KAAR TECHNOLOGIES INDIA PRIVATE LIMITED,CHENNAI vs. ACIT, CORP. CRICLE 4(2), CHENNAI, CHENNAI

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ITTPA 22/CHNY/2025Status: DisposedITAT Chennai12 June 2026AY 2020-218 pages
AI SummaryRemanded

What did the Tribunal hold?

For AY 2020-21, the Tribunal admitted the additional evidence filed by the assessee, which included industry reports and financials, as it went to the root of the issue regarding imputation of interest on outstanding receivables. Considering that substantial justice and equity required proper adjudication, the matter was restored to the file of the AO/TPO for fresh examination of the admitted evidence and a decision in accordance with law. For AY 2021-22, the Tribunal noted that the CIT(A) had dismissed the appeal in limine without adjudicating on merits. The Tribunal found that the issue was identical to that for AY 2020-21 and that the CIT(A) ought to have adjudicated the appeal on merits in the absence of a final assessment order under Section 144C(13). Therefore, the impugned order was set aside, and the matter was restored to the file of the AO/TPO for fresh consideration, adopting the same course as for AY 2020-21.

What were the facts?

The assessee, Kaar Technologies India Pvt. Ltd., filed appeals against orders of the CIT(A) for Assessment Years 2020-21 and 2021-22. For AY 2020-21, the Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO) who proposed an upward adjustment of Rs. 46,80,367/- on account of alleged arm's length interest on outstanding receivables from Associated Enterprises (AEs). The TPO contended that retrospective amendment to Section 92B made outstanding receivables a separate international transaction. The CIT(A) upheld the TPO's adjustment. For AY 2021-22, the CIT(A) dismissed the appeal in limine, stating it was not maintainable. The assessee contended that an appeal against the AO's order dated 31.01.2024, passed under Section 143(3) r.w.s. 144C(3) r.w.s. 144B, lies before the CIT(A), while the Revenue could not produce a final assessment order under Section 144C(13) against which an appeal would lie directly to the Tribunal.

What were the issues?

1. Whether interest is required to be imputed on outstanding receivables from the assessee's Associated Enterprises (AEs) for AY 2020-21, considering the economic conditions in Saudi Arabia affecting payments. The assessee argued that delayed payments from Saudi companies to its AEs, due to falling oil prices and difficult market conditions, consequently delayed remittances to the assessee. The assessee sought to admit additional evidence, including industry reports and financials, to support this. The revenue supported the AO/CIT(A) orders. 2. Whether the CIT(A) erred in dismissing the assessee's appeal for AY 2021-22 in limine, when the assessee contended that objections were filed before the DRP and an appeal against the AO's order dated 31.01.2024 was maintainable before the CIT(A), and no final assessment order under Section 144C(13) was placed on record by the revenue. The assessee argued that the appeal should have been adjudicated on merits. The revenue supported the CIT(A) order.

Which sections of the Income-tax Act were involved?

Section 92B,Section 92CA,Section 250,Section 143(2),Section 144C(1),Section 144C(3),Section 144C(5),Section 144C(13),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA

Hearing: 11.06.2026Pronounced: 12.06.2026

आयकर अपील�य अ�धकरण, ‘डी’ �यायपीठ, चे�नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI �ी जॉज� जॉज� के, उपा�य� एवं �ी एस.आर.रघुनाथा, लेखा सद�य के सम� BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A Nos.: 22 & 23/CHNY/2025 िनधा�रण वष�/Assessment Years: 2020-21 & 2021-22 Kaar Technologies India Pvt. The Assistant Commissioner Ltd., Vs. of Income Tax, Level 8, Shyamala Towers, Corporate Circle 4(2), No.136, Arcot Road, Chennai Saligramam S.O., Chennai – 600 093. PAN: AACCK 7322E (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri N. Arjunraj, Advocate ��यथ� क� ओर से/Respondent by : Shri Jenaradhanan, CIT सुनवाई क� तारीख/Date of Hearing : 11.06.2026 घोषणा क� तारीख/Date of Pronouncement : 12.06.2026 आदेश/ O R D E R PER GEORGE GEORGE, VICE PRESIDENT: These appeals filed by the assessee are directed against two orders of the Commissioner of Income Tax (Appeals), Chennai-16 dated 29.05.2025 & 30.05.2026 passed u/s.250 of the Income Tax Act, 1961 (hereinafter the ‘Act’). The relevant assessment years are 2020-21 & 2021-22.

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2.

Common issue is raised in these appeals and hence, they were heard together and are being disposed off by this consolidated order. We shall first adjudicate IT(TP)A No.22/CHNY/2025 concerning assessment year 2020-21.

IT(TP)A No.22/CHNY/2025 (Assessment year 2020-21) 3. Brief facts in relation to the above appeal are as follows: The assessee is a company engaged in the business of implementation and customization of SAP software solutions. For the Assessment Year 2020-21, the assessee filed its return of income on 30.12.2020 declaring total income of Rs.7,89,75,650/-. The return of income was selected for scrutiny assessment and notice u/s.143(2) of the Act was issued on 29.06.2021. During the course of assessment proceedings, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP) in respect of the international transactions entered into by the assessee with its Associated Enterprises (AEs). The TPO, vide order dated 18.07.2023 passed u/s.92CA(3) of the Act, proposed an upward transfer pricing adjustment of Rs.46,80,367/- on account of alleged arm’s length interest on outstanding receivables from the

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Associated Enterprises. According to the TPO, pursuant to the retrospective amendment to Section 92B of the Act with effect from 01.04.2002, outstanding receivables constitute a separate international transaction requiring independent benchmarking analysis. The TPO observed that the assessee had neither benchmarked the outstanding receivables in its Transfer Pricing Study Report nor furnished any explanation in response to the show-cause notice issued during the proceedings. Accordingly, considering a credit period of 30 days as being in accordance with industry standards, the TPO computed notional interest on the receivables outstanding beyond the said period by applying a rate of USD LIBOR plus 350 basis points. On such basis, the TPO determined an adjustment of Rs.46,80,367/- towards arm’s length interest on delayed realization of receivables from the Associated Enterprises.

