Transfer pricing adjustments must be deleted based on consistency

Transfer pricing adjustments must be deleted based on consistency if identical issues were cleared previously.

Issue

Whether a Transfer Pricing Officer (TPO) can make an arm’s length price adjustment on management fees paid to an Associated Enterprise (AE) if the tribunal has already deleted identical adjustments for the assessee in previous assessment years.
Whether an Assessing Officer (AO) can sustain a tax addition that the assessee has already suo motu disallowed in their original computation of income.
Whether a taxpayer is entitled to a remand for verification when the tax department grants a short credit of Tax Deducted at Source (TDS).
Whether interest under Section 234A can be levied if the taxpayer filed their return of income within an extended due date officially authorized by a CBDT press release.

Facts

Management Fee and Benchmarking: For the assessment year 2020-21, the assessee paid management fees to its AE for specialized services covering business development, corporate communication, brand management, human resources, IT, and finance. The assessee benchmarked these using the Transactional Net Margin Method (TNMM) at the entity level, showing its net margin was at arm’s length.
TPO’s Disallowance: The TPO proposed an adjustment, claiming certain services were never actually rendered and others merely constituted shareholder activities.
Double Disallowance: The tax department made an adjustment in the Section 143 intimation for an expense amount that the assessee had already voluntarily disallowed in its own tax computation.
TDS Credit Shortfall: The assessment order granted a short TDS credit, missing approximately Rs. 7.41 lakhs of eligible deductions claimed by the assessee.
Interest Dispute: The AO levied interest under Sections 234A and 234B. The assessee contested that the return was filed within the extended deadlines granted via a CBDT press release.

Decision

Deletion of Transfer Pricing Adjustment: The Tribunal ruled in favor of the assessee and deleted the management fee adjustment, emphasizing the rule of consistency since identical transfer pricing disputes had been decided in the assessee’s favor in prior years.
Remand for Double Addition Verification: The issue of the double disallowance was restored to the jurisdictional AO with directions to verify the computation facts and remove the duplication if already disallowed by the taxpayer.
Correction of TDS Short-Grant: The Tribunal held that the assessee is legally entitled to full TDS credit. The matter was remanded to the AO to verify the tax certificates and correct the short-grant.
Verification of Extended Due Dates: The Section 234A and 234B interest issue was restored to the file of the AO to verify if the return submission fell within the extended timelines, noting that Section 234B interest remains purely consequential.

Key Takeaways

Principle of Consistency in Transfer Pricing: When specialized transactions like cross-border management fees are repeatedly benchmarked using entity-level TNMM and cleared by tribunals in past years, tax authorities cannot arbitrarily alter their stance in subsequent years without a material change in facts.

Protection Against Double Taxation: Mechanical processing under Section 143 that creates a double addition—taxing an item both through the taxpayer’s self-disallowance and an automated department adjustment—is legally unsustainable and requires factual rectification by the AO.

Due Date Extensions Limit Interest: Statutory interest for filing delays under Section 234A cannot be applied mechanically if a taxpayer complies with valid deadline extensions explicitly announced by CBDT administrative notifications or press releases.

IN THE ITAT MUMBAI BENCH ‘J’

NTT India (P.) Ltd.

v.

Dy. CIT^*

Pawan Singh, Judicial Member
and BIJAYANANDA PRUSETH, Accountant Member

IT Appeal No. 5018 (MUM) OF 2024
[Assessment year 2020-21]

MAY 5, 2026

Vijay Mehta, CA for the Appellant. Pankaj Kumar, CIT – DR for the Respondent.

ORDER

Pawan Singh, Judicial Member. – This appeal by assessee is directed against the additions in the assessment order passed under section 144C(13) r.w.s. 144B dated 31.03.2024, passed in pursuance of directions of Dispute Resolution Penal (DRP)- 2, Mumbai, dated 20.06.2024 for Assessment Year (AY) 2020-21. The assessee has raised following grounds of appeal:

GROUNDS OF APPEAL

1. Ground No. 1: Transfer Pricing adjustment of INR 151,57,42,646/-on account of payment of Management Fees:

1.1. On the facts and in the circumstances of the case and in law, the Hon’ble Dispute Resolution Panel (‘DRP’) / Learned Transfer Pricing Officer (‘Ld. TPO’) / Learned Assessing Officer (‘Ld. AO’) have erred, in making transfer pricing adjustment of INR 151,57,42,646/- to the value of international transactions in respect of payment of management fees to its Associate Enterprise (‘AE’) i.e. NTT Asia Pacific Holdings Pte. Ltd. (‘NTT Asia’).

