ARAMEX TRANSPORTATION INDIA PRIVATE LIMTED ,MUMBAI vs. DCIT, 1(1)(1), MUMBAI

आयकरअपीलीयअिधकरण, मुंबईपीठ�, मुंबई INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI BENCH: K BEFORE SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER AND MS. RATNA DASGUPTA, HON’BLEACCOUNTANT MEMBER

ITA 9086/MUM/2025 (िनधा�रणवष�/AssessmentYear:2022-23) ARAMEX TRANSPORTATION DCIT, 1(1)(1), MUMBAI INDIA PRIVATE LIMTED Aayakar Bhavan, M.K Road, 209, Ascot Centre Sahar Airport Mumbai-400020, Maharashtra Vs. Road, Andheri East, Mumbai- 400099, Maharashtra अपीलाथ�Appellant ��थ� Respondent

Permanent Account Number of AAFCG4493H Assessee:

अपीलाथ��ारा/Appellant represented Shri Ajit Jain & Shri Siddesh by: Chaugule ��थ��ारा/Respondent represented by: Shri Ajay Uke Sr. AR

सुनवाईकीतारीख/Date of conclusion of hearing: 16-Sep-2026 घोषणाकीतारीख/Date of pronouncement: 06-Oct-2026 आदेश आदेश / ORDER आदेश आदेश PER: SHRI ANIKESH BANERJEE, JUDICIAL MEMBER: The instant appeal of the assessee filed against the order of the Assessment Unit, Income Tax Department [for brevity “Ld. CIT(A)”], order passed under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2022-23, date of order 29.10.2025. The impugned order emanated from the order of the Ld. CIT(DRP- 1) Mumbai - 3 (for brevity ‘Ld. AO’), order passed under Section 144C(5)of the Act, date of order 30.09.2025. 2. The assessee has raised the following grounds of appeal:-

“General Ground

Order passed beyond time limit

Reference to TPO

Internal Transaction Net Margin Method (‘TNMM’) preferred over External TNMM

TPO's approach to consider Assessee's entity-wide margin instead of margin from AE transactions when using external TNMM

Application of quantitative filter to accept/ reject companies

Comparability analysis

Margin rectification for companies selected by the TPO in the final comparable set

Economic adjustment

Inappropriate rejection of comparable company

Inappropriate selection of PLI

Penalty Proceedings

Each of the above grounds of appeal is without prejudice to and independent of one another.

The Appellant craves leave to add, alter, amend or delete the above grounds of appeal at or before the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal according to law.”

2.1. Brief facts of the case are that the assessee, Aramex Transportation India Private Limited, formerly known as Global Transportation Services Private Limited, was incorporated on 12/12/2013 and is part of the Aramex group. The assessee is engaged in the business of freight forwarding and is primarily engaged in transportation of goods, cargo and luggage through air, sea, rail and road.

2.2. For the year under consideration, the assessee filed its return of income on 30/11/2022 declaring loss of Rs.1,56,33,505/-. The case was selected for scrutiny and notice u/s.143(2) of the Act was issued on 02/06/2023. Considering the international transactions reported in Form No.3CEB, reference was made to the Ld. Transfer Pricing Officer (“Ld.TPO”) on 28/07/2023 for determination of arm's length price (“ALP”) in respect of the international transactions entered into by the assessee.

2.3. During the year under consideration, the assessee entered into international transactions relating to provision as well as availing of international freight forwarding services. The relevant transactions were reported as under:-

Sr. Method Nature of transaction Amount (Rs.) No. adopted

Provision of international freight forwarding 1. 41,98,03,708/- Internal TNMM services

2.4. The assessee benchmarked the aforesaid international transactions by adopting internal Transactional Net Margin Method (“TNMM”). For this purpose, the profitability arising from freight forwarding transactions undertaken with the Associated Enterprises (“AEs”) was compared with corresponding freight forwarding transactions undertaken by the assessee with unrelated parties.

2.5. The segmental profitability furnished by the assessee was as under:-

Particulars AE Segment (Rs.) Non-AE Segment (Rs.)

Operating Revenue 70,19,78,337/- 63,13,71,406/-

Operating Cost 70,45,24,766/- 65,37,85,521/-

Operating Profit/(Loss) (25,46,429/-) (2,24,14,114/-)

OP/OR (-)0.36% (-)3.55%

Thus, according to the assessee, the operating margin earned from transactions with the AEs was better than the corresponding margin from the uncontrolled transactions and, accordingly, the international transactions satisfied the arm's length test.

