ACIT - 14(2) (2), MUMBAI vs. PFIZER LTD, MUMBAI

ITA 1497/MUM/2018Status: DisposedITAT Mumbai25 July 2025AY 2005-06Bench: Smt. Kavitha Rajagopal (Judicial Member), Shri Omkareshwar Chidara ( (Accountant Member)1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that payments made to clinical labs for clinical trials are pass-through costs and should be excluded from the cost base for calculating the operating margin. The Tribunal also rejected an additional ground raised by the assessee regarding the assumption of jurisdiction by the AO after a significant delay.

What were the facts?

The assessee company, Pfizer Limited, made payments to clinical labs for clinical trials, which the Assessing Officer (AO) treated as not pass-through costs. The AO made an adjustment to the arm's length margin. The assessee argued these were pass-through costs and should be excluded from the cost base.

What were the issues?

Whether payments to clinical labs for clinical trials constitute pass-through costs, and whether an additional ground regarding AO's jurisdiction can be raised after a 14-year delay.

Which sections of the Income-tax Act were involved?

Section 143(3)

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Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, Mumbai “J” Bench, Mumbai.

Before: Smt. Kavitha Rajagopal (JM) & Shri Omkareshwar Chidara (AM)

For Appellant: Shri Nihar Ranjan Samal
Pronounced: 21/07/2025

Per Omkareshwar Chidara (AM) :- In the above cited Departmental appeal, the following grounds of appeal are taken :

1.

On the facts and circumstances of the case, Ld. CIT(A) erred in holding that the payments made by the assessee to the clinical labs to be treated as pass-through cost without appreciating that pass-through cost can be allowed only when the assessee is acting as an agent of the AE (Para 7.36 of O

The order continues below.

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