DCIT, CIRCLE 3(4), MUMBAI, MUMBAI vs. TATA CONSULTANCY SERVICES LIMITED, MUMBAI

ITA 2245/MUM/2025Status: DisposedITAT Mumbai30 December 2025AY 2016-1789 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided on the issue of tax credit for dividends received from the Singapore subsidiary. It held that the dispute was primarily about the method of calculation and not the eligibility for tax sparing credit under Article 25(2) and (3) of the India-Singapore DTAA. The Tribunal found that the AO's disallowance was based on an assumption regarding the utilization of reserves of TAPL, without cogent evidence. The assessee had provided calculations under both FIFO and LIFO methods. The Tribunal considered the FIFO method, which considers dividends from accumulated profits within reserves, to be appropriate. Therefore, the Tribunal directed that the tax sparing credit be allowed to the assessee based on the working provided under the FIFO method. This decision allowed Ground No. 1 raised by the assessee. The Tribunal also noted that its observations and findings on other issues would apply mutatis mutandis to all assessment years and respective grounds of appeal. The judgment indicates that the appeals of both the revenue and the assessee were partly allowed.

What were the facts?

These are six appeals filed by both the assessee, Tata Consultancy Services Limited (TCS), and the revenue against the orders of the CIT(A)-58, Mumbai. The appeals pertain to Assessment Years (AYs) 2016-17, 2017-18, and 2018-19. The assessee's appeals (ITA Nos. 1516, 1517, and 1518/MUM/2025) challenge assessment orders passed by the ACIT/NFAC. The revenue's appeals (ITA Nos. 2243, 2244, and 2245/MUM/2025) also challenge assessment orders passed by the ACIT/NFAC. The orders under challenge were passed under Section 143(3) read with Section 144C of the Income Tax Act, 1961. The disputes involve claims for tax credit on dividends received from a Singapore subsidiary and transfer pricing adjustments.

What were the issues?

1. Whether the assessee is eligible for tax credit under Section 90 of the Income Tax Act, 1961, in respect of Singapore tax paid on dividends received from its subsidiary, as per Article 25(3) of the India-Singapore Double Taxation Avoidance Agreement (DTAA)? - Assessee's contention: The assessee claimed tax credit for Singapore tax paid on dividends. The dispute centers on the method of calculating this credit, specifically whether the FIFO method, considering dividends from accumulated profits within reserves, is appropriate. - Revenue's contention: The revenue disallowed the claim, arguing it was irrational to assume reserves were entirely idle and not invested, and that the assessee did not provide details of investment activities. The revenue also noted that exemption benefits were available only for specific AYs. 2. Whether the transfer pricing adjustments made by the Assessing Officer (AO) and Transfer Pricing Officer (TPO) are valid and sustainable? - Assessee's contention: The assessee argued that the AO failed to comply with mandatory conditions under Section 92C(3) by not recording satisfaction before referring to the TPO. They also contended that the TPO failed to prove tax evasion and that proceedings were void ab initio due to improper application of mind and lack of valid approval under Section 92CA(1). The assessee further argued that the adjustments were contrary to earlier ITAT orders in their own case and that the CIT(A) erred in rejecting their transfer pricing documentation, functional and economic analysis, and benchmarking analysis. Specific grounds relate to re-characterization of international transactions, disregarding agreements, and selection of comparable companies. - Revenue's contention: The judgment does not explicitly record the revenue's arguments on the transfer pricing adjustments.

Which sections of the Income-tax Act were involved?

Section 90,Section 92C(3),Section 92CA(1),Section 25(3),Section 25(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H” BENCH MUMBAI

Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL

Hearing: 14.10.2025Pronounced: 30.12.2025

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

All these six appeals filed by both, assessee (TCS) and revenue are against the orders of Ld. CIT(A)-58, Mumbai passed against the ITA No. 1516/Mum/2025 and others Tata Consultancy Services Ltd. AY 2016-17, 2017-18 and 2018-19

assessment orders by ACIT, Mumbai/N

The order continues below.

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