2.6. The Ld. TPO did not accept the internal TNMM adopted by the assessee. The principal reasons recorded for rejection thereof were that the assessee had incurred losses during the relevant year; that its financial results were significantly influenced by related-party transactions which constituted more than 50% of the revenue; that adequate material was not available to establish comparability between the AE and non-AE segments; that the composition of air and sea shipments in the respective segments was not available; and that the third-party freight forwarding arrangement was not in the same form and format as the agreement entered into with the AE.

2.7. The Ld.TPO accordingly rejected internal TNMM and proceeded to benchmark the international transactions by adopting external TNMM. Thirteen companies were selected as comparables. On the basis of the external comparable set, the Ld.TPO determined the arm's length margin and proposed transfer pricing adjustment of Rs.3,37,76,000/- vide order passed u/s.92CA(3) dated 27/01/2025.

2.8. The Ld.AO thereafter passed the draft assessment order dated 20/03/2025 incorporating the aforesaid transfer pricing adjustment. Aggrieved, the assessee filed objections before the Ld.DRP challenging, inter alia, rejection of internal TNMM, application of external TNMM, entity-level benchmarking, selection of comparables and consequential determination of ALP.

2.9. The Ld.DRP, after considering the objections raised by the assessee, upheld the transfer pricing adjustment made by the Ld.TPO, subject to the directions contained therein. Pursuant thereto, the Ld.AO passed the impugned final assessment order dated 29/10/2025 u/s.143(3) r.w.s.144C(13) and 144B of the Act, wherein the returned loss of Rs.1,56,33,505/- was enhanced by the transfer pricing adjustment of Rs.3,37,76,000/-, resulting in assessed income of Rs.1,81,42,495/-. Aggrieved by the aforesaid final assessment order, the assessee is in appeal before us.

3.1. The Ld. AR submitted the flow chart to understand the activities which are reproduced as below:-

3.2. The Ld.AR submitted that the assessee performs international freight forwarding activities both with its AEs and with unrelated third parties. It was submitted that the uncontrolled transactions undertaken by the assessee itself provide a direct internal comparable and are more reliable than comparison with external enterprises which may operate under different commercial and economic conditions.

3.3. The Ld.AR submitted that under outbound freight forwarding arrangements, the assessee receives cargo from consignors in India and arranges transportation thereof to overseas destinations through air or sea routes. Where an Aramex group entity is present at the overseas destination, the relevant AE performs destination-related logistics and delivery functions; in other cases, such functions are undertaken by unrelated third-party service providers. Likewise, in the case of inbound shipments, the assessee undertakes customs clearance/local logistics and delivery functions in India, whether the overseas counterparty is an AE or an unrelated party. The Ld.AR, therefore, submitted that the basic nature of the freight forwarding services, functions performed, assets employed and risks assumed remained substantially similar in the AE and non-AE transactions.

3.4. The Ld.AR further submitted that the Ld.TPO erred in treating the loss incurred by the assessee as a reason for rejecting internal TNMM. It was submitted that the entity-level loss arose on account of commercial and market factors, including loss of comparatively high-margin customers, reduction in margins from certain existing customers and lower margins earned from new customers.

3.5. The Ld.AR emphasised that the loss was not peculiar to the AE segment. The AE segment itself earned OP/OR of (-)0.36%, whereas the corresponding uncontrolled non-AE segment earned OP/OR of (-)3.55%. Therefore, notwithstanding the overall losses incurred during the year, the controlled segment performed better than the uncontrolled segment. In support of this contention, the Ld.AR relied upon the decision of the coordinate Bench in 10 Aramex India Private Limited v. DCIT [2015] 167 TTJ 476 (Mum.-Trib.), ITA No.798/Mum/2014, order dated 28/11/2014.

3.6. We have perused the aforesaid decision. In the said case, while considering rejection of segmental results on account of losses, the coordinate Bench noted that the Ld.TPO had proceeded on the premise that greater costs were allocated to the domestic segment. The Tribunal noticed that neither the losses nor the corresponding expenditure had been disturbed by the Ld.AO and held that loss in a segment, without supporting material demonstrating unreliability thereof, could not constitute the sole basis for rejecting duly maintained segmental results. The coordinate Bench accordingly held that the segmental results could not be rejected merely on the basis of the losses suffered in a particular segment.

