2026 (7) TMI 780

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....und No.4: Erroneous computation of operating margin for comparable companies chosen by the learned A.O/TPO/Hon'ble DRP; • Ground No.5: Erroneous computation of operating profit margin of the appellant; • Ground No.6:Restriction in claim of deduction applied under section 80JJAA of the Act; • Ground No.7: Restriction of TDS Credit; • Ground No.8: Wrongful levy of fee u/s. 234F • Ground No.9: Wrongful levy of interest; • Ground No.10" Short grant of interest u/s. 244A • Ground No.11: initiation of penalty proceedings under section 270A of the Act. 2. The assessee is a company engaged in the business of providing HR solutions including staffing, recruitment, outsourcing and consulting services. The assessee is a wholly owned subsidiary of Ranstad Asia Pacific B.V, Netherlands. The assessee filed a return of income for AY 2021-22 on 14.03.2022 declaring Nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to complete the Arm&#39....

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....andstad Group companies. These included, inter alia (detailed description provided in DRP Appeal in Pg 79 to 82 of ITAT Appeal docs): - Enterprise IT Applications: Access to globally standard HR & staffing software, recruitment management systems, digital platforms (e.g. online job boards, Randstad's career portal), data analytics tools, etc., enabling RIPL India to carry out its day-to-day business efficiently. - IT Infrastructure & Network Services: Centralized cloud computing resources (e.g. AWS/Azure), data center hosting, leased network circuits & bandwidth (e.g. global contracts with BT for network connectivity) and telecommunications support. - Software Licensing & Maintenance: Provision and maintenance of enterprise software licenses (e.g. Microsoft software, Cisco network security, Citrix remote access) on a group scale, giving RIPL India cost-effective access to technology. - Group IT Coordination & Support: Services like global helpdesk, cyber-security oversight, IT policy setting, vendor management, and implementation of global IT projects/updates, which improve RIPL India's operational efficiency and ensure standardization across the....

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....ncurred by the AE's RTPS on providing IT services group-wide. The Appellant's share was determined using allocation key of on ratio of Indian revenue to total global revenue. The Global IT service fee is allocated to RIPL India based on ratio of RIPL India's revenue to total global revenue of the Group as provided below (detailed workings provided in DRP Appeal forming part in Pg 92 to 97 of ITAT Appeal docs): Particulars FY 2020 (INR) * FY 2021 (INR) ** Total Mark-up charged Allocation of direct third-party IT costs 4,54,18,968 1,90,09,868 6,44,28,836 No mark-up Reimbursements 4,00,351 (23,547) 3,76,804 No mark-up Allocation of indirect costs 28,72,006 9,92,256 38,64,262 6.6% for FY 2020 and 5% for FY 2021 on the cost incurred Depreciation on IT assets 53,84,679 19,97,547 73,82,226   Interest expenses 3,82,637 43,677 4,26,314   Total IT charges     7,64,78,442   * FY 2020 represents a 9-month period ** FY 2021 represents 3-month period d. Evidence of Services Rendered: To substantiate the nature and extent of services rendered....

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....ry / data protect. 450,237 11,672 461,909 2.53%     Cloud management / monitoring 453,674 17,460 471,134 3.71%     Cybersecurity 634,997 24,312 659,309 3.69%     Identity and Access Management 39,960   39,960 0.00%     SaaS Other 44,406 1,668 46,073 3.62%       49,453,561 745,652 50,199,212 1.49%   * The IT cost is allocated to RIPL India based on the ratio of RIPL India's revenue to total revenue of user entities iv. Sample third-party vendor invoices in respect of direct IT costs have been submitted (Pg 1-48 of the annexure to the additional evidence). The underlying costs incurred by the AE are supported through invoices from independent third-party service providers such as Amazon Web Services (AWS), Microsoft, Citrix, BT, TCS, etc., demonstrating that the services are not notional allocations. These costs span across cloud infrastructure, connectivity, software licensing, cybersecurity, IT support and tooling, which are essential for business operations. In addition, sample inv....