RANSTAD INDIA PRIVATE LIMITED,CHENNAI vs. ACIT CIRCLE 1 LTU, CHENNAI

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ITTPA 135/CHNY/2024Status: DisposedITAT Chennai05 June 2026AY 2021-2210 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that for Ground No. 1 (Downward adjustment on account of Global IT services), the additional evidence submitted by the assessee, including third-party invoices, went to the root of the issue and were crucial for proper adjudication. Since this evidence was not presented before the lower authorities, the Tribunal admitted it and remitted the issue back to the AO/TPO for fresh consideration. The AO/TPO was directed to examine the evidence, considering the nature of services, and allow the claim in accordance with law. Ground No. 1 was allowed for statistical purposes. For Ground No. 6 (Deduction u/s. 80JJAA), the Tribunal directed the AO to verify and give full effect to the DRP's directions to allow the deduction as per law. For Ground No. 7 (TDS credit), the AO was directed to grant credit after verification. For Ground No. 8 (fee u/s. 234F) and Ground No. 10 (interest u/s. 244A), the issues were remitted back to the AO to verify the assessee's claims and allow them in accordance with law. Grounds No. 9 (interest u/s. 234B) and 11 (penalty u/s. 270A) were considered consequential and did not require separate adjudication. The appeal was partly allowed for statistical purposes.

What were the facts?

The assessee, Ranstad India Private Limited, filed an appeal against the final assessment order for AY 2021-22. The assessment order was passed by the Assistant Commissioner of Income Tax (ACIT) under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961. The assessee is engaged in providing HR solutions. The case involved international transactions, leading to a reference to the Transfer Pricing Officer (TPO). The TPO proposed adjustments for global IT services and entity-level AE costs. The Dispute Resolution Panel (DRP) provided partial relief. The assessee's appeal to the ITAT raised multiple grounds, including issues related to transfer pricing, deductions, TDS credit, fees, and interest. Some grounds were not pressed by the assessee.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the downward adjustment to AE cost on account of Global IT Services (Ground No. 1) was erroneous, considering the nature of services, alleged duplication, and the allocation methodology. 2. Whether the restriction in the claim of deduction under Section 80JJAA of the Act was justified (Ground No. 6). 3. Whether there was a short grant of TDS credit (Ground No. 7). 4. Whether the levy of fee under Section 234F was warranted (Ground No. 8). 5. Whether there was a short grant of interest under Section 244A of the Act (Ground No. 10). Assessee's contentions: - For Ground No. 1, the assessee argued that global IT services were essential for its operations, provided by Randstad Technology Platform Services (RTPS) and not duplicative of management charges. They submitted additional evidence, including third-party invoices, to substantiate the services and costs, and prayed for remittance. - For Ground No. 6, the assessee contended that the deduction under Section 80JJAA was restricted without considering the enhanced gross total income. - For Ground No. 8, the assessee argued that the return was filed within the extended due date as per CBDT Circular No. 1/2022, making the Section 234F fee not leviable. - For Ground No. 10, the assessee submitted that interest under Section 244A was not correctly granted and required re-computation. Revenue's contentions: - The Revenue relied on the orders of the lower authorities for all grounds.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 80JJAA,Section 234F,Section 244A,Section 234B,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI

For Respondent: Ms. Ann Marry Baby, CIT

आदेश / O R D E R

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the final order of the assessment passed by Asst. Commissioner of Income Tax, Circle-1, LTU, Chennai (in short "AO") passed u/s. 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (in short "the Act") dated 29.10.2024 for Assessment Year (AY) 2021-22. The assessee raised various grounds pertaining to the following issues: • Ground No.1: Downward adjustment to AE cost on account of Global IT Services;

IT(TP)A No.135/Chny/2024 Ranstad India Pvt. Ltd. :- 2 -:

• Ground No.2: Erroneous aggregation of transitions for benchmarking instead of transaction by-transaction analysis; • Ground No.3: Erroneous consideration of functionally dissimilar companies; • Ground No.4: Erroneous computation of operating margin for comparable companies chosen by the learned A.O/TPO/Hon’ble DRP; • Ground No.5: Erroneous computation of operating profit margin of the appellant ; • Ground No.6:Restriction in claim of deduction applied under section 80JJAA of the Act; • Ground No.7: Restriction of TDS Credit; • GroundNo.8: Wrongful levy of fee u/s. 234F • Ground No.9: Wrongful levy of interest; • Ground No.10” Short grant of interest u/s. 244A • Ground No.11: initiation of penalty proceedings under section 270A of the Act. 2. The assessee is a company engaged in the business of providing HR solutions including staffing, recruitment, outsourcing and consulting services. The assessee is a wholly owned subsidiary of Ranstad Asia Pacific B.V, Netherlands. The assessee filed a return of income for AY 2021-22 on 14.03.2022 declaring Nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to complete the Arm's Length Price (ALP) of the international transactions. The TPO proposed the following TP adjustments: i. Downward adjustment to AE cost at entity level for the transitions considered – Rs. 46,37,485/-; ii. Downward adjustment to AE cost on account of global IT services – Rs. 7,64,78,442/-.