1.2. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in law by considering management fees paid as a separate class of transaction and segregating it for the benchmarking purpose.

1.3. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in rejecting the TNMM analysis adopted by the Appellant to benchmark management fees paid and have also failed to demonstrate how the CUP/Other Method is the most appropriate method for benchmarking the transaction and alleging that the provisions of Rule 10B of the Income Tax Rules, 1962 have been contravened.

1.4. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in facts and law in not considering or ignoring the detailed analysis and evidence presented by the Appellant as regards the benefits received by the Appellant towards the management services availed from its AE and rejecting such detailed analysis of the Appellant without providing properjustification.

1.5. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in rejecting the detailed documentary evidences with respect to various categories of services received by the Appellant, by making a generic comment that the activities were routine in nature, part of shareholder activities, evidences do not lead to availment of services and ignored the breakup of the costs submitted

1.6. The Hon’ble DRP/Ld. TPO/Ld. AO have also erred in holding that various evidence submitted by the Appellant in the form of agreement, invoices, director certificate and other documents maintained are self-generated and vague despite these evidences being maintained in accordance with the law.

1.7. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in ignoring the evidence demonstrating that the benefit received by the Appellant was more than the payment made to its AE

1.8. On the facts and in the circumstances of the case and in law, the Hon’ble DRP/ Ld. TPO have erred in alleging that the gain in the form of discounts on the purchase price is merely on account of membership of the Appellant in the multinational group and not because of efforts of the AE

1.9. The Hon’ble DRP/Ld TPO/Ld. AO have erred in ignoring the fact that management fee is for the bundle of services and the Appellant has the right to avail any ofthe services mentioned in the agreement

1.10. The Hon’ble DRP have erred in disallowing management fee under section 37 of the Act as an alternate ground when the same was not part ofthe draft assessment order

1.11. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in not granting any relief on account of guarantee fee relating to the corporate guarantee extended by the AE which is bundled with management services rendered and also erred in stating that issuance of corporate guarantee by the AE is in the nature of managerial activity/shareholder activity requiring no compensation.

1.12 The Hon’ble DRP/Ld. TPO/Ld. AO have erred in not considering the Mumbai Income-tax Appellate Tribunal’s decision in the Appellant’s own case for AY 2011-12 and AY 2017-18 when the facts relating to the availment of services have remained the same

2. Ground No. 2: Transfer Pricing adjustment of INR 6,47,80,141/- on account of payment of Regional Services:

2.1. On the facts and in the circumstances of the case and in law, the Hon’ble DRP/Ld. TPO/Ld. AO have erred, in making transfer pricing adjustment of INR 6,47,80,141/- to the value of international transactions in respect of payment of regional services to its Associate Enterprise (‘AE’) i.e. NTT Global Shared Services Center Asia Pacific SdnBhd (‘NTT GSSC’).

2.2. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in law by considering regional services as a separate class of transaction and segregating it for the benchmarking purpose.

2.3. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in law by rejecting the TNMM analysis. undertaken by the appellant taking AE as tested party to benchmark its international transactions and have failed to demonstrate how the Other Method is the most appropriate method

2.4. The Hon’ble DRP/Ld. TPO/Ld. AO have erred in facts and law by applying the same rationale as was applied in Management fees by not considering or not appreciating the evidence presented by the assessee as regards the benefits received by the assessee towards the regional services availed from its AE

2.5. The Hon’ble DRP have also erred in disallowing regional services under section 37 of the Act as an alternate ground when the same was not part ofthe draft assessment order.

3. Ground 3: Additions made in the intimation u/s 143(1) of INR 6,15,36,910/-

3.1 The Ld. AO have erred in ignoring the fact that the appellant has already disallowed INR 6,15.36,910/- in its tax return (under section 40(a) payment made to residents) for which tax was not deducted

3.2. The action ofthe AO has resulted in double addition

3.3. The Ld. AO have also erred in ignoring the response filed by the Appellant to delete the adjustment made in the intimation u/s 143(1).

4 Ground 4: Short grant of Tax Deducted at Source (TDS) credit amounting to INR 7,40,788/-

On the facts and circumstances of the case and in law, the Ld. AO have erred in granting TDS credit of Rs 75,05,85,268/-against Rs 75,13,26,046/-as claimed in the return of income filed by the Appellant

The Appellant, therefore, prays the Hon’ble Members to direct the learned AO to grant balance credit for TDS of Rs. 7,40,788/

5. Ground 5: Levy of Interest u/s 234A and2348:

5.1. On the facts and circumstances of the case and in law, the Ld. AO have erred in levying interest u/s 234A since the income tax return was filed within the due date extended by Ministry of Finance for AY 2020-21.

