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

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  • Last Updated on 19 April, 2024

registered/notarized agreements

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

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