MAERSK TANKERS INDIA PRIVATE LIMITED,MUMBAI vs. THE ASSESSMENT UNIT, INCOME-TAX DEPARTMENT, MUMBAI

2 During assessment proceedings, the Assessing Officer noticed that the assessee had reported transactions in Form No. 3CEB. Accordingly, a reference was made to the Transfer Pricing Officer under section 92CA(1) on 26.07.2023. The Transfer Pricing Officer passed an order under section 92CA(3) dated 27.01.2025, proposing a transfer pricing adjustment of Rs. 46,45,29,035/- in respect of a transaction involving divestment of India's Support Services Business in relation to Technical Management by the assessee to Lionheart Shipping Private Limited, an Indian resident group entity. The TPO determined the arm's length price of the transaction at Rs. 53,33,00,000/-, as against the value disclosed by the assessee, by reworking the valuation and altering assumptions including the growth rate.

3 Based on the TPO's order, the Assessing Officer passed a Draft Assessment Order under section 144C(1) dated 06.03.2025, proposing an addition of Rs. 46,45,29,035/- and computing the total income at Rs. 63,49,99,326/-, with proposal for initiation of penalty proceedings under section 270A.

4 The assessee filed objections before the DRP, under section 144C(2), contending, inter alia, that the impugned transaction was between two Indian resident entities and did not constitute an international transaction under section 92B, nor a deemed international transaction under section 92B(2), nor a specified domestic transaction under section 92BA. The assessee also challenged the validity of the reference to the TPO, the rejection of the independent valuation report, and the reworking of valuation assumptions by the TPO, and objected to the proposed penalty proceedings.

5 The DRP, after considering the draft assessment order, the objections, submissions, and material on record, issued directions under section 144C(5) dated 10.09.2025, rejecting the assessee's objections and directing the Assessing Officer to confirm the proposed transfer pricing adjustment.

6 In pursuance of the DRP's directions, the Assessing Officer passed the final assessment order dated 23.10.2025 under section 143(3) read with sections 144C(13) and 144B, assessing the total income at Rs. 63,49,99,325/-, after making an addition of Rs. 46,45,29,035/- on account of transfer pricing adjustment, and initiating penalty proceedings under section 270A separately.

Aggrieved by the final assessment order passed in conformity with the DRP's directions, the assessee is in appeal before us raising following grounds of appeal: Transfer Pricing grounds

During the course of hearing before us, the learned Authorised Representative (AR) of the assessee explained the corporate structure of the assessee and the background of the impugned transaction, and reiterated the factual and legal contentions already placed on record.

1 The AR submitted that the assessee, Maersk Tankers India Private Limited (hereinafter referred to as “the assessee”), is a resident company incorporated on 28.09.2017 under the Companies Act, 2013, and is a wholly owned subsidiary of Maersk Tankers A/S (MTAS). It was submitted that the business objectives of MTAS were to perform commercial and technical management in strategic partnership with vessel owning companies, including group companies of the Maersk Tankers Group. Since inception, the assessee has been engaged in the business of providing back-office support services to its holding company, MTAS, under a Service Level Agreement (SLA), for which it receives arm's length remuneration benchmarked annually.

2 The AR submitted that during financial year 2021–22, MTAS, the parent company, initiated a global divestment of its Technical Management business to a third party, namely Synergy Marine Pte. Ltd. Consequent thereto, a Business Transfer Agreement dated 28.10.2021 was executed between the assessee and its domestic associated enterprise, Lionheart Shipping Private Limited, for divestment of the function providing support services in relation to the technical management business, for a consideration of Rs. 6,88,00,000/-.

3 It was submitted that the transaction was effected by way of slump sale, and the assessee duly offered the resultant capital gains to tax under section 50B of the Act. The AR pointed out that in the return of income for A.Y. 2022–23 filed on 28.11.2022, the assessee disclosed total income of Rs. 17,04,70,290/-, which included the said consideration of Rs. 6,88,00,000/- under the head Long Term Capital Gains, and paid tax thereon at the applicable rate of 20 percent. It was emphasized that the Assessment Unit accepted the slump sale characterization and taxed the capital gains accordingly.

5 The AR submitted that both the transferor (the assessee) and the transferee (Lionheart Shipping Private Limited) were Indian resident companies, incorporated and operating in India under the Companies Act, 2013, at the time the transaction was entered into. Therefore, according to the AR, the transaction does not qualify as an “international transaction" under section 92B(1) of the Act, since the said provision expressly requires that one or both of the associated enterprises must be non-residents. The AR read out section 92B(1) of the Act and submitted that the statutory condition is not satisfied in the present case.

