MEDICOVER HEALTHCARE PRIVATE LIMITED,DELHI vs. DCIT, CIRCLE 16(1), DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “I” NEW DELHI MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER AND SMT. RENU JAUHRI, ACCOUNTANT MEMBER IT (TP)A No.114/Del/2026 Assessment Year : 2022-23 Medicover Healthcare DCIT, Private Limited, v/s Circle-16(1), E-20, Panchsheel Park, New Delhi/ New Delhi – 110 017. Assessment Unit, Income Tax Department. PAN: AAKCM1202H Appellant Respondent Assessee by Shri Nageswar Rao, Shri Pratik Rath & Shri Parth, Advocates. Department by Shri Mahesh Kumar, CIT, DR Date of Hearing 24.06.2026 Date of Pronouncement 21.09.2026

ORDER Per Kavitha Rajagopal, J M:

This appeal is filed by the assessee, challenging the final assessment order passed by the Learned Assessing Officer [‘the Ld. AO’ for short], u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (‘the Act', for short), dated 17.12.2025 in pursuance of the directions of the Hon’ble Dispute Resolution Panel (‘the Hon’ble DRP’, for short) pertaining to the Assessment Year (‘A.Y.’ for short) 2022-23.

2 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT 2. The assessee has raised the following grounds of appeal:- “1. Final Assessment order (impugned order) of Ld. Assessing Officer ('AO') pursuant to directions issued by Ld. Dispute Resolution Panel ('DRP'), being based incorrect appreciation of facts and law, is bad in law and liable to be set aside. 2. Impugned order proceeds on incorrect notions about nature of services resulting in unjustified and unlawful adjustment to arm's length price of provision of business support services. Transfer pricing analysis submitted by appellant ought have been accepted. 3. Impugned order erred in making an addition of INR 23,87,82,496 to Appellant's reported loss of INR 7,22,41,606. 4. Adjustment to arm's length price based on assumed nature of transaction is invalid, unlawful and deserves to be deleted in toto. Further substitution by Ld. TPO of transfer pricing analysis without properly appreciating and rejecting valid benchmarking analysis conducted-by Appellant is unsustainable as same is contrary to law laid down by Hon'ble Courts. 5. Re-characterization of business support services provided by Appellant to its AE as healthcare services being based on wrong notions and presumptions is unlawful and not justified in law. 6. Failure to-appreciate correct nature of services and underlying facts has resulted in application of incorrect filters, leading to choice of wrong comparable companies having complex and distinctly different functionality. Comparable companies selected by appellant deserves to be accepted. 7. Benchmarking exercise is with respect to international transactions actually entered into during Assessment year, anticipated total volume contemplated in the agreement is different and cannot be misconstrued and empty suspicion cannot be basis for rejecting analysis of actual transactions. 8. Without prejudice to above, adjustment by making entity level comparison and ignoring segmental profitability is unjust, contrary to settled law & Chapter X of the Act and deserves to be deleted. 9. Without prejudice to above impugned order erred in not limiting proposed adjustment to international transactions on a pro rata basis.

3 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT 10. Impugned order failed in appreciate the economic background and reality resulting in lose allegations against appellant, ignoring to consider material and submissions made by Appellant . The above grounds of appeal are without prejudice to each other and the Appellant craves leave to add or alter, by deletion, substitution or otherwise, the above grounds of appeal at any time before or during the hearing of this appeal.”

