Assessee is Cargill Bulgaria EOOD

Cargill Bulgaria EOOD is engaged in the trade and export of agricultural commodities - wheat, corn, barley, sunflower and rapeseed. During the period (FY 2016–2018), it conducted controlled transactions by selling agricultural goods to related parties - Cargill International S.A. (Switzerland), Cargill N.V., Cargill B.V. and Cargill Agricultura SRL.

Following a tax audit, the Bulgarian Revenue Authority increased Cargill Bulgaria's taxable income by BGN 6,286,944 (2016), BGN 4,226,549 (2017) and BGN 2,556,103 (2018), resulting in additional corporate tax of BGN 1,061,753 plus interest of BGN 629,516. The authority rejected the Company's Cost Plus method and instead applied TNMM with Return on Sales (EBIT/Revenue) as the profit level indicator, benchmarked against five comparables with an interquartile range of 1.21% – 1.79%, adjusting results to the lower quartile of 1.21%. The Administrative Court of first instance annulled the assessment, favouring Cost Plus as the most appropriate method. The tax authority appealed to the Supreme Administrative Court.

The Bulgaria Supreme Administrative Court annulled the first instance decision and remanded the case for fresh consideration. It held that the lower court failed to provide independent reasoning on the competing method positions (Cost Plus vs. TNMM), did not address whether Cost Plus is appropriate for sale-of-goods transactions and incorrectly allocated the burden of proof. On remand, the court must explicitly assign evidentiary burdens, analyse all factual material with expert assistance if needed and rule on the merits of the tax assessment.

Assessee is EPTA S.p.A.

EPTA S.p.A. is an Italian Company that had a controlled transaction with its Hungarian subsidiary, Epta International KFT, in FY 2015. The Italian Revenue Authority issued an upward adjustment of €4,119,149 to EPTA's taxable income, relying on the fact that the Hungarian tax authorities had granted Epta International KFT a downward transfer pricing adjustment of €4,742,659 under Hungarian law. The Italian authority treated the absence of a corresponding upward adjustment in Italy as evidence of double non-taxation and artificial profit shifting.

EPTA challenged the assessment. The Provincial Tax Commission of Milan rejected the appeal. The Lombardy Court of Appeal then ruled in EPTA's favour, holding that the tax authority had not proven a transaction below normal value. The tax authority escalated the matter to the Supreme Court (Court of Cassation).

Assessee's Contentions -

The tax authority failed to determine the "normal value" of the controlled transaction and did not prove that prices between EPTA and Epta International KFT were below arm's length. The arm's length provision was therefore inapplicable on the facts.

The Lombardy Court of Appeal correctly found that without a proper "normal value" determination, the assessment lacked legal basis. A foreign adjustment alone cannot trigger an automatic corresponding upward adjustment in Italy.

Revenue's Contentions -

A downward TP adjustment of €4,742,659 was recognised by Hungarian authorities in the subsidiary's books. The absence of a corresponding upward adjustment in Italy constitutes evidence of double non-taxation and supports an upward assessment under the Italian arm's length rules.

The Italian arm's length rules require parity where a foreign jurisdiction grants a downward adjustment, Italy is entitled to make a corresponding upward correction to eliminate double non-taxation of group profits.

Supreme Court's Judgment -

The arm's length provision for cross-border related party transactions is aimed at preventing artificial profit shifting. The Hungarian downward adjustment, based on OECD criteria constitutes sufficient initial evidence by the tax authority. The Court quashed the appeal judgment and remanded for fresh assessment on the merits.

Once the tax authority demonstrates a price reduction via a foreign TP adjustment, the burden shifts to the taxpayer to prove the agreed consideration reflects market value and that the authority's assumption is incorrect. The taxpayer's silence on this point is not sufficient to rebut the presumption.

