CARDINAL HEALTH INTERNATIONAL INDIA PRIVATE LIMITED,BANGALORE, KARNATAKA vs. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 2(2)(1) BANGALORE, BANGALORE, KARNATAKA

ITTPA 1074/BANG/2026Status: DisposedITAT Bangalore22 September 2026AY 2022-2313 pages
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What did the Tribunal hold?

The Tribunal held that the final assessment order was passed in violation of Section 144C(13) of the Income-tax Act, 1961. The Dispute Resolution Panel (DRP) had directed the exclusion of certain comparable companies, granting relief to the assessee. However, the Assessing Officer (AO) in the final assessment order stated that the DRP had rejected all objections and upheld the transfer pricing adjustment in its entirety, which was contrary to the DRP's directions. The AO did not refer the matter back to the Transfer Pricing Officer to give effect to the DRP's directions and instead ignored them. The Tribunal relied on the decision of the Hon'ble Karnataka High Court in Flextronics Technologies (India) Private Limited, which held that an assessment order not in conformity with DRP directions is liable to be quashed. Therefore, the Tribunal quashed the assessment order. Consequently, ground No. 3 of the assessee's appeal was allowed, and the remaining grounds were dismissed as infructuous. The Tribunal directed that the assessment order be quashed.

What were the facts?

The assessee, Cardinal Health International India Private Limited, filed an appeal against the assessment order dated January 9, 2026, passed by the Assessment Unit of the Income Tax Department. The assessment year is 2022-23. The returned income was ₹259,050,770, and the assessed income was ₹324,727,100. The sole adjustment was a transfer pricing variation, following directions from the Dispute Resolution Panel (DRP) on December 24, 2025. The assessee provides software development and related IT services to its associated enterprises. The assessee reported international transactions amounting to ₹958,388,283 and benchmarked them using the Transactional Net Margin Method, reporting a margin of 15% on total cost. The assessee identified nine comparable companies. The Assessing Officer (AO) made an upward transfer pricing adjustment. The DRP directed the exclusion of certain comparable companies, including Infosys Limited, Tata Consultancy Services Limited, and LTIMindtree Limited, on grounds of high brand value. However, the AO's final assessment order allegedly ignored these directions and upheld the adjustment in its entirety.

What were the issues?

1. Whether the final assessment order under section 143(3) read with sections 144C(13) and 144B of the Income-tax Act, 1961, dated January 9, 2026, is bad in law as it was not passed in conformity with the directions issued by the Dispute Resolution Panel (DRP) under section 144C(10) read with section 144C(13) of the Act? - Assessee's contention: The AO failed to comply with the binding directions of the DRP, rendering the assessment order void. - Revenue's contention: Not recorded. 2. Whether the lower authorities erred in making an upward transfer pricing margin adjustment towards the provision of software development and related IT services, amounting to INR 6.56 crores? - Assessee's contention: The lower authorities erred in rejecting the assessee's comparables, selecting dissimilar companies, and misapplying filters. They also erred in not including additional companies furnished by the assessee, computing margins erroneously, treating forex gain as non-operating, and not providing working capital or risk differential adjustments. - Revenue's contention: Not recorded. 3. Whether the Assessing Officer erred in levying interest under Sections 234A, 234B, and 234C of the Act? - Assessee's contention: The levy of interest is erroneous. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92CA(3),Section 144C(10),Section 153(1),Section 153(4),Section 143(2),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.

For Respondent: Smt Divya K.J, CIT-DR

PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

01.

This appeal is filed by Cardinal Health International India Private Limited (the assessee/appellant) against the assessment order dated 9 January 2026, passed by the Assessment Unit of the Income Tax Department under section 143(3) read w

The order continues below.

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