THE UK TRADE DESK LTD,LONDON,UNITED KINGDOM vs. ASSISTANT COMISSIONER OF INCOME TAX CIRCLE INTERNATIONAL TAXATION - 4(3)(1), MUMBAI,MAHARASHTRA
What did the Tribunal hold?
The Tribunal held that the addition of Rs. 4,23,10,839/- made on account of profit attribution to the PE in India cannot be sustained. The Tribunal noted that the controversy for the current year was materially identical to the issue adjudicated in the assessee's own case for AY 2022-23, where the Tribunal had held that no further profit was attributable to the PE in India when the Indian AE had been remunerated at arm's length, following the Supreme Court's decision in DIT v. Morgan Stanley & Co. The judgment reiterated the principle from Morgan Stanley that if an associated enterprise constituting a PE is remunerated on an arm's length basis, taking into account all risk-taking functions, then no further profit would be attributable to the PE. Since it was not disputed that the assessee had remunerated its Indian PE/AE at cost plus 15% and the arm's length nature of this remuneration was not disturbed, the ad hoc attribution of profit by the AO was not justified. Accordingly, the addition was deleted, and the relevant grounds were allowed. Ground No. 1 (general) and Ground No. 4 (consequential) were not separately adjudicated.
What were the facts?
The assessee, The UK Trade Desk Ltd., filed its return of income for AY 2023-24 declaring Nil income. The assessee provides technology and internet advertising services, purchasing media space overseas and supplying it to Indian customers. For marketing and support, it has an agreement with its Indian subsidiary, Trade Desk India Private Limited (TTD India). The Assessing Officer (AO) held that TTD India constituted a Dependent Agent Permanent Establishment (DAPE) under Article 5 of the India-UK DTAA and a business connection under Section 9(1)(i) of the Income Tax Act, 1961. The AO, rejecting the assessee's contention that its Indian entity was remunerated at arm's length, estimated 25% of Indian revenue as attributable to India and a further 25% of that as business profit, leading to an addition of Rs. 4,23,10,839/-. This was upheld by the Dispute Resolution Panel (DRP). The assessee appealed to the ITAT.
What were the issues?
1. Whether the Assessing Officer and Dispute Resolution Panel erred in attributing profits to the assessee's Permanent Establishment (PE) in India under Section 9(1)(i) of the Income Tax Act, 1961, despite the Indian Associated Enterprise (AE) being remunerated at arm's length, contrary to the principles laid down in DIT vs. Morgan Stanley Co. Inc. and Honda Motors Co. Ltd. v. ADIT? (Question of law) Assessee's contention: The Indian entity was remunerated at arm's length, and therefore, no further profits should be attributed to the PE. The AO and DRP erred in not following the binding order of the coordinate bench in the assessee's own case for AY 2022-23, which applied the Supreme Court's decision in Morgan Stanley. The AO and DRP also erred in arbitrarily assigning ad hoc ratios and departing from the profit attribution ratio of the preceding year without material change. Revenue's contention: Not recorded in the judgment.
Which sections of the Income-tax Act were involved?
Section 9(1)(i),Section 143(3),Section 144C(5),Section 144C(13),Section 234B,Section 234C,Section 234D,Section 234F
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM
आयकर अपीलीय अिधकरण �ायपीठ मुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No. 3350/Mum/2026 (Assessment Year: 2023-24) The UK Trade Desk Ltd Assistant Commissioner of Income 10th Floor, 1 Barthomolew close, Tax Circle International Taxation – London, United Kingdom, United 4(3)(1) Vs. Kingdom Kautilya Bhavan, Bandra Kurla Complex, Bandra East – 4(3)(1), Mumbai-400051 PAN: AAHCT6320Q Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :
: Shri Sriram Seshadri (Virtually Assessee by Present) : Shri Sridhar G. Menon (Sr. DR) Revenue by Date of Hearing : 09.07.2026 Date of Pronouncement : 06.10.2026
O R D E R Per Arun Khodpia, AM: The captioned appeal is filed by the assessee challenging the order passed by Assistant Commissioner of Income Tax International Tax Circle – 4(3)(1), Mumbai [in short, “the Ld. AO”] dated 28.01.2026 u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 [in short, “the Act”] for the Assessment Year (AY) 2023-24, in pursuance to directions of Dispute Resolution Panel (in short, “the DRP”) u/s 144C(5) vide order dated 05.12.2025.