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3.

The A.O passed the draft assessment order incorporating the TP adjustments. The A.O also made certain concrete additions to arrive at the assessed income at Rs. 13,92,28,760/-. Aggrieved, the assessee raised its objections before the DRP. The DRP gave partial relief to the assessee whereby the TP adjustment towards AE cost at entity level was reduced to Rs. 26,85,433/-. The assessee is in appeal against the final order of assessment passed by the A.O giving effect to the directions of the DRP.

4.

The Ld. Authorized Representative (AR) of the assessee submitted that during the course of hearing submitted that ground No. 2 to 5 towards the downward adjustment to AE cost on aggregation of transactions is not pressed considering the smallness of the amount. Accordingly, these grounds are dismissed as not pressed.

Downward adjustment on account of Global IT services – Ground No.1 5. The TPO noticed that the assessee has paid a sum of Rs. 7.64 Crores towards global IT services. The TPO further noticed that the assessee has also paid a sum of Rs. 1.74 Crores towards IT charges as part of management charges. The TPO was of the view that the assessee has not produced the need benefit analysis for payment of global IT services besides in addition to the IT charges. The TPO further held that the assessee has not substantiated the payment with any documentary evidences to the effect that the payment has resulted in any tangible benefits to the assessee. Accordingly, the TPO computed the ALP at Nil. The DRP upheld the TP adjustment on similar grounds.

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6.

The Ld. AR made a written submission as extracted herein below:

a. Nature of Services & Benefit to Appellant:The global IT services are provided by the Randstad Technology Platform Services (‘RTPS’) department of Randstad Global IT Solutions B.V. Netherlands to various affiliated operating companies within the Randstad group.

The Global IT Services availed by RIPL India encompassed a suite of IT infrastructure and digital platform services provided by the RTPS department to all Randstad Group companies.These included, inter alia (detailed description provided in DRP Appeal in Pg 79 to 82 of ITAT Appeal docs):

- Enterprise IT Applications: Access to globally standard HR & staffing software, recruitment management systems, digital platforms (e.g. online job boards, Randstad’s career portal), data analytics tools, etc., enabling RIPL India to carry out its day-to-day business efficiently. - IT Infrastructure & Network Services: Centralized cloud computing resources (e.g. AWS/Azure), data center hosting, leased network circuits & bandwidth (e.g. global contracts with BT for network connectivity) and telecommunications support. - Software Licensing & Maintenance: Provision and maintenance of enterprise software licenses (e.g. Microsoft software, Cisco network security, Citrix remote access) on a group scale, giving RIPL India cost- effective access to technology. - Group IT Coordination & Support: Services like global helpdesk, cyber-security oversight, IT policy setting, vendor management, and implementation of global IT projects/updates, which improve RIPL India’s operational efficiency and ensure standardization across the Randstad network.

b. Stewardship Rebuttal: The Appellant strenuously rebuts the characterization of these charges as stewardship. The Appellant’s own IT team in India is limited in scale and does not perform these high-end functions; in fact, RIPL relies on the AE’s IT expertise and global systems to run its business efficiently, confirming these services are necessary and not duplicative of any in-house function(detailed explanation related to excluding stewardship cost is given in DRP Appeal forming part in Pg 86 & 87 of ITAT appeal docs).

Duplication Rebuttal:The Ld. TPO has erroneously concluded that the services availed by the Appellant are duplicative in nature by alleging that a