5.2. On the facts and circumstances of the case and in law, the interest levied by Ld. AO u/s 2348 is consequential and once the TP adjustment is deleted, the consequential interest u/s 2348 of the Act will not be applicable.

6. Ground 6: Penalty Proceedings:

The Ld. AO has erred in law in initiating penalty proceedings under section 270A ofthe Act.

The Appellant being aggrieved is filing the present appeal. 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 Members to decide this appeal according to law.

2. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that the ld AR of the assessee submits that substantial grounds of appeal, which is ground No1, is covered in favour of the assessee in its own case for earlier years, wherein similar transfer pricing adjustment has been deleted by Tribunal, copies of such decisions are already placed on record. While explaining the facts, the ld AR of the assessee submits that Transfer Pricing Officer (TPO) suggested transfer pricing adjustment of Rs. 151,57,42,646/-on account of payment of Management Fees. The appellant-assessee is engaged in the trading of networking products and in providing related services such as training, maintenance, installation, consultancy, facility management, outsourcing and systems integrationthe area of information communications systems, and computer networking. The business activities of the assessee are accepted by Transfer Pricing Officer (TPO) on page 1 of his order.The appellant-assessee has paid an amount of Rs. 166.32 crores as management fee to its Associated Enterprise (AE), in consideration of providing various services in the field of business development, corporate communication, brand management, human resources, information technology, finance etc. The T.P.O. assessing officer (A.O.) has made an adjustment of Rs. 151.57 crores, which has been upheld by the Ld. DRP.The assessee has entered into agreement dated 01^stApril 2014 with its Associated Enterprises (AE) vide which it has availed various management services like corporate communication, brand management, human resources, information technology etc. The assessee has benchmarked this transaction under entity level by adopting Transactional Net Margin Method (TNMM) and since the net margin earned by the appellant is in accordance with the provisions of section 92C(2), the transaction of payment of management fee is considered at arm’s length, such facts are also recorded at page 3 of TPO’s order. The appellant has filed various evidence in support of the management services availed from the AE. According to the TPO and ldDRP, some services are not being rendered, and some are in the nature of shareholder activity.The appellant has also submitted sample third-party invoices for the services availed from the vendors and paid by the AEs to the tune of Rs. 14,75,29,959/- (proportionate share of the appellant), which was allowed by the TPO. The ld AR of the assessee submits that similar issue of arm’s length price of management fee received has arose in earlier years,such facts are recorded by TPO in para 6.3 on page 3 of his order. It was also noted that the issue is repetitive in nature and that similar additions were made in earlier years. However, on appeal before Tribunal it was held in favour of assessee, copy of order in appeal for AY 2011-12 in ITA No. 2280/M/2026 is filed. Against the decision of Tribunal,the Departmental filed appeal before Hon’ble Bombay High Court is dismissed. On similar issue the order of Tribunal in AY 2017-18 and AY 2018-19 is also filed on record on record. No further appeal is filed by department in AY 2017-18 & 2018-19 is filed before High Court. Further, the assessee filed applications under Vivad se Vishwas Scheme for A.Y. 2010-11, A.Y. 2012-13 to 2016-17 wherein the identical dispute has been settled by considering it to be covered in favour of assessee by the decision of the Hon’ble Bombay High Court and thereby enabling the assessee to pay only 50% of the disputed tax. The TPO order for the assessment year under consideration (A.Y. 2020-21) is similarly worded as the TPO’s order for A.Y. 2018-19, copy of which is also filed on record. Hence, the matter is fully covered by earlier years’ decisions stated above.