3.7. The Ld.AR further submitted that the Ld. TPO's objection regarding the magnitude of related-party transactions was factually insufficient for rejecting internal TNMM. The operating revenue from the AE segment was Rs.70,19,78,337/-, constituting approximately 53% of the operating revenue, whereas the operating revenue from the non-AE segment was Rs.63,13,71,406/-, constituting approximately 47%. It was submitted that the uncontrolled business therefore represented a substantial part of the assessee's freight forwarding activity and constituted a meaningful internal benchmark.

3.8. Insofar as contractual comparability is concerned, the Ld.AR submitted that merely because the agreements with the AE and unrelated parties were drafted differently or were in different formats could not render the transactions incomparable. What was required to be examined was the substance of the services, functions performed, assets employed, risks assumed and the material commercial terms affecting profitability.

3.9. The Ld.AR further submitted that the functional analysis placed on record demonstrates that the functions performed by the assessee in the AE and non- AE transactions are substantially similar. In both sets of transactions, the assessee undertakes freight forwarding functions, while the corresponding counterparty undertakes the relevant destination/origin functions, as the case may be.

3.10. As regards the preference of internal TNMM over external TNMM, the Ld.AR relied upon the Third Member decision of the Mumbai Tribunal in Tecnimont ICB Private Limited v. Addl. CIT reported in [2012] 24 taxmann.com 28 (Mum.-Trib.)(TM).

3.11. In the aforesaid decision, while interpreting Rule 10B(1)(e), the Tribunal explained that the Rule contemplates determination of net profit margin with reference to comparable uncontrolled transactions of the enterprise itself as well as those of an unrelated enterprise. The Tribunal observed that where an uncontrolled transaction of the same enterprise is available, such internal comparison generally possesses a higher degree of comparability because several enterprise-specific factors, such as assets employed, input costs and business circumstances, remain common. The decision thus recognises the greater reliability of a suitable internal uncontrolled comparable over an external comparable.

3.12. As regards the absence of separate air and sea shipment margins, the Ld.AR submitted that TNMM examines profitability at the transactional/segmental level and is comparatively less sensitive to individual differences in products or modes of carriage. It was submitted that the Ld.TPO had not demonstrated that the difference, if any, in the composition of air and sea shipments between the two segments materially influenced the profitability thereof.

3.13. The Ld.AR thus submitted that rejection of the internal TNMM was without proper basis and prayed that the same be accepted and the transfer pricing adjustment be deleted.

3.14. The Ld.DR, on the other hand, relied upon the findings of the Ld.TPO and the directions of the Ld.DRP. It was submitted that availability of transactions with unrelated parties would not automatically justify application of internal TNMM unless the comparability requirements prescribed under Rule 10B were satisfied. The Ld.DR accordingly submitted that the external TNMM adopted by the Ld.TPO deserved to be upheld.

3.15. We have perused the submissions advanced by both sides in light of the record placed before us. The controversy before us is essentially whether the freight forwarding transactions undertaken by the assessee with unrelated parties constitute a reliable internal uncontrolled benchmark for determining the ALP of the corresponding transactions entered into with its AEs. Rule 10B(1)(e) provides for computation of the net profit margin realised by the enterprise from an international transaction and comparison thereof with the net profit margin realised by the enterprise itself or by an unrelated enterprise from a comparable uncontrolled transaction. Thus, the statutory framework itself recognises both internal and external comparables. At the same time, mere existence of an internal uncontrolled transaction does not dispense with the requirement of comparability. The transaction must satisfy the relevant tests prescribed under Rule 10B(2), having regard to the characteristics of the 13 services, functions performed, assets employed, risks assumed, contractual terms and economic circumstances. Further, in terms of Rule 10B(3), a transaction can be treated as comparable where none of the differences materially affects the price or margin or where reasonably accurate adjustments can be made for such differences. On applying the aforesaid principles to the facts before us, we find that the reasons assigned for rejection of the internal TNMM do not justify discarding the internal uncontrolled comparison.

3.16. Firstly, the mere fact that the assessee incurred losses at the entity level cannot determine comparability of the controlled and uncontrolled transactions. The segmental results demonstrate that both the AE and non-AE segments suffered operating losses. The AE segment recorded operating loss of Rs.25,46,429/- on revenue of Rs.70,19,78,337/-, resulting in OP/OR of (-)0.36%. The non-AE segment recorded operating loss of Rs.2,24,14,114/- on revenue of Rs.63,13,71,406/-, resulting in OP/OR of (-)3.55%.

