BARD INDIA HEALTHCARE PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1(2)(1) MUMBAI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH: MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. 6797/Mum/2024 (Assessment Year: 2021-22)

Bard India Healthcare Private Deputy Commissioner of Limited Income-tax, Circle 1(2)(1) 501 Hub Town Solaris, N.S. vs. Mumbai Phadke, Marg Andheri(E), Circle 1(2)(1), Aayakar Bhawan, Mumbai 400069, Maharashtra, Mumbai, MUMBAI, Maharashtra, India, MUMBAI, Maharashtra, 400020. 400069.

PAN: AACCB5020E (Appellant) (Respondent) For Assessee : Shri Rishabh Malhotra & Ms. Supriya Mehta For Revenue : Shri Ujjawal Kumar, SR.DR Date of Hearing : 13.03.2026 Date of Pronouncement : 11.06.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Assessee against the order of the Learned Assessing Officer passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 [‘the Act’], vide order dated 25.10.2024, pertaining to Assessment Year (AY) 2021-22, wherein the Assessee has taken the following grounds of appeal: “1. That on the facts and circumstances of the case, and in law, the impugned Assessment Order dated 25 October, 2024 passed by the

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited Assessment Unit, Income Tax Department ('Ld. AO') under section 143(3) r.w.s 144C(13) read with section 144B of the Income Tax Act, 1961 ('the Act') is erroneous, bad in law and barred by limitation. 2. On the facts and circumstances of the case, and in law, Ld. AO / Learned Deputy / Assistant Commissioner of Income-tax, Transfer Pricing Officer- 1(2) (1), Mumbai ('Ld. TPO') and the Hon'ble Dispute Resolution Panel ('Hon'ble DRP') have erred in assessing the total income of the Appellant at INR 21,50,75,892/- as against the returned income of INR 11,39,69,600/- by making an adjustment of INR 10,11,06,292/- on account of Transfer Pricing ('TP') issue. 3. On the facts and circumstances of the case and in law, the Hon'ble DRP/Ld. AO/ Ld. TPO has erred in enhancing the income of the Appellant by INR 10,11,06,292/- on account of adjustment pertaining to the Appellant's international transaction of purchase of traded goods. While making the adjustment, the Hon'ble DRP/Ld. AO/Ld. TPO has grossly erred in: 3.1. rejecting the economic analysis conducted by the Appellant in its transfer pricing documentation report prepared for its fiscal year ended March 31, 2021 ('TP Documentation') in accordance with the section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 ('the Rules'); 3.2. erred in rejecting the economic analysis conducted by the Appellant for the international transaction pertaining to the distribution segment without demonstrating deficiency in the benchmarking approach followed by the Appellant; 3.3. erred in modifying quantitative filters for the purpose of determination of the Arm's Length Price ('ALP') and also disregarding the rule of consistency; 3.4. rejecting a comparable company (i.e., ADS Diagnostic Ltd.), as it fails turnover filter proposed by the Ld. AO/Ld. TPO; 3.5. rejecting a functionally comparable company (i.e., Riviera Glass Limited) as being functionally dissimilar to the Appellant; 3.6. computing the operating profit margin of the Appellant without appreciating the TP framework of the Appellant. 3.7. computing the TP adjustment by not allowing the benefit of proportionate adjustment to the Appellant. 4. On the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest of INR 12,99,100/- under section 234A of the Act.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited 5. On the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest of INR 1,30,47,849/- under section 234B of the Act. 6. On the facts and circumstances of the case and in law, the Ld. AO has erred in charging interest of INR 70,310/- under section 234C of the Act.”