Holding -

The Italian Supreme Court held that the tax authority bears an initial burden to show intra-group transactions occurred at a price below normal value which can satisfy by evidencing a foreign downward TP adjustment on OECD criteria. Thereafter, the burden shifts to the taxpayer to prove the transaction reflected market value. The Court quashed the Lombardy Court of Appeal decision and remitted the case for fresh assessment.

Background -

Stellantis Portugal, S.A, a Portuguese vehicle distributor operating within the Stellantis multinational group (formerly General Motors group) was subject to a tax audit that led to litigation before the Portuguese courts. The central question was whether a year-end transfer pricing adjustment, made purely for corporate income tax purposes to ensure compliance with the arm's length principle, could also carry consequences for Value Added Tax (VAT).

Under the group's distribution arrangement, the sale prices of vehicles were structured to be adjustable, ensuring the distributor maintained a minimum profit margin. When actual margins fell short of the contractually agreed threshold, the related manufacturers within the General Motors group issued debit or credit notes to Stellantis Portugal to reallocate profits accordingly.

The core dispute was whether such adjustments which do not alter individual transaction unit prices but instead reallocate group-level profits should be treated for VAT purposes as:

a) a retroactive correction to the consideration for earlier goods supplies, reducing or increasing the taxable amount; or

b) the consideration for a separate supply of services, thereby constituting an independent taxable event.

The Supremo Tribunal Administrativo (Portugal's Supreme Administrative Court) referred the matter to the Court of Justice of the European Union (CJEU) by way of a preliminary ruling request, asking for an interpretation of Article 2 of the Sixth VAT Directive.

Advocate General's Opinion -

The Advocate General proposed that the CJEU answer the preliminary reference as follows: the VAT relevance of a transfer pricing profit adjustment depends entirely on its underlying structure and the manner in which it is executed. Three distinct scenarios were identified:

Scenario 1 - Services-based adjustment: Where the adjustment is implemented through separate, genuine supplies of services for consideration (i.e., real input/output flows), those supplies are taxable transactions under Article 2(1)(c) of Directive 2006/112.

Scenario 2 - Unilateral tax authority reallocation: Where the adjustment is made unilaterally by a tax authority purely to allocate profits appropriately between two jurisdictions, this is not as a general rule, relevant for VAT purposes.

Scenario 3 - Contractually agreed variable price (present case): Where the profit adjustment is made via a sale price specifically provided for and agreed to be variable, relating to a specific supply of goods, it constitutes a correction to the taxable amount under Article 90 or an additional element of consideration under Article 73 and cannot, by itself, constitute a supply of services under Article 2(1)(c).

The Advocate General proposed that Articles 2(1)(c), 73 and 90 of Council Directive 2006/112/EC must be interpreted as follows -

1) The VAT relevance of a transfer pricing profit adjustment depends on what it relates to and how it is made, not merely on whether it is described as a TP adjustment or was motivated by income tax considerations.

2) Adjustments structured as genuine separate supplies of services for consideration are taxable under Article 2(1)(c), provided they are not merely fictitious.

3) A unilateral reallocation by tax authorities for inter-jurisdictional profit allocation purposes is generally not VAT-relevant, as it does not involve a supply.

4) Where, as in the present case, the adjustment is implemented through a contractually variable sale price tied to a specific goods supply, it constitutes either a reduction in the taxable amount (Article 90) or an additional element of consideration (Article 73) and cannot itself constitute a supply of services under Article 2(1)(c).

Velcro Europe, S.A. is a Spanish manufacturing entity within the Global Velcro Group. As part of its operations, the Company paid royalties for the use of trademarks and proprietary technology owned by the group. The intellectual property was legally held by Velcro Industries B.V., based in Curaçao (Dutch Antilles), while Velcro Holding B.V., incorporated in the Netherlands, functioned as the European licensing and collection intermediary.

Velcro Europe remitted royalty payments to Velcro Holding B.V. (the Dutch entity) and sought an exemption from Spanish withholding tax under the EU Interest and Royalties Directive, treating the Dutch entity as the beneficial owner of the royalty income.

