EIT SERVICES INDIA PRIVATE LIMITED ,BANGALORE vs. DCIT, CIRCLE-2(2)(1), BANGALORE

PDF · subscribers
ITITA 630/BANG/2025Status: DisposedITAT Bangalore25 February 2026AY 2011-129 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the transfer pricing adjustment should be restricted only to AE transactions with Non-US Countries, as US AE transactions were settled in MAP. The TPO was directed to restrict the adjustment to international transactions with associated enterprises in non-US countries. This resolved Ground No. 2 in favor of the assessee. Regarding TDS credit (Ground No. 3), the AO was directed to verify the credit and allow it in accordance with the law, calling for information from the assessee before disallowing any part. Similarly, for advance tax credit (Ground No. 4), the AO was directed to verify and allow the credit, seeking information from the assessee if any part was not allowable. For interest under section 234B (Ground No. 5), the AO was directed to recompute the interest, if any chargeable. For interest under section 220(2) (Ground No. 6), the AO was directed to compute the interest in accordance with law, considering the assessee's claim that no interest is chargeable beyond October 2022, and to grant an opportunity of hearing if the AO believed such interest was chargeable. Grounds 1 and 7 were dismissed as general. The ratio for Ground 2 is that transfer pricing adjustments are limited to AE transactions, especially when other transactions with AEs are settled via MAP, and adjustments cannot be made at the entity level to include non-AE transactions.

What were the facts?

The assessee, EIT Services India Pvt. Ltd., filed an appeal for assessment year 2011-12 against an assessment order dated January 24, 2025, passed under section 143(3) r.w.s. 254 of the Income Tax Act, 1961. The original return of income was ₹ 1,767,765,756, and the assessed income was ₹ 3,757,541,464. The assessee had previously appealed to the ITAT, and also filed a Mutual Agreement Procedure (MAP) with the USA. All international transactions with US associated enterprises (AEs) were settled in the MAP. A draft assessment order was framed on March 30, 2024, followed by directions from the Dispute Resolution Panel (DRP) on December 23, 2024, leading to the final assessment order under challenge. The appeal raises grounds concerning transfer pricing adjustments, TDS credit, advance tax credit, and levy of interest under sections 234B and 220(2).

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the transfer pricing adjustment should be restricted to international transactions with non-US associated enterprises, and not applied at the entity level or to domestic transactions with non-AEs (Section 92CA). - Assessee's contention: The transfer pricing adjustment should be restricted to transactions with associated enterprises in non-US countries, as US AE transactions were settled via MAP. Domestic transactions with non-AEs in the Non-USA segment should not be subject to arm's length testing under Chapter X. The DRP erred in stating the issue was decided against the assessee in a Miscellaneous Petition and that the TPO had no discretion for proportionate adjustment. - Revenue's contention: The learned DR agreed with the assessee's contention. 2. Whether the denial of TDS credit of Rs. 39,47,253, pertaining to amalgamated entities, was justified (Section 199). - Assessee's contention: The TDS credit is allowable as per Section 199. - Revenue's contention: Not recorded. 3. Whether the denial of advance tax credit of Rs. 13,80,000, pertaining to amalgamated entities, was justified (Section 219). - Assessee's contention: The advance tax credit is allowable as per Section 219. - Revenue's contention: Not recorded. 4. Whether the levy of incremental interest under section 234B was correct, considering potential allowance of other grounds (Section 234B). - Assessee's contention: Liability to pay excess interest of Rs. 2,36,48,415 is denied. - Revenue's contention: Not recorded. 5. Whether the levy of interest under section 220(2) was justified, particularly beyond October 2022, given the demand discharge and potential allowance of other grounds (Section 220(2)). - Assessee's contention: The assessee is not in default, and interest should not be leviable beyond October 2022. Liability for excess interest is denied. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 254,Section 92CA,Section 144C(5),Section 199,Section 219,Section 234B,Section 220(2),Section 144C(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY

