Assessee is North Delhi Metro Mall Private Limited
The assessee is engaged in commercial development, construction, leasing, and related services for mall infrastructure projects.
•The issue pertains to a Transfer Pricing adjustment of INR 9.83 crores made by the TPO for payments to the AE, Virtuous Retail South Asia Pte. Ltd. (VRSA), for development supervision services related to a mall project. The TPO disallowed the expense, questioning the commercial expediency and claiming no real benefit was derived
Assessee’s Contentions | Revenue’s Contentions | Judgement |
|---|---|---|
The AE, VRSA, was appointed as Development Manager under a Development Management Agreement (DMA) to supervise the mall project. | The Revenue, via the TPO, questioned the genuineness of development supervision services claimed from AE VRSA, alleging no real or tangible benefit was derived by the assessee from these services. | The ITAT held that the TPO overstepped its jurisdiction by evaluating the necessity or business expediency of the service instead of determining the arm’s length price. |
The AE’s services, detailed in project reports and meeting minutes, included construction oversight, technical coordination, design reviews, legal and marketing support, reporting, and supervision. | They argued that the payments made to the AE were excessive and lacked proper justification, thereby not conforming to the ALP prescribed under Transfer Pricing regulations. | The ITAT cited the Delhi High Court in Cushman and Wakefield (India) Pvt. Ltd. and its own rulings in Dresser Rand India, Walter Tools, and McCann Erickson to reaffirm that the “benefit test” is beyond the TPO’s scope under Section 92CA. |
The assessee demonstrated limited in-house capabilities, with minimal employee cost and no internal project management infrastructure. | The Revenue contended that the expense should be disallowed because the TPO believed the services were not commercially expedient or necessary for the project, implying that the arrangement was designed to shift profits rather than reflect a genuine business transaction. | The Tribunal observed that there was substantial evidence demonstrating the AEs multifaceted involvement in the project. Consequently, the ITAT directed the deletion of the transfer pricing adjustment of INR 9.83 crores in full. |
The Delhi ITAT held that the TPO exceeded his jurisdiction by questioning “commercial expediency” and accordingly deleted the entire transfer pricing adjustment.
