2025 (12) TMI 1335 - AT - Income Tax

Research support services transfer pricing benchmarking and delayed EPF remittance from banking glitches; adjustment and disallowance deleted.

For TP adjustment in respect of research support services, the Tribunal held that a selected comparable company had turnover of only about INR 3.65 crores ... TP Adjustment - Comparable selection - benchmarking of the comparables for research support services - HELD THAT:- From the perusal of financial statement we find that the company M/s SPT Investment Advisory Services Ltd., which has been selected as one of the comparables by the TPO, has turnover of INR 3.65 crores and thus, fails the turnover filter. Accordingly, we direct the AO/TPO to re-consider the comparables after properly applying the filters and exclude the company namely M/s SPT Investment Advisory Services Ltd. as it fails the turnover filter and then worked out the adjustment, if any. With these directions, Ground of appeal disposed off accordingly. Delayed payment of employees contribution to the provident fund - HELD THAT:- In the instant case the payment on the part of the assessee company was made within the stipulated date and the same was also debited in its bank account and merely due to technical glitches, it was not credited in the bank account of EPFO within the due date which is beyond the control of the assessee and thus the ratio laid down in the case of Checkmate Services (Pvt.) Ltd [2022 (10) TMI 617 - SUPREME COURT (LB)] is not applicable. Appeal of assessee allowed. Issues: (i) Whether the transfer pricing adjustment of INR 1,45,67,227/- based on the comparables selected by the TPO is justified having regard to the filters applied (specifically the turnover filter) and whether the comparable SPT Investment Advisory Services Ltd. should be excluded; (ii) Whether the disallowance of INR 2,21,19,425/- on account of alleged delayed deposit of employees' provident fund contribution is sustainable where payment was debited from the assessee's bank account within the due date but credited to EPFO after the due date due to technical glitches.Issue (i): Whether the transfer pricing adjustment based on the final comparable set (including SPT Investment Advisory Services Ltd.) is valid.Analysis: The Tribunal examined the TPO's own applied turnover filter (average turnover approximately INR 4-5 crores) and reviewed the public financials of the selected comparable SPT Investment Advisory Services Ltd., which showed turnover of INR 3.65 crores for the relevant period. The TPO had applied a turnover criterion and, in selecting comparables, adopted a filter that effectively excluded entities below the stated threshold. Since SPT's financials demonstrated it fell below that turnover threshold, its inclusion was inconsistent with the TPO's filter application. The Tribunal directed reconsideration of the comparable set by excluding any company that fails the applied filters and directed recomputation of any adjustment thereafter.Conclusion: The comparable SPT Investment Advisory Services Ltd. is to be excluded as it fails the turnover filter; the AO/TPO is directed to re-apply the filters consistently, re-compute the comparable set and then determine the transfer pricing adjustment, if any. This disposes Ground Nos. 2 and 3 in favour of the assessee.Issue (ii): Whether the disallowance for delayed PF deposit of INR 2,21,19,425/- is maintainable despite the assessee's payment being debited from its bank account within the due date but credited to EPFO after the due date due to technical glitches.Analysis: The Tribunal relied on the Coordinate Bench's earlier decision in ITA No.412/Del/2023 for the same assessment year, which found that the assessee had generated the challan and the payment was debited from the assessee's bank account within the due date, and that subsequent reversal and delay in credit to EPFO was caused by technical glitches beyond the assessee's control. The Tribunal distinguished the Supreme Court authority relied upon by the AO (which holds that payments not made within prescribed time are not deductible) on the facts that here the assessee had effectuated the payment within the time limit and the late credit was due to circumstances outside the assessee's control. The Coordinate Bench order was not challenged by the revenue and thus stood final; accordingly the disallowance in the final assessment could not be sustained.Conclusion: The disallowance of INR 2,21,19,425/- is deleted and Ground Nos. 4 to 4.4 are allowed in favour of the assessee.Final Conclusion: The appeal is partly allowed the transfer pricing adjustment is remitted for re-computation after excluding comparables that fail the TPO's own filters; the PF-related disallowance is deleted. Other grounds either not pressed or premature were dismissed or not adjudicated. The overall effect is relief to the assessee on substantive transfer pricing comparability and on deletion of the PF disallowance.Ratio Decidendi: A comparable must be excluded where it fails the filters expressly applied by the revenue in selecting comparables; a payment debited from the assessee's bank account within the statutory time, but credited late to the recipient due to technical glitches beyond the assessee's control, is to be treated as timely for deduction purposes where a coordinate bench has so held and that order is unchallenged.