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd 2. The grounds of appeal raised by the assessee are as under: “1. General ground 1.1 The final assessment order ("Impugned Order") passed by the Assistant Commissioner of Income-tax (International Taxation) - 4(3)(1) ("Ld. 40") under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 (the "Act"), pursuant to the directions issued by the Learned Dispute Resolution Panel-2, Mumbai (the "Ld. DRP") under section 144C(5) in so far as it is prejudicial to the Appellant, is without jurisdiction, bad in law, violative of principles of natural justice, erroneous on the facts and unsustainable in law, been passed without adequate inquiries and hence is liable to be quashed as such. 2. Attribution of profits to the Indian Operations 2.1 The Ld. AO and the Ld. DRP ("Lower Authorities") erroneously applied Section 9(1)(i) of the Act without appreciating that the Appellant did not undertake any part of its operations in India. 2.2 The Lower Authorities erred in not following the binding order of the coordinate bench of the Hon'ble Tribunal in the Appellant's own case for AY 2022-23 (ITA 2038/MUM/2025), wherein on the same facts and circumstances, the binding position of law laid down by the Hon'ble Supreme Court in the case of Morgan Stanley Co. Inc. [292 ITR 416] was applied, holding that no further profits could be Pattributed to the Permanent Establishment ("PE") when the Indian Associated Enterprise ("AE") is remunerated at arm's length. 2.3 The Lower Authorities erred in attributing further profits to the Assessee's PE in India by, inter alia, purportedly applying Rule 10 of the Income Tax Rules, 1962 ("IT Rules"), and further, erred in not following the provisions of Article 7 of the Agreement for Avoidance of Double Taxation ("DTAA") between India and the UK, which provide for the application of transfer pricing principles to determine any such attribution, by considering a PE as a distinct and a separate entity. 2.4 The Lower Authorities erred in arbitrarily assigning ad hoc ratios of 25 percent towards the gross revenue attributable to the operations of the PE in India and its taxable business profits in India, despite the undisputed fact that the Assessee has incurred losses in the calendar year 2023 and 2024, as evidenced from its audited financial statements. 2.5 The Lower Authorities erred in doubly taxing the same profits, by not allowing a deduction towards the profits already taxed in the hands of the Appellant's Indian AE, i.e., Trade Desk India Private Limited ("TTD INDIA"), whose activities are said considered as creating a PE in India, in determining its taxable profits under the Act. 2.6 Without prejudice, the Lower Authorities erred in arbitrarily departing from the profit attribution ratio adopted for AY 2022-23, in the absence of any material change in the facts and circumstances or in law. 4 Erroneous computation of interest and demand 2
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd
4.1 The Ld. AO erred in levying an aggregate amount of INR 34,86,060 towards interest and fee payable under Sections 2344 234B, 234C, 234D and 234F of the Act, in determining the sum payable by the Appellant pursuant to the Impugned Order, in the computation sheet annexed thereto.” 3. The concise facts of the case are that the assessee filed its return of income for A.Y. 2023-24 on 30.10.2023, declaring total income at Nil. The case was selected for complete scrutiny under CASS. Notice under section 143(2) and 142(1) along with questionnaires, were issued from time to time, to which the assessee furnished submissions and supporting details.
The assessee, The UK Trade Desk Ltd., is engaged in the business of providing technology and internet advertising-related services. It purchases media space from overseas suppliers and provides the same to Indian customers. For carrying out marketing, sales and post-sales support activities in India, the assessee had entered into a Master Service Agreement with its Indian subsidiary, Trade Desk India Private Limited (TTD India).
During the assessment proceedings, the Assessing Officer examined the functions performed by TTD India, including marketing and promotion, generation of leads, liaison with prospective and existing customers, pricing and negotiation within prescribed parameters, sales support and post-sales technical services. On the basis of these activities, the Assessing Officer held that TTD India constituted a Dependent Agent Permanent Establishment
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd (DAPE) of the assessee in India under Article 5 of the India–UK DTAA and also constituted a business connection under section 9(1)(i) of the Act.
