आदेश/ORDER 

PER PRABHASH SHANKAR [A.M.] :-

The present appeal emanating from the appellate order dated 17.11.2025 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax, Appeal, CIT(A)-57, Mumbai [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3)r.w.s. 144C of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 25.05.2024 for the Assessment Year [A.Y.] 2022-23.

2. The grounds of appeal are as under:-

1. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that once the AE is remunerated at ALP, the assessment cannot be prejudicial to interest of revenue, when the assessee itself has adopted a dual taxpayer approach and attributed profits to its PE in India?”

2. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that once assessee has adopted dual taxpayer approach and has PE in India, the profits attributable to it have to be calculated on ALP basis as per the Article 7 of DTAA irrespective of the ALP compensation made to AE in India?”

3. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that once dual taxpayer approach is adopted, even if either one of AE or PE are not compensated at ALP, the assessment is not only erroneous but also prejudicial to the interest of revenue?”

4. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that profit attribution by DAPE by FAR analysis was carried out because the Indian AE was not remunerated at arm’s length?”

5. “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there is no finding on the AE not having been compensated at ALP, when the revision order u/s 263 order clearly mentions that functions like collection & receivables management, finance management, R & D, market risk etc, have not been correctly allocated to Indian operation while determining the profits taxable in India?”

6. “Whether on the has erred in not holding that the assessment-order is erroneous in as much as it accepts the assessee’s mode of computation of taxable profit in India wherein the marketing fees paid to PE is reduced after attribution of Gross Profits in India instead of being deducted before attribution of Profits in India?”

3. Briefly stated facts of the case are that the assessee is a non- resident company incorporated under the laws of Malaysia and is a Tax Resident assessed to tax there. The group has an Indian subsidiary, MFE Formwork Technology India Pvt. Ltd. (“MFE-India”), which acts as a Dependent Agent Permanent Establishment (DAPE) / business connection in India under Article 5 of the DTAA and Explanation 2 to section 9(1)(i). The assessee company has a Marketing Services Agreement (MSA) and a Technical Services Agreement (TSA) with MFE- India, under which MFE-India performs marketing and technical support services and is remunerated at cost plus 15%, which has consistently been accepted at arm’s length in its own assessments. The company filed its Return of Income declaring total income of Rs. 2,88,94,220/-which was processed u/s 143(1) of the Act. Its case was selected for scrutiny and subsequently, a draft assessment order under section 144C(1) of the Act was issued to it. Against the said order, it requested the AO to pass the final assessment order as per the law as it did not wish to file objections with the Dispute Resolution Panel and reserved it right to file an appeal with the CIT(A).Eventually, the AO passed an assessment order under section 143(3) r.w.s 144C(3) of the Act determining the assessee’s total income at Rs. 11,92,53,651/-, inter alia making certain variation/adjustments to the returned income. The major variation was enhancement of the profit attribution ratio from 24% to 35% and restriction of deduction of marketing/technical f