The Spanish tax authorities denied the exemption, contending that Velcro Holding B.V. was a mere conduit with minimal substance, effectively channelling royalty income to the Curacao entity. Accordingly, the authorities levied domestic withholding tax on the royalty payments, without allowing recourse to the Spain–Netherlands double tax agreement (DTA). The taxpayer challenged this assessment, first before the High Court of Justice of Catalonia (which upheld the authorities), and subsequently before the Supreme Court.

Court's Holding -

The Supreme Court dismissed the appeal and upheld the tax authorities' assessment in full. It ruled that:

1) Beneficial ownership under the EU Interest and Royalties Directive requires real economic substance and autonomous decision-making, a conduit structure does not satisfy this test.

2) The EU Directive takes precedence over bilateral tax treaties, and its denial of an exemption forecloses any fallback to treaty-based relief.

3) Consistent with CJEU's guidance in the Danish cases, a substance-over-form analysis must be applied when determining who is the true beneficial recipient of royalty income.

4) Spain was entitled to levy withholding tax at full domestic rate under the Non-Resident Income Tax Act, since the EU Directive conditions were not met.

Assessee is Swatch Group (India) Pvt. Ltd.

The Assessee is engaged in the business of retail trading of watches under the brand name 'Swatch'.

The TPO has considered two different transactions as regular business transaction and determined TP adjustment based on entity level by rejecting segmental information submitted by assessee.

The Delhi ITAT held that a one-off transaction cannot be treated as a separate segment nor considered part of the regular business, and that it must be examined and verified based on an internal factual analysis.

Assessee is Hyundai Wia India Pvt. Ltd

A wholly owned subsidiary of Hyundai Wia Corporation; was engagaed in manufacturing of automative parts and components.

The assessee earned export incentives in the form of MEIS scrips and duty drawback on exports made to both AEs and unrelated parties. The TPO treated these incentives as non-operating income and denied working capital adjustment.

The Chennai ITAT held that MEIS scrips and duty drawback are part of operating revenue and directed Working Capital Adjustment, ensuring proper arm’s length margin computation.

Assessee is Concentrix Catalyst Technologies Private Limited.

The assessee is engaged in providing IT consulting and mobile technology solutions, including cloud-based software services.

Assessee's Contentions -

The assessee contended that the final assessment order for AY 2020-21 was barred by limitation under the first proviso to section 153(1) read with section 153(4). It was submitted that the undisputed last date for passing the assessment order was 30.09.2023, beyond which the Assessing Officer (‘AO’) had no authority to complete the assessment.

While the draft assessment order was issued on 29.09.2023 u/s 143(3) read with section 144C, and the directions of the DRP were issued on 25.06.2024 u/s 144C(5), the assessee argued that these subsequent steps could not extend the statutory time limit prescribed u/s 153. According to the assessee, the limitation period stood exhausted on 30.09.2023 itself.

Placing reliance on settled judicial precedents, the assessee submitted that the final assessment order passed on 29.07.2024 was clearly time-barred and without jurisdiction.

Revenue's Contentions -

The Revenue contended that the final assessment order for AY 2020-21 was passed within the permissible time limit by correctly invoking the section 144C(13). It was argued that this provision specifically authorises the AO to pass the final assessment order within one month from the end of the month in which the directions of the Dispute Resolution Panel (‘DRP’) are received.

In the present case, the DRP issued its directions u/s 144C(5) on 25.06.2024. Accordingly, u/s 144C(13), the time limit for passing the final assessment order stood extended up to 31.07.2024, irrespective of the general limitation period prescribed u/s 153(1) read with section 153(4).

On this basis, the Revenue submitted that the final assessment order dated 29.07.2024 was passed well within the extended statutory time limit. Therefore, it was argued that the order was valid in law and could not be regarded as barred by limitation.

