AVEVA INFORMATION TECHNOLOGY INDIA PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 15(1)(1), MUMBAI

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ITA 1064/MUM/2026Status: DisposedITAT Mumbai10 July 2026AY 2022-2310 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee was not engaged in wholesale trading and therefore the 3% variation limit was applicable. Since the transfer pricing adjustment was within this 3% range, the adjustment made by the AO/TPO was directed to be deleted.

What were the facts?

The assessee, Aveva Information Technology India Private Limited, engaged in sub-licensing software products, claimed its international transaction of sub-licensing fees to be at arm's length. The Transfer Pricing Officer (TPO) disagreed with the assessee's comparable companies and proposed an adjustment.

What were the issues?

Whether the transfer pricing adjustment made by the TPO was valid, considering the applicable variation limit and the nature of the assessee's business. Whether the assessment order was passed within the time limit and if TDS credit was correctly granted.

Which sections of the Income-tax Act were involved?

Section 92C,Section 92CA,Section 143(3),Section 144C,Section 144B,Section 234D,Section 244A,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “K” BENCH; MUMBAI

Hearing: 13.04.2026Pronounced: 10.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL“K” BENCH; MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER ITA No. 1064/Mum/2026 (Assessment Year: 2022-23)

Aveva Information Deputy Commissioner of Technology India Private Income Tax, Circle 15(1)(1) Limited vs. AayakarBhavan, Maharishi Unit no. 202, A Wing, 2nd Karve road, Mumbai 400020. floor, Supreme Business Park, Supreme City, Hiranandani Gardens, Powai, Mumbai 400076. PAN: AADCA0847M (Appellant) (Respondent) For Assessee : Shri Harsh R. Shah & Shri Karan Jain For Revenue : Shri Bhagirath Ramawat (SR DR) Date of Hearing : 13.04.2026 Date of Pronouncement : 10.07.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Assessee against the order of the Assessing Officer passed u/s. 143(3) r.w.s. 144C(3) r.w.s. 144B of the Income Tax Act, 1961 [‘the Act’], dated 26.11.2025, pertaining to Assessment Year (AY) 2022-23, wherein the Assessee has taken the following grounds of appeal:

“Based on facts and circumstances of the case and in law, the Appellant respectfully craves leave to prefer an appeal against the order dated 26 November 2025 passed by the learned Assessing Officer ('AO') under section 143(3) read with section 144C(13) read with section 144B of the Income-tax Act, 1961 (the 'Act') in pursuance of the directions dated 1 October 2025 issued by the Hon'ble Dispute Resolution Panel ('DRP') on following grounds, each of which is in the alternative and without prejudice to one another: General: 1. Whether on facts and circumstances of the case and in law, the learned Transfer Pricing Officer ('TPO') / the learned AO, under the directions of the Hon'ble DRP, have erred in assessing the Appellant's income as INR 14,47,26,517/- as against the returned income of INR 13,24,75,370? Payment of sub-licensing fees to Associated Enterprise (INR 1,22,51,147): 2. Whether on facts and circumstances of the case and in law, the learned AO has erred in making an addition of INR 1,22,51,147 to the Appellant's income on account of transfer pricing adjustment, without appreciating the fact that the variation between the arm's length price determined by the learned TPO (in pursuance of the DRP directions) and the price at which the international transaction was actually undertaken did not exceed thepercentage specified by the Central Government as per the second proviso to section 92C(2) of the Act? Without prejudice to the above: 3. Whether on facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, have erred in arbitrarily rejecting the Appellant's documentation and economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1962 (the 'Rules') and various submissions made by the Appellant before lower authorities by incorrectly invoking conditions mentioned in section 92C(3) of the Act? 4. Whether on facts and circumstances of the case and in law, the learned AO has erred in making a reference to the learned TPO for computation of the arm's length price, without complying with the provisions of section 92CA(1) of the Act? 5. Whether on facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, have erred in not providing a detailed search process/matrix and computation of margins for the companies selected by the learned AO / learned TPO as comparable to the Appellant? 6. Whether on facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, have erred in rejecting/modifying the filters adopted by the Appellant and proposing additional filters while conducting a fresh benchmarking analysis during the transfer pricing assessment proceedings? 7. Whether on facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, have erred in selecting companies that undertake functions, employ assets and bear risks which are not similar to the Appellant? 8. Whether on facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, have erred in rejecting companies, which undertake functions, employ assets and bear risks similar to the Appellant? 9. Whether on facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, have erred in not granting the working capital adjustment to account for the difference in working capital level of the Appellant vis-à-vis comparables companies? Assessment barred by limitation: 10. Whether on the facts and circumstances of the case and in law, the final assessment order dated 26 November 2025 passed under section 143(3) read with section 144C(13) read with section 144B of the Act for AY 2022-23 is void and bad in law as it has been passed beyond the time limit prescribed under the provisions of section 153 of the Act? Short grant of TDS Credit 11. Whether on facts and circumstances of the case and in law, the learned AO has erred in not granting TDS credit of Rs. 3,68,003 claimed by the Appellant in the return of income and accepted in the Intimation order u/s. 143(1) of the Act dated 17 January 2023? Interest under section 234D: 12. Whether on facts and circumstances of the case and in law, the learned AO erred in levying interest under section 234D of the Act? Interest on Refund under section 244A: 13. Whether on facts and circumstances of the case and in law, the learned AO erred in not granting interest on refund in accordance with section 244A of the Act? Initiation of penalty under section 270A:

14.

