ITAT Holds Company Not A Full-Risk Service Provider; Deletes Rs 38.20 Crore TP Adjustment:

ITAT Holds Company Not A Full-Risk Service Provider; Deletes Rs 38.20 Crore TP Adjustment The ITAT Delhi has ruled in favour of Boeing India Defence Private Limited by deleting a transfer pricing adjustment of about Rs 38.20 crore made by the Income Tax Department for Assessment Year 2021-22. The present case relates to the payments made by the assessee, Boeing India Defence Private Limited to Boeing Aerospace Operations (BAO), for technical and training services linked with C-17 aircraft and Boeing Business Jet (BBJ) support services provided to the Indian Air Force (IAF). The assessee claimed that it acted mainly as a local coordination and liaison entity, while the actual technical expertise, simulators, know-how, and related risks were managed by BAO and other Boeing group entities.

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The company argued that due to the sensitive nature of defence contracts, the IAF preferred dealing with a domestic Indian entity to ensure smoother communication and assistance. Boeing India Defence Private Limited stated that it only performed limited-risk support functions and earned a fixed cost-plus return, whereas BAO assumed the major operational and contractual risks. However, the Transfer Pricing Officer (TPO) considered the assessee as a full-risk service provider and consequently made a transfer pricing adjustment of more than Rs 38 crore. Being aggrieved with this decision, the assessee filed the present appeal before the ITAT, pointing out that a similar arrangement had already been accepted by the tax department in the previous assessment year.

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When the tribunal analysed the agreements, financial records, and operational structure, it noted that the assessee did not own the simulators, technical assets, or proprietary technology required for providing such defence-related services. The Tribunal held that the company mainly acted as a facilitator and coordination entity, while BAO actually performed the core technical functions and bore the related risks. The tax authorities and TPO are directed to accept the transfer pricing benchmarking adopted by the assessee and allow the appeal.