ITAT's Judgement -

The Hyderabad ITAT held that the final assessment order for AY 2020-21 was barred by limitation, as the undisputed time limit prescribed u/s 153(1) read with section 153(4) had expired on 30.09.2023. The Tribunal observed that once the statutory limitation period had lapsed, the AO no longer had jurisdiction to pass a valid assessment order.

The Tribunal further ruled that the extended time limit contemplated u/s 144C(13) could not override or revive the limitation period after it had already expired u/s 153. According to the ITAT, the mechanism u/s 144C operates within the framework of section 153 and cannot be used to circumvent the mandatory time limits prescribed therein.

Accordingly, since the final assessment order was passed on 29.07.2024, the Hyderabad ITAT quashed the same as being time-barred.

The Delhi ITAT held that the final assessment order, having been passed beyond the limitation period prescribed u/s 153(1) read with section 153(4), was time-barred and therefore liable to be quashed.

Assessee is Financial Software and Systems Pvt. Ltd.

The assessee is engaged in providing software development and related information technology services.

The Chennai ITAT held that the observation treating foreign AEs as comparables was a clerical error and, therefore, liable to be rectified u/s 254(2), with the matter remitted to the TPO for fresh consideration.

Assessee is Idemitsu Lube India Pvt Ltd.

The assessee is engaged in the business of manufacturing and marketing Lubricating oils and greases.

Assessee’s Contentions -

The assessee contended that the TPO had committed a calculation error while computing the margins of certain comparables, which resulted in an incorrect determination of the arm’s length margin.

The assessee contended that the TPO failed to explain the manner in which the margins were calculated. In this regard, the assessee submitted his own working chart detailing the computation of margins for consideration.

It was contended by the assessee that the forex loss arose due to the translation of ECB and, as it was not connected with routine operational activities, the same should be treated as a capital loss.

Assessee contended that such loss should be treated non operating for TP margin calculation. Same treatment was accepted in earlier years.

Revenue’s Contentions -

The TPO recomputed the margins of the comparable companies based on his own calculations, after examining the relevant financial data and applying the appropriate methodology.

The TPO did not accept assesse's working chart and proceeded without explaining the detailed basis of computation.

The Revenue treated the net foreign exchange loss arising from the translation of ECB as an operating expense, on the ground that such loss was integrally connected with the business operations of the assessee.

The Revenue included the loss while recomputing operating margin and didn't follow the treatment accepted in earlier years.

ITAT's Judgement -

The ITAT held that the loss on foreign exchange translation relating to ECBs should be treated as non-operating for the purpose of computing the OPM , since such loss arises from financing activities and is not attributable to the core operational performance of the business for the year under consideration.

The Delhi ITAT held that foreign exchange loss due to ECB translation is capital loss. Such loss should be treated as non-operating loss for TP margin calculation.

Assessee is Ekta Everglade Homes Pvt Ltd engaged in the real estate business and as a builder and developer.

The assessee had issued INR-denominated Compulsorily Convertible Debentures ('CCDs') to its Associated Enterprise ('AE') and paid interest at 19.17%, the Transfer Pricing Officer ('TPO') benchmarked the rate at SBI PLR + 75 bps, i.e. 15.5%, to align with domestic lending conditions, thereby making a TP adjustment.

The Mumbai ITAT held that foreign-currency yield data cannot benchmark INR-denominated CCDs and upheld SBI PLR-based rate as arm’s length.

Assessee is Vodafone Mobile Services Ltd.

The assessee is engaged in providing cellular mobile telephony services in the State of Gujarat.

Mumbai ITAT held that the draft assessment order passed in the name of a non-existent entity post amalgamation was non est in law, and consequently the entire assessment proceedings, including the final order, were liable to be quashed.

Assessee is Andhra Paper Limited.

The Assessee is engaged in the business of manufacturing paper and paper products.

The primary issue was whether the royalty paid by the assessee to its AE for use of trademarks was at ALP, where the TPO rejected the CUP method and determined the ALP at NIL on the ground of absence of commercial benefit.

