ZF DIGITAL SERVICES INDIA PRIVATE LIMITED,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1),BANGALORE, BANGALORE

ZF Digital Services India Private Limited [the assessee/appellant] has filed this appeal against the assessment order of the DC/ACIT, TP-2(2)(2), Bengaluru, dated 11-Dec-2025, for Assessment Year 2022-23, passed under section 143(3) read with sections 144C(13) and 144B of the Income-tax Act, 1961 [the Act], challenging the transfer pricing adjustment of ₹ 16,983,460 as raised in Ground No. 2 of the appeal.

The brief facts are that the assessee’s return of income was selected for scrutiny, and the determination of the arm’s-length price of the international transaction was referred to the learned Transfer Pricing Officer. The learned Transfer Pricing Officer passed an order on 24 January 2020 proposing an upward adjustment of ₹ 245 lakhs. Thereafter, the draft assessment order was passed on 12 February 2025 and was challenged before the Dispute Resolution Panel. The Panel issued its directions on 18 November 2025 granting certain relief, pursuant to which it is submitted before us that the entire transfer pricing adjustment ought to have been deleted.

However, while passing the order giving effect to the directions of the learned Dispute Resolution Panel, the learned Transfer Pricing Officer passed an order dated 6 December 2025 in which the adjustment was inadvertently computed at ₹ 1.69 crores. Consequently, this adjustment remained in the final assessment order passed on 11 December 2025, and the present appeal has been filed against it.

During the hearing, the assessee submitted a letter dated 28 May 2026 stating that the learned Transfer Pricing Officer has rectified the mistake in the order giving effect and recomputed the transfer pricing adjustment at ₹ Nil. It was therefore submitted that, if the learned Assessing Officer is directed to rectify the final assessment order based on the rectified order giving effect passed by the learned Transfer Pricing Officer, the appeal challenging the transfer pricing adjustment before the Tribunal would become infructuous.

The learned authorized representative, Shri Ashish Shah, Chartered Accountant, submitted the order passed under section 154 by the learned Transfer Pricing Officer on 27 March 2026, wherein the transfer pricing adjustment was determined at ₹ Nil.

The learned CIT-DR submitted that, since the learned Transfer Pricing Officer had deleted the entire transfer pricing adjustment in accordance with the directions of the learned Dispute Resolution Panel, nothing survived for adjudication and the assessee’s appeal had become infructuous and was liable to be dismissed.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that, pursuant to the directions of the learned Dispute Resolution Panel, the learned Transfer Pricing Officer initially confirmed a transfer pricing adjustment of ₹ 16,983,460 by order dated 6 December 2025, which was carried into the final assessment order by the learned Assessing Officer. Subsequently, by rectification order dated 27 March 2026, the learned Transfer Pricing Officer recomputed the adjustment at ₹ Nil in the rectified order giving effect. Thus, the entire addition originally made, now stands reduced to nil. The learned Assessing Officer is therefore required to give effect to the rectified order and accordingly rectify the final assessment order.

We direct the learned Assessing Officer to pass the rectification order by adopting the arm’s-length price determined by the learned Transfer Pricing Officer and by reducing the transfer pricing adjustment to ₹ Nil. Thus, the learned Assessing Officer shall also make the corresponding rectification in the final assessment order and determine the assessee’s total income at the returned income within 30 days from the date of receipt of this order.

We note that the assessee had already made a request to the learned Assessing Officer by letter dated 1 April 2026; however, the consequential order has not yet been passed.

In the result appeal filed by the assessee is allowed.