4.

Aggrieved, assessee filed appeal before the CIT(A). The CIT(A) after examining the TP study of the assessee observed that the AE undertakes significant risk/ hold substantial assets and performs crucial functions. Therefore, it was concluded by the CIT(A) the contention of the assessee that AEs are merely

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pass through entities fail. Further, it was stated that the transactions subject to TP audit are with AEs and not with the Saudi companies and thereby upheld the upward adjustment made by the TPO.

5.

Aggrieved, assessee has filed the present appeal before the Tribunal. The Ld.AR has filed a petition under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 (hereinafter the ‘Rules’) for admission of additional evidences. The additional evidences that are sought to be admitted are financials of the assessee, financials of the assessee’s AEs, Master agreement entered by assessee with its AEs, the literature published by the international agents in relation to the economic conditions prevailing in Saudi Arabia that had resulted in delayed payments to the AEs which was in turn paid to the assessee. The Ld.AR submitted that the above documents could not be furnished before the lower authorities on account of limited opportunities granted.

6.

The Ld.DR supported the orders of the AO / CIT(A). However, the Ld.DR did not have a serious objection of the

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remand of the case to the AO, if the additional evidences are admitted.

7.

We have heard rival submissions and perused the material on record. The solitary issue for our consideration is whether any interest is required to be imputed on the outstanding receivables from the assessee's Associated Enterprises (AEs). The Ld. AR submitted that the assessee's AEs were dealing with oil companies in Saudi Arabia. During the relevant period, due to the fall in oil prices and difficult market conditions in the oil industry, the Saudi companies made payments to the AEs with considerable delay. Consequently, the AEs also delayed the remittance of the amounts to the assessee, resulting in outstanding receivables. In support of its contentions, the assessee has filed a petition for admission of additional evidence. The additional evidence mainly consists of industry reports and publications explaining the economic conditions prevailing in the oil sector during the relevant period, as well as the financial statements of the assessee and its AEs. The said documents now furnished goes to the root of the issue namely whether interest is to be imputed on the outstanding receivables. Therefore, for substantial justice and equity, we are

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of the view the same needs to be admitted for proper adjudication of the matter and we admit the additional evidences now filed before the Tribunal. Since additional evidences are admitted, we deem it appropriate to restore the matter to the files of the AO/TPO for fresh examination. The AO/TPO shall consider the additional evidence admitted by us, provide adequate opportunity of hearing to the assessee, and thereafter decide the issue afresh in accordance with law. It is ordered accordingly.

IT(TP)A No.23/CHNY/2025 (Assessment year 2021-22) 8. At the very outset, we notice that the CIT(A) has dismissed the assessee's appeal in limine without adjudicating the grounds raised on merits. The observation of the CIT(A) reads as follows:- 5. ……………………………… …………………………….. The AO issued draft order u/s.144C(1) of the Income tax Act, 1961 to the assessee on 26.12.2023. Thereafter, the appellant approached the DRP and filed objections against the draft assessment order. The DRP vide letter dated 24.09.2024 issued directions rejecting the objections of the appellant. Hence the appeal against the order of AO dated 31.01.2024 is not maintainable.”

9.

We notice that the assessee company had filed an appeal before the CIT(A)-16 against the assessment order dated 31.01.2024 passed u/s.143(3) r.w.s. 144C(3) r.w.s. 144B of the

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Act. In the said order at para 3.8, the AO observed that no objections had been filed before the DRP within the prescribed period and accordingly completed the assessment u/s.143(3) r.w.s. 144C(3) r.w.s.144B of the Act. An appeal against such an order lies before the CIT(A). However, the assessee contended that objections had in fact been filed before the DRP u/s.144C(5) of the Act and that, pursuant to the DRP's directions, the AO was required to pass a final assessment order u/s.144C(13) of the Act, against which an appeal would lie directly before the Tribunal. The assessee submitted that it was not aware of any final assessment order having been passed u/s.144C(13) of the Act. The Revenue was also unable to place on record any such final assessment order. In these circumstances, the CIT(A) ought not to have dismissed the appeal in limine and should have adjudicated the appeal on merits in the absence of any final assessment order u/s.144C(13) of the Act. Ordinarily, the matter would have been restored to the file of the CIT(A) for adjudication. However, we find that the issue involved in the present appeal is identical to that considered by us in the assessee's case for Assessment Year 2020-21, relating to transfer pricing adjustment on account of computation of interest on outstanding receivables from AEs.

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Since, for Assessment Year 2020-21, we have already restored the issue to the file of the AO/TPO for fresh examination in light of the additional evidence filed by the assessee, we consider it appropriate to adopt the same course for the present year as well. Accordingly, the impugned order is set aside and the matter is restored to the file of the AO/TPO for fresh consideration. It is ordered accordingly.

10.

In the result, the appeals filed by the assessee are allowed for statistical purposes.

Order pronounced in the open court on 12th June, 2026 at Chennai.

Sd/- Sd/- (एस.आर. रघुनाथा) (जॉज� जॉज� के) (S.R. RAGHUNATHA) (GEORGE GEORGE K) उपा�य� /VICE PRESIDENT लेखा सद�य/ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 12th June, 2026 RSR, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.06.16 12:46:06 +05'30'

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