6 It was further submitted that the transaction also does not fall within the ambit of a deemed international transaction under section 92B(2) of the Act. According to the AR, section 92B(2) applies only where a transaction is entered into with a third party, pursuant to a prior agreement or arrangement with a non- resident AE. In the present case, the transaction was directly between two domestic associated enterprises, and not with a third party. Hence, the invocation of section 92B(2) by the TPO and the DRP was stated to be legally untenable.

7 The AR contended that the TPO and the Assessment Unit grossly erred in concluding that a transaction between two Indian resident group entities, merely because it was not reported as a "Specified Domestic Transaction”, becomes an international transaction. It was submitted that the Act does not contemplate such an interpretation, and that absence of reporting as T cannot convert a domestic transaction into an international transaction.

8 In support of this proposition, the AR placed reliance on the decision of the juri ictional Co-ordinate Bench in the case of Reach Data Services India Private Limited v. ITO (ITA No. 1842/Mum/2017), wherein it has been held that a transaction between two domestic associated enterprises does not qualify as a deemed international transaction under section 92B(2) of the Act. The AR also placed reliance on the decision of Co-ordinate Bench 1891/MUM/2014).

9 The AR further assailed the very reference made by the Assessing Officer to the TPO, contending that the same was contrary to CBDT Instruction No. 3 of 2016 dated 10.03.2016, which is binding on the Assessing Officer. It was submitted that where a taxpayer reports a transaction in Form 3CEB with qualifying remarks to the effect that the transaction is neither an international transaction nor a specified domestic transaction, the Assessing Officer is mandatorily required to record satisfaction that there is income or potential income arising from such transaction, and grant an opportunity of being heard to the assessee before seeking approval of the PCIT/CIT and before making a reference to the TPO. The AR submitted that in the present case, the Assessing Officer failed to provide any opportunity of being heard to the assessee and did not record the requisite satisfaction, thereby rendering the reference to the TPO invalid and without juri iction.

10 The AR further submitted that the TPO failed to follow any of the prescribed methods under section 92C(1) of the Act while determining the arm's length price. It was submitted that section 92C mandates determination of ALP only by adopting one of the prescribed methods, including the “Other Method” as defined under Rule 10AB. The assessee had relied on an independent valuation report prepared in accordance with the prescribed “Other Method”, whereas the TPO arbitrarily substituted commercial assumptions and reworked the valuation without adhering to the statutory framework.

11 Without prejudice, the AR submitted that since the transaction was admittedly a slump sale taxable under section 50B, the fair market value determined under Rule 11UAE of the Income-tax Rules, which has been accepted by the Assessment Unit for capital gains purposes, ought to be adopted as the arm's length price for Chapter X purposes as well. It was submitted that the consideration received by the assessee was higher than the FMV determined under Rule 11UAE, and therefore, even on merits, the transaction is inherently at arm's length.

12 Finally, the AR clarified that the disclosure made in Form 3CEB, showing Specified Domestic Transaction as NIL under Clause 9 and making observations under Clause 18 was purely out of abundant caution, with a categorical assertion that the impugned transaction was between two domestic associated enterprises and that transfer pricing provisions were not applicable.

The learned Departmental Representative (DR) supported the orders of the lower authorities and placed reliance on the directions of the DRP. The DR submitted that although section 92B(1) contemplates that an international transaction is one where at least one of the associated enterprises is a non-resident, the DRP has held that section 92B(2) expands the scope by deeming certain transactions as international where the transaction, though structured domestically, is in substance governed by prior agreements or arrangements involving non- resident associated enterprises and the terms are determined in substance by such associated enterprises.

1 The DR submitted that the DRP has recorded a categorical finding that, contrary to the assessee's plea, the corporate structure and the surrounding facts establish a deemed international transaction, since both the assessee and Lionheart are ultimately controlled by non-resident entities and the impugned divestment was part of a larger group reorganisation involving non-resident entities. The DR further submitted that the DRP has observed that the global divestment of the technical management business was initiated at the group level, and the existence of prior agreements and arrangements involving foreign group entities, including Synergy Denmark A/S, substantively determined the terms of the divestment. On this premise, it was submitted that the DRP upheld the TPO's conclusion that the transaction attracts section 92B(2).