4 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT S.No. Name of Transaction Value of Method transaction (in Rs.) 1. Availing of Business support 558,933 TNMM services 2. Provision of Business support 70,423,728 TNMM services 3. Payment of Royalty and License 366,522 Other Method fees 4. Issue of share capital 14,153,600 Other Method 5. Buy back of equity share capital 235,346,650 Other Method 6. Reimbursement of expenses 8,58,188 Other Method incurred by AEs 4. The Ld. AO referred the same to the Ld. TPO for determination of Arm’s Length Price (ALP) as per Section 92CA of the Act. The Ld. TPO, vide order dated 28.01.2025, passed an order u/s 92CA(3) of the Act proposing an adjustment towards ‘business support services’ amounting to Rs.23,87,82,496/-. The Ld. AO, then, passed the draft assessment order dated 22.02.2025 u/s 144C(1) of the Act proposing total income at Rs.16,65,40,890/-, after including the TP adjustment of Rs.23.87 crore. Aggrieved by the draft assessment order and the underlying TP determination, the assessee filed its objection in Form 35A dated 24.03.2025 before the Hon’ble DRP and the Hon’ble DRP, vide directions dated 19.12.2025 u/s 144C(5) of the Act concluded that as the assessee was engaged in healthcare services, the functional profile of the company selected by the TPO broadly aligned with the profile of the assessee and held that there was no infirmity in the TPO’s benchmarking approach or in the selection of comparables thereby

5 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT upholding the transfer pricing adjustment. Pursuant to the DRP’s directions, the Ld. TPO passed an order giving effect making no modifications to the original transfer pricing adjustment u/s 92CA(3) of the Act. The Ld. AO, thereafter, passed a final assessment order u/s 143(3) r.w.s. 144C(13) by incorporating TP adjustments in the final assessment where the total income was determined at Rs.16,65,40,890/-. The Ld. AO also initiated penalty proceedings u/s 270A of the Act. Aggrieved, the assessee is in appeal before us challenging the impugned order.

6 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT precise international transactions that have been subjected to transfer pricing benchmarking. The Ld. AR further stated that the relevant controlled transaction was not the provision of medical treatment of hospital services to its AEs, but, the provision of business-support/general management services which includes payment of royalty/licence fees, issue of share capital, buy-back of equity shares and reimbursement of expenditure are some of the other transactions, but, the impugned adjustment pertains to the provision of business-support services. The ld. AR argued that the TPO ought to have benchmarked the specific controlled transactions rather than benchmarking the assessee as though it was rendering healthcare services to its AEs. The Ld. AR brought our attention to the service agreement dated 01.07.2021 entered into by the assessee with its AE which demonstrated that the services contemplated between the parties were in the nature of business-support/general-management consultancy services which fact, the Hon’ble DRP itself had recorded that the agreement referred to general- management consultancy and related assistance. The Ld. AR reiterated that the agreement does not contemplate the assessee rendering clinical treatment, hospital care or medical services to the AE, hospital companies cannot be automatically treated as comparables merely because the assessee carried on healthcare business in India. The Ld. AR further objected to what the assessee has recorded as the re- characterisation of controlled transaction by the TPO where the TPO had effectively proceeded on the wrong footing that the assessee was rendering

7 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT healthcare services to its AE where the controlled transaction was only for business-support services. It was further argued that the services rendered were in the nature of support functions and were not patient-facing clinical services and, hence, the economic characteristics, assets employed, risks assumed and the revenue model of hospitals and healthcare operating companies were materially different from those pertaining to the controlled transaction. The TPO’s functional analysis did not delineate the transaction before embarking upon the comparable search which related to healthcare, hospital, diagnostic and related sectors which were not functionally comparable to the international transaction under examination. The Ld. AR argued that the comparison violated the basic FAR principle for the reason that the selected entities were qualitatively different. The Ld. AR also specifically objected to the factual error committed by the TPO in his comparable analysis where one of the selected entities the TPO had referred to a website or business description pertaining to another company operating hospitals, thereby resulting in an incorrect functional profile. The Ld. AR further submitted that the TPO had accepted the Transactional Net Margin Method (TNMM) adopted by the assessee as the Most Appropriate Method (MAM) and used OP/OC as the Profit Level Indicator (PLI) and, hence, the real controversy was not the method itself, but, the selection of comparables and the functional characterisation underlying the benchmarking exercise. The ld. AR also relied upon the contractual arrangement to explain the assessee’s remuneration mechanism where the Hon’ble