3. On the other hand, the ld CIT-DR for the revenue supported the order of TPO/AO and DRP.

4. We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. We have also deliberated on the decisions of Tribunal in assesses own for earlier assessment years. On careful consideration of the facts, we find that this issue is repetitive in earlier various assessment years. In AY 2011-12, similar adjustment / additions were suggested by TPO, which were confirmed by DRP and on further appeal before Tribunal in Dimension Data India (P.) Ltd. v. Dy. CIT (Mumbai)/ITA No. 2280/Mum/2016, entire additions were deleted vide order dated 16.08.2017. The order of Tribunal in AY 2011-12 was followed in AY 2017-18 in NTT India (P.) Ltd. v. Addl/JT/Dy./ACIT/Tax/ITO National Faceless Assessment Centre, Delhi [IT Appeal No. 722 (Mum) of 2022, dated 4-9-2023]. we find that on similar issue/ adjustment in AY 2018-19 in NTT India (P.) Ltd. v. Assessment Unit/NFAC/DCIT Circle 15(1)(2) (Mumbai – Trib.)/ITA No. 2491/Mum/2022 dated 24.06.2025, it was argued on behalf of the assessee that Bombay High Court in CIT v. Merck Ltd. 389 ITR 70 (Bombay) held that the payment of management fee does not require separate benchmarking and therefore, if overall profit margin of assessee at entity level is comparable under TNMM with the comparable no adjustment is required. Even, if the management services fee requires separate benchmarking, no adjustment is required for the reasons that the assessee received services under umbrella agreement of intra group services. We also find that such stand of the assessee was accepted in earlier years on the basis of High Court decision. We find that Tribunal by following orders in assesses case for earlier years allowed the appeal after detailed discussions, and also extracted the relevant part of decision of Tribunal in AY 2017-18 dated 04.09.2023. Thus, considering the consistent decisions of Tribunal, which has been followed in earlier years. Thus, following the principal of consistency and the decisions of coordinate benches of Tribunal on same grounds of appeal, ground No. 1 of the appeal is allowed with similar directions.

5. Ground No. 2, relates to Transfer Pricing adjustment of INR 6,47,80,141/-onaccount of payment of Regional Services. The ld AR of the assessee submits that he is not pressing this ground of appeal. Considering the submissions of ld AR of the assessee ground No. 2 of the appeal is dismissed.

6. Ground 3 relates to additions made in the intimation under section 143(1) of Rs. 6,15,36,910/-. The ld AR of the assessee submits that this addition was made by way of an adjustment in the intimation passed under section 143(1)(a) of the Act. From the reading of the ground of appeal itself, it is clear that this is the case of double addition. The item disallowed by the assessee itself has been added by the CPC while processing the return. The necessary documents, establishing double addition, are part of the paper book filed before the Tribunal.However, the same may be verified by the jurisdictional Assessing Officer, who may kindly be directed to give the relief after such verification. No appeal against the adjustment made in intimation under section 143(1) is filed by the assessee.

7. On the other hand, the ld CIT-DR for the revenue submits that necessary directions may be given to the AO to verify facts.

8. Considering the submissions of ld AR of the assessee and the nature of grounds of appeal that the assessee has already disallowed such payment in its computation of income, and this addition was made by way of an adjustment in the intimation passed under section 143(1)(a). Hence, this ground of appeal is restored to the file of jurisdictional assessing officer to verify the facts and pass order in accidence with law. Needless to direct that before passing order, he shall allow opportunity to the assessee. In the result, this ground of appeal is allowed for statistical purpose.

9. Ground 4 relates to short grant of Tax Deducted at Source (‘TDS’) credit amounting to Rs. 7,40,788/-. The ld AR of the assessee submits that this ground may be remanded to the jurisdictional Assessing Officer for proper verification with a direction to grant credit of the TDS as per law. The ld CIT-DR for the revenue raised no objection to the contention of assessee.

10. Considering the contentions of both the parties this ground of appeal is restored to the file of jurisdictional assessing officer to verify the facts and pass order in accidence with law. Needless to direct that before passing order, he shall allow opportunity to the assessee. In the result, this ground of appeal is allowed for statistical purpose.

11. Ground 5 relates to levy of interest under section 234A and 234B. It was submitted that the assessee has filed the return of income within the extended time limit and hence interest under section 234A is not leviable. The appellant has filed its return of income on 15^thFebruary 2021, whereas the time limit for filing return of income has been extended to 15th February 2021 vide press release of CBDT dated 30th December 2020, copy of which is filed on record. Therefore, this issue may be remanded to the jurisdictional Assessing Officer with a direction togrant the relief after verification as per law. And interest under section 234B is consequential in nature. The ld CIT-DR for the revenue fairly submits that this issue also needs verification at the end of assessing officer.

12. Considering the contentions of both the parties this ground of appeal is restored to the file of jurisdictional assessing officer to verify the facts, if the assessee has filed return of income with in the extended due date of filing return of income and pass order in accidence with law. Needless to direct that before passing order, he shall allow opportunity to the assessee. In the result, this ground of appeal is allowed for statistical purpose.

13. In the result, the appeal of the assessee is partly allowed.