The assessee contended that the Indian entity was remunerated at arm's length and, therefore, no further profits were attributable to the PE in India, relying, inter alia, upon the decision of the Hon'ble Supreme Court in the case of DIT vs. Morgan Stanley & Co [2007] 292 /TR 416 (SC). The assessee also submitted that it had incurred losses at the global level and that, in the alternative, any attribution should be made in accordance with the CBDT's draft report on profit attribution.
The Assessing Officer, however, did not accept the submissions. Observing that no India-specific profit and loss account had been furnished and that the global financial results could not be adopted for determining income under the Indian provisions, the Assessing Officer invoked Rule 10 of the Income-tax Rules, 1962. He estimated 25% of the revenue from Indian operations as attributable to India and thereafter estimated 25% of such attributable revenue as business profit, resulting in an addition of Rs. 4,23,10,839/-.
In due course, a draft assessment order under section 144C(1), dated 25.03.2025, was issued proposing a total income of Rs. 4,23,10,839/-. The assessee filed objections before the DRP, challenging, inter alia, the
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd attribution of profits, the ad hoc methodology adopted for such attribution, the denial of deduction in respect of profits already taxed in the hands of TTD India, the inconsistency in the approach vis-à-vis the preceding assessment year, and the initiation of penalty proceedings under section 270A.
The DRP, vide directions dated 05.12.2025 under section 144C(5), dismissed all the objections, principally observing that the facts and circumstances for the year remained the same as in the earlier years and following its earlier findings. Pursuant to the DRP's directions, the Assessing Officer passed the final assessment order under sections 143(3) r.w.s. 144C(13) and 144C(5), determining total income at Rs. 4,23,10,839/-. The consequential tax demand, after allowing credit for TDS, was determined at Rs. 91,79,970/-.
Being aggrieved with the aforesaid estimated addition by the Ld. AO, assessee is in appeal before us.
At the outset, the Learned Counsel for the assessee appeared virtually submitted that the assessee company had already paid cost + 15% to its PE in India, which is recorded by the Ld. AO in assessment order. Ld. AO observed that for the purpose of attribution of profit to dependent agency PE, the TP Study Report is examined and considering that the dependent agent
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd in India is performing functions which are way beyond the 15% markup on the cost being given to it, the TTD India is dependent agent of the applicant. Ld. AO then after considering the submissions of assessee, but having difference of opinion had arbitrarily rejected the contention of the assessee and concluded that it is clear that the assessee company has business connection in India uls 9(1)(i) of the Act and DAPE in India under Article 5 of the Indian UK DTAA. Taking into consideration these circumstances and in absence of details from the side of the assessee with respect to the profitability from Indian operations, it is reasonable to estimate the taxable profits for purposes of Rule 10(i) of the Income-Tax Rule at 25% of the gross revenue from Indian operations is attributable to India.
Learned counsel for the assessee further submitted that the identical issue arose in the assessee's own case for assessment year 2022‑23 in ITA No. 203/Mumbai/2025, wherein the ITAT as per the order dated 07.01.2026 decided the identical controversy, holding that if the PE in India is remunerated on an arm‑length basis, taking into account the risk‑taking functions of foreign enterprises, no profit would be attributable to the PE. Accordingly, the addition made by the Ld. AO was directed to be deleted.
Therefore, it was prayed that, in the absence of any material on record demonstrating any distinguishing fact or circumstance in the present case, or 6
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd any subsequent binding decision warranting a different view, the addition made by the Revenue was without any cogent basis and, therefore, unsustainable.
On the contrary, the Ld. Sr. DR representing the revenue vehemently supported the orders of the revenue authorities.
We have considered the rival submissions, perused the material available on record and the orders of the authorities below.
Admittedly, the issue before us is identical to the controversy considered by the Tribunal in the assessee’s own case for AY 2022-23, wherein the Assessing Officer had attributed a specified portion (25%) of the total business revenue from Indian operations to India and thereafter made an ad-hoc attribution of 20% thereof as business profits of the assessee. In the year under consideration, i.e., AY 2023-24, the Assessing Officer has adopted the same methodology, the only difference being the percentages adopted. For the year under consideration, 25% of the total business revenue from Indian operations has been treated as attributable to India and a further 25% thereof has been estimated as business profits attributable to India.