8 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT DRP records that the service arrangement was a fixed payment of INR 15 Million per month plus applicable taxes and the assessee was to be compensated on a cost plus 10% mark-up basis and, hence, the remuneration model substantiates that the transaction was of limited nature of controlled functions. The Ld. AR argued that another objection was that the TPO proceeded by referring to the overall business activity at the entity level rather than isolating the international transaction with the AE and merely because it operated fertility clinics in India that does not mean that every service rendered by it to an AE was a healthcare service where the controlled transaction had to be separately delineated. The Ld. AR also reiterated that the TPO had made an entity level transfer pricing adjustment where Chapter X adjustment could be made only with reference to the value of the relevant international transaction and without prejudice argued that if the TPO’s margin fee has to be sustained, then, the adjustment could not travel beyond the international transaction with the AE and the ALP cannot be computed to even unrelated domestic or uncontrolled transactions. The Ld. AR contended that the Hon’ble DRP’s finding that the assessee had not produced sufficient underlying documentary evidence to demonstrate the actual rendition and precise nature of service was also faulted for the reason that the assessee had furnished all contractual agreement and materials before the authorities. The Ld. AR summed up that the subject of benchmarking was a business-support service transaction not the assessee’s entire healthcare business where the TPO initially treated the

9 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT assessee as a healthcare operator for purposes of FAR analysis and, thereafter, selected hospitals/healthcare companies on that premise, applied their profitability to a large broader operating base, thereby generating Rs.23.87 crore adjustment. This, according to the Ld. AR, was a mis-characterisation of controlled transaction where the documentary evidences furnished by the assessee such as the service agreement, evidence of actual services rendered, invoices, etc., would determine the assessee’s characterisation out of the contemporaneous records. The Ld. AR relied on a catena of decisions and prayed that the impugned TP adjustment be deleted.

10 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT documentary evidence demonstrating service-by-service as to what functions were performed by whom and for whose benefit and how those services were connected with the consideration received, etc., were not explained by cogent documentary evidences. The Ld. DR reiterated that the assessee has failed to furnish sufficient details and documentary evidences to prove the rendition and precise nature of services claimed to have been provided to the AE and without such evidence, the assessee cannot insist that the transaction be benchmarked as a low risk or routine support-service function merely on the basis of the language in the contractual agreement. The Ld. DR further argued that even in the website of the assessee and publicly available description, the assessee is stated to have been engaged in healthcare sector and, hence, the fresh search undertaken by the TPO for comparables from similar sectors were justified. The Ld. DR further contended that the assessee has failed to demonstrate with adequate functional evidence that the services rendered to the AE were distinct from its healthcare operations which requires a distinct comparable set and the TPO’s action in considering quantitative and qualitative filters cannot be faulted with. The Ld. DR, admittedly, stated the TNMM as the Most Appropriate Method was not disputed, rather, it was the assessee’s comparable selection and functional characterisation which was challenged as not adequately reflecting the true economic profile of the transaction resulting in fresh search by the Ld. TPO by applying various filters including use of contemporaneous /current year data, turnover and service income parameters,

11 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT exclusion of entities affected by abnormal economic circumstances along with RPT filters. The Ld. DR argued that these filters were rational and the resulting companies were appropriate comparables for the assessee’s nature of activity. The Ld. DR contended that the existence of a cost plus mechanism did not by itself establish that the assessee was a routine, low risk support-service provider when the nature of the underlying functions have still not been substantiated by cogent evidences. The Ld. DR relied on the orders of the lower authorities.

