ZS ASSOCIATES INDIA PVT.LTD,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -12,, PUNE
Facts
The assessee filed an appeal against an assessment order for AY 2017-18, which included significant transfer pricing adjustments made by the AO/TPO, totaling INR 52,79,57,627/-, following directions from the Dispute Resolution Panel. During the appeal proceedings, the assessee's associated enterprise applied for a Mutual Agreement Procedure (MAP) resolution for the transfer pricing issues, which subsequently resulted in a resolution.
Held
The assessee requested to withdraw its appeal before the ITAT, citing that the transfer pricing grounds were resolved under the Mutual Agreement Procedure. The Departmental Representative had no objection to this withdrawal. Consequently, the Tribunal permitted the withdrawal of the appeal and dismissed it as withdrawn.
Key Issues
Whether the transfer pricing adjustments, including issues related to comparable companies and notional interest on receivables, were justified; whether the deduction for education cess was allowable; and the validity of interest levy and penalty initiation. Ultimately, the key issue before the tribunal was whether to allow the withdrawal of the appeal due to MAP resolution.
Sections Cited
143(3), 144C(13), 144B, 144C(5), 144C(1), 92C(1), 234B, 234C, 270A, 92CA
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Income Tax Appellate Tribunal, PUNE BENCHES “C” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
आयकर अपीलीय अधिकरण ”सी” न्यायपीठ पुणेमें। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “C” :: PUNE BEFORE DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपऩल सं. / ITA No.211/PUN/2022 निर्धारण वषा / Assessment Year: 2017-18 ZS Associates India Private V The Additional / Joint / Limited, s Deputy / Assistant Tower 3, World Trade Centre, Commissioner of Kharadi, Pune – 411014. Income Tax, DCIT, Circle-12, Pune. PAN:AAACZ2157Q Appellant/ Assessee Respondent /Revenue Assessee by Shri Ninad Patade (through virtual) Revenue by Shri Prakash L Pathade Date of hearing 11/12/2025 Date of pronouncement 06/02/2026 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: In this case, Assessee has filed an appeal against the Assessment Order dated 16.02.2022 passed u/s.143(3) r.w.s 144C(13) read with section 144B of the Act, 1961 for the A.Y.2017- 18, emanating from order of the Dispute Resolution Panel u/s.144C(5) of the Act, dated 06.12.2021, which in turn emanates from Draft Assessment Order u/s.143(3) r.w.s 144C(1) of the Act,
ITA No.211/PUN/2022 [A] dated 31.03.2021. The Assessee has raised following grounds of appeal : “Based on the facts and circumstances of the case, 25 Associates India Private Limited (hereinafter referred to as "25 India" or "the Appellant") prefers an appeal for the assessment year 2017-18 against the order dated 16 February 2022 (received on 16 February 20221 passed by the learned Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income-tax Officer, National Faceless Assessment Centre, Delhi ["hereinafter referred to as "Assessing Officer"/"AO"| under section 143(3) r.ws 144C(13) read with section 1448 of the Income-tax Act, 1961 ("hereinafter referred to as "the Act"] on the following grounds which are independent of and without prejudice to each other General Ground Transfer pricing adjustment of INR 52,79,57,527/- 1.1 On the facts and in circumstances of the case and in law, the learned AO or Transfer Pricing Officer (hereinafter referred to as "TPO") pursuant to the directions of Hon'ble Dispute Resolution Panel (hereinafter referred to as "DRP"), has erred in making an adjustment amounting to INR 52,79,57,627/-to the value of international transactions entered into by the Appellant with its associated enterprise (hereinafter referred to as "AE"), 1.2 By making a transfer pricing adjustment, and by undertaking an enhancement to the returned income the Hon'ble DRP, the learned TPO and the learned AO have erred, both in law and on facts of the case, in rejecting the TP report including economic and benchmarking analysis undertaken. 2 Transfer Pricing Adjustment of INR 50,41,74,414/- to the international transaction relating to provision of business auxiliary and software development services by the Appellant 2.1 The learned AD/learned TPO / Hon'ble DRP erred in not accepting certain comparable companies selected by the Assessee on the basis of additional quantitative/qualitative filters adopted by the learned TPO and confirmed by the Hon'ble DRP 211 Akshay Software Technologies Ltd. 2.1.2 CG-VAX Software & Exports Ltd. 2.1.3 Cheers interactive (India) Pvt. Ltd. 2 2.1.4 Evoke Technologies Pvt. Ltd.
