Voluntary Transfer Pricing adjustment eligible for Income Tax Deduction u/s 10AA: ITAT grants Relief to EY [Read Order]

Granting relief to EYBGS India Pvt. Ltd, an IT Company, the Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that the amount of voluntary Transfer pricing adjustment shall be eligible for deduction under section 10AA of the Income Tax Act, 1961.

The assessee, a 100% subsidiary of EYGI B.V., Netherlands, engaged in the business of providing back-office support services, which are in the nature of ‘Information Technology Enabled Services’ (ITES). The nature of services provided by the assessee to its Associated Enterprises (AEs) includes financial analysis and reporting functions such as standard reporting/analysis, work-in-progress details, timesheet details, etc., accounting center processing activities/functions such as accounts receivable, accounts payable functions, billing analysis, and invoice preparation, etc and financial assistance/administration functions such as time and expenses review, helpdesk providing assistance on employee queries, etc. The assessee is remunerated at the “cost-plus” basis for the services provided to its AEs.

For the relevant assessment year, the Assessing Officer disallowed the deduction of Rs. 8.11 crores under section 10AA to the assessee on the ground that the Voluntary Transfer Pricing adjustment is not eligible to be deducted under the provision.

The assessee submitted before the Tribunal that they arrived at the amount of voluntary T.P adjustment in a scientific manner by comparing the margins of comparable companies selected by them. They further submitted that the coordinate bench has held in the case of I-Gate Global Solutions Ltd has held that the assessee is eligible for deduction u/s 10AA on the amount of voluntary TP adjustment.

The Tribunal referred the decision of the Pune ITAT in the case of Apoorva Systems (P) Ltd wherein the Tribunal observed that the assessee is entitled to get deduction under section 10A on account of suo-moto adjustment on account of transfer pricing provisions.

Allowing the plea of the assessee in the light of the above decision, the Tribunal held that “Identical view has been expressed by the Delhi bench of Tribunal in the case of AT Kearney India P Ltd (ITA No.2623/Del/2015 dated 21.06.2019). Accordingly, we hold that the assessee is eligible for deduction u/s 10AA of the Act in respect of voluntary Transfer Pricing adjustment made by it. We direct accordingly.”