ITAT Deletes Rs. 38.20 Crore Transfer Pricing Adjustment Against Boeing India Defence Unit

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has deleted a transfer pricing adjustment of ₹38.20 crore made against Boeing India Defense Private Limited for Assessment Year 2021-22, holding that the Indian entity functioned merely as a limited-risk service provider coordinating training and technical support services for the Indian Air Force (IAF), while the Associated Enterprise (AE) bore the substantial risks and responsibilities. The bench of Challa Nagendra Prasad (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that the Indian entity did not own any specialized assets or technical infrastructure required for providing aircraft training or sophisticated aerospace technical support. After examining the balance sheet and agreements on record, the Bench found that Boeing India possessed only routine office assets and coordination infrastructure. The appeal arose from an assessment order passed under Sections 143(3), 144C(13), and 144B of the Income-tax Act pursuant to directions issued by the Dispute Resolution Panel (DRP). The Transfer Pricing Officer (TPO) had proposed an adjustment of ₹38.20 crore in relation to technical and training services received from Boeing Aerospace Operations (BAO), the Associated Enterprise of Boeing India Defense Pvt. Ltd. The assessee argued that it merely acted as a coordination and liaison entity between the IAF and Boeing’s overseas entities for aircraft training and technical support connected with C-17 Globemaster aircraft and Boeing Business Jets (BBJ). The company submitted that the technical know-how, simulators, proprietary information, and operational capabilities were entirely owned and controlled by the AE. According to the records before the Tribunal, Boeing’s overseas entities had sold aircraft to the IAF and subsequently arranged for training and support services. Boeing India Defense Pvt. Ltd. entered into local contracts with the IAF primarily because the defence establishment preferred dealing with an Indian entity for coordination, time-zone management, and operational convenience. The company contended that it neither owned simulators nor possessed proprietary technical knowledge required for the training services. For the C-17 training programme, the simulator was sold by the AE to Mahindra Defense Systems, which operated and maintained it independently while providing training through its own instructors. Boeing India merely coordinated the arrangement and employed only one site manager for oversight functions. Similarly, in relation to BBJ aircraft support services, Boeing India stated that its Field Service Representatives acted only as facilitators who communicated technical issues raised by the IAF to Boeing’s overseas technical teams. The Tribunal noted that where technical problems were not covered by standard bulletins, service requests were routed to Boeing’s global technical teams, which provided the actual solutions. Buy Now: Income Tax Judgments E-Compilation : April 2026 The assessee also relied heavily on inter-company agreements demonstrating that all major business risks, including liquidated damages, performance guarantees, customer claims, and non-performance liabilities, were contractually borne by the Associated Enterprise. The TPO, however, rejected the assessee’s limited-risk characterization and treated Boeing India as a full-risk service provider. The department alleged that the company had failed to furnish certain defence contracts with the Ministry of Defence and the IAF and therefore the shifting of risk to the AE could not be independently verified. Boeing India responded that the defence contracts contained strict confidentiality clauses and involved sensitive national security information that could not legally be disclosed without specific approval from the Ministry of Defence. The assessee pointed out that even the DRP had directed the TPO not to draw adverse inference merely because such classified agreements could not be produced. The ITAT further noted that the assessee completely depended upon Boeing Aerospace Operations for execution of the substantive services and that the Associated Enterprise bore the operational and commercial risks. Importantly, the Tribunal also relied upon the principle of consistency. It recorded that in Assessment Year 2020-21, the department had accepted the same transfer pricing model, functional profile, risk allocation, and benchmarking analysis after detailed scrutiny. Since there was no change in the factual matrix during AY 2021-22, the Bench held that the Revenue could not arbitrarily depart from its earlier accepted position. The Bench criticized the TPO for proceeding on the assumption that Boeing India itself rendered all training and technical services, whereas the actual evidence demonstrated that the substantive services were being rendered through Boeing’s overseas entities. Accepting the assessee’s benchmarking analysis under the Transactional Net Margin Method (TNMM), the Tribunal directed the Assessing Officer and TPO to accept the transfer pricing study conducted by the assessee. It held that the non-disclosure clauses in the defence contracts could not be treated as a valid basis for rejecting the benchmarking analysis and limited-risk characterization. Accordingly, the ITAT allowed the appeal of Boeing India Defense Pvt. Ltd. and deleted the transfer pricing adjustment. Case Details Case Title: Boeing India Defense Private Limited Versus DCIT Citation: JURISHOUR-1141-ITA-2026(DEL) Case No.: ITANo.6042/DEL/2024 Date: 06.05.2026 Counsel For Appellant: Sriram Seshadri, CA Counsel For Respondent: Anima Barnwal, CIT DR Click Here To Read Order Read More: Exporters Not Liable To Pay Service Tax On Foreign Bank Charges Deducted From Export Proceeds: CESTAT

ITAT Deletes Rs. 38.20 Crore Transfer Pricing Adjustment Against Boeing India Defence Unit

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