ITAT's Judgement -

• The ITAT held that the assessee failed to demonstrate any tangible commercial or economic benefit arising from the use of trademarks, and mere increase in sales could not be conclusively attributed to the royalty payment.

• The Tribunal noted that the AE did not have a significant brand presence in India, whereas the assessee was an established entity in the Indian market, indicating that the assessee was largely responsible for developing and promoting the brand locally.

• Considering the absence of a clear nexus between the royalty payment and business benefits, and the inadequacy of compara­bles under the CUP method, the ITAT upheld the arm’s length price of royalty at NIL, thereby sus­taining the transfer pricing adjustment.

The Visakhapatnam ITAT upheld the ALP of royalty at NIL, holding that the assessee failed to demonstrate any tangible commercial benefit or provide a reliable comparability analysis for the payment.

Assessee is Microsoft Research Lab India Private Limited.

The assessee is engaged in providing research and development services in the field of advanced technology and innovation.

The Bangalore ITAT quashed the final assessment as void ab initio, holding that passing an order without serving a draft assessment order violates the mandatory procedure prescribed u/s 144C.

Assessee is Red Hat India Private Limited.

The assessee is engaged in providing software-related services and allied activities. During the relevant assessment year, the assessee entered into an international transaction involving royalty with its Associated Enterprise (AE), Red Hat Inc..

The PCIT invoked revisionary jurisdiction under section 263, alleging that the reassessment order was erroneous and prejudicial to the interests of the Revenue as the AO completed the reassessment without considering the TPO’s order under section 92CA(3) and without examining the ALP of the royalty transaction, despite having made a reference to the TPO.

Assessee Contentions -

• The assessee contended that it had voluntarily offered the royalty income to tax through a revised return in the correct year of accrual.

• All relevant details relating to the royalty transaction and transfer pricing were duly furnished during assessment and reassessment proceedings.

• The AO had discharged his statutory obligation by making a reference to the TPO u/s 92CA.

• Since the TPO did not pass any order u/s 92CA(3), the AO could not have independently determined the ALP.

• The reassessment order could not be treated as erroneous for non-consideration of a non-existent TPO order, nor was any prejudice caused to the Revenue.

Revenue Contentions -

• Revenue argued that the reassessment order was erroneous and prejudicial as the AO completed the assessment without considering the TPO’s order u/s 92CA(3).

• The Revenue’s case was that the Assessing Officer omitted to verify the arm’s length price (ALP) of the royalty transaction, resulting in an order that was erroneous and prejudicial to the interests of the Revenue, thus attracting section 263.

• Revenue relied on Explanation 2 to section 263, asserting that the AO had not made adequate enquiries which should have been conducted.

ITAT Judgment -

• The ITAT held that revision u/s 263 cannot be sustained where the very basis of revision, namely non-consideration of a TPO’s order, fails because no such order existed on record.

• The Tribunal observed that an “error” u/s 263 must arise from the AO’s order and not from the inaction of an independent authority like the TPO; further, once a reference is made u/s 92CA, the AO is barred from determining the ALP in the absence of a TPO’s order.

• The Tribunal held that revisionary powers cannot be used to revive time-barred statutory functions or to bypass the limitation u/s 92CA(3A), and accordingly quashed the section 263 order, restoring the reassessment in favour of the assessee.

The Mumbai ITAT quashed the section 263 revision, ruling that an assessment is not erroneous for failing to consider a TPO order that was never issued.

Assessee is IQVIA RDS (India) Pvt Ltd.

The assessee is engaged in providing research and development services in the field of advanced technology and innovation.

ITAT’S Judgement -

The ITAT held that the Transfer Pricing order was required to be passed within the statutory time limit under section 92CA(3A), and since it was issued beyond the prescribed period, it was barred by limitation. The Tribunal further observed that the time limit under section 92CA(3A) is mandatory, and accordingly quashed the TP order, deleting the entire transfer pricing adjustment of INR 54.56 lakhs.

