LINTAS INDIA PRIVATE LIMITED,MUMBAI, INDIA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 16(1), MUMBAI, MUMBAI, INDIA

This appeal by the assessee is directed against the assessment order dated 25.08.2025 passed by the Assessment Unit, Income Tax Department, under section 143(3) read with sections 254 and 144B of the Income-tax Act, 1961 ('the Act'), pursuant to the directions dated 28.07.2025 of the Dispute Resolution Panel-1, Mumbai ('the DRP'), under section 144C(5) of the Act, for the assessment year 2017-18.

This is the second round of proceedings. In the first round, the Transfer Pricing Officer ('the TPO') determined the arm's length price of payments for Global Information Services ('GIS'), Management Service Fee ('MSF') and Multinational Client Co-ordination Services ('MNC services') at nil and proposed an adjustment aggregating to Rs.19,48,26,100. The assessment also included an addition of Rs.10,79,303 on account of the difference between the income reflected in Form No.26AS and the books of account. The assessee's claim for withdrawal of the disallowance of Rs.1,00,56,473 suo motu made under section 14A in its return was not accepted. The matter reached the Tribunal in ITA No.595/Mum/2022, which was disposed of by the common order dated 09.12.2022 along with ITA No.398/Mum/2019 for assessment year 2014-15.

By the aforesaid order, the Tribunal restored the transfer pricing issues to the AO/TPO with the directions given for assessment year 2014-15. The issues concerning the reconciliation of income and the claim under section 14A were also restored for examination. The assessee has stated that it has preferred an appeal before the Hon'ble High Court against the order dated 09.12.2022. The present appeal arises from the proceedings undertaken to give effect to that order. No order of the Hon'ble High Court staying or modifying the relevant remand directions has been placed before us. Consequently, the present proceedings have to be examined within those directions, subject to the decision of the Hon'ble High Court.

The Tribunal's order was received in the office of the Principal Commissioner on 30.03.2023. The AO made a reference to the TPO under 4

We first take up ground No.1 relating to limitation. The learned Authorised Representative ('the learned AR') submitted that the period prescribed under section 153(3) expired on 31.03.2024, being twelve months from the end of the financial year in which the Tribunal's order was received by the Principal Commissioner. According to him, the Tribunal had directly restored the transfer pricing issue to the TPO, and the subsequent reference by the AO was unnecessary. Therefore, the additional period of twelve months under section 153(4) was not available. He referred to paragraph 23 of the earlier order and relied on New Delhi Television Ltd. v. Dispute Resolution Panel, reported in (2024) 465 ITR 687 (Delhi), and United Spirits Ltd. v. DCIT, reported in (2026) 184 taxmann.com 286 (Karnataka). He also submitted that section 254(3), read with rule 35 of the Income-tax (Appellate Tribunal) Rules, 1963, requires communication of the Tribunal's order to the assessee and the Commissioner, and does not require separate service upon the TPO. Therefore, non-service upon the TPO could not alter the limitation. In the alternative, it was submitted that even if section 153(4) applied, the final assessment ought to have been completed by 31.03.2025.

The learned Departmental Representative ('the learned DR') relied on the orders of the AO and the DRP. The Revenue's case is that the Tribunal restored the matter to the AO/TPO for fresh determination of the arm's length price, and the reference dated 02.05.2023 was made in the course of those proceedings. Reliance was placed on paragraph 3.5 of CBDT Instruction No.3 of 2016 dated 10.03.2016, which requires a case involving a transfer pricing

We have considered the rival submissions and perused the material on record. The date of receipt of the earlier order by the Principal Commissioner is 30.03.2023, as recorded by the DRP in paragraph 9.3 of its directions and also stated by the assessee in its written submissions. The inconsistent date appearing in ground No.1(a), as reproduced above, does not alter this factual position. The ordinary period under section 153(3), read with its proviso, would accordingly end on 31.03.2024. The question is whether the reference made by the AO during the restored assessment proceedings attracts section 153(4). That provision expressly extends the period available under section 153(3) where a reference under section 92CA(1) is made during the course of assessment or reassessment proceedings.

