of central government for implementation of these projects. Hence, it is not the case of the Revenue that the assessee was carrying on any business or activities of its own while implementing this scheme in question. It was therefore held that when the assessee is held as a custodian and full command for utilization of money, thereon remains with the government, same cannot be termed as income of the assessee. On the basis of these citations, it was argued that the situation with the assessee is the same as it was carrying on activities from the restricted grant by the doner nation i.e. India in this case and the payment were made to the project on expenses basis and similarly It was the head office which was incurring expenses on the project in India for the activities carried out by the assessee and as such the assessee has only reimbursed the said expenses incurred by the head office and as such it cannot be construed as income of the head office.

25 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

key has been provided by the assessee company before the AO or DRP. Further, assessee has not proven that the said costs are indeed reimbursement nor has assessee given any reasonable allocation key by which it can definitively be proven that these costs represent simple reimbursement without any profit element. Further, the assessee also failed to bring on record any document to show that what services in respect such indirect cost of Rs.1,33,85,916/- was received by the Branch Office in India and hence, the reasonableness of the expenditure could not be established by the assessee company. Thus, in view of the Panel, the AO was correct in disallowing 20% of such indirect cost of Rs. 1,33,85,916/- u/s 40A(2)(a) of the Act. i. As regard the addition of Rs. 1,07,08,585/- made to the income of the assessee company on the ground that such amount represents the income of HO received from the Branch Office in India, the Panel finds force in the order of the AO that the income of Rs. 1,07,08,585/- has arisen from an Indian source and hence taxable in India. The PE has booked it as expenditure as a separate legal entity and therefore, the HO should book it as income arising from an Indian source which is taxable in India as a separate entity. Further, the arguments of the assessee that it is not liable to tax by virtue of the Privileges and Immunities Act, is also negated for the reasons discussed in the above paragraphs wherein it has been held by the Panel that the assessee company is not covered by the UNPI Act and is liable to pay tax in India. Accordingly, the objections raised in ground number 1 are disposed of.” 17. It is evident from the observation of the ld. DRP that the disallowance u/s 40A(2)(a) of Rs.26,77,193/- has been done on the basis that assessee has failed to provide any scientific basis or mechanism on the basis of which the indirect cost was allocated by the head office to branch office of the assessee company in India. It was further observed by the ld. DRP that no proper basis of allocation key has been provided by the assessee company before the AO or the ld. DRP. Similarly, with regard to the addition of Rs.1,07,08,585/- holding the same as

26 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

income of the head office received from the branch office in India, the ld. DRP has followed the observation of the AO to the effect that the income of Rs.1,07,08,585/- has arisen from an Indian source and hence taxable in India. The AO has observed in that regard that there is no proof that these are mere reimbursement as contracts with the donors do not prove the reception of these costs reimbursement only. Claim of reimbursement can only be allowed on actual proof and not on mere contractual statements. Thus the claim of the assessee has been rejected and the indirect cost of Rs.1,33,85,916/- has been held to the income of the head office of the assessee on the same ground that the assessee has failed to provide any scientific basis or mechanism for allocation and utilization of indirect cost of amount allocated toward indirect cost and no proper basis of allocation key has been provided by the assessee company before the AO or the ld. DRP.

27 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

ld. DRP. Hence, these grounds regarding disallowance of indirect cost amount of Rs.1,33,85,916/- is restored to the file of the ld. DRP for deciding the same afresh with the direction to the assessee to submit the necessary required material for satisfying the requirement of the ld. DRP as mentioned above.

Ground No. 7:

28 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

which is admittedly a PE as per the assessee and its Head Office is situated in Malaysia. During the subject year under consideration, the assessee made payments to (a) an NRI Mr. Ronal Shuker and (b) an Indian Company, Ecociate Consultants Pvt. Ltd. 5.4.2 Evidently, these payments were made on account of certain consultancy ' services provided by the individual and the company, but no TDS has been deducted on such payments. The assessee submitted that the payee is Non-Resident in India, and is a freelance editor based in Canada and he provided his freelancing services towards editing and proofreading and for this purpose, invoice was raised from Canada upon the assessee, HO Malaysia. Since the expense was attributable to projects in India, the cost of freelancing services was captured by the India branch. The AO rejected the contention of the assessee and made addition on account of non-compliance of TDS provisions stating that the assessee had not submitted TRC for Mr. Shuker. However the assessee furnished the TRC of Mr. Shuker during the proceedings before DRP, hence the objection of the AO does not stand anymore. Further, there were no adverse findings given by the AO that Mr. Shuker had any business connection or PE in India or that the receipts were in lieu of services rendered by Mr. Shuker for Royalty/FTS. Hence the AO is directed to delete the addition on account of disallowance on non- compliance of TDS Provisions. 5.4.3 In respect of non-deduction of TDS on the payment made to M/s Ecociate Consultants Pvt. Ltd, the Panel observes that the M/s Ecociate Consultants Pvt. Ltd. is an Indian resident and regularly files return in India as stated by the assessee. Further, as the assessee stated that M/s Ecociate Consultants Pvt. Ltd. had complied with all the conditions of the first proviso of section 201 and had submitted certificate 26A evidencing that income referred in the invoices was duly returned in the IT return filed by it. In view of tire submission of the assessee, / the AO is directed to verify the correctness of the claim of the assessee from the material available on record and if the claim of the assessee is found admissible, relief shall be accordingly granted. Accordingly, the objections raised in ground number 2 are disposed of.”

29 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

30 IT(IT)A No. 1090/Del/2025 International Centre for Living Aquatic Resource Management

section (5) before completing the assessment. Since, the Assessing Officer has not complied with the directions of the ld. DRP, ends of justice requires that the matter be restored to the file of the Assessing Officer to comply with the directions of the ld. DRP in that regard by deleting the addition made with respect to Mr. Shonker of Rs.1,31,867/- as well as in respect of Indian entity as directed by the ld. DRP. The ground No. 7 is disposed off in above terms.