For Appellant: Shri Padamchand Khincha, CA
For Respondent: Dr. Divya K J, CIT(DR)(ITAT), Bengaluru
Hearing: 15.12.2025Pronounced: 25.02.2026

Per Prashant Maharishi, Vice President 1. This appeal is filed by EIT Services India Private Limited [the assessee/appellant] for assessment year 2011–12 against the assessment order passed under section 143 (3) r.w.s. 254 of the Income Tax Act, 1961 [the Act] dated 24th of January 2025 raising following grounds of appeal:-

IT(TP)A No.630/Bang/2025 Page 2 of 9

“ 1. General ground: 1.1. The Assistant Commissioner of Income Tax, Circle 2(2)(1), Bangalore (hereinafter referred to as AO for brevity) has erred in passing the assessment order dated 24 January 2025 under section 143(3) read with section 254 of the Income-tax Act, 1961 (hereinafter referred to as the Act for brevity) in the manner passed by it. 1.2. The Dispute resolution panel -1, Bangalore (hereinafter referred to as DRP for brevity) has erred in issuing its directions under section 144C(5) of the Act in the manner passed by it. 2. Transfer pricing addition not restricted to international transactions — Section 92CA 2.1. The learned TPO, AO and Honorable DRP has erred in fact and in law in computing the transfer pricing addition at entity level and not restricting the transfer pricing adjustment to the value of international transactions, thereby making an excess addition of Rs. 10,46,27,999. 2.2. The learned TPO, AO and Honorable DRP have erred in not appreciating that the Appellant has earned income from domestic transactions with non-AEs in its Non-USA segment, and these domestic transactions with non-AE's could not be subject to arm's length test under Chapter X of the Income Tax Act, 1961. 2.3. The learned TPO, AO and Honorable DRP have erred in not following various judicial precedents, including decision of the Honorable Tribunal in the Appellant's own case, upholding the principle of proportional adjustment in transfer pricing. 2.4. Without prejudice to the above, the Honorable DRP has erred in stating that the issue was decided against the assessee in the Miscellaneous Petition order dated 29.05.2023. 2.5. The Honorable DRP has erred in stating that the learned TPO has no discretion to make a proportionate adjustment in the absence of specific direction from the ITAT, without appreciating that the disputed addition is ultra vires the provisions of the Act.

IT(TP)A No.630/Bang/2025 Page 3 of 9

2.6. Based on the above, the learned TPO and AO have erred in making the transfer pricing addition at Rs. 1,30,34,63,786 as against the correct addition of Rs. 1,198,835,787. The Honorable DRP has also erred in not allowing the relief of Rs. 10,46,27,999 being the transfer pricing addition computed on domestic transactions. 3. Short grant of TDS credit — Section 199 3.1. The learned AO has erred in restricting the TDS credit claimed by the Appellant to Rs. 13,16,21.573, by denying claim of TDS credit of Rs. 39,47,253 without providing any reason for the same. 3.2. Based on facts and circumstances of the case and law applicable, the TDS credit of Rs. 39,47,253 pertaining to entities that have been amalgamated with the Appellant is allowable as credit under section 199 of the Act. 4. Short grant of credit of advance tax paid 4.1. The learned AO has erred in restricting the advance tax credit claimed by the Appellant to Rs. 37,82,00.000 by denying claim of advance tax of Rs. 13 80 000 without providing any reason for the same. 4.2. Based on facts and circumstances of the case and law applicable, the advance tax credit of Rs. 13.80.000 pertaining to entities that have been amalgamated with the Appellant in allowable as credit under section 219 of the Act. 5. Levy of incremental interest under section 234B 5.1. The learned AO has erred in levying an incremental interest u/s 234B amounting to Rs. 27,73,90,624. On the facts and circumstances of the case, interest u/s 234B on the additional tax liability on the undisputed adjustments would be Rs. 25,37,42,209, if the aforementioned grounds are allowed. The Appellant denies its liability to pay the excess interest of Rs. 2,36,48,415 as computed.

