DELOITTE CONSULTING INDIA PROJECTS LP,HYDERABAD vs. ADIT (INT TAXN)-1, HYDERABAD

The assessee has raised the following grounds of appeal:

The brief facts of the case are that the assessee is a foreign company engaged in the business of providing professional services. The assessee filed its return of income for the Assessment Year 2021-22 declaring total income of Rs.7,19,024/-. The case of the assessee was selected for scrutiny under the compulsory manual selection process. Accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued to the assessee on 30.06.2022. Since there were international transactions entered into by the assessee with its Associated Enterprise (“AE”), the Learned Assessing Officer (“Ld. AO”) referred the matter to the Learned Transfer Pricing Officer (“Ld. TPO”) under section 92CA of the Act. The Ld. TPO, vide order dated 30.10.2023 passed under section 92CA(3) of the Act, proposed an adjustment of Rs.2,67,93,174/- on account of the provision of services by the assessee to its AE. Based on the said order, the Ld. AO passed a draft order under section 144C(1) of the Act on 28.12.2023 making an upward TP adjustment of Rs.2,67,93,174/-

Against the draft order of the Ld. AO, the assessee filed objections before the Learned Dispute Resolution Panel (“Ld. DRP”). The Ld. DRP, vide its directions dated 09.09.2024, upheld the findings of the Ld. TPO. Accordingly, the Ld. AO passed a final assessment order under section 143(3) read with section 144C(13) of the Act on 22.10.2024 making the addition on account of TP adjustment of Rs.2,67,93,174/- determining the total assessed income of the assessee at Rs.2,75,12,198/-.

Aggrieved with the final assessment order of the Ld. AO, the assessee is in appeal before us. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the only dispute in appeal of the assessee relates to the TP adjustment of Rs.2,67,93,174/-. He submitted that the AE of the assessee had entered into a contract with United States Agency for International Development (“USAID”) under the Renewable Integration and Sustainability Initiative (“RISE”) project for execution of the Greening the Grid (“GTG”) project under the US–India clean energy cooperation program. As a part of the said engagement, the assessee was assigned the responsibility of carrying out project implementation activities in India. The Ld. AR submitted that the AE was remunerated on cost + 6% basis under the terms of the original contract of AE with USAID and the assessee is also remunerated on cost + 6% basis on the back-to-back assignment agreement. Therefore, the AE did not retain any extra margin over and above cost + 6%. Since the AE itself received only cost + 6%, there was no scope of any mark-up beyond the said agreed basis.

Per contra, the Learned Departmental Representative (“Ld. DR”) opposed the request for admission of additional

On perusal of the above, it is evident that the assessee had filed the said additional evidence before the Ld. DRP along with the paper book. However, the Ld. DRP declined to admit the same only on the ground of non-compliance of procedure prescribed under Rule 4 of the DRP Rules. In our considered view, rejection of crucial documentary evidence merely on procedural grounds defeats the cause of substantive justice. The said agreement is essential for determining the correct arm’s length

As the matter has been restored, we do not express any opinion on the alternative arguments of the assessee regarding rejection of TP study and characterization of the services as KPO, and the same is kept open to be urged before the Ld. DRP.

In the result, the appeal of the assessee is allowed for statistical purposes.