Briefly, the facts of the case are that the assessee is engaged in the 2. business of distribution of BD products in the local market and also provides marketing support services to Bard Shannon (BOC Branch) to promote sale of BD products in India. It filed its return of income on 15.03.2022, which was selected for scrutiny and thereafter, the reference was made to the Transfer Pricing Officer (‘TPO’) for determination of Arm’s Length Price of the international transactions. The TPO thereafter passed the order u/s. 92CA(3), wherein the TPO has proposed an adjustment of Rs. 13,29,71,418/- on account of transactions by way of purchase of traded goods from its associated enterprises. Thereafter, the AO passed the draft assessment order dated 22.12.2023, u/s. 144C(1) of the Act. The assessee thereafter filed its objections before the DRP.The DRP vide its directions dated 19.09.2024, directed the TPO to include Dr. Morepen Limited in the final set of comparable companies for the distribution segment. However, the other two comparables, namely ADS Diagnostics Limited and Riviera Glass Limited were continued to be rejected and against the said order, the assessee is in appeal before us.

Regarding ground no. 3, firstly, regarding exclusion of ADS 4. diagnostics Limited, during the course of hearing, the ld. AR submitted

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited that the TPO has modified the turnover filter and has excluded ADS Diagnostics Limited from the final set of comparable companies by holding that it does not meet the turnover filter test without making any comments regarding the functional profile of ADS Diagnostics and re-determined the ALP for the transaction pertaining to purchase of finished goods and which has since been confirmed by the DRP. It was submitted that the company ADS Diagnostics Limited is involved in trading of diagnostic medical consumables and services of medical equipments and machines and in this regard, reference was drawn to the annual report of ADS Diagnostics Limited for financial year 2020-21. It was submitted that the functions performed by the comparable company are broadly similar to the functions performed by the assessee and it can therefore be safely concluded that ADS Diagnostics is functionally comparable to the assessee company. It was submitted that the TPO however modified the lower turnover filter to exclude companies having turnover less than 1/10th of the assessee’s turnover and accordingly, excluded ADS Diagnostics Limited from the list of comparables. It was submitted that once it has been established that ADS Diagnostics Limited is a comparable company, the scale of operations or turnover alone cannot be the reason for elimination of a company as a comparable. It was submitted that for the purposes of comparability, it is essential to consider the activity/functions performed (functional comparability) rather than turnover alone and merely because of the fact that an otherwise functionally comparable company has high or low turnover is not good enough for rejecting such a company. In support, reliance was placed on the following decisions: a. Chryscapital Investment Advisors (India) (P.) Ltd. vs. Deputy Commissioner of Income-tax [2015] 56 taxmann.com 417 (Delhi) b. Rampgreen Solutions (P.) Ltd. vs. Deputy Commissioner of Income-tax [2023] 154 taxmann.com 541 (Delhi Trib.)

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited c. Nortel Networks India (P.) Ltd Vs ACIT, New Delhi [ITA No 4765/Delhi/2011] & [ITA No 427/Delhi/2013] d. Ness Technologies (India) (P.) Ltd Vs DCIT [ITA 943/Mum/2015] e. Techbooks International (P.) Ltd Vs DCIT [ITA 240/Del/2015].

It was accordingly submitted that the turnover filter should not be 5. applied as a search criterion for selection of comparable companies and the comparable companies so rejected by the TPO should be included in the final set of comparable.

