TaxTMI 
TaxTMI 
2026 (9) TMI 49
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....x Act, 1961 ('the Act') is barred by limitation as the same is passed beyond the time limit prescribed under section 153 of the Act and hence, the order is barred by limitation and liable to be quashed. B. Transfer Pricing: 1. The learned AO/ the learned Transfer Pricing Officer ("learned TPO")/ the Hon'ble Dispute Resolution Panel ("Hon'ble DRP") grossly erred in law and on facts in proposing an adjustment of INR 74,202,686/-and adding the same to the retuned income of the Appellant. 2. The learned AO/ the learned TPO/ the Hon'ble DRP grossly erred in rejecting the Transfer Pricing ("TP") documentation maintained by the Appellant by invoking provisions of sub-section (3) of section 92C of the Act. 3. The learned AO/ the learned TPO and the Hon'ble DRP have erred in imputing adjustment on provision of Information Technology enabled Services ("ITeS"). 3.1. The learned AO/ learned TPO/ Hon'ble DRP erred in making transfer pricing adjustment of INR 74,130,814/-in relation to provision of ITeS. 3.2. The learned AO/ learned TPO/ Hon'ble DRP grossly erred in rejecting comparability analysis undertaken in th....
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....ellant in the transfer pricing documentation with respect to the provision of ITeS despite such comparables meeting the comparability criteria: I. Cosmic Global Limited II. Microland Limited III. Silgate Solutions Limited IV. Jindal Intellicom Limited V. Allsec Technologies Limited 3.14. The learned AO/ learned TPO/ Hon'ble DRP has grossly erred in not accepting the following additional companies as comparable to the provision of ITeS which was introduced by the Appellant during the assessment proceedings: I. Virinchi Limited (ITeS Segment) II. MAA Business Solutions Private Limited 3.15. The learned AO/ learned TPO/ Hon'ble DRP has grossly erred in not rejecting the following companies as comparable to the provision of ITeS despite the companies being functionally dissimilar to the Appellant: I.E Care India Private Limited II. Sutherland Global Services Private Limited III. Tech Mahindra Business Services Limited IV. Savitriya Technologies Private Limited V. Sagacious Research Private Limited VI. Bahar Infocons Private Limited VII.....
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....had not adopted any of the methods prescribed under the Income-tax Rules, 1962 ("the Rules"). 4.7 The learned AO/ learned TPO/ Hon'ble DRP erred in not appreciating the fact that transfer pricing adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. C. Corporate Tax 5. Levying of Interest under section 234B of the Act 5.1 The learned AO has erred in levying interest under section 234B of the Act amounting to INR 6,569,100 which is consequential in nature. 6. Levying of interest under section 234D of the Act 6.1 The learned AO has erred in levying interest under section 234D of the Act amounting to INR 2,096,291 which is consequential in nature. 7. Levying of Interest under section 244A of the Act 7.1 The learned AO has erred in recovering interest under section 244A of the Act amounting to INR 453,251 which is consequential in nature. 3. The brief facts of the case are that the assessee is a Limited Liability Partnership firm. For the year under consideration, the assessee filed its return of incom....
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.... by the Finance Act, 2026, whereby sub-section (13A) was inserted in section 144C of the Act, with retrospective effect from 01.04.2009, we are of the considered view that the impugned final assessment order in the present case was passed within the prescribed limitation period as provided under the Act. Accordingly, Ground No. A raised by the assessee is dismissed. 7. In Ground No. B, the assessee has raised several grounds challenging the transfer pricing adjustment made by the AO/TPO pursuant to the directions issued by the learned DRP. Each of these grounds has been dealt with separately in the following paragraphs. 8. Ground No. 1 and 2, raised in the assessee's appeal, are general grounds. Therefore, the same need no separate adjudication. 9. Ground No. 3, raised in assessee's appeal, pertains to the transfer pricing adjustment in relation to international transaction of "Provision of ITeS". 10. The brief facts of this case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee entered into an international transaction of "Provision of ITeS" to its associated enterprises. For benchmarking the said internation....
