TaxTMI 
TaxTMI 
2026 (6) TMI 1437
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....posed by the learned Deputy Commissioner Of Income Tax Transfer Pricing - 2 (1) (1), Bangalore (the learned TPO) with respect to the arm's-length price of the international transaction of ITeS segment of Rs. 28,961,255 and interest on delayed receivable was computed at Rs. 45,027/- was made. 2. The assessee is aggrieved with the same and has preferred this appeal. 3. The assessee was incorporated in 2008 as a wholly owned subsidiary of Meritor Holdings (Barbados) Ltd, with Meritor Inc., USA as the ultimate holding company. 4. The assessee submitted its income tax return on 25 December 2020, reporting a total income of Rs. 87,459,960. Subsequently, the return was selected for scrutiny, and a notice under Section 143(2) of the Act was issued. 5. Since the assessee engaged in international transactions, a reference was made pursuant to Section 92CA of the Income Tax Act to the Transfer Pricing Officer-The Deputy Commissioner of Income Tax, Transfer Pricing 2 (1) (1), Bangalore (hereinafter referred to as the learned TPO). 6. The assessee's functional profile indicates involvement in computer-aided design and development of commercial vehicle systems. The organization de....
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....as marginal and did not warrant an adjustment. However, the transfer pricing officer dismissed these arguments, determined that the delayed receipt constitutes a separate international transaction requiring benchmarking, and rejected the aggregation of transactions on the grounds that they are not closely interlinked. Consequently, the officer applied the average SBI PLR of 13.62% to three invoices, which had delays of 25, 32, and 4 days respectively, resulting in an interest computation amounting to Rs. 45,027. 9. Accordingly, a total adjustment under section 92CA of the Act was made in the amount of Rs. 2,90,06,282. Based on this, the learned Assessing Officer issued a draft assessment order under section 144C (1) of the Act dated 24 September 2023, determining the total income of the assessee at Rs. 116,466,242. The assessee submitted an objection to the Dispute Resolution Panel-2, Bangalore (the DRP), which issued its directions on 19 June 2024. Subsequently, the Transfer Pricing Officer passed an order giving effect thereto on 11 July 2024, whereby the adjustment on the ITeS segment was restricted from Rs. 28,961,255 to ....
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....rable, as its primary business activity is medical transcription, which differs from that of the assessee. A detailed analysis of this comparable suggests that it should be excluded from consideration. 12. The learned authorized representative argued that Vitae International Accounting Private Limited' is functionally dissimilar, generating exceptionally high profits and displaying inconsistent margins, thus warranting exclusion. However, the learned transfer pricing officer did not exclude it, stating that the company operates in data processing, manages back-office functions, and provides IT-enabled services to international clients using computer software. The authorized representative further emphasized that its primary activities involve accounting, bookkeeping, and auditing services, where it earns a margin of 97.78%, compared to only 0.22% in computer programming consultancy and related fields. This disparity demonstrates that the company has a distinct functional profile and should therefore be excluded. 13. The learned authorized representative raised objections to the inclusion of Domex E Data Private Limited, asserting that the company is functionally distinct.....
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....limited and MSP Ltd should be excluded. With respect to the other comparable companies such as E care Ltd, Vitae accounting services private limited, Domex E Limited and brickworks India private limited, she submitted that the learned transfer pricing officer has provided enough reasons for not excluding those companies. 16. With respect to the computation of the outstanding receivable from the associated enterprise which are delayed for recovery, she submitted that it is a separate international transaction which is required to be benchmarked separately, it is not connected with the transaction of the assessee as not closely interlinked. She further submitted that the learned transfer pricing officer and the learned dispute resolution panel has correctly held that the interest is required to be computed at the rate of SBI PLR at the rate of 13.62% per annum. She further submitted that whether the assessee is a debt free company or is not receiving interest from any other non-associated enterprise does not merit any consideration. Her submission was that no independent person would have allowed the buyer to carry on its outstanding beyond the specified due date of recovery. She ....
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....s incumbent upon him to furnish the annual report to the assessee. The assessee contends, with reference to the company's website, that it operates in the medical transcription sector, and this point has not been disputed by either the TPO or the Dispute Resolution Panel. Therefore, due to both the non-provision of the annual accounts and the differences identified in functional analysis, we direct the learned AO to exclude this comparable from consideration. 21. With respect to Vitae Accounting Ltd we find that this is engaged in the bookkeeping services where 97% of such revenue is derived from that activity, this itself proves that it is functionally different and not providing ITeS services. Therefore, the functional profile of this company is different, the learned AO is directed to exclude the same. 22. With respect to the Domex E private limited as well as the brickworks India private limited we find that brickworks India private limited is knowledge process outsourcing function and therefore it deserves to be excluded because it is providing high end services with highly qualified and skilled persons. Naturally assessee is providing ITeS services, therefore KPO se....