2 The DR further pointed out that the DRP also relied on the principle that substance over form should prevail, and referred to the decision in Vodafone India Services Pvt. Ltd. v. ACIT (Bombay High Court) to support the proposition that where a domestic transaction is embedded within a cross-border group strategy, it can be treated as international in substance. The DR contended that the DRP distinguished the assessee's reliance on the Mumbai Tribunal decision in Reach Data Services India Private Limited, on the reasoning that in that case there was no material indicating prior non-resident influence, whereas in the present case the TPO's findings based on corporate structure and alleged prior agreements establish such influence.

3 The DR further submitted that the DRP has attached significance to the fact that the assessee itself reported the transaction in Form 3CEB under Clause 18 for international transactions, disclosing the value at Rs. 6.88 crore, which, according to the DRP, amounts to an implicit admission of transfer pricing applicability. It was contended that the DRP rejected the assessee's explanation that the reporting was out of abundant caution, and held that qualifying remarks cannot override the disclosure, and that such disclosure triggers transfer pricing examination. The DR pointed out that the DRP also observed that non-reporting as specified domestic transaction and reporting under Clause 18 supported the inference that the transaction was treated as international for Chapter X purposes. 6 We have considered the rival submissions, the material placed on record, and the directions of the DRP. The controversy, in substance, is whether the business transfer/divestment of India's support services business by the assessee (a resident company) to Lionheart (also a resident company), both being domestic associated enterprises, can at all be brought within Chapter X by treating it as an “international transaction”, including as a “deemed international transaction” under section 92B(2).

1 Since the juri ictional foundation itself is in dispute, we first adjudicate that issue. Only if Chapter X is found to apply, the remaining contentions on reference to TPO, method, valuation assumptions, Rule 11UAE, etc., would arise for consideration.

The undisputed factual position relevant to section 92B is such that i. The Business Transfer Agreement dated 28.10.2021 is between the assessee (Maersk Tankers India Private Limited) and Lionheart Shipping Private Limited, both incorporated and resident in India. This is expressly noted as the assessee's case before the DRP. ii. The DRP also records that the assessee's primary objection is that the transaction is between “two Indian resident associated enterprises (AEs)" and therefore does not meet section 92B(1). iii. he DRP's approach is that, though the transaction is between two resident AEs, it can be treated as a deemed international transaction, because both entities are ultimately controlled by non-resident group entities and because the divestment was part of a larger group reorganization involving a prior agreement.

1 Thus, the determinative issue is the correct construction and application of section 92B(1) and 92B(2).

2 The DRP directions reproduce section 92B(1) and also set out the legal elements of section 92B(2). The relevant portions are as under: Section 92B(1) (as reproduced in DRP directions): “For the purposes of this section and sections 92, 92C, 92D and 92E, “international transaction” means a transaction between two or more associated enterprises, either or both of whom are non-residents, ....” Section 92B(2) (as reproduced in DRP directions): “a transaction entered into by an enterprise with a person other than an associated enterprise shall, for the purposes of sub- section (1), be deemed to be an international transaction entered into between two associated enterprises, if there exists a prior agreement ...."

3 The DRP also correctly notes the core requirement of section 92B(2) that it applies where “the transaction is entered into by an enterprise with a ‘person other than an associated enterprise'...”.

4 Section 92B(1), as reproduced above, requires that the transaction be between AEs “either or both of whom are non- residents".

5 In the present case, the contracting parties to the Business Transfer Agreement are both resident entities in India. The DRP does not record that either contracting party is a non-resident. On these admitted facts, the transaction fails the basic juri ictional condition embedded in section 92B(1).

6 The coordinate bench has already dealt with an analogous contention where the Revenue argued that since two resident AEs were subsidiaries of a foreign holding company, and the transaction was influenced/controlled by such foreign holding, it should be treated as an international transaction. The Tribunal rejected that approach, holding that section 92B does not contain any such deeming condition merely because resident AEs are subsidiaries of a foreign holding company. In MWH India Pvt. Ltd. (ITA No.1891/Mum/2014), the Bench held: “Thus, the agreement for purchase of asset, on the basis of slump sale is between two resident companies/AEs. It is an admitted fact that both the aforesaid companies are subsidiaries of Foreign Holding Compапу... A bare reading of section 92B... would show that there is no such condition that the transaction between two resident companies, subsidiary of a Foreign Holding Company shall be deemed as international transaction... Since, the asset purchase agreement is between two resident companies such transaction cannot be regarded as ‘international transaction.” (page 11, para 10)

7 The ratio applies on all fours to the juri ictional limb under section 92B(1) in the present case, because here too the transaction is admittedly between two resident entities, though within a foreign-headed group.