12 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT TPO/AO instead of benchmarking the actual controlled transaction on the basis of its contractual and functional characteristics, treated the assessee substantially as healthcare/hospital operator and, thereby, selected companies in the healthcare sector as comparables. The assessee relied upon the service agreement dated 01.07.2021 entered into with its AE according to which the agreement contemplated general-management consultancy/business-support services and did not envisage rendering medical treatment, hospital care or clinical services to the AE. It was emphasised that although the assessee itself operated fertility clinics in India, the mere fact that its own business was in the healthcare sector did not confer every service rendered by it to its AE into a healthcare service where the assessee maintained that the international transaction itself had to be separately delineated and characterised rather than benchmarking it by reference to the assessee’s entity level healthcare activities. Further, the assessee’s contention was that the remuneration mechanism contained in the service agreement supported its characterisation of the transaction where the arrangement contemplated a fixed payment of Rs.15 lakh per month plus applicable taxes together with a 10% mark- up which, according to the assessee, indicated a limited support service arrangement rather than the provision of hospital or clinical services. The assessee’s objection was principally against the TPO’s functional characterisation and the selection of comparables rather than against the method adopted under the TNMM as the Most Appropriate Method. The assessee contended that the

13 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT healthcare/hospital companies selected by the Ld. TPO/AO performed materially different functions, assumed different risks and possessed different assets and revenue models and, hence, failed the basic FAR comparability test.

14 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT provided to the AE. In particular, the Hon’ble DRP considered the contemporaneous evidence inadequate to establish what services were actually rendered by whom, to whom, for whose benefit and how those services were connected with the controlled transaction. Before us, the assessee has challenged, inter alia, the transfer pricing adjustment, the characterisation of the controlled transaction, the selection of comparables and the benchmarking exercise and the principal contention of the assessee is that the authorities have re-characterised the assessee’s entity level healthcare/fertility-clinic business with the specific international transaction of business-support services. We are of the considered view that the comparability must be determined with reference to the functions actually performed, assets employed and risks assumed in the controlled transaction and not merely because the assessee and the selected comparables happen to operate broadly within the healthcare sector. Further, it is also observed that the lower authorities have failed to determine the arm’s length price by taking into consideration the actual agreement, invoices and evidence relating to the services rendered for the purpose of determining the characterisation of the transaction. We also take cognizance of the fact that the Revenue has contended that the assessee has not satisfactorily established the precise nature of the international transaction through adequate contemporaneous evidence for determining the functional description as the evidences furnished by the assessee could only give a broad or generic nature of the transaction and did not sufficiently

15 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT demonstrate the actual functions performed under the service agreement. Even before us such exercise has not been demonstrated by the assessee with cogent documentary and supporting evidences.

16 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT followed by the Hon’ble jurisdictional High Court in the subsequent case, namely, M/s Avenue Asia Advisors Pvt. Ltd. Vs. DCIT, ITA No.350/2016, Order dated 18.09.2017, wherein it was held that the comparable transaction ought to be selected on the basis of similarity with the controlled transaction or activity and, while doing so, Rule 10B(2) of the Income Tax Rules, 1962 (‘the Rules’, for short) has to be taken into consideration and even in the case of TNMM, mere broad functionality is by itself insufficient.

17 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT comparables offering services/products which are not entirely similar to the controlled transaction/entity however, this can be done only if, inter alia, the difference in services/products offered has no material bearing on the profitability, and do not have functional differences or any differences in their risk profiles. Thus, it can be concluded that the ITAT was correct in excluding the abovementioned comparable companies.”

18 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT forming the subject matter of the controlled transaction in accordance with the section 92C of the Act r.w. Rule 10B of the Rules and more so that these details were neither made available by the assessee even before us. Needless to say, the assessee shall be afforded a reasonable opportunity of being heard and shall be at liberty to furnish relevant contemporaneous evidence in support of the nature and rendition of the services. The ld. TPO shall consider the same and determine the ALP afresh in accordance with the law, without being influenced by the earlier benchmarking exercise. The grounds of appeal raised by the assessee are hereby allowed for statistical purpose. 12. In the result, the appeal filed by the assessee is allowed for statistical purpose on the above terms.

Order pronounced in the open court on 21.09.2026.

Sd/- Sd/- (RENU JAUHRI) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21st September, 2026 dk

19 IT(TP)A No.114/Del/2026 Medicover Healthcare Pvt. Ltd. Vs DCIT

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. Dr, ITAT, Mumbai 5. Guard File. BY ORDER, //True COPY// (Assistant Registrar) ITAT, Delhi Benches