For this purpose, the operative direction for the assessment year before us is material. Paragraph 37 of the Tribunal's order dated 09.12.2022 reads as under:

The direction for assessment year 2017-18 is thus addressed to the AO/TPO. It has to be read with the directions for assessment year 2014-15, including the concluding direction in paragraph 23 requiring the TPO/AO to examine the material for determination of the arm's length price. In our view, the restored proceedings required the AO to take up the matter and refer the transfer pricing component to the TPO for the prescribed exercise. The TPO was not independently served with the appellate order, and the matter was placed before him by the AO through the reference dated 02.05.2023. That 6

We have considered the decisions relied upon by the learned AR. In New Delhi Television Ltd. (supra), the Hon'ble Delhi High Court examined the terms of the particular remand and held that the Tribunal had directly remitted the transfer pricing issue to the TPO. The TPO had already acted on that remand and passed an order before the AO made another reference. The Hon'ble High Court held the later reference to be superfluous and rejected the contention that the Tribunal's remand itself could be treated as a deemed reference under section 153(4). Paragraph 79 of the judgment, also reproduced in the DRP record, reads as under:

The Hon'ble High Court further explained in paragraph 81:

In United Spirits Ltd. (supra), the Hon'ble Karnataka High Court followed the distinction between a matter remitted by the Tribunal to the TPO and a

The date from which the limitation period is computed continues to be the date of receipt by the statutory authority specified in section 153(3), namely 30.03.2023 in the present case. Once section 153(4) applies, twelve months are added to the period otherwise available under section 153(3). The extended period accordingly ended on 31.03.2025. The TPO's order dated 22.01.2025 and the draft assessment order dated 27.02.2025 were passed within that period. Ground No.1(a) is dismissed.

The alternative contention in ground No.1(b) is that the timelines in section 144C are subsumed within the overall limitation under section 153 and that the final order dated 25.08.2025 is therefore beyond time even on the footing that section 153(4) applies. In considering this contention, the amendments made by section 8 of the Finance Act, 2026 have to be taken into account. Sub-section (4A) of section 144C clarifies the period for completion under sub-section (4) where a draft has been forwarded within the time allowed under section 153. Since the assessee in the present case filed objections and obtained directions from the DRP, the corresponding provision directly applicable is sub-section (13A), also inserted by the Finance Act, 2026. Both these provisions are deemed to have been inserted with effect from 01.04.2009. Sub-section (13A) reads as under:

The amended provision preserves the requirement that the draft assessment order be forwarded within the time allowed under section 153. Once that requirement is fulfilled, the further period for the DRP proceedings and the consequential assessment is governed by section 144C(12) and (13). In the present case, the draft order was passed on 27.02.2025, within the period ending on 31.03.2025. The DRP issued directions on 28.07.2025, and the final assessment order was passed on 25.08.2025. Even reckoning receipt of the directions in July 2025, the final order is within the period ending on 31.08.2025 under section 144C(13). The retrospective amendment therefore answers the contention that the final assessment also had to be completed by 31.03.2025. It does not itself extend or revive the period for issuing the draft order; that order is within time for the reasons already recorded under section 153(3) read with section 153(4). Ground No.1(b) is accordingly dismissed.

Ground No.2 concerns the alleged failure to issue a show-cause notice under section 144B before the draft assessment order. The learned AR submitted that a notice setting out the prejudicial variations was a mandatory requirement under section 144B(1)(xii)(b), and that the draft order could not substitute that notice. According to him, the transfer pricing adjustment was incorporated without the requisite notice from the AO.

The learned DR relied on the assessment record and the DRP directions. The record contains a show-cause notice dated 17.02.2025, a video conference opportunity on 20.02.2025 and the assessee's reply dated 21.02.2025. The DRP also considered the assessee's objections after hearing its representative. 9

Ground Nos.4 to 7 relate to the adjustment of Rs.19,48,26,100 towards intra-group services. The learned AR submitted that the authorities had not followed the findings and directions in the first round. In respect of GIS of Rs.5,70,46,722, he referred to the agreement at pages 173 to 179 of paper book Volume I, the disclosure in Form No.3CEB, the cost allocation working at pages 1279 and 1280 of Volume III and the certificate of the Finance Director at page 1366. The services covered enterprise infrastructure, applications, messaging, service desk support, hosting and related information technology support. The chart and Exhibit A were relied upon to correlate the categories of services with the supporting correspondence and their use in the assessee's business. It was submitted that the AE recovered the allocated cost without a mark-up and that the transaction had been benchmarked under the other method.

The learned AR further submitted that the TPO had not carried out a price comparison under rule 10AB and had instead repeated the need, evidence and benefit objections which had already been considered in the earlier order. He relied on the decisions in the assessee's own case for earlier years and on FCB Ulka Advertising Pvt. Ltd. v. ACIT in IT(TP)A No.2194/Mum/2017 dated 25.06.2019; Megger India (P.) Ltd. v. DCIT, (2020) 115 taxmann.com 631 (Mumbai); CIT v. Johnson & Johnson Ltd., (2017) 80 taxmann.com 269 (Bombay); CIT v. Lever India Exports Ltd., (2017) 78 taxmann.com 88 (Bombay); and CIT v. Merck Ltd., Income-tax Appeal No.272 of 2014 dated 08.08.2016. On the selection of the foreign AE as the tested party, reliance was placed on Virtusa Consulting Services Pvt. Ltd. v. DCIT, T.C.A. No.996 of 2018 dated 04.02.2021, and PCIT v. Almatis Alumina Pvt. Ltd., ITAT No.35 of 2020 dated 18.02.2022. It was urged that the entire adjustment be deleted.