The computation of addition made by the Assessing Officer is extracted hereunder:
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd Particulars Amount (Rs.) Total Business Revenue from Indian operations 67,69,73,427 25% of (A) Attributable to India operations Business 16,92,43,356 Revenue from India (A) Business Profits from India assumed at 25% of (A) 4,23,10,839 Total Income 4,23,10,839
We find that the while deciding the issue akin to the controversy before us, The ITAT in assessee’s own case for AY 2022-23 has held as under: 4. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue. The ld. AR of the assessee that assessee is engaged in the business of providing technology and services related to internet advertising. The assessee purchases media space from overseas suppliers and provides to Indian customer. The assessee appointed its subsidiary in India to provide marketing and related services to assessee. The assessee is a non-resident and maintained its financial statement in its source country that is UK. The financial statements were provided to lower authorities. The assessee entered into a master service agreement with its AE in India. The copy of master service agreement to lower authorities. In pursuance of agreement, the India AE rendered certain services to assessee. Such transactions were considered as international transaction as per Indian Income Tax Regulation. The transaction between assessee and its AE were at arm’s length. To substantiate such transactions, the assessee furnished its transfer pricing study report. The lower authorities has not doubted the arm’s length transaction with its AE. Once the AE was remunerated at arm’s length price no further profit could be attributed to the permanent establishment as has been held by Hon’ble Apex Court in Morgan Stanley & Co. INC (supra). The assessing officer attributed further profit to assessee is dependent agent / permanent establishment in India by applying rule 10 and not followed the provisions of Article 7 of DTAA between India and UK. Article 7 of DTAA between India and UK provides for application of transfer pricing principle for determining such profit attribution. The assessing officer arbitrarily assigned adhoc ratio 25% of 20% that is 5% towards the gross revenue attributable to the operation of dependent agent in India without resorting the TP regulation as per Income Tax Act. To support its submission, the ld. AR 8
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd though filed voluminous legal paper book, however, at the time of his submission he merely relied upon the decision of Hon’ble Apex Court in DIT vs Morgan Stanley & Co. (supra), Honda Motors Co. Vs ADIT (2018) 92 taxmann.com 353 (SC), DIT vs Travelport Inc in CA No. 6511 -6518/2010 dated 19.04.2023 and decision of Mumbai Tribunal in ADIT vs ACR Today Ltd. (2021) 124 taxmann.com 1 (Mumba).
On the other hand the learned senior DR for the revenue supported the order of lower authorities. The learned senior DR for the revenue submits that assessing officer while passing the draft assessment order in para 5.4 has clearly recorded the finding that activities of Indian AE of assessee are devoted wholly on behalf of assessee company. India entity has only source of income is from assessee company which is due to the agreement with assessee. The India entity is economically dependent on assessee. The AO correctly worked out / estimated revenue from Indian operation attributable to India.
We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various documentary evidences filed by the assessee on record. We have also deliberated on various case laws relied by ld. AR of the assessee. We find that there is no much dispute on fact. There is no dispute that during the assessment, the assessee has furnished its transfer pricing its study report to show the transaction with its AE ar arm’s length. Admittedly, arm’s length price has not been examined or doubted by the assessing officer. We find that in a series of decision, the various bench of Tribunal held that where the assessee has a dependent agency, permanent establishment and its Indian agent had been paid / remunerated at arm’s length price, nothing further could be taxed in the hands of assessee. We also find that Hon’ble Apex Court in Honda Motors Co. Ltd. vs ADIT (supra) while quashing the notice under section 147 held that where notice to the assessee for reassessment was based only on the allegation that it had permanent establishment in India, said notice could not be sustained once arm’s length price procedure has been followed. We also find that the Hon’ble Apex Court in leading decision in DIT vs Morgan Stanley & Co. (supra) has held that as long as Morgan Stanley Advantage Services Ltd., being PE in India is remunerated for its arm’s length basis taking into account risk taking functions of foreign enterprises, no profit would be attributable to PE. Thus, on the basis of aforesaid settled legal position, we are of the considered view that once Indian entity has been remunerated at arm’s length prices, no further profit would be attributable to PE in India. Thus, we do not find any justification in making such adhoc addition. In the result, various sub grounds of ground no. 3 are allowed.