IT(TP)A No.630/Bang/2025 Page 4 of 9

6.

Levy of interest u/s 220(2): 6.1. The learned AO has erred in not appreciating that the Appellant has discharged the demand raised in the original assessment order under section 143(3), by requesting adjustment with outstanding refunds for subsequent assessment years and paid the balance amount payable as determined by the AO within a period of 30 days of order of the AO dated 14.10.2022. 6.2. The learned AO has erred in not appreciating that based on facts of the case and law applicable, the assessee is not an assessee in default under section 220 of the Act and interest under section 220(2) shall not be leviable beyond the period of October 2022. 6.3. Without prejudice, the Appellant denies its liability to pay the excess interest u/s 220(2) which shall not be leviable if the aforementioned grounds of appeal are allowed. 6.4. Based on the facts and circumstances of the case and law appliable, the levy of interest under section 220(2) beyond the period of October 2022 and incremental interest on disputed additions, is incorrect and bad in law. Appellant denies its liability to pay the interest as computed. 7. Prayer: 7.1. Based on the above grounds and other grounds adduced at the time of hearing, the appellant prays that the above grounds and relief prayed thereof be allowed. 7.2. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal. The appellant prays accordingly.”

2.

Brief facts of the case shows that the assessee company is engaged in software development, technical services and other related services filed its return of income for ₹ 1,767,765,756/– which was assessed as

IT(TP)A No.630/Bang/2025 Page 5 of 9

per the assessment order passed under section 143 (3) r.w.s 144C the Income Tax Act, 1961 [the Act] on 19 February 2016 at an assessed income of ₹ 3,757,541,464.

3.

This assessment order was challenged before the Tribunal and assessee also filed a Mutual Agreement Procedure with the competent authority in USA under article 27 of the Double Taxation Avoidance Agreement between India and USA on 17 March 2016. Pursuant to that the appeal of the assessee before the Tribunal in IT(TP)A No. 810 & 835/Bang/2016 were decided on 3rd June 2022 where the ITAT adjudicated certain issues by restoring to the file of the AO for fresh consideration.

4.

All international transaction of the assessee with US AE are settled in MAP.

5.

In pursuance of that the learned AO framed the assessment order under section 144C (1) as draft assessment order on 30 March 2024. The objections were filed before the learned Dispute Resolution Panel – 1 Bangalore (the ld.DRP) who has passed the direction on 23rd December 2024 which resulted into passing an final assessment order on 24th of January 2025 which is in dispute before us.

6.

The learned AR, Shri Padamchand Khincha, CA submitted that it is fact that all US transactions have been settled in MAP. Therefore the transfer pricing adjustment now can only be made with respect to AE transaction with non-US countries. Thus, he submits that the transfer

IT(TP)A No.630/Bang/2025 Page 6 of 9

pricing adjustment should be restricted only to the extent of transactions with associated enterprises in non-US countries. He referred to page No. 62 of the appeal set which is paragraph No. 2.11 of the order of the Coordinate Bench in ITA No. 810 and 835/Bangalore/2016 wherein the details are provided. He also referred to page No. 216 of the paper book which is part of the order giving effect passed by the ACIT, Transfer Pricing – 1 (2) (1), Bangalore wherein it is shown that non-US transactions in software development segment is ₹ 3,364,150,578 as well as in ITeS segment is ₹ 982,442,197. He submitted that these transactions include transaction with associated enterprises as well as non-associated enterprises. He submits that the ld. TPO has made the adjustment on total non-US transactions in both these segments where the transactions are comprising of AE and non-AE transaction. He submits that adjustment is required to be made only to the extent of AE transaction with Non US Countries.

7.

The learned DR also agreed with the above contention.

8.