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sum of ₹1.74 crores towards IT services is already included in the Management & HQ charges, while a further ₹7.64 crores has been separately paid towards Global IT services (Para 7 in TP Order forming part of Pg 162-163 of the ITAT Appeal docs) The aforesaid conclusion is factually incorrect and arises from a misunderstanding of the nature of services. The IT-related services forming part of Management & HQ services are limited to ICT strategy, governance, and corporate-level guidance (refer Para 5.1, Page 260 of the Paperbook). These are high level, strategic functions relating to group-wide direction and oversight. In contrast, the Global IT services pertain to day-to-day operational execution, including provision and maintenance of IT infrastructure, applications, network connectivity and system support, which are directly utilized in the Appellant’s business operations. The IT services rendered by the AEs are critical to the functioning of the Appellant, enabling smooth day-to-day operations and supporting core business activities. These services are neither routine nor duplicative but rather complement the business functions of the Appellant. It is further relevant that the Appellant does not maintain any specialized in- house IT team or infrastructure to perform such functions and is therefore dependent on the AEs for such services, which are essential for its operations and growth (refer detailed submissions in DRP objections at Pages 77 and 87 of the ITAT Appeal Documents).

c. Cost Base & Allocation Methodology: The Global IT service fee charged to RIPL India represents its share of the total costs incurred by the AE’s RTPS on providing IT services group-wide. The Appellant’s share was determined using allocation key of on ratio of Indian revenue to total global revenue. The Global IT service fee is allocated to RIPL India based on ratio of RIPL India’s revenue to total global revenue of the Group as provided below (detailed workings provided in DRP Appeal forming part in Pg 92 to 97 of ITAT Appeal docs): FY 2020 (INR) FY 2021 Particulars Total Mark-up charged * (INR) ** 4,54,18,968 Allocation of direct 1,90,09,868 6,44,28,836 No mark-up third‑party IT costs 4,00,351 Reimbursements (23,547) 3,76,804 No mark-up 28,72,006 Allocation of indirect 6.6% for FY 2020 9,92,256 38,64,262 costs and 5% for FY 53,84,679 2021 on the cost Depreciation on IT 19,97,547 73,82,226 incurred assets

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FY 2020 (INR) FY 2021 Particulars Total Mark-up charged * (INR) ** 3,82,637 Interest expenses 43,677 4,26,314

Total IT charges 7,64,78,442

* FY 2020 represents a 9-month period ** FY 2021 represents 3-month period

d. Evidence of Services Rendered: To substantiate the nature and extent of services rendered, the Appellant has placed on record contemporaneous evidence in the Paper Book and additional evidence petition. This includes: the Master Service Agreement for Global IT Services was submitted as i. annexure 3 to the submission dated 11 January 2023(Pg 275 of the Paperbook). Copy of invoices issued by the AE to RIPL India for the IT charges during ii. FY 2020-21 were submitted as annexure 7 in the submission dated 30 MAY 2023 (Pg 240-244 of Paperbook). As part of additional evidence petition dated 10 February 2026, cost iii. breakdowns at the AE’s end (e.g. bills from Amazon Web Services, BT, Citrix, Microsoft, TCS etc.) to demonstrate the underlying costs incurred to serve RIPL India. The detailed break-up of the direct third-party IT cost components allocated to the Appellant by the AE for the period 1 January 2020 to 31 December 2020 is provided below (amounts in Euros): Sample % invoices in Allocated to Allocated to allocated annexure to Cost components AEs in other the Total to the additional countries Appellant* Appellant evidence (Page Nos) Amazon Web Services 11,643,614 411,137 12,054,750 3.41% 1-31 Cloud Google Cloud Platform 1,875,201 3 1,875,204 0.00% BT Voice 1,925,309 1,925,309 0.00% ISP connectivity BT 1,673,858 1,673,858 0.00% ISP connectivity other 3,544,866 3,544,866 0.00% Connectivi suppliers ty Network core 1,055,288 35,923 1,091,211 3.29% 32-34 Network Support BT 829,738 37,687 867,426 4.34% 35-38 Network Support other 843,906 843,906 0.00% suppliers Citrix licenses 447,103 21,604 468,707 4.61% 39-40 Microsoft licenses 820,868 28,052 848,920 3.30% 41-43 Licenses Oracle licenses 65,010 65,010 0.00% Other licenses 219,556 5,656 225,213 2.51% Salesforce licenses 905 905 0.00% Other IT Other IT costs 134,507 1,499 136,005 1.10% costs

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Sample % invoices in Allocated to Allocated to allocated annexure to Cost components AEs in other the Total to the additional countries Appellant* Appellant evidence (Page Nos) IT support 3rd parties 5,355 5,355 0.00% (not TCS) Support IT support TCS 22,745,202 148,979 22,894,181 0.65% 44-48 Back-up recovery / data 450,237 11,672 461,909 2.53% protect. Cloud management / 453,674 17,460 471,134 3.71% monitoring Tooling Cybersecurity 634,997 24,312 659,309 3.69% Identity and Access 39,960 39,960 0.00% Management SaaS Other 44,406 1,668 46,073 3.62% 49,453,561 745,652 50,199,212 1.49%

