ITO, AAYAKAR vs. AGS WORLD TRANSPORT INDIA PVT. LTD., MUMBAI

ITA 9190/MUM/2025Status: DisposedITAT Mumbai08 October 2026AY 2013-149 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that neither the TPO's approach of making a 100% adjustment nor the CIT(A)'s approach of granting 50% ad-hoc relief could be sustained. The TPO could not disallow 100% of the payment solely due to the assessee's failure to furnish complete supporting evidence. The transfer pricing provisions require the arm's length price (ALP) to be computed by applying one of the prescribed methods under Section 92C, not through ad-hoc or estimated disallowances. Similarly, the CIT(A) erred by substituting the TPO's 100% adjustment with another estimated percentage (50%) without computing the ALP using a prescribed method. Such adjustments must be based on proper benchmarking, not on what is considered reasonable or fair. Consequently, the Tribunal set aside the impugned order and restored the matter to the Assessing Officer. The Assessing Officer was directed to refer the matter back to the TPO to re-examine the international transactions and compute the ALP in accordance with Section 92C, adopting the most appropriate method based on available material. The assessee was to be given an opportunity to furnish relevant documents. The TPO was to pass a speaking order, avoiding ad-hoc or percentage-based adjustments.

What were the facts?

The assessee, AGS World Transport (India) Pvt. Ltd., filed its return of income for Assessment Year 2013-14 declaring Nil income. The Transfer Pricing Officer (TPO) noted international transactions with Associated Enterprises (AEs). The major transaction involved ₹6,72,29,658/- paid for freight, handling, and related services from AEs. The assessee benchmarked this under the Cost Plus Method. The TPO adjusted the entire amount, citing failure to substantiate services and arm's length nature. Another transaction involved ₹7,33,45,960/- received from AEs for services rendered; the TPO assumed a 10% profit margin, adjusting ₹73,34,596/-. Adjustments were also made for licence/software costs (₹63,27,356/-) and expense reimbursements (₹1,13,846/-). The total adjustment was ₹8,10,05,456/-. The CIT(A) restricted the first adjustment to 50% (₹3,36,14,829/- relief) but confirmed the others. The Department appealed this partial relief.

What were the issues?

1. Whether on the facts and in circumstances of the case, the Ld. CIT(A) was justified in law in granting ad-hoc relief of 50% in transfer pricing adjustment, despite categorical findings that the assessee failed to substantiate even 1% of international transactions with documentary evidence as mandated u/s 92D of the Act? 2. Whether on the facts and in circumstances of the case, the Ld. CIT(A) erred in law in substituting one estimation with another estimation without applying any of the prescribed transfer pricing method u/s 92C r.w. Rules 10B and 10AB? 3. Whether on the facts and in circumstances of the case, the Ld. CIT(A) could lawfully grant relief on equitable considerations such as “interest of justice” and presumed incurrence of expenditure, which are extraneous to determination of Arm’s Length Price under chapter X of the Act? 4. Whether on the facts and in circumstances of the case, the Ld. CIT(A) order is perverse in law for granting partial relief despite recording a clear finding that the assessee failed to discharge its statutory burden of providing ALP of international transactions? 5. Whether on the facts and in circumstances of the case the Ld. CIT(A) reliance on the ‘other method’ without demonstrating comparison with uncontrolled transactions or objective valuation techniques is legally sustainable? Assessee's contentions: The TPO rejected the transfer pricing study without dealing with the adopted method and made adjustments based on estimates. The assessee was under liquidation and unable to produce further documents. Revenue's contentions: The CIT(A) granted relief despite the assessee failing to substantiate transactions. The CIT(A) substituted one estimation with another without applying prescribed methods. Relief was granted on equitable considerations, which are extraneous to ALP determination.

Which sections of the Income-tax Act were involved?

Section 92D,Section 92C,Section 10B,Section 10AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SIDDHARTHA NAUTIYALAND SHRI MAKARAND VASANT MAHADEOKAR

PER SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:

This appeal is filed by the Department against the order of Ld. CIT(A) / NFAC dated 29-Oct-2025 for the Assessment Year 2013-14. The Department has raised the following grounds of appeal:

1.

Whether on the facts and in circumstances of the case, the Ld. CIT(A) was justified in law in granting ad-hoc relief of 50% in transfer pricing adjustment, despite catergorical findings that the assessee failed to substantiate even 1% of international

The order continues below.

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