ARM EMBEDDED TECHNOLOGIES PRIVATE LIMITED ,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, BENGALURU

ITTPA 785/BANG/2026Status: DisposedITAT Bangalore22 June 2026AY 2022-2313 pages
AI SummaryAllowed

What were the facts?

The assessee, M/s. Arm Embedded Technologies Pvt. Ltd., filed its return of income for Assessment Year 2022-23 on 29.11.2022. The company, engaged in D&D, SWD, and MSS services to its Associated Enterprises (AEs), is a subsidiary of Arm Ltd., UK. The case was selected for scrutiny, and a reference was made to the Transfer Pricing Officer (TPO) due to international transactions with AEs. The TPO rejected the assessee's TP study, which used TNMM, and proposed adjustments. The TPO determined ALP adjustments for SWD services at Rs. 42,28,51,810, MSS at Rs. 12,15,917, and interest on receivables at Rs. 3,19,62,582, totaling Rs. 45,60,30,309. A Draft Assessment Order was passed on 19.03.2025. The assessee filed objections before the Dispute Resolution Panel (DRP), which issued directions to exclude certain comparables and include one. However, the Assessing Officer (AO) passed the Final Assessment Order on 24.12.2025 without adhering to the DRP's directions.

What did the Tribunal hold?

The Tribunal held that the Assessing Officer (AO) is bound by the directions issued by the Dispute Resolution Panel (DRP) under section 144C(10) of the Income-tax Act, 1961, and is required to pass the assessment order in conformity with these directions within the stipulated time frame under section 144C(13). The Tribunal noted that the AO had recorded in the assessment order that a reference was made to the TPO for re-working the ALP as per the DRP's directions, but the Order Giving Effect (OGE) was not received in time, leading the AO to pass the assessment order based on the draft assessment order. The Tribunal found this to be in violation of section 144C. Citing the jurisdictional High Court of Karnataka's decision in PCIT Vs. Flextronics Technology India Ltd. and the Supreme Court's dismissal of a Special Leave Petition against a similar High Court decision, the Tribunal concluded that the final assessment order passed by the AO was not in conformity with the DRP's directions and therefore deserved to be quashed. Consequently, ground No. 2 raised by the assessee was allowed. The other grounds were rendered academic and kept open.

What were the issues?

1. Whether the final assessment order passed by the AO under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act, dated 24 December 2025, is bad in law and liable to be quashed to the extent prejudicial to the Appellant. 2. Whether the final assessment order passed by the AO is not in conformity with the directions of the DRP dated 20 December 2025 and hence liable to be quashed as void-ab-initio. 3. Whether the AO/TPO erred in making a transfer pricing adjustment of INR 422,851,810 towards SWD services, INR 1,215,917 towards MSS, and INR 31,962,582 towards interest on delayed receivables. Assessee's Contentions: The assessee argued that the AO is bound by the DRP's directions under section 144C(10) and must pass an order in conformity with them under section 144C(13). The AO's order was not in conformity with the DRP's directions and was passed in violation of section 144C. The assessee also raised grounds concerning the rejection of its TP documentation, the comparability analysis, the use of non-contemporaneous data, and the modification of filters, as well as the inclusion/exclusion of specific comparables. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions on the substantive transfer pricing issues. However, the revenue's representative, CIT(DR)(ITAT), Bengaluru, was present.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92CA,Section 92D,Section 143(2),Section 142(1),Section 144C(10),Section 144C(5),Section 144C(8),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI BALAKRISHNAN S & SHRI SOUNDARARAJAN K

For Appellant: Ms. Tanmayee Rajkumar, Advocate
For Respondent: Smt. Divya K. J, CIT(DR)(ITAT), Bengaluru
Hearing: 15.06.2026Pronounced: 22.06.2026

Per Balakrishnan S, Accountant Member :

This appeal filed by the assessee against the Final Assessment Order passed under section 143(3) r.w.s. 144C(13) of the Act for the Assessment Year 2022-23. 2. Brief facts of the case are assessee M/s. Arm Embedded Technologies Pvt. Ltd., (in short “Arm India”), a company incorporated under the Software

Technology Parks of India (‘STPI’) scheme, is a subsidiary of Arm Ltd., UK, and is engaged in the provisions of services in the nature of D&D services, software

development services (SWD) and marketing support services (MSS) to its Asso

The order continues below.

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