On a careful perusal of the aforesaid decisions and considering the facts on record, we find that the controversy in the year under consideration 9
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd is materially identical to the issue adjudicated by the Tribunal in the assessee’s own case for AY 2022-23 in ITA No. 203/Mum/2025, vide order dated 07.01.2026. In that year also, the Assessing Officer, after holding the Indian entity to constitute a dependent agent PE (DAPE), attributed a specified percentage of the revenue from Indian operations to the PE and further estimated profits therefrom on an ad-hoc basis. The Tribunal, upon noting that the Indian AE had been remunerated at arm’s length and that such arm’s length remuneration had neither been disputed nor disturbed by the Assessing Officer, held that no further profit was attributable to the PE in India, following, inter alia, the ratio laid down by the Hon’ble Supreme Court in DIT v. Morgan Stanley & Co. and Honda Motors Co. Ltd. v. ADIT (supra).
At this juncture, we find it apposite to refer the observations of the Hon’ble Supreme Court in DIT v. Morgan Stanley & Co. (supra), in the context of attribution of profits to a PE where the associated enterprise has already been remunerated at arm’s length basis, taking into consideration all risk-taking functions of the multinational enterprises, as under: “33. To conclude, we hold that the AAR was right in ruling that MSAS would be a Service PE in India under Article 5(2)(1), though only on account of the services to be performed by the deputationists deployed by MS Co and not on account of stewardship activities. As regards income attributable to the PE (MSAS) we hold that the Transactional Net Margin Method was the appropriate method for determination of the arm's length price in respect of transaction between MSCo and MSAS. We accept as correct the computation of the remuneration based on cost plus mark-up worked out at 29% on the operating costs of MSAS. This position is also accepted by the Assessing Officer in his order dated 29.12.06 10
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd (after the impugned ruling) and also by the transfer pricing officer vide order dated 22-9-2006. As regards attribution of further profits to the PE of MSCo where the sanction between the two are held to be at arm's length, we hold that the ruling is correct in principle provided that an associated enterprise (that also constitutes a PE) is remunerated on arm's length basis taking into account all the risk-taking functions of the multinational enterprise. In such a case nothing further would be left to attribute to the PE. The situation would be different if the transfer pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a case, there would be need to attribute profits to the PE for those functions/risks that have not been considered. The entire exercise ultimately is to ascertain whether the service charges payable or paid to the service provider (MSAS in this case) fully represents the value of the profit attributable to his service. In this connection, the Department has also to examine whether the PE has obtained services from the multinational enterprise at lower than the arm's length cost? Therefore, the Department has to determine income, expense or cost allocations having regard to arm's length prices to decide the applicability of the transfer pricing regulations.”
In the year under consideration also, it is not in dispute that the assessee has remunerated its Indian PE/AE at cost plus 15% and that the arm’s length nature of such remuneration has not been disturbed in the assessment proceedings. The Assessing Officer, however, has proceeded to attribute 25% of the gross business revenue from Indian operations to India and thereafter estimated the business profits at 25% attributable to India, resulted in an addition of Rs. 4,23,10,839/-. The basis adopted for such attribution and estimation is thus materially the same as that considered by the Tribunal in the assessee’s own case for AY 2022-23.
In the absence of any distinguishing fact, circumstance or material having been brought on record for the year under consideration, and respectfully following the aforesaid decision of the Tribunal in the
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd assessee’s own case following the settled principle of law by Hon’ble apex court in the cases referred to supra, the impugned ad-hoc attribution of profit to the PE in India cannot be sustained. Accordingly, the addition of Rs. 4,23,10,839/- made on account of profit attribution to the PE in India is deleted and the relevant grounds raised by the assessee are allowed. Ground No. 2 of the assessee’s appeal, accordingly stands allowed.
Ground No. 1 is general in nature and, therefore, does not warrant any separate adjudication. Ground No. 4, being consequential in nature, has become academic in view of the substantive addition having been directed to be deleted. 24. In result the appeal of assessee stands allowed, in above terms.
Order pronounced in the open court on 06-10-2026.
Sd/- Sd/- (AMIT SHUKLA) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated : 06-10-2026. Ankit K., Sr. PS
ITA No. 3350/Mum/2026 The UK Trade Desk Ltd
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT
BY ORDER, Digitally signed by ABHINAV ABHINAV ANANT ANANT GAVANDE GAVANDE Date: 2026.10.15 17:58:36 +05'30' (Dy./Asstt. Registrar) ITAT, Mumbai
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