GIESECKE AND DEVRIENT INDIA PVT LTD.,GURGAON vs. ACIT (OSD), NEW DELHI

That the DRP/AO erred in not appreciating that Circular / Notification issued by the CBDT in exercise of the powers conferred under section 119 of the Act are binding on all income-tax authorities and ought to be complied in letter and spirit.

That the impugned Final Assessment Order dated 30.05.2022 passed by the Assessing Officer is bad in law and non-ext being passed in violation to the mandate of section 144C(13) of the Act, which prescribes to complete assessment in "conformity with the directions" of the DRP.

That the impugned Final Assessment order dated 30.05.2022 is non-est, having being passed by the ACIT(OSD) as opposed to the National Faceless Assessment Centre ("NFAC") which had validly assumed jurisdiction over the Assessee.

That on the facts and in law, in terms of section 144B of the Act read with S.O. No. 1434(E) dated 31.03.2021 issued by the Central Board of Direct Taxes ("CBDT"), the assessment order could only be passed by the relevant income-tax authority designated as an "Assessing Officer" under the NFAC scheme, failing which the assessment framed would be non-est and void.

That, without prejudice, on the facts and in law the ACIT(OSD) erred in assuming jurisdiction and passing the final assessment order, without appreciating that once the jurisdiction was transferred to the NFAC, the jurisdictional AO became fiunctus officio and could not suo-moto re-assume jurisdiction over the matter in the absence of a valid approval as envisaged under Section 144B(8) of the Act.. TRANSFER PRICING GROUNDS A. Software Development and Design Support Services Segment [INR 2,00,97,763/-] 12. On the facts and in law, the TPO/AO grossly erred in determining and DRP erred in confirming the addition to the tune of INR 2,00,97,763/- to the total income of the Appellant on account of the difference in the arm's length price of international transactions pertaining to the Software Development and Design Support Services Segment.

On the facts and in law, the TPO/AO/DRP have erred in rejecting the economic analysis undertaken by the Appellant without proper justification and conducting a fresh search using arbitrary filters for identifying companies comparable to the Appellant.

On the facts and in law, the TPO/AO/ DRP grossly erred in not accepting the comparable companies proposed by the Appellant, as the said comparable companies met the FAR (functions performed, assets employed and risk assumed) test as envisaged under Rule 10B(2) of the Income Tax Rules, 1962 ("the Rules").

On facts and in law, the AO/ TPO erred in violating the provisions of Rule 10B(2) of the Rules by introducing new comparables without considering the differences in the functions performed, assets employed and risks assumed by such companies vis-à-vis the Appellant, thereby resorting to cherry picking of comparables.

That the TPO/DRP erred in not appreciating that risk and working capital adjustment had consistently been granted to the Appellant in the preceding years and in the absence of any change in facts, ought to have been allowed to the Appellant during the relevant year as well.

That the TPO erred on facts and in law in incorrectly computing the unadjusted margins of the comparable/s which have been finally selected for determining the arm's length price of the international transaction pertaining to provision of software development support services, despite specific directions in Para 3.2.2 at Page 8 of the DRP Directions and in complete ignorance of the data available as per audited financials of the comparables.

On facts and in law, the DRP erred in not adjudicating upon certain objections raised by the Appellant and the TPO further erred in not giving effect to the directions of the DRP which if followed, the entire adjustment ought to be deleted. B. ITeS Support Services Segment [INR 65,48,110/-] 20. On the facts and in law, the TPO/AO grossly erred in determining and Ld. DRP erred in confirming the addition of INR 65,48,110/- to the total income of the Appellant on account of the difference in the arm's length price of international transactions pertaining to the ITeS Support Services.

On the facts and in law, the TPO/AO/DRP have erred in rejecting the economic analysis undertaken by the Appellant without proper justification and conducting a fresh search using arbitrary filters for identifying companies comparable to the Appellant.

On the facts and in law, the TPO/AO/DRP grossly erred in not accepting the comparable companies proposed by the Appellant, as the said comparable companies met the FAR (functions performed, assets employed and risk assumed) test as envisaged under Rule 10B(2) of the Rules.

On facts and in law, the AO/TPO erred in violating the provisions of Rule 10B(2) of the Rules by introducing new comparables without considering the differences in the functions performed, assets employed and risks assumed by such companies vis-à-vis the Appellant, thereby resorting to cherry picking of comparables only on the basis of quantitative filters.

On facts and in law, the TPO/AO/DRP erred in not allowing working capital risk adjustment to the Appellant, thereby contravening the provisions of Rule 10B(1)(e)(iii) read with Rule 10B(3) of the Rules.

That the TPO/DRP erred in not taking cognizance of the evidence adduced in respect to the payment of service charges and also erred in disregarding the favorable decision of Commissioner of Income Tax (Appeals) confirmed by this Hon'ble Tribunal in the case of Appellant for earlier Assessment Years in similar set of facts.

That the DRP/TPO erred in summarily rejecting the approach adopted by the Appellant wherein it has benchmarked this international transaction using Transactional Net Margin Method ("TNMM") as the most appropriate method.

That the TPO/DRP erred in making/upholding the adjustments while applying the principles of "commercial expediency", which approach had been rejected judicially and is not mandated under the provisions of section 92CA of the Act.

That the TPO/DRP grossly erred in applying the "Benefit Test" whilst determining the ALP of the transaction at Nil which in itself is in gross violation of the law settled by various co-ordinate benches of the Tribunal as well as the jurisdictional High Court.