* The IT cost is allocated to RIPL India based on the ratio of RIPL India’s revenue to total revenue of user entities Sample third‑party vendor invoices in respect of direct IT costs have been iv. submitted (Pg 1-48 of the annexure to the additional evidence).The underlying costs incurred by the AE are supported through invoices from independent third-party service providers such as Amazon Web Services (AWS), Microsoft, Citrix, BT, TCS, etc., demonstrating that the services are not notional allocations.These costs span across cloud infrastructure, connectivity, software licensing, cybersecurity, IT support and tooling, which are essential for business operations. In addition, sample invoices evidencing purchase of IT assets forming part of depreciation have also been provided (Pg 49 - 123 of the annexure to the additional evidence).

The Ld. AR prayed the issue may be remitted for fresh consideration in the light of the additional evidences now submitted.

7.

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

8.

We have heard the parties, and perused the material available on record. The main ground on which the TPO has made the downward adjustment is that the assessee has not provided proper documentary

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evidences is to substantiate the rendering of services and the need for the services. The downward adjustment is also made for the reason that the assessee has made payments towards global IT services in addition to making payments towards IT charges which are part of managing services. From the perusal of the detailed breakup of the global IT services as extracted in the earlier part of this order, we notice that these are charges paid and allocated to the assessee towards services utilized from the third parties. We also notice that the assessee as part of additional evidences has now submitted the third party invoices to substantiate that the services are indeed rendered by third parties. The additional evidences now produced go the root of the issue and the core reason for making the adjustment by the lower authorities. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. Considering that these additional evidences were not submitted before the lower authorities, we are of the view that the issue needs to be examined afresh. Accordingly, we remit the issue back to the A.O/TPO for fresh consideration. The A.O/TPO is directed to examine the additional evidences keeping in mind the nature of services rendered by the third parties and allow the claim of the assessee in accordance with law. The AO/TPO is further directed to call for any addition details/documentary evidence as may be required. The assessee is directed to furnish the details as may be called for and cooperate with the assessment/TP proceedings. It is ordered accordingly. Ground No.1 is allowed for statistical purposes only.

Deduction u/s. 80JJAA of the Act – Ground No.6 9. The assessee in the return of income has claimed deduction u/s. 80JJAA of the Act for a lesser amount to the extent of gross total income.

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The assessee contended before the DRP that though the assessee is eligible for deduction to the tune of Rs.9,93,43,314/-, the A.O has restricted the deduction to Rs.48,33,640/- without considering the enhanced gross total income as assessed by the A.O. We notice in this regard that the DRP has given direction to the A.O to allow the deduction as per law (page 14 para 7.1 of DRP directions). Accordingly, we direct the A.O to verify and give full effect to the DRP directions, and allow deduction under section 80JJAA as per law. Needless to say that the assessee be given a reasonable opportunity of being heard.

10.

The assessee through Ground No.7 is contending the short grant of TDS. We in this regard direct the A.O to grant the credit for TDS after verification and allow the credit in accordance with law.

11.

The assessee through ground No.8 is contending the levy of fee u/s.234F and through Ground No.10 is contending the short grant of interest under section 244A of the Act. With regard to levy of fee under section 234F the Ld. AR in this regard submitted that the assessee for the AY under consideration has filed the return of income on 14.03.2022 which is within the extended due date of 15.03.2022 as allowed by CBDT Circular No.1/2022 dated 11.01.2022. Accordingly, the Ld. AR argued that levy of fees u/s. 234F is not warranted. With regard to interest under section 244A the ld AR submitted that the interest has not been correctly granted and requires re- computation. Considering the submissions of the assessee we deem it fit to remit these two issues back to the AO with a direction to verify the claim of the assessee and allow the same in accordance with law.

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12.

Ground No.9 is with regard to interest u/s. 234B and ground No.11 is with regard to initiation of penalty proceedings u/s. 270A of the Act. Since these issues are consequential, the grounds do not warrant any separate adjudication.

13.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced on 05th day of June, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार िग"र) (पदमावती यस) (Manu Kumar Giri) (Padmavathy.S) लेखा सद�य सद�य /Accountant Member �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य लेखा लेखा लेखा सद�य सद�य चे�नई/Chennai, �दनांक/Dated: 05th June, 2026. EDN, Sr. P.S आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF EJTADA Digitally signed by EJTADA DURGA DURGA NARESH Date: 2026.06.11 NARESH 17:23:25 +05'30'

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