The Bangalore ITAT quashed the Transfer Pricing adjustment, ruling that the 60-day time limit under section 92CA(3A) is mandatory and any order passed beyond it is barred by limitation.

Assessee is Matrix Clothing Pvt. Ltd.

The Assessee is engaged in the business of design, manufacturing and export of a wide range of garments for men, women and children, catering to several international fashion brands.

The Transfer Pricing Officer (TPO) made adjustments by imputing guarantee commission on Standby Letter of Credit (SBLC) issued on behalf of the Associated Enterprise (AE) and by enhancing the interest rate on loans advanced, alleging that the transactions were not at arm’s length.

The Delhi ITAT deleted TP adjustments, holding that SBLC charges shouldn't be benchmarked against bank rates and interest rates aligned with market benchmarks are at arm's length.

Assesee is MN Dastur and Company Pvt. Ltd.

The assessee is engaged in providing consulting and software engineering services to both domestic and international clients.

The case involves inappropriate transfer pricing adjustments applied at the overall entity level, rather than being limited to specific international transactions.

The ITAT Bangalore ruled that TP adjustments must be limited to AE transactions and remanded the matter for fresh verification and fair assessment.

Assessee is Piaggio Vehicles Pvt. Ltd

Whether the Transfer Pricing adjustment by combining all exports (both manufactured goods and goods sourced from third parties) to AEs under a single internal TNMM approach was appropriate.

ITAT's Judgement

• ITAT held that the TPO incorrectly combined functionally distinct transactions under internal TNMM.

• Directed AO to verify the correctness of internal TNMM for exports of manufactured goods and apply external TNMM for global sourcing transactions based on assessee’s TP report.

• Cited earlier ITAT rulings in assessee’s favour, acknowledging functional differences in spare parts segments.

The Pune ITAT directed separate benchmarking for manufactured and sourced exports, holding that the TPO erred in applying a combined approach for functionally distinct transactions.

Assessee is North Delhi Metro Mall Private Limited

The assessee is engaged in commercial development, construction, leasing, and related services for mall infrastructure projects.

•The issue pertains to a Transfer Pricing adjustment of INR 9.83 crores made by the TPO for payments to the AE, Virtuous Retail South Asia Pte. Ltd. (VRSA), for development supervision services related to a mall project. The TPO disallowed the expense, questioning the commercial expediency and claiming no real benefit was derived

The Delhi ITAT held that the TPO exceeded his jurisdiction by questioning “commercial expediency” and accordingly deleted the entire transfer pricing adjustment.

Assessee is Bharti Airtel Limited (Successor to Telenor India Communications Pvt. Ltd.)

Engaged in providing wireless telecommunication services and operated as a GSM network carrier.

The primary issue was that the assessment order for AYs 2017–18 and 2018–19 was passed in the name of Telenor India Communications Pvt. Ltd., despite its merger with Bharti Airtel Limited with effect from 14.05.2018. The merger was duly approved by the National Company Law Tribunal (NCLT) and the Assessing Officer (AO) was informed multiple times. Yet, the final assessment order, draft order, and TPO order were issued in the name of the non-existent entity.

ITAT’s Judgement:

The ITAT found merit in the assessee’s claim, observing that despite the AO’s awareness and multiple intimation letters, the assessment was continued in the name of a non-existent entity. Relying on the Supreme Court's ruling in Maruti Suzuki India Ltd. and the Delhi High Court's decision in Vedanta Ltd., the Tribunal emphasized that such assessments suffer from jurisdictional defects and cannot be cured under Section 292B. Consequently, it held that the final assessment order dated 27.05.2022 was legally unsustainable and quashed it in its entirety.

The Delhi ITAT ruled that issuing assessment orders in the name of a non-existent entity is not valid and quashed the assessment order as legally unsustainable.