ITA No.211/PUN/2022 [A]
2.15 E-Zest Solutions Ltd. 2.1.6 Informed Technologies India Ltd. 2.1.7 Inteq Software Pvt. Ltd. 2.1.8 Kals Information Systems Ltd. 2.1.9 Maveric Systems Ltd. 2.1.10 Microland Ltd. 2.1.11 OFS Technologies Ltd. 2.1.12 One Touch Solutions (India) Pvt. Ltd. 21.13 Sasken Communication Technologies Ltd. 2.1.14 Sundaram Business Services Ltd., 2.2 The learned AD/learned TPO/Hon'ble DRP erred in selecting the following additional comparable companies which are not functionally comparable to the Assessee 221 MPS Ltd 2:22 24/7 Customer Pvt. Ltd 2.2.3 Parexel International (India) Pvt. Ltd. 2.24 Exiservice. Com (1) Pvt. Ltd. 2.3 The learned AD/learned TPO/Hon'ble DRP erred in not granting the economic adjustment on account of differences in risk profile of the Assessee vis-à-vis the comparable companies selected by the learned TPO and confirmed by the Hon'ble DRP 3. Transfer Pricing Adjustment of INR 2,37,83,213/- to the international transaction relating to notional interest on delayed realization of receivables by the Appellant 3.1 The learned AO/learned TPO/Hon'ble DRP erred in considering notional interest on receivables as a separate international transaction. Further, the learned AO/learned TPO/Hon'ble DRP has erred by rejecting the Assessee's claim that the same is intrinsically linked to the principal international transaction (of provision of services) and hence 3 should be aggregated with the same
ITA No.211/PUN/2022 [A]
3.2 Without prejudice to the Assessee's point that overdue receivables is not a separate International transaction, the learned AO/learned TPO/Hon'ble DRP incorrectly applied an external interest rate. even when an internal interest rate was available in the form of the Assessee not charging interest even from third parties on receivables 3.3 Without prejudice to the Assessee's point that overdue receivables is not a separate International transaction, only real income can be considered and taxed, the learned AO/learned TPO/Hon'ble DRP erred in not applying any of the prescribed methods as per Section 92C(1) of the Act while determining the arm's length price of the interest on outstanding receivables. Deduction in respect of 'Education Cess on income-tax', while computing the total income of the Appellant 4.1 The learned AO/Hon'ble DRP erred in not granting the Appellant deduction of 'education cess on income-tax' and 'secondary and higher education cess on income-tax while computing the Appellant's total income for the year under consideration. 4.2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, 'education cess on income-tax' and 'secondary and higher education cess on income tax for the year under consideration, ought to have been allowed while assessing its income for the year under consideration. 4.3 The Appellant submits that the learned AO be directed to re- compute its total income and tax thereon after allowing deduction for 'education cess on income-tax' and 'secondary and higher education cess on income-tax 5. Levy of interest under section 2348 and 234C of the Act 5.1 On the facts and circumstances of the case and in law, the learned AO pursuant to the directions of the Hon'ble DRP, erred in levying interest under section 2348 and 234C of the Act, as applicable, without considering that interest should not be levied on account of transfer pricing adjustment made to the total income of the Appellant, which are unanticipated in nature and the fact that interest u/s. 234C has to be levied on returned income. 6. Initiation of Penalty Proceedings under section 270A of the Act 6.1 On the facts and circumstances of the case and in law, the learned AO erred in initiating penalty proceedings under section 270A without 4 considering the fact that transfer pricing adjustment has been made on
ITA No.211/PUN/2022 [A] account of difference of opinion, interpretation of provisions of law, etc. and not due to any concealment of or furnishing of inaccurate particulars of income by the Appellant. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law.” Submission of ld.AR : 2. Ld.Authorised Representative(ld.AR) for the Assessee filed a letter duly signed by Director of the Company requesting to withdraw the appeal.
Submission of ld.DR : 3. Ld.Departmental Representative(ld.DR) for the Revenue has no objection for withdrawal of the appeal by the Assessee.
Findings & Analysis : 4. We have heard both the parties and perused the records. In this case, in the assessment order passed u/s.143(3) r.w.s 92CA r.w.s 144C of the Act, Assessing Officer has added Rs.52,79,57,627/- in respect of international transactions to the total income of the Assessee. The Transfer Pricing Officer(TPO) had suggested adjustment of Rs.52,79,57,627/-.
ITA No.211/PUN/2022 [A] 4.1 The Assessee requested for withdrawal of the appeal filed by Assessee. The Assessee’s letter is scanned and reproduced here as under :
In view of the above, we permit to withdraw the appeal of the assessee. Accordingly, grounds of appeal raised by the assessee are dismissed as withdrawn. 6
ITA No.211/PUN/2022 [A] 5. In the result, appeal of the assessee is dismissed as withdrawn. Order pronounced in the open Court on 06 February, 2026.
Sd/- Sd/- VINAY BHAMORE Dr.DIPAK P. RIPOTE JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददिधंक / Dated : 06 Feb, 2025/ SGR आदेशकीप्रनिनलनपअग्रेनषि / Copy of the Order forwarded to : अपऩलधर्थी / The Appellant. 1. प्रत्यर्थी / The Respondent. 2. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. नवभधगऩयप्रनिनिनर्, आयकर अपऩलऩय अनर्करण, “सऩ” बेंच, पपणे / DR, 5. ITAT, “C” Bench, Pune. गधर्ाफ़धइल / Guard File. 6. आदेशधिपसधर / BY ORDER, / / TRUE COPY / / सहधयक रनिस्ट्रधर /Assistant Registrar आयकर अपऩलऩय अनर्करण, पपणे/ITAT, Pune.