3.17. Thus, it is not a case where losses are concentrated in the uncontrolled segment while abnormal profits are reflected in the controlled segment. On the contrary, the segmental results show losses in both segments, with the AE segment performing better than the non-AE segment. The principle laid down in Aramex India Private Limited (supra) is relevant in this regard. The existence of a loss may warrant examination of the segmental accounts, but loss by itself cannot be substituted for evidence demonstrating that the allocation of revenue or expenditure is unreliable. Unless the segmental results are shown to be distorted or superficial on the basis of material on record, their rejection merely because one or more segments have incurred losses cannot be sustained.

3.18. Secondly, we do not find merit in rejection of internal TNMM merely because the AE revenue constitutes approximately 53% of the operating revenue. The corresponding non-AE revenue constitutes approximately 47% of the operating revenue. Thus, the uncontrolled transactions represent a substantial volume of the assessee's own freight forwarding business. What is relevant for purposes of Rule 10B is not whether the AE turnover crosses an arbitrary percentage at the entity level but whether sufficiently comparable uncontrolled transactions can be reliably identified. In the facts before us, the non-AE freight forwarding transactions constitute a substantial and separately identifiable uncontrolled segment.

3.19. Thirdly, the economic substance of the transactions has to be examined for determining comparability. We find that in both the controlled and uncontrolled segments, the assessee is engaged in the activity of international freight forwarding. The functions undertaken broadly involve receipt/pick-up of cargo, arranging transportation through international routes, documentation and coordination of origin/destination logistics and delivery.

3.20. The mere fact that the contractual documents governing transactions with an AE and an unrelated party are not identically worded or are in different formats cannot, by itself, determine comparability. The requirement under Rule 10B is substantive comparability of the transactions and not textual identity of the underlying agreements. On the material placed before us, no fundamental difference in the functions performed, assets employed or risks assumed has been demonstrated which would render the non-AE freight forwarding segment economically incomparable with the AE freight forwarding segment.

3.21. Fourthly, insofar as the objection regarding absence of separate air and sea segment margins is concerned, we agree that a difference having material bearing upon profitability cannot be ignored merely because TNMM has been adopted. However, the existence as well as the materiality of such difference has to be demonstrated. In the present case, no material has been brought on record to demonstrate that the composition of air and sea shipments in the AE segment is materially different from that in the non-AE segment or that any such difference has materially influenced the respective margins. There is also no quantification demonstrating the effect of the alleged difference upon profitability.

3.22. Therefore, a mere absence of further sub-segmentation between air and sea shipments, without demonstrating its material effect on the net margin, cannot constitute sufficient reason for discarding an otherwise comparable uncontrolled freight forwarding segment. Once the comparability of the internal uncontrolled segment is established, the principle explained by the Third Member in Tecnimont ICB Private Limited (supra) assumes significance. An internal uncontrolled transaction is ordinarily a closer comparator because the comparison involves the same enterprise and thereby neutralises several enterprise-specific variables which may otherwise exist while comparing it with an independent company.

3.23. We hasten to add that there is no immutable proposition that an internal comparable must invariably be accepted over an external comparable. Its preference follows only upon satisfaction of the comparability tests. In the facts of the present case, however, the controlled and uncontrolled transactions relate to the same broad freight forwarding activity undertaken by the same enterprise; the non-AE segment constitutes a substantial part of the business; and no material difference affecting profitability has been established so as to render such comparison unreliable.

3.24. On accepting the internal TNMM, the result is that the AE segment has earned OP/OR of (-)0.36%, whereas the uncontrolled non-AE segment has earned OP/OR of (-)3.55%. Thus, the margin from the controlled transactions is better than the margin earned from the comparable uncontrolled transactions. In view of the foregoing discussion, we hold that the Ld.TPO was not justified in rejecting the internal TNMM adopted by the assessee and substituting the same with external TNMM.

Ground Nos.4 and 6 are accordingly allowed.

5.1. The Ld.AR submitted that even assuming, without admitting, that external TNMM was required to be applied, the transfer pricing adjustment could only be computed with reference to the international transactions entered into with the AEs and could not be extended to uncontrolled transactions forming part of the assessee's entity-wide results.

