India vs AON Consulting: CASE SUMMARY
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India vs AON Consulting: CASE SUMMARY
Case Information
- Court: High Court of Delhi
- Case No: ITA 244/2024
- Applicant: AON Consulting Pvt. Ltd. (Successor Entity of AON Services (I) Pvt. Ltd.)
- Defendant: Principal Commissioner of Income Tax – 1 and Ors.
- Judgment Date: 06 February 2025
- Download the FULL JUDGMENT
Judgment Summary
The High Court of Delhi, in its ruling on AON Consulting Pvt. Ltd. v. Principal Commissioner of Income Tax – 1 and Ors. (ITA 244/2024), addressed a crucial transfer pricing (TP) dispute concerning the application of Mutual Agreement Procedure (MAP) to transactions not covered under the agreement. The judgment clarifies that MAP-based TP adjustments, which are negotiated between competent authorities of contracting states, cannot be unilaterally extended to transactions beyond their scope.
The case originated from a TP adjustment made by the Transfer Pricing Officer (TPO) in respect of international transactions of Hewitt Associates (India) Pvt. Ltd., later merged into AON Consulting Pvt. Ltd. The TPO had initially made an upward TP adjustment of ₹44,06,38,092, consisting of:
- ₹41,79,89,294 for US Transactions, which were settled through the MAP process under Article 27 of the India-US Double Taxation Avoidance Agreement (DTAA).
- ₹2,26,48,798 for Non-US Transactions, which remained disputed.
The Income Tax Appellate Tribunal (ITAT), while hearing the case, ruled in favour of the Revenue and remanded the Non-US Transactions to the TPO, directing that the same framework agreed upon under MAP for US Transactions be applied to Non-US Transactions as well.
AON Consulting challenged this order before the High Court of Delhi, arguing that MAP is a consensual dispute resolution mechanism between two contracting states, and its principles cannot be imposed unilaterally on transactions outside its purview. The core issue was whether the TP framework settled between the US and Indian tax authorities under MAP could be extended to unrelated Non-US Transactions.
The High Court ruled in favour of AON Consulting, holding that:
- MAP settlements are voluntary, case-specific, and dependent on negotiations between competent authorities.
- The ITAT’s decision to extend MAP principles to Non-US Transactions was legally flawed as there was no agreement with other jurisdictions for such an application.
- Transfer pricing adjustments must be determined independently under Section 92C of the Income Tax Act, 1961, and Rule 10B of the Income Tax Rules, 1962.
The court emphasised that MAP settlements cannot be used as a binding precedent for unrelated transactions, especially when there is no bilateral agreement with the tax authorities of the respective Non-US jurisdictions. The Revenue’s approach, which sought to impose a negotiated MAP outcome onto transactions outside its jurisdiction, was rejected.
As a result, the High Court overturned the ITAT’s order and restored AON Consulting’s appeal, directing the ITAT to assess the TP adjustments independently, without relying on the MAP framework used for US Transactions.