Accordingly, we direct the learned AO to restrict the adjustment of transfer pricing only on AE transaction of the assessee with Non US Countries Only for the reason that transfer pricing adjustment can only be made on AE segment as in the present case, the transaction of the assessee with associated enterprises of USA have already been settled in Mutual Agreement Procedure. Therefore the learned AO is directed to restrict the adjustment in relation to international transaction

IT(TP)A No.630/Bang/2025 Page 7 of 9

(transaction of the assessee with its associated enterprises) in non-US countries (countries other than USA).Accordingly Ground no 2 of the appeal is allowed.

9.

The 3rd Ground of appeal is against the action of the learned AO in restricting the TDS credit claimed by the Appellant to Rs. 13,16,21.573, by denying claim of TDS credit of Rs. 39,47,253. It is claimed that ld AO did not provide any reason. It is submitted that the TDS credit of Rs. 39,47,253 pertaining to entities that have been amalgamated with the Appellant is allowable as credit under section 199 of the Act, has not been granted. The ld AO is directed to verify the credit and allow the same in accordance with the law. If the ld AO is of the view that some credits are not allowable the assessee, he is directed to call for information and explanation from assessee, before disallowing the same. Ground no 3 is allowed as indicated above.

10.

4th Ground of appeal is against the action of the learned AO in denying claim of advance tax of Rs. 13 80 000 without providing any reason for the same. It is the claim of the assessee is that the advance tax credit of Rs. 13.80.000 pertaining to entities that have been amalgamated with the Appellant in allowable as credit under section 219 of the Act. The ld AO is directed to verify the credit and allow the same in accordance with the law. If the ld AO is of the view that some credits are not allowable the assessee, he is directed to call for information and explanation from assessee, before disallowing the same. Ground no 4 is allowed as indicated above.

IT(TP)A No.630/Bang/2025 Page 8 of 9

11.

Ground no 5 of the appeal is against the levy of interest u/s 234B amounting to Rs. 27,73,90,624. It is the claim that if the grounds are allowed, The Appellant denies its liability to pay the excess interest of Rs. 2,36,48,415 as computed u/s 234 B of the act. We direct the ld AO to recompute interest, if any chargeable, u/s 234B of the Act. Ground no 5 is allowed as indicated above.

12.

Ground no 6 of the appeal is against the levy of interest u/s 220 (2) of the act It is submitted that ld AO has not appreciating that the Appellant has discharged the demand raised in the original assessment order under section 143(3), by requesting adjustment with outstanding refunds for subsequent assessment years and paid the balance amount payable as determined by the AO within a period of 30 days of order of the AO dated 14.10.2022. Therefore, the assessee is not an assessee in default under section 220 of the Act and interest under section 220(2) shall not be leviable beyond the period of October 2022. It is also claimed that the Appellant denies its liability to pay the excess interest u/s 220(2) which shall not be leviable if the grounds of appeal are allowed. Hence, the levy of interest under section 220(2) beyond the period of October 2022 and incremental interest on disputed additions, is incorrect and bad in law. Appellant denies its liability to pay the interest as computed. We direct the ld AO to compute the interest u/s 220 (2) of the act in accordance with law, it is the claim of the assessee that no such interest is chargeable beyond October 2022. In case if the AO is of the view that such interest is chargeable, then he must grant

IT(TP)A No.630/Bang/2025 Page 9 of 9

assessee an opportunity of hearing. Ground no 6 is allowed as indicated above.

13.

Ground no 1 and 7 are general in nature and hence dismissed.

In the result, the appeal by the assessee is partly allowed.

Pronounced in the open court on this 25th day of February, 2026.

Sd/- Sd/- ( KESHAV DUBEY ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 25th February 2026. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order

Assistant Registrar ITAT, Bangalore.

More judgments on Section 92CA

All 3,978 judgments and leading authorities on Section 92CA →

Recent GST High Court judgments

Search GST case law →