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....ed that the said recovery of expenses is not operating in nature and should be excluded while computing the Operating Margin of the assessee. As regards the benchmarking of international transaction of "Provision of ITeS", the learned AR submitted that if five companies, namely, Tech Mahindra Business Services Ltd., Sutherland Global Services Pvt. Ltd., TTEC India Customer Solutions Pvt. Ltd., Domex E-Data Pvt. Ltd., and Sagacious Research Pvt. Ltd., are directed to be excluded, then this international transaction shall be at arm's length and the entire transfer pricing adjustment made in respect thereof shall be deleted. 14. Accordingly, in view of the submissions made by the learned AR, we have confined our findings in Ground No. 3 only in respect of the aforesaid issues. Further, the other issues raised in Ground No. 3 are treated as not pressed and are kept open for adjudication if they arise in the assessee's case in the future. 15. We have considered the oral/written submissions of both sides and perused the material available on record. 16. As regards the issue pertaining to the computation of Operating Margin of the assessee, raised in Ground No. 3.3, we find that ....
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.... assessee in relation to the international transaction of "Provision of ITeS", and the same are stated in the Transfer Pricing Study Report, as follows: - "5.1.1 Functions performed EIACI provides various Elanco affiliates with certain routine services including ITeS services. Elanco drug lifecycle is broken down into seven stages - exploratory, lead optimization, preclinical development, clinical trials, registration, manufacture and launch and finally post launch optimization and support. These stages are further broken down into various processes and EIACI is engaged in documentation support in the nature of preparation / editing of decks/writeups, submission of regulatory dossier packages, publishing and statistical analysis, computational modelling by simulation and support in marketing and other financial analytics etc. The work performed by EIACI is reviewed by the global team of Elanco Group and accordingly, appropriate action is taken on the EIACI deliverables. EIACI provides ITeS services to Elanco Group and is remunerated on a cost plus 12 percent markup. The transaction flow for the ITeS services rendered to Elanco Group is a....
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....ith certain level qualitative inputs without substantially changing the standard report. Further, EIACI also analyses markets such as Europe, US and other markets to assist Elanco group with understanding the revenue potential of new and existing drugs / products. In its forecasting function, EIACI analyzes and considers country specific data as each local market has unique variables impacting revenue potential. * Global Pharmacovigilance Elanco Pharmacovigilance team is responsible for responding to any adverse events or product complaints with regard to Elanco Group products. The team includes associate case managers and reviewers who are responsible for the review of fact pattern received from multiple sources. These teams enter relevant data into a global safety database ensuring completeness and accuracy as per regulatory requirements. The reviewers evaluate the safety data for medical content and completeness and assess the impact on Elanco products to adverse events. * Global Regulatory Affairs EIACI assists Elanco Group in regulatory matters for the assigned projects and products. The functions are limited to writing, editing and....
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....e on the job by way of mandatory web-based trainings. Performance/ Quality assurance With respect to services rendered, EIACI is responsible for ensuring that the requisite quality/ performance standards are met while rendering services to Elanco Group. However, Elanco Group is liable for the utilization of the services received from EIACI and for their final quality check. Management and Administration EIACI is responsible for its human resources, financial management, and routine administration activities. It has its own finance, recruitment, administration and training departments, which support the overall services being rendered to Elanco group." 19. Thus, from the functional profile of the assessee as recorded in the Transfer Pricing Study Report, it is evident that in respect of international transaction of "Provision of ITeS", the assessee is not only rendering services in the nature of documentation support, which included medical writing of scientific documents of different types and checking the accuracy of the data in the documents but also is organizing and analysing data using various IT tools. The assessee is also performing dat....
