IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2038/MUM/2025 (AY : 2022-23)

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Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER;

1. This appeal by assessee is directed against the addition in assessment order passed under section 143(3) r.w.s. 144C(13) dated 28.01.2025, passed in pursuance of direction of DRP dated 24.12.2024 for A.Y. 2022-23. The assessee has raised following grounds of appeal:

“1. General Ground

1.1 The final assessment order ("Impugned Order") passed by the Assistant Commissioner of Income-tax (International Taxation)-4(3)(1) ("Ld. AO") under Section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 (the "Act"), pursuant to the directions issued by the Learned Dispute Resolution Panel 2, Mumbai (the "Ld. DRP") under section 144C(5) of the Act, suffers from legal defects such as, but not limited to, being passed in violation of principles of natural justice, is devoid of merits, based on conjectures, surmises and a pre-judged mind without appreciating the Appellant's submissions, contrary to the facts on record and the provisions of the Act, and hence, is bad in law and is liable to be quashed as such

2. Validity of the Impugned Order

2.1 The Impugned order dated January 28, 2025, is void-ab-initio, invalid, without jurisdiction and bad in law on account of being barred by the period of limitation prescribed under Section 153 of the Act the limitation prescribed under the Act and is liable to quashed as such.

3. Attribution of profits to the Indian Operations

3.1 The Ld. AO and the Ld. DRP ("Lower Authorities") erroneously applied Section 9(1)(i) of the Act without appreciating that the Appellant did not undertake any part of its operations in India.

3.2 The Lower Authorities erred in not following the binding position of law laid down by the Hon'ble Supreme Court in the case of Morgan Stanley Co. Inc. [292 ITR 416), that no further profits could be attributed to the Permanent Establishment ("PE") when the Indian Associated Enterprise ("AE") is remunerated at arm's length. 3.3 The Lower Authorities erred in attributing further profits to the Appellant's Dependent Agent Permanent Establishment ("DAPE") in India by applying Rule 10 of the Income Tax Rules, 1962 ("IT Rules") and, further erred in not following the provisions of Article 7 of the Agreement for Avoidance of Double Taxation ("DTAA") between India and the UK, providing for the application of transfer pricing principles for determining such profit attribution, by considering a PE as a distinct and a separate enterprise.

3.4 Without prejudice, the said attribution of profits by the Ld. AO, without referring the Appellant's international transactions to the Ld. Transfer Pricing Officer ("TPO") for an arms length determination, is beyond the jurisdiction provided under the Act, and hence, is illegal and invalid.

3.5 The Lower Authorities erred in arbitrarily assigning ad hoc ratios of 25 percent and 20 percent respectively, towards the gross revenue attributable to the operations of the DAPE in India, and its taxable business profits in India, despite the undisputed fact that the Appellant has incurred losses in the calendar year 2021 and

2022, as evidenced from its audited financial statements.

3.6 Without prejudice, attribution of further profits to the Appellant's DAPE in India, if any, shall be restricted to a deemed profitability rate of 2 percent of the total revenue, as recommended in the draft report on Profit Attribution, dated April 18, 2019, issued by the Central Board of Direct Taxes ("CBDT"), in the cases where the foreign enterprise incurred a global loss or earned marginal profits.

3.7 The Lower Authorities erred in doubly t