The learned DR relied on the TPO's order and the DRP directions. The Revenue's objections, as recorded therein, are that the agreements, correspondence and allocation keys do not establish the actual cost

We have considered the rival submissions and the material referred to by the parties. The starting point in this second round must be the findings and directions in the Tribunal's order dated 09.12.2022. Paragraph 19, dealing with the documentation, reads as under:

The scope of the exercise that nevertheless remained to be undertaken was stated in paragraph 23, which reads as under:

These directions were adopted for assessment year 2017-18 by paragraph 37, reproduced earlier. The two findings must be read together. The Tribunal did not approve a wholesale rejection of the service documentation or the repetition of the earlier nil valuation merely on that basis. Equally, it did not hold that the contractual payments necessarily represented the arm's length price for the year. On the contrary, it expressly declined outright deletion and directed an examination of the documents for benchmarking. The pending appeal before the Hon'ble High Court does not permit either the departmental authorities or this Bench, in the present appeal, to proceed as though those directions had ceased to operate.

The approach in the second round has not adequately given effect to that distinction. The TPO and the DRP have again substantially rested the nil valuation on the absence of demonstrated need, requisition, receipt and tangible benefit. The correspondence and the service-wise chart identify, amongst other matters, support for messaging and user accounts, applications and systems, business planning, advertising adaptation and multinational client co-ordination. Such material could not be rejected generally by repeating that no specific service had been identified, without dealing with the identified material and the earlier findings. Whether particular costs are attributable to the assessee and whether the resulting charge is at arm's length remain matters for examination; they require a reasoned analysis of the costs, allocation and pricing, within the earlier directions.

In CIT v. Johnson & Johnson Ltd. (supra), the Hon'ble jurisdictional High Court explained the requirement of determining the arm's length price by a

The use of the expression 'other method' does not dispense with a pricing exercise. Rule 10AB requires consideration of the price charged or paid, or which would have been charged or paid, for the same or a similar uncontrolled transaction in comparable circumstances. A general conclusion that an independent enterprise would pay nothing, founded on the very objections which the earlier order required to be considered differently, is not by itself the prescribed analysis. At the same time, recovery at cost does not, without examining the cost pool and its allocation, conclusively establish the arm's length price of GIS. The cost allocation working and the supporting certificate must therefore be considered for what they establish, and any specific deficiency must be identified and put to the assessee.

For MSF and MNC services, the foreign location of the AE cannot by itself be a sufficient reason to reject it as the tested party. The selection depends upon the functions, assets and risks relating to the transaction, the relative complexity of the parties and the availability of reliable financial and comparable data. The decisions in Virtusa Consulting Services Pvt. Ltd. and Almatis Alumina Pvt. Ltd. relied upon by the learned AR require consideration of that factual exercise. Conversely, the mere fact that the AE charged a mark- up of 5% does not, by itself, establish that it is the least complex entity or

We are, therefore, unable to sustain the determination of the arm's length price at nil on the reasoning adopted. However, accepting the contractual amounts as the final arm's length price without completing the benchmarking would also bypass the exercise expressly directed in the first round. Accordingly, we set aside the impugned determination on this issue and restore it to the AO/TPO for the limited purpose of determining the arm's length price in accordance with sections 92C and 92CA and the applicable Rules, giving effect to paragraphs 19, 23 and 37 of the earlier order. The GIS cost pool and allocation shall be examined with the relevant working and certificate. The TNMM analysis for MSF and MNC services, including the tested party, comparable data, geographical comparability and mark-up, shall be examined by recording specific reasons for acceptance or rejection. Any adjustment shall emerge from the prescribed benchmarking exercise.

The AO/TPO shall consider the material already furnished, including the service-wise chart and the certificates referred to by the learned AR, and may seek particulars necessary to verify the pricing and allocation. The remand shall not be used to repeat a general rejection of the service documentation contrary to the earlier findings. The assessee shall be afforded a reasonable opportunity to explain any identified deficiency and any proposed adjustment. These directions are subject to the orders of the Hon'ble High Court in the assessee's appeal against the order dated 09.12.2022. We have not expressed any view on the correctness of the earlier remand challenged before the Hon'ble High Court. Ground Nos.4 to 7 are allowed for statistical purposes in these terms.