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....d. From the perusal of the Annual Report of Tech Mahindra Business Services Ltd., forming part of the Paper Book Volume - 1 from Pages 867 - 924, we find that this company provides voice-based call centre services to Hutchison 3G UK Ltd. Further, we find that this company earns revenue only from voice-based call centre services, and there is no other revenue stream. Thus, we find that this company was performing routine IT-enabled Services. On the other hand, as noted in the foregoing paragraphs, the assessee is rendering diverse services to its associated enterprises, which are technical in nature. Therefore, even though Tech Mahindra Business Services Ltd. was performing voice-based call centre services, which are considered as IT-enabled Services as per Rule 10TA of the Income Tax Rules, 1962, the same cannot be said to be functionally comparable to the wide range of activities performed by the assessee. Thus, without going into other submissions made by learned AR, we are of the considered view that Tech Mahindra Business Services Ltd. is not functionally comparable to the assessee. Accordingly, we direct the AO/TPO to exclude Tech Mahindra Business Services Ltd. for benchmarki....
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....assessee. Being aggrieved, the assessee has sought the exclusion of this company as comparable for benchmarking the international transaction of "Provision of ITeS". 28. During the hearing, the learned AR submitted that this company is engaged in providing services in the nature of business process outsourcing, voice support and technical helpdesk, which is functionally different from IT-enabled Services provided by the assessee. The learned AR further submitted that the turnover of this company is substantially higher than the turnover of the assessee. On the other hand, the learned DR vehemently relied upon the order passed by the lower authorities in respect of this company. 29. We have considered the submissions of both sides and perused the material available on record. From the perusal of the Annual Report of TTEC India Customer Solutions Pvt. Ltd. for the year under consideration, forming part of the Paper Book Volume 7 from Pages 637 - 866, we find that this company is engaged in Business Process Outsourcing ("BPO") services which include transaction processing, email management, software consultancy, voice support and technical helpdesk. On the other hand, as noted i....
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....imise the value of their information assets. Insofar as the assessee is concerned, as noted in the foregoing paragraphs, it is engaged in documentation support in the nature of preparation/editing of decks/writeups, submission of regulatory dossier packages, publishing and statistical analysis, computational modelling by simulation and support in marketing and other financial analytics, etc. The various IT-enabled Services rendered by the assessee to its associated enterprises, as categorised in the Transfer Pricing Study Report, are medical writing, document management, statistics, commercial analytics and marketing services, responding to any adverse events or product complaints, generating reports on finance and supply chain. Therefore, we are of the considered view that the functions performed by Domex E-Data Pvt. Ltd. are of a similar nature to those performed by the assessee, and even though both have claimed to render IT-enabled Services, these services are technical in nature. Accordingly, we are of the considered view that Domex E-Data Pvt. Ltd. is functionally comparable to the assessee. Thus, the findings of the lower authorities in considering Domex E-Data Pvt. Ltd. as ....
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....we direct the AO/TPO to exclude Sagacious Research Pvt. Ltd. for benchmarking the international transaction of "Provision of ITeS". 36. To sum up, we direct Tech Mahindra Business Services Ltd., Sutherland Global Services Pvt. Ltd., TTEC India Customer Solutions Pvt. Ltd., and Sagacious Research Pvt. Ltd. to be excluded while benchmarking the international transaction of "Provision of ITeS". While the findings of the AO/TPO considering Domex E-Data Pvt. Ltd. as a comparable to the assessee for benchmarking the international transaction of "Provision of ITeS" are upheld. Accordingly, Ground No. 3.15 raised in assessee's appeal challenging the inclusion of companies for benchmarking the international transaction of "Provision of ITeS" is partly allowed. 37. Ground No. 4, raised in assessee's appeal, pertains to the transfer pricing adjustment on account of outstanding trade receivables from the associated enterprises. 38. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the transfer pricing adjustment proceedings, it was observed that certain invoices raised by the assessee to its associated enterprise have not been paid, and th....