No Need for a Registered/Notarized Agreement for Undertaking International Transactions With Group Cos | ITAT

Case Details: CRM Services India (P.) Ltd. v. DCIT - [2024] 161 taxmann.com 508 (Delhi-Trib.)

Judiciary and Counsel Details

• • Shamim Yahya, Accountant Member & Anubhav Sharma, Judicial Member
  • Ajay Vohra, Sr. Adv., Neeraj Jain, Adv. & Abhishek Aggarwal, AR for the Appellant.
  • Rajesh Kumar, CIT-DR for the Respondent.

Facts of the Case

In the instant case, the Transfer Pricing Officer (TPO) held that the agreement and its addendum, entered by the appellant with its associated enterprise, lack registration and dating, which suggests the addendum is a belated attempt to evade tax liability resulting from earlier Transfer Pricing proceedings.

This forms the crux of the dispute: whether the addendum should be disregarded in establishing the Arm’s Length Price of the transaction.

ITAT Held

The Tribunal held that there is no requirement under the provisions of the Income-tax Act to have an underlying agreement, much less a registered or notarized agreement for undertaking an international transaction with the group companies. The mutual conduct of parties over time is often determinative of actual intentions.

In case of any ambiguity, the conduct is the best evidence to establish the real intention and effect of respective promises. The discrepancies pointed out by the TPO do not have much consequence when the parties do not question the document. Revenue is not alleging the document to be false, but only the intention of execution post facto is questioned.

Accordingly, the Tribunal held that the TPO and DRP both have fallen in error in first rejecting the addendum as a piece of evidence showing the consistency of the conduct and the actual intentions of the parties to the agreement and then making erroneous interpretation of the clauses of the Collaboration Agreement and the Licence Agreement to conclude that the assessee was providing services to the TP USA only and not to third parties for whom TP USA had acted as an intermediary.

List of Cases Referred to

• • CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692 (SC) (para 15)
  • CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC) (para 15)
  • CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC) (para 17)
  • CIT v. Walchand and Co. (P.) Ltd. [1967] 65 ITR 381 (SC) (para 17)
  • J.K. Woollen Mfg. v. CIT [1969] 72 ITR 612 (SC) (para 17)
  • CIT v. Birla Cotton Spinning & Weaving Mills Ltd [1971] 82 ITR 166 (SC) (para 17)
  • Madhav Prasad Jatia v. CIT [1979] 10 CTR 375/118 ITR 200/1 Taxman 477 (SC) (para 17)
  • S.A. Builders Ltd. v. CIT (Appeals) [2006] 206 CTR 631/[2007] 288 ITR 1/158 Taxman 74 (SC) (para 17)
  • CIT v. Bharti Televenture Ltd. [2011] 11 taxmann.com 356/331 ITR 502/200 Taxman 39 (Delhi) (para 17)
  • CIT v. Rockman Cycle Industries (P.) Ltd. [2011] 15 taxmann.com 306/238 CTR 363/331 ITR 401/203 Taxman 302 (Punjab & Haryana) (para 17)
  • CIT v. EKL Appliances Ltd.: ITA No. 1068/2011 (para 17)
  • CIT v. Dalmia Cement (P.) Ltd. [2002] 174 CTR 188/254 ITR 377/121 Taxman 706 (Delhi) (para 17)
  • Vodafone International Holdings B.V. v. Union of India [2012] 17 taxmann.com 202/247 CTR 1/341 ITR 1/204 Taxman 408 (SC) (para 18).