Assessee is Volkswagen Group Technology Solutions India Pvt. Ltd

The Assesseeis engaged in providing IT services exclusively to its Associated Enterprises (AEs) and earns revenue in foreign exchange.

Invoking Rule 10TA, the Transfer Pricing Officer (TPO) excluded foreign exchange gains from operating income while treating forex losses as operating expenses, resulting in a TP adjustment of INR 15.77 crores.

The Pune ITAT held that no transfer pricing adjustment was warranted, and the appeal was allowed in favour of the assessee.

Assesee is Era Realtors Pvt Ltd

Engaged in the real estate development and construction sector.

The AO made a significant addition of ₹ 116,92,92,850/- related to the issuance of CCDs and equity, treating it as an international transaction requiring an Arm's Length Price (ALP) adjustment. Consequentially, another ₹32.6 Crores was added for interest paid on these debentures.

The Mumbai ITAT affirms the deletion of the transfer pricing adjustments concerning CCD issuance and associated interest payments.

Assessee is Tega Industries Ltd

Engaged in providing customized solutions for mining, mineral beneficiation, bulk material handling, environment, and slurry transportation industries.

The Kolkata ITAT held that corporate guarantees constitute international transactions under Section 92B.

Assessee is KBS Creations

Assessee, a company engaged in gems and jewellery, primarily manufacturing and export of diamond-studded jewellery.

The assessee has one unit in a Special Economic Zone (SEZ) (SEEPZ-SEZ) claiming deduction under Section 10AA, and another unit outside the SEZ supplying diamonds to the SEZ unit.

For AY 2021-22, KBS Creations claimed a Section 10AA deduction after reporting an SDT with its AE. The AO referred the case to the TPO, who proposed a downward TP adjustment of about INR 11 crore (revised to ₹10.98 crore by the DRP). The key issue was whether an “arrangement” causing “more than ordinary profit” under Section 80IA(10) existed before the TP adjustment.

Mumbai ITAT ruled that a Transfer Pricing adjustment under Section 80IA (10) cannot be made without first establishing a specific "arrangement" between connected parties.

Assessee is Inlogic Technologies Pvt. Ltd

Engaged in the business of providing software development services

For AY 2021-22, the issue is whether the AE relationship between Inlogic Technologies and Medtech Global Ltd (MGL) lasted 12 months or just two months in FY 2020-21, impacting a ₹1.99 crore TP adjustment. It also focuses if the AE cessation is due to a common director’s share sale and resignation, thus it counts as "business restructuring" needing Form 3CEB reporting.

ITAT’s Judgement:

The ITAT acknowledged procedural lapses but held that substantial justice should not be denied. It rejected the TPO/DRP’s claim that AE cessation was “business restructuring” requiring Form 3CEB disclosure. It accepted that TP provisions apply only for the actual two-month AE period, subject to verification. Noting inconsistent evidence rejection by the DRP, the ITAT remanded the case to the TPO for fresh review, allowing the assessee to file a revised Form 3CEB and submit all evidence.

The Chennai ITAT remitted the TP adjustment, ruling AE cessation due to a director’s share sale is not “business restructuring,” and TP applies only for the actual two-month AE period.

Assessee is Electronic Arts Games (India) Private Limited (Successor to Griptonite Games India Pvt. Ltd.) and providing Software Development Services (SDS).

TPO/DRP rejected assessee’s use of SBI-PLR (13.75%) to benchmark interest on ₹5.5 crore INR-denominated ECB (charged at 10.45%), treating it like a Masala Bond.

Using Masala Bond rates (avg. 7.68%) under CUP method, TPO deemed the interest excessive and made a TP adjustment of ₹4.7 lakh, stating SBI-PLR is not suitable for international benchmarking.

The Hyderabad ITAT ruled in favour of the assessee, upholding its use of SBI PLR for benchmarking interest on INR-denominated ECBs by rejecting 'Masala bond' rates.