It was further submitted that ADS Diagnostics Limited has been 6. used as a comparable in the previous year i.e., A.Y. 2020-21 as well and no adverse inference has been drawn in such year regarding its selection as a comparable entity as evident from the order of the TPO for A.Y. 2020- 21. It was submitted that it is a well settled principle that where the fundamental fact pervading through different assessment year remain the same, the Revenue is not justified in adopting a different approach against the assessee merely because a contrary view appears more preferable to the Revenue.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited the relevant criteria for comparability, for the reason that a company’s ability to scale operation and bear risk increases with the size of the company. It was submitted that the Hon'ble Bombay High Court in case of CIT vs. Pentair Water India Pvt.Ltd. [2016] 69 taxmann.com 180 has upheld the decision of the Tribunal that size and turnover of a company are deciding factors for treating a company as a comparable. It was submitted that Hon'ble Bombay High Court in the said decision has relied on the decision of the Hon'ble Delhi High Court in case of CIT v. Agnity India Technologies (P.) Ltd. [2013] 36 taxmann.com 289, wherein also, it was held that the large and bigger companies cannot be benchmarked or equated to the small size companies. It was submitted that the decision of the Hon'ble jurisdictional Bombay High Court has since been followed in number of decision by the Coordinate Mumbai Benches and reference was drawn to the decision in case of M/s. Jakob Engineering India Pvt.Ltd. vs. DCIT, ITA No. 7194/Mum/2012, dated 17.05.2017, wherein it was held that the upper turnover filter can be reasonably fixed at approximately 10 times the turnover of the tested party and the lower turnover filter can be reasonably fixed at approximately 1/10thof the turnover of the tested party. Further, reference was drawn to the decision of Coordinate Benches in case of CNH Industrial (India) Pvt. Ltd. vs. ACIT in ITA No.1890/Mum/2022, dated 15.05.2023, wherein following the decision of Hon'ble Bombay High Court in case of Pentair Water India (P.) Ltd (supra), it was held that the turnover filter of 10 times more or less of the assessee turnover has been correctly applied by the TPO and the ground of appeal so raised by the assessee was dismissed.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited be determined independently for each year and therefore, the said contention cannot be accepted. In support, reliance was placed on the decision of Coordinate Benches in case of Graves Cotton Ltd. vs. ACIT, ITA Nos. 1745/Mum/2016 and Ors., dated 25.07.2023, wherein a similar contention was raised that the matter has been decided in favour of the assessee by the earlier decision of the TPO as well as the DRP and the Coordinate Bench has held that all the arguments and facts failed for the simple reason that Arm's Length Price of an international transaction is required to be determined on the basis of economic conditions, commercial factors, the relationship and the benefit between two of the international transactions existing for each year and it was further held that no doubt the judicial precedence bind us but at the same time, we are also conscious of the fact that the provisions of Section 92C(3), the decision of the Special Bench affirmed by the Hon'ble High Court, the OECD guidelines have a higher binding precedent than the order of the ITAT in assessee’sown case. It was accordingly submitted that the argument of the ld. AR regarding the consistency therefore cannot be accepted and the findings of the TPO and the DRP and the findings in the final assessment order should therefore, be upheld.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited 10. It was accordingly submitted that the DRP has rightly held that the upper turnover filter should be fixed approximately at 10 times the turnover of the tested party and the lower turnover filter should be fixed approximately at 1/10thof the turnover of the tested party and applying the same, has rightly held that ADS Diagnostics Limited should be excluded from the final set of comparable companies by holding that it does not meet the turnover filter test.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited and has looked at the turnover filter so applied by the assessee while passing the order for the earlier year, therefore, where the matter has not been examined in the earlier year, earlier year order cannot act as a precedent which binds the TPO. In any case, the transfer pricing benchmarking analysis has to be undertaken every year based on the facts and circumstances as so prevailing in the year and merely the fact that a company has been included as a comparable entity in an earlier year, the same doesn’t necessarily be taken as accepted position in the current year as the facts and circumstances of that entity can also vary from year to year. In light of the same, we upheld the order and findings of the DRP as so followed by the AO in terms of exclusion of ADS Diagnostic Ltd as a comparable entity for the purposes of benchmarking analysis and the contentions so raised are dismissed.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited selected by the assessee is broadly functionally similar and therefore, the same should be included in the final set of comparables and the reliance was placed on the following decisions: a. Diageo India (P.) Ltd. vs. DCIT [2013] 34 taxmann.com 284 (Mumbai-Trib.) b. Lionbridge Technologies (P.) Ltd. vs. ACIT [2017] 87 taxmann.com 267 (Mumbai-Trib.) c. DCIT vs. Epcos Ferrites Ltd. [2019] 102 taxmann.com 422 (Kolkata-Trib.)

