TaxTMI 
TaxTMI 
2026 (8) TMI 689
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....ion Panel ("Ld. DRP") under section 143(3) r.w.s. 144C(13) and 144B of the Income Tax Act, 1961 ("the Act") dated 12.12.2025 for the A.Y. 2022-23. 2. The assessee has raised the following grounds of appeal: I. GENERAL GROUND 1. The Ld. TPO, Ld. AO and Ld. DRP (hereinafter collectively referred as lower authorities') erred in finalizing an order of assessment which suffers from legal defects such as but not limited to being passed in violation of principles of natural justice, contrary to the provisions of the Act, barred by limitation, is devoid of merits and contrary to facts on record and applicable law, unsustainable and hence is liable to be quashed as such. II. JURISDICTIONAL GROUNDS 2. The no....
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....horities erred in proposing a lower interest rate prejudicial to the interests of the revenue, leading to overall tax base erosion. 7. The lower authorities erred in determining an ad hoc arm's length interest rate without applying any of the prescribed methods, in contravention of the provisions of the Act and related IT Rules, and devoid of commercial and business reality. 8. The Lower authorities erred in rejecting the benchmarking submitted by the Appellant and erroneously determined the ALP of the interest paid, without appreciating that the ALP of the impugned interest received by the Associated Enterprises have been accepted to be at arm's length. 9. Without prejudice, the adjustment if any, should ....
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.... AO to the Learned Transfer Pricing Officer ("Ld. TPO") for determination of the arm's length price. The Ld. TPO, vide order dated 22.01.2025, proposed an adjustment of Rs. 49,98,106 on account of interest paid by the assessee to its Associated Enterprise ("AE"). Based on the transfer pricing adjustment suggested by the Ld. TPO, the Ld. AO passed a draft assessment order under section 144C(1) of the Act dated 22.02.2025 proposing an addition of Rs. 49,98,106 on account of interest paid by the assessee to AE. 4. Aggrieved by the draft assessment order, the assessee filed objections before Ld. DRP. The Ld. DRP, vide directions dated 26.11.2025, rejected the objections of the assessee and confirmed the adjustment proposed by the Ld. TPO. Co....
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....t the assessee had opted for the concessional tax regime under section 115BAB of the Act and was liable to pay tax at the rate of 15%. The Ld. AR further invited our attention to the return of income filed by its AE and demonstrated that the said AE had opted for the concessional tax regime under section 115BAA of the Act and was liable to tax at the rate of 22%. It was, therefore, submitted that the assessee was liable to tax at a rate lower than that applicable to its AE. Accordingly, there could be no motive for shifting profits from the assessee to the AE and, therefore, the entire exercise was revenue neutral. In support of the above contention, reliance was placed upon the judgment of the Hon'ble Supreme Court in the case of CIT Vs. G....
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....22%. Thus, the undisputed factual position is that the assessee is liable to tax at a rate lower than that applicable to its AE. We have also carefully gone through para no. 4 of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia (P.) Ltd. (supra), which is to the following effect: 8. On a perusal of the above, we find that the Hon'ble Supreme Court has observed that in cases involving domestic related party transactions, under-invoicing of sales or over invoicing of expenditure would ordinarily be revenue neutral except in two situations, namely, where profits are shifted from a profit-making concern to a loss-making concern or where profits are diverted from an entity chargeable to tax at a higher ra....
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....th a direction to verify the nature of the impugned transaction. If, upon such verification, it is found that the transaction is a SDT between domestic entities as contended by the assessee, then, in view of the undisputed fact that the assessee is liable to tax under section 115BAB of the Act at the rate of 15%, whereas the AE is liable to tax under section 115BAA of the Act at the rate of 22%, and in the light of the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Glaxo SmithKline Asia (P.) Ltd. (supra), the Ld. AO is directed to delete the transfer pricing adjustment of Rs. 49,98,106 made in the hands of the assessee. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order p....