The learned DR relied on the orders of the AO and the DRP. The AO retained the voluntary disallowance on the footing that it formed part of the income offered in the return and referred to CIT v. Shelly Products, (2003) 261 ITR 367 (SC). The DRP also relied on Goetze (India) Ltd. v. CIT, (2006) 284 ITR 323 (SC), concerning a claim before the AO otherwise than through a revised return.

We have considered the submissions. The earlier order dealt expressly with the voluntary disallowance. For completeness, paragraph 39 is reproduced below:

The assessee itself has computed and disallowed a sum of Rs.1,00,56,473 under section 14A read with rule 8D while determining its total income in the return. Thus, the amount in question represents expenditure identified and quantified by the assessee itself as relatable to its investments. The claim now made is for withdrawal of that disallowance on the ground that no exempt income was earned during the year. The earlier order of the Tribunal has to be read in its entirety. While referring to the absence of exempt income, the Tribunal also expressly observed that the assessee, having made the disallowance under section 14A in its return, was required to place the relevant facts before the AO, who was to examine the same and decide the issue in accordance with law. The Tribunal did not itself delete the quantified amount of the voluntary disallowance; it restored the claim for examination according to law. In this context, we also take note of the Explanation inserted in section 14A by the Finance Act, 2022, with effect from 01.04.2022, which provides that the section shall apply and shall be deemed to have always applied even where income not forming part of the total income has not accrued or arisen or has not been received during the relevant previous year, provided expenditure has been incurred in relation to such income. The legislative clarification emphasises the relationship between the expenditure and the income of the exempt category. We refer to that clarification in considering the assessee's own identification and quantification of such expenditure; we are not invoking it to impose a fresh disallowance by treating its retrospective application to assessment year 2017-18 as a concluded proposition. The voluntary computation is a relevant circumstance which cannot be disregarded while examining the subsequent claim for its withdrawal. Having regard to that computation and the direction in the earlier order to examine the claim in accordance with law, we do not find sufficient reason to disturb the amount already disallowed by the assessee. Accordingly, the suo motu disallowance of Rs.1,00,56,473 shall be retained. Any further

Ground Nos.3 and 9 concern the difference between the income determined in the assessment order and the amount adopted in the computation sheet. The learned AR submitted that the order determined total income at Rs.93,56,94,283, whereas the computation sheet adopted Rs.94,85,78,065 without any corresponding finding or reason. The additional amount was stated in ground No.9 to be Rs.1,28,83,783. The learned DR relied on the assessment order.

The computation sheet must give effect to the income determined in the assessment order and cannot independently introduce an addition unsupported by that order. The arithmetic difference between the two stated totals is Rs.1,28,83,782. The AO shall reconcile the figures with the actual computation sheet and remove the excess, if it has no basis in the assessment order. The total income shall then be recomputed in accordance with our findings on the substantive grounds. Ground Nos.3 and 9 are allowed for statistical purposes.

In ground Nos.10 and 11, the assessee contends that the computation incorrectly applies a basic tax rate of 25%, whereas the applicable rate is 30%, with a consequential error in surcharge and cess. The AO shall verify the applicable rate for the assessee for assessment year 2017-18 under the relevant Finance Act and apply the correct rate, together with the applicable surcharge and cess, to the income finally determined. The assessee shall be given an opportunity to explain the discrepancy. These grounds are allowed for statistical purposes.

Ground No.12 relates to interest of Rs.62,48,572 under section 234B. The learned AR submitted that the issue is consequential. The AO shall recompute the interest, if leviable, in accordance with law on the basis of the

Ground Nos.13 to 15 relate respectively to relief under section 91 in respect of foreign taxes of Rs.5,10,655, short grant of TDS credit of Rs.7,771 and credit of Rs.10,23,13,261 representing refunds of other years stated to have been adjusted against the demand for the year under consideration. The learned AR requested that the claims be verified by the AO. The AO shall examine the foreign-tax documents, the conditions applicable to the claim under section 91, the TDS particulars and the records of adjustment of refunds. Credit or relief found due shall be granted after reconciliation, ensuring that no credit is omitted or duplicated. The assessee shall furnish the necessary particulars and be afforded a reasonable opportunity. These grounds are allowed for statistical purposes.

Ground No.16 challenges the initiation of penalty proceedings under section 270A. As no order imposing the penalty is under appeal before us, the ground is premature and is dismissed. Nothing stated in this order shall be treated as a finding on the merits of any separate penalty proceedings.

In the result, the appeal of the assessee is partly allowed for statistical purposes in the terms indicated above.