5.2. The Ld.DR relied upon the orders of the authorities below.

5.3. We have perused the submissions advanced by both sides in light of the record placed before us. The issue is also supported by the decision in Aramex India Private Limited (supra). In para 7.7, the coordinate Bench held that transfer pricing adjustment is required to be made with reference to international transactions with the AEs and not on the entire sales at the entity level. The Tribunal reasoned that transactions with uncontrolled parties cannot be subjected to an adjustment contemplated for international transactions between associated enterprises. The scheme of sections 92 and 92C also proceeds on determination of income arising from an “international transaction” having regard to its ALP. Therefore, uncontrolled transactions with independent parties cannot themselves form the subject matter of a transfer pricing adjustment merely because an entity-level margin is used in the course of benchmarking. Accordingly, even otherwise, an adjustment, if warranted under external TNMM, could not have been mechanically computed by applying the arm's length margin to the entire entity-wide operating base inclusive of the non-AE transactions.In view of ongoing discussion and also considering our finding accepting internal TNMM,

Ground No.7 is allowed.

6.1. Since we have accepted the internal TNMM adopted by the assessee and the resort to external TNMM itself does not survive, adjudication of the turnover filter and individual external comparables would be academic.

Ground Nos.8 and 9 are therefore not adjudicated being academic.

7.1. We have already held that the non-AE freight forwarding transactions constitute an appropriate internal uncontrolled benchmark and have accepted the internal TNMM on that basis. The alternative plea seeking inclusion of the same margin in the dataset adopted under external TNMM therefore does not survive for separate adjudication.

Ground No.10 is accordingly rendered academic.

8.1. Since external TNMM itself has been rejected by us and the internal TNMM adopted by the assessee has been accepted, examination of the inclusion or exclusion of individual external comparables would not have any bearing upon the ALP.

Ground Nos.11 to 15 are accordingly not adjudicated being academic.

9.1. In view of our acceptance of the internal TNMM, the margins of external comparables no longer enter into computation of the ALP. Therefore, no separate adjudication is called for.

Ground No.16 is rendered academic.

10.1. Since the external comparable analysis itself does not survive consequent to our findings hereinabove, the claim for working capital adjustment to the margins of such companies also becomes academic.

Ground No.17 is accordingly not adjudicated.

11.1. In view of our acceptance of internal TNMM, the constitution of the external comparable set no longer affects determination of the ALP.

Ground No.18 is accordingly rendered academic.

12.1. We have already accepted the assessee's benchmarking based upon internal TNMM and held that the international transactions satisfy the arm's length test. Consequently, the controversy concerning the appropriate PLI for the external TNMM does not survive.

Ground No.19 is accordingly rendered academic.

14.1. Since the transfer pricing adjustment of Rs.3,37,76,000/- stands deleted pursuant to our findings hereinabove, the Ld.AO is directed to recompute the assessed income/loss in accordance with law.

Ground No.1 is accordingly allowed for statistical purposes in terms indicated hereinabove.

15.1. Since the assessee succeeds on the substantive transfer pricing issue and the entire addition giving rise to the dispute stands deleted on merits, adjudication of the aforesaid legal ground is not necessary for disposal of the present appeal.

We, therefore, leave Ground No.2 open without expressing any opinion thereon.

16.1. Since we have deleted the entire transfer pricing adjustment on merits, adjudication of the aforesaid legal ground would not affect the result of the appeal.

Accordingly, Ground No.3 is also left open without expressing any opinion thereon.

17.1. The challenge to initiation of penalty proceedings at the stage of assessment is premature and does not call for adjudication in the present proceedings.

Ground No.20 is accordingly dismissed as premature.

Order pronounced in the open court on 06th day of October 2026.

Sd/- Sd/-

(RATNA DASGUPTA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, िदनांक/Dated: 06/10/2026 Soumili, PS

Copy of the Order forwarded to: अपीलाथ�/The Appellant , 1. �ितवादी/ The Respondent. 2. आयकरआयु� CIT 3. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, 4. Mumbai गाड�फाइल/Guard file. 5.

BY ORDER, //True Copy// Digitally signed by ABHINAV ANANT GAVANDE ABHINAV ANANT GAVANDE Date: 2026.10.13 13:37:06 +05'30' (Asstt. Registrar), ITAT, MUMBAI