The Bangalore Bench of Income Tax Appellate Tribunal (ITAT)directed the Transfer Pricing Officer (TPO) to conduct a fresh transfer pricing (TP) study on the applicability of the arm’s length price (ALP) determined under the Mutual Agreement Procedure (MAP) to transactions with non-US-based associated enterprises (AEs).
NI Systems (India) Pvt. Ltd., appellant-assessee, was a subsidiary of a US-based company engaged in contract software and hardware development services. It had AEs in the US and other countries. For the relevant assessment year, it reported an income of ₹4,60,74,010. Due to international transactions, the case was referred to the TPO for an ALP assessment, leading to certain adjustments.
The assessee filed its objections before the Dispute Resolution Panel (DRP) aggrieved by the order of the TPO.
The DRP, on September 7, 2018, partly allowed the assessee’s objections and reduced the TP adjustment for software and hardware development services from ₹8,17,59,555 to ₹5,05,63,913. It also granted relief for marketing support and distribution activities.
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On December 3, 2018, the assessee applied for a MAP resolution. The competent authority resolved the dispute under MAP on July 29, 2024. The assessee then requested that the ALP from the MAP proceedings for transactions with US-based AEs be applied to transactions with non-US-based AEs, which made up 64% of the transactions.
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During the hearing, the counsel for the appellant-assessee confirmed that the disputes were mostly settled under the MAP. The request was to apply the ALP from the MAP proceedings to transactions with non-US-based entities.
The two member bench comprising Prakash Chand Yadav(Judicial Member) and Waseem Ahmed(Accountant Member) reviewed the submissions and the record. It noted that the appellant-assessee had entered MAP proceedings on December 3, 2018, resolving most of the dispute.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The tribunal found that the dispute for both segments had been settled under MAP and decided to send the matter back to the TPO for a fresh TP study, considering the adjustments accepted for transactions with US-based entities.
In conclusion, the appeal filed by the assessee was allowed for statistical purposes.
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