Whether on the facts and circumstances of the case and in law, the learned AO has erred in initiating penalty proceedings under section 270A of the Act? The above grounds are independent and without prejudice to one another. The Appellant craves for leave to add, amend, vary, omit, or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law.

2.

Briefly, the facts of the case are that the assessee had entered into a non-exclusive distribution agreement for sub-licensing of software product license of Aveva group companies to end customers in India. The assessee for its activity of sub-licensing of software products to customers in India is remunerated at 3% of total sales and in addition to this, the cost incurred by it towards these activities. The assessee claimed its international transaction of payment of sub-licensing fees to be at arm's length based on TNMM benchmarking. The assessee identified a set of 10 companies whose margins were in the range of 2.28% to 3.25% against the assessee's margin of 3.42% and hence, claimed at arm’s length. On reference and examination, the TPO did not agree with the assessee's comparable companies and conducted a fresh search for comparable companies. As a result of this, the TPO identified a set of 12 companies whose margins were in the range of 4.01% to 6.64% (median 5.40%). Since the assessee's margin of 3.42% was below this range, the TPO computed an adjustment of Rs. 2,63,13,456 as under:

Sr. Particulars Amount (Rs.) 1. Payment of sub-licensing fees (A) 105,54,88,276 2. Operating Revenue (B) 131,73,27,676 3. Operating Profit @3.42% shown by 4,50,52,606 Assessee (C)

4.

ALP Operating Profit @ 5.40% (D=B*5.40%) 7,13,99,160 5. Difference (E=C-D) 2,63,13,456 6. ALP Payment of sub-licensing fees (F=A-E) 102,91,74,820 7. ALP adjustment proposed (E) 2,63,13,456

3.

The assessee objected to the Ld. TPO's approach inter-alia by challenging the selection of comparable companies, rejection of its comparable companies, seeking a working capital adjustment. However, the Ld. TPO overruled all of the assessee's objection and made the above transfer pricing adjustment. The Assessing Officer incorporated the above in the draft assessment order, against which the Assessee filed objections with the Dispute Resolution Panel. The Dispute Resolution Panel examined the Assessee's objections concerning the comparable companies selected by the TPO and partially accepting the assessee's objections directed exclusion of various comparable companies vide its order dated 01.10.2025. Based on the DRP directions, the set of comparable companies are as under:

Sr. Name Margin 1. Creative Newtech Ltd. 2.47% 2. Softcell Technologies Global Pvt. Ltd. 2.55% 3. IvalueInfosolutions Pvt. Ltd. 5.24% 4. K7 Computing Pvt. Ltd. 7.14% Arithmetic Mean 4.35% Assessee’s Margin 3.42%

4.

Thereafter, pursuant to directions of the DRP, the Assessing Officer and the TPO made a transfer pricing adjustment of Rs. 1,22,51,147/- as under:

Sr. Particulars Amount (Rs.) 8. Payment of sub-licensing fees (A) 105,54,88,276 9. Operating Revenue (B) 131,73,27,676 10. Operating Profit @3.42% shown by 4,50,52,606 Assessee (C) 11. ALP Operating Profit @ 4.35% (D=B*4.35%) 5,73,03,753 12. Difference (E=C-D) 1,22,51,147 13. ALP Payment of sub-licensing fees (F=A-E) 1,04,32,37,129 14. ALP adjustment proposed (E) 1,22,51,147

3.

And, following the directions of the DRP, the AO passed the final assessment order u/s. 143(3) read with 144C(13) read with 144B vide order dated 26.11.2025, wherein, the assessed income/loss after making the aforesaid transfer pricing adjustment was determined at Rs. 14,47,26,517/- and against the said order and the findings of the Assessing Officer, pursuant to the directions of the DRP, the assessee is in appeal before us.

4.