8 Accordingly, the transaction cannot be treated as an “international transaction” within the meaning of section 92B(1).

Section 92B(2) begins with a condition precedent: it contemplates “a transaction entered into by an enterprise with a person other than an associated enterprise...”.

1 The coordinate bench in Reach Data Services India Pvt. Ltd. (ITA No.1842/Mum/2017) has explained this requirement in clear terms. The Bench held: “Now, adverting to the extended meaning of an international transaction, as is envisaged in sub-section (2) of Sec. 92B, we find, that the same presupposes a transaction entered into by an enterprise with a person other than an associated enterprise. In the case before us, as the transaction under consideration is clearly a transaction between two AEs, therefore, the prerequisite condition contemplated in sub- section (2) of Sec.92B ... is not satisfied. Accordingly... the transaction... being a transaction between two domestic AEs, cannot be brought within the realm of the definition of an international transaction as envisaged in Sec.92B of the Act.”

2 In the present case, it is not even the Revenue's case that the assessee entered into the Business Transfer Agreement with a third party (a “person other than an associated enterprise”). On the contrary, the DRP itself proceeds on the footing that the assessee and Lionheart are AEs, and the transaction is the divestment by the assessee to Lionheart.

3 Once the transaction is between two AEs, the statutory gateway of section 92B(2) is not crossed, as held in Reach Data (supra).

The DRP holds that because of the group reorganization and the alleged prior agreement involving non-resident group entities, "Lionheart [is] effectively a ‘person other than an AE' in substance for 92B(2) purposes...", and it invokes “substance over form”.

1 We are unable to approve this approach for the following reasons: i. Section 92B(2) is a deeming provision with a clearly stated trigger: the enterprise must transact with a person other than an associated enterprise. The statute does not permit the phrase "person other than an associated enterprise" to be judicially rewritten into “a person who is an associated enterprise but may be treated as if it were not, in substance”. ii. The DRP's own record shows that Lionheart is treated as an associated enterprise. The assessee's position that the transaction is with its domestic AE is noted, and the section 92B(2) argument is framed by the DRP itself on that basis. iii. The Tribunal in MWH India has already rejected a similar "control by foreign holding” argument, holding that section 92B does not deem a domestic AE transaction as international merely because a foreign holding company influences or controls the resident subsidiaries' decisions.

2 Therefore, even assuming that the group-level divestment was a wider global strategy, that circumstance cannot cure the absence of the statutory condition that the assessee's transaction must be with a non-AE third party to invoke section 92B(2).

The DRP states that Reach Data is distinguishable because there was “no evidence of prior non-resident AE influence” in that case. This distinction does not hold in law, because the decisive ratio in Reach Data is not founded on absence or presence of influence. It rests on the statutory prerequisite that section 92B(2) "presupposes a transaction... with a person other than an associated enterprise" and that where the transaction is “between two AEs", the prerequisite is not satisfied. Hence, the DRP's attempt to keep Reach Data out on facts does not address the governing legal test.

1 For the aforesaid reasons, section 92B(2) has no application to the present transaction. Consequently, the transaction between the assessee and Lionheart, being a transaction between two resident associated enterprises, cannot be deemed to be an international transaction.

The DRP holds that because the assessee reported the transaction in Form 3CEB (Clause 18) at Rs. 6,88,00,000/-, it "implicitly admitted" that it is an international transaction and that qualifying remarks do not override reporting. We are unable to accept this as a juri iction-conferring proposition. In our opinion i. The applicability of Chapter X must be tested on the statute, namely section 92B, and not on the basis of how a transaction was described in a reporting form. The statutory definition cannot be expanded by an "admission” in a report, particularly when the assessee's consistent case is that the disclosure was made out of abundant caution with qualifying remarks that the transaction is not an international transaction. ii. The DRP itself notes that the assessee's objection is that the transaction is between two Indian resident AEs and thus outside section 92B(1).Therefore, the dispute is squarely one of juri iction under the Act. iii. The Tribunal in MWH India also noticed that grounds/positions were sometimes taken "out of abundant caution” and treated juri iction as a matter to be adjudicated on law.

1 Accordingly, the DRP's inference that Form 3CEB disclosure by itself triggers Chapter X, notwithstanding the statutory conditions, cannot be sustained.