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited unit, whereas the assessee company is into trading of medical devices like catheters, vascular devices etc. and given that the comparable company is into trading of laboratory equipments which may or may not be used for medical purposes, the said company cannot be said to be trading in medical devices and therefore, the broad functional criteria of trading in medical devices is not fulfilled and the TPO has rightly rejected the comparable and which has been upheld by the DRP. He accordingly supported the order and the findings of the TPO and the DRP.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited dispute which has been raised by either parties before us on the aforesaid description of products being handled by the assessee and that by the Rivierra Glass Pvt Ltd. With that background, we find that the assessee company caters to the products that are used for treatment of patients at the hospitals/medical institutions etc and thus fall in the category of medical devices whereas the products dealt with by the Rivierra falls in category of laboratory and glassware instruments, water analysis and distillation units, etc and thus carry a different functional profile/end-use and cater to a different segment of customers across various chemical and scientific community. Thus, both in terms of functional profile/usage of the products and the customers profile to which they cater, these are different products which doesn’t satisfy the test of broad functional comparability of products. Further, we find that the assessee as so contended might have considered Rivierra Glass Pvt Ltd as a comparable for the purposes of benchmarking in the earlier years, however, there is nothing on record either in terms of show-cause or otherwise that the TPO has examined the functional profile of the entity while passing the order for the earlier year, therefore, where the matter has not been examined in the earlier year, earlier year order cannot act as a precedent which binds the TPO. Further, we have gone through the Coordinate Benches decisions so relied upon and as we have discussed above, there is no dispute on the legal proposition that while applying TNMM method, broad functional and product comparability of the transactions are required to be seen instead of exact product comparability, at the same time, factually the said decisions doesn’t support the case of the assessee. In the result, we upheld the order and findings of the DRP as so followed by the AO in terms of exclusion of Rivierra Glass Pvt Ltd as a comparable entity for the purposes of benchmarking analysis and the contentions so raised are dismissed.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited 17. Another contention which was raised by the ld AR during the course of hearing was that the TPO while computing the ALP of the international transaction pertaining to purchase of traded goods incorrectly computed the OP/OR of the appellant at 3.91%. It was submitted that according to the inter-company agreement entered between the assessee and its AE, the purchase price of the products shall allow the assessee to earn an operating profit margin within a range consistent with the arm’s length principle as defined in the OECD guidelines and/or local transfer pricing laws of India. It was submitted that in the instant case, the assessee operating net profit margin falls short of the arm’s length range and its associate enterprises accordingly compensated the assessee by way of a subvention payment amounting to Rs. 3,493,18,417/-. It was submitted that post receipt of the subvention amount, the assessee operating net profit margin comes to 5.04%. It was submitted that the TPO as well as the DRP accepted that subvention income is interlinked to the distribution segment and therefore, shall be considered while computing the net profit margin. It was submitted that after including the subvention income in the operating net profit margin computation, the assessee operating net profit margin stands at 5.04%. However, the TPO erred in computing the operating NPM where the subvention income was also included in the denominator when computing the operating NPM which created a circular reference. It was submitted that the assessee received the subvention income as its results fall short of an arm’s length operating NPM. While calculating the operating NPM, such subvention income should be included in the numerator only i.e. operating profit. The subvention income should not affect the denominator i.e. the operating revenue in the operating NPM ratio.It was accordingly submitted that the necessary directions be given to the AO/TPO wherein the operating NPM of the assessee be taken at 5.04% as against 3.91% currently taken.

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited

ITA No. 6797/Mum/2024; A.Y. 2021-22 Bard India Healthcare Private Limited TPO/AO to consider the net operating at 5.04% as computed by the assessee.

Order pronounced in the open court on 11.06.2026

Sd/- Sd/- ANIKESH BANERJEE VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 11.06.2026 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