TPO already made Adjustments on Information & Technology Fees: ITAT deletes AO's Protective Addition [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) deleted the protective addition made by the Assessing Officer (AO) because the Transfer Pricing Officer (TPO) had already made adjustments to the Mutual Agreement Procedures (MAP) regarding the Information & Technology Fees.

LM Wind Power Blades (India) Pvt. Ltd., the assessee, is engaged in the business of manufacturing blades used in wind turbines. For the assessment years 2010-11, 2011-12, and 2013-14, the company's income tax returns were scrutinized, and it was observed that the company had entered into international transactions.

The Assessing Officer (AO) made a protective disallowance of Rs. 2,13,24,188 for the assessment year 2010-11, on account of payments made by the assessee to its Associated Enterprise (AE) under the head "information & technology fees."

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On appeal, the assessee’s counsel argued that the assessee entered into Mutual Agreement Procedures (MAP) with the competent authority, and the MAP proceedings culminated in a settlement. The Transfer Pricing Officer (TPO) made an adjustment on account of information & technology fees, determining the Arm's Length Price (ALP) at NIL.

The two-member bench comprising Waseem Ahmed (Accountant Member) and Prakash Chand Yadav (Judicial Member) observed that the assessee had settled its dispute with the competent authority under MAP and had accepted the adjustments made by the TPO on account of information technology fees amounting to Rs. 2,13,24,188.

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The tribunal ruled that the protective addition made by the AO was not tenable because the substantial addition had already been settled in the MAP proceedings. The tribunal deleted the protective disallowance made by the AO and allowed the appeals of the assessee.

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