During the course of hearing, the ld. AR submitted that that the assessee’s primary grievance is that the Assessing Officer and TPO ought to have appreciated that no transfer pricing adjustment was warranted in this case post DRP directions as the assessee's margin was within the +/- 3% range of the comparable companies. The ld. AR submitted that since in the present case, set of only 4 comparable companies survived after the DRP directions, the arm's length price was to be determined as per Rule 10CA(7). Reference was drawn to the said Rule which reads as under: "(7) In a case where the provisions of sub-rule (4) are not applicable, the arm's length price shall be the arithmetical mean of all the values included in the dataset: Provided that, if the variation between the arm's length price so determined and price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed such percentage not exceeding three per cent of the latter, as may be notified by the Central Government in the Official Gazette in this behalf, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm's length price." 5. The ld. AR further submitted that for the year under consideration, the range prescribed by Notification No. 70 of 2022 dated 20.06.2022 was as under: "In exercise of the powers conferred by the third proviso to sub-section (2) of section 92C of the Income-tax Act, 1961 (43 of 1961) (hereafter referred to as the "said Act"), read with proviso to sub-rule (7) of rule 10CA of the Income-tax Rules, 1962, the Central Government hereby notifies that where the variation between the arm's length price determined under section 92C of the said Act and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed one per cent. of the latter in respect of wholesale trading and three per cent. of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm's length price for assessment year 2022-2023. Explanation.- For the purposes of this notification, "wholesale trading" means an international transaction or specified domestic transaction of trading in goods, which fulfils the following conditions, namely:- (i) purchase cost of finished goods is eighty per cent. or more of the total cost pertaining to such trading activities; and (ii) average monthly closing inventory of such goods is ten per cent. or less of sales pertaining to such trading activities."

6.

The ld. AR submitted that in the present case, the range of 3% is applicable and not the 1% range, since the assessee is not engaged in "wholesale trading". The term "wholesale trading" is defined in the notification. It requires "trading of goods". The Assessee is engaged in the business of services and is not engaged in the business of trading of goods, which is evidenced from:  Its disclosure in the profit and loss statement all of revenue from operation is from various types of fees, that indicates receipts from services.

 Its disclosure in the income tax return complete revenue is from sale of services and nothing from sale of goods.  Its disclosure in the GST returns what is imported is services (not goods)

7.

The ld. AR further submitted that in addition to the "trading of goods" the notification also requires satisfaction of two conditions that are computed based on percentages of inventories maintained by the Assessee. Since the Assessee is involved in services, there is no inventory that is involved. Hence, even both these conditions are not satisfied. Accordingly, the assessee has to be allowed the 3% range as provided by the Notification No. 70 of 2022, dated 20th June 2022 read with Rule 10CA(7). Hence, based on the above, the ld. AR submitted that if the transfer pricing adjustment is within a 3% range of the international transaction, then no adjustment is warranted as evident from the calculation as under:  International Transaction - Rs. 1,05,54,88,276  3% of International Transaction - Rs. 3,16,64,648  Transfer Pricing Adjustment - Rs. 1,22,51,147

8.

In light of aforesaid, it was submitted that the adjustment of Rs. 1,22,51,147 ought to be deleted and necessary relief be provided to the assessee.

9.

The ld. DR has been heard, who has been relied on the orders of the lower authorities.

10.

We have heard the rival contentions and perused the material available on record. In the instant case, while applying the TNMM method, the final set of comparables as so directed by DRP and applied by the AO/TPO consist of only four companies, in such a situation, the provisions of Rule 10CA(7) applies and which is not under dispute before us. Rule 10CA(7) provides that the arm's length price shall be the arithmetical mean of all the values included in the dataset. At the same time, it has been provided that where the variation between the arm's length price so determined and price at which the international transaction has been actually undertaken does not exceed such percentage not exceeding three per cent of the latter, as may be notified by the Central Government in the Official Gazette in this behalf, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price. In terms of notification No. 70 of 2022 dated 20/06/2022 as applicable for assessment year 2022-23, variation of one percent in case of whole sale trading has been notified and three percent has been retained in all other cases. The assessee has entered into a non-exclusive distribution agreement for sub-licensing of software products to customers in India and basis its transactions as so reflected in its financial statements and GST filings in terms of provision of services rather than sale of goods which are not in dispute, it doesn’t qualify as a wholesale trader in goods coupled with non-compliance/satisfaction of mandatory conditions so specified in terms of maintenance of inventory. In such a situation, the variation of 3 percent has to be seen and on perusal of the figures, it is noted that arm's length price so determined by TPO is Rs 1,04,32,37,129/- as against the price of Rs 1,05,54,88,276/- at which the international transaction has been actually undertaken by the assessee and the variation is Rs 1,22,51,147/- which is well within 3% range. We accordingly find merit in the contention advanced by the ld AR and the transfer pricing adjustment so done by the AO/TPO is hereby directed to be deleted and ground no. 2 of the assessee’s appeal is allowed. The grounds of appeal no. 3-9 have thus become academic and are dismissed as infructious.

11.

Ground No. 1 is general in nature, doesn’t call for any separate adjudication. Ground no. 10 has again become academic and is dismissed as infructious. Ground no. 11 relates to short grant of TDS credit. The AO is directed to verify the said claim and allow the necessary credit as per law. Ground no. 12 and 13 relates to levy of interest u/s 234D and 244A which are consequential in nature. Ground no. 14 relates to initiation of penalty proceedings, again doesn’t call for any adjudication in the present proceedings.

12.

In the result, the appeal filed by the assessee is disposed off in light of aforesaid directions.

Order pronounced in terms of Proviso to Rule 34(4) of Income Tax (Appellate Tribunal) Rules,1963 on 10.07.2026

Sd/- Sd/- KAVITHA RAJAGOPAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 10.07.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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