The TPO/DRP erred in rejecting the cost plus mark up approach adopted by the Appellant as per the Agreement and failed to appreciate that the service charges were incidental to all business segments of the Appellant and on receipt of the services a mark up of 3 percent on the cost has been paid.

That the DRP/TPO erred on facts and in law in concluding that no documentation was furnished to substantiate the cost base, allocation key and mark-up by the Appellant in complete disregard of the fact that all these details form part of the inter-company agreement and economic analysis submitted by the Appellant.

That the DRP erred on facts and in law in concluding that: a. there is no evidence that the services have been actually provided; SA No. 166/Del/2022 b. there is no basis for revenue claimed to have been generated from the alleged services: c. cost allocation for the intra group services has no basis nor has any such basis been given for each intra-group services received; d. CUP has been correctly applied by the TPO; e. The Appellant has failed to establish that any direct nexus which would establish the benefit received by the appellant on account of receipt of such services; and f. No independent party would be willing to pay for services which are a part of its routine business performed by it and would not engage to receive such incidental services for a payment, even at cost. D. Interest on Receivables [18,506/-] 34. The TPO/DRP erred in making an adjustment of INR 18,506 to the income of the Appellant on account of alleged difference in the arm's length price of the alleged international transaction of interest on outstanding receivables 35. That the TPO/AO/DRP erred on facts and in law by considering the continuing debit balance of receivables of the Appellant as a separate "international transaction'.

That the TPO/AO/DRP erred on facts and in law in ignoring that no adjustment was warranted on account of receivables since the Appellant did not charge interest on delayed payment of receivables from third parties.

That the DRP/TPO ought to have considered that as a commercial decision the Appellant is neither levying nor charging interest on outstanding receivable from AE's as well as the third parties.

The TPO/AO erred in applying 'substance over form' principle to re- characterizing the transaction as an interest free loan' the coming to the conclusion that 6 months LIBOR rate is to applied in calculating the interest on receivables.

That without prejudice, the TPO/AO erred not appreciating that once the working capital adjustment was taken into account, as had been allowed to the Appellant in there preceding years, no separate adjustment on account of receivables was warranted in terms of the dictum of the jurisdictional High Court.

Without prejudice, the TPO erred in computing the amount of interest on outstanding receivables. In doing so, the TPO erred in not appreciating that Appellant has significantly higher outstanding payables towards AEs which SA No. 166/Del/2022 should also be considered while calculating the overall credit period and resultant interest payable/chargeable to the AE. Consequential Grounds 41. That the AO has erred in initiating penalty proceedings under Section 270 r.w.s. 274 of the Act. 42. That the AO has erred in levying interest under section 234B of the Act on the Assessee. 2.1 The assessee vide application dated 26.08.2025 has also raised following additional jurisdictional ground:

Admittedly, in the instant case as per “Intimation Letter for Order under Section 144C(5)”, dated 30.03.2022 [DIN & Document No.: ITBA/DRP/S/91/2021- 22/1042080183(1)], appearing at page 26 of the appeal set filed before us, the DRP order dated 17.03.2022 under Section 144C(5) of the Act was uploaded on the ITBA portal on 30.03.2022. The final assessment order under Section 143(3) r.w.s. 144C(13) was passed by the Assessing Officer on 30.05.2022. The Learned Counsel appearing for the assessee joins issue here to this effect that once the final order is passed beyond the prescribed time limit in terms of Section 144C(13) of the Act which ought to have been passed within one month from the end of the month in which DRP direction is issued i.e.

On the other hand, the Learned DR submitted a report obtained from the Assessing Officer stating that the DRP order dated 17.03.2022 was provided to the NFAC on 11.04.2022. The same was further received by the TPO on 7.4.2022 and on 29.4.2022 by the office of the ACIT(OSD), Range-X, New Delhi, who in turn passed the final assessment order under Section 143(3) r.w.s. 144C(13) of the Act on 30.05.2022. In that view of the matter, since the DRP order was received by the Assessing Officer on 29.04.2022, the impugned assessment order dated 30.05.2022 is very much sustainable in the eyes of law as the same has been passed within the statutory time limit.

Having heard the rival submissions made by the parties and considering the present facts of the matter and particularly taking into consideration the settled provision of law for passing final assessment order in terms of Section 144C(13) of the Act, we have perused the observation made by the Hon’ble Jurisdictional Delhi High Court in the case of Louis Dreyfus Company India (P) Ltd (supra), the relevant observation of which is as under:

In this backdrop, we note that both the judgments of the Bombay High Court in Shell India Markets (P) Ltd's case (supra) and Vodafone Idea Lid's case (supra)

It is thus manifest that as per the provisions of E-as, 2019, all orders, notices and decisions have to be necessarily uploaded on the ITBA portal and as part of the larger faceless assessment regime which now holds the field. The uploading of the directive of the DRP on the ITBA portal would thus constitute valid and sufficient service and the period of limitation as prescribed in Section 144C(13) of the Act would be liable to be computed bearing that crucial date in mind. Once the aforesaid position becomes clear, it is evident that the -order of assessment, if at all could have been framed lastly by 31 July 2022. There has thus been an abject failure on the part of the first respondent to comply with the mandatory timelines as incorporated in the gforenoted provisions. Accordingly, the writ petition is liable to be allowed and the impugned order of assessmem and the consequential penalty proceedings are thus liable to be set aside on this short score alone.

The writ petition is allowed. The order of assessment dated 24 August 2022 as well as the penalty show cause notice dated 24 August 2022 are quashed and set

In view of the appeal itself having been disposed of by us, the stay application filed by the assessee has become infructuous and is disposed of accordingly.