The DRP places strong reliance on the corporate structure and ultimate non-resident control to hold that the transaction is "embedded in a cross-border group strategy". However, as already held above: • Section 92B(1) requires at least one non-resident party to the transaction. • Section 92B(2) requires a transaction with a person other than an AE. • Common foreign holding/control does not create a deeming fiction not found in the statute, as held in MWH India. • Even where the parent company holds 100% and 99% shareholding, the Tribunal in Reach Data held that it may establish AE relationship under section 92A, but “merely on the said count" the transaction cannot be held to be an international transaction if section 92B conditions are not satisfied.

1 Thus, the corporate structure does not advance the Revenue's case beyond section 92A; it cannot override section 92B.

The assessee argues that the reference itself is bad in law for non-compliance with Para 3.4 of CBDT Instruction No. 3/2016, particularly where Form 3CEB contains qualifying remarks. This is raised in the assessee's submissions. The DRP rejects the objection and holds the reference valid. In our considered view, once we hold that the impugned transaction is not an international transaction under section 92B(1) and cannot be deemed so under section 92B(2), the very assumption of juri iction by the TPO to determine ALP in respect of this transaction fails. Consequently, the debate on the procedural validity of the reference becomes academic for adjudication in this appeal.

The DRP upholds the TPO's adoption of DCF under “Other Method" and its modifications to projections, growth, and terminal value. Since the transaction itself is held to be outside Chapter X, we do not enter into the merits of valuation and method, and we expressly keep all such issues open.

The assessee contends that the transaction is taxed as slump sale under section 50B and FMV determined under Rule 11UAE, accepted for capital gains purposes, should be treated as ALP. The DRP rejects this. Again, in view of our finding on non- applicability of Chapter X, this issue does not survive for decision.

The DRP lists penalty initiation as one of the objections. This also becomes consequential and does not call for separate adjudication once the underlying adjustment is deleted.

Before parting with the matter, we deem it appropriate to note that the assessee has also raised a juri ictional ground challenging the validity of the final assessment order on the ground of limitation, contending that the assessment order dated 23.10.2025 is bad in law and void ab initio as being barred by limitation prescribed under section 153 read with section 144C of the Income-tax Act, 1961, and has placed reliance, inter alia, on the decisions of the Hon'ble Madras High Court in Pr. CIT v. Roca Bathroom Products Pvt. Ltd. (445 ITR 537) and the Hon'ble juri ictional High Court in Shelf Drilling Ron Tappmeyer Ltd. v. Asstt. CIT, International Taxation [2023] 457 ITR 161. However, in view of our decision on the primary juri ictional issue relating to the applicability of Chapter X and the consequent deletion of the transfer pricing adjustment, we do not consider it necessary to adjudicate this ground at this stage. Accordingly, the contention of the assessee regarding the assessment order being barred by limitation is left open, without expressing any opinion on merits, to be adjudicated in an appropriate proceeding, if so required.

Accordingly, the impugned transfer pricing adjustment of Rs. 46,45,00,000/- is held to be without juri iction and is deleted. All other grounds on merits and procedure become academic and are left open.

We have also considered the Stay Application filed by the assessee seeking stay of recovery of the outstanding demand arising from the final assessment order dated 23.10.2025, along with the rival submissions. It is a settled judicial principle that where the addition giving rise to the disputed demand is deleted on merits, the corresponding demand becomes infructuous, and no separate or independent adjudication of the stay application is required. In such circumstances, the stay application does not survive for consideration.

1 Accordingly, in view of the relief granted to the assessee in the quantum appeal, the Stay Application filed by the assessee stands dismissed as infructuous.

In the combined result, the appeal filed by the assessee is allowed, and the Stay Application filed by the assessee is dismissed as infructuous. Order pronounced in the open court on 20.01.2026. (AMIT SHUKLA) JUDICIAL MEMBER Mumbai, Dated 20/01/2026 Dhananjay, Sr.PS (MAKARAND VASANT MAHADEOKAR) ACCOUNTANT MEMBER आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to : 1. 2. 3. 4. 5. 6. अपीलार्थी / The Appellant प्रत्यर्थी / The Respondent. संबंधित आयकर आयुक्त / The CIT(A) आयकर आयुक्त (अपील) / Concerned CIT विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण, मुम्बई / DR, ITAT, Mumbai गार्ड फाईल / Guard file. सत्यापित प्रति //// BY ORDER, उप/सहायक पंजीकार (Asst.