Your APA has no rollback for the year under appeal. Can you still make the TPO benchmark that year on the APA's method and tested party?
On this order, yes. The Bench held that although the APA signed for assessment year 2014-15 carried no rollback for the years in appeal, the principles it laid down for comparability analysis have persuasive value, and it drew support from Rule 10MA in applying the methodology accepted in the APA to the year in appeal. It held that the foreign associated enterprises, accepted as the tested party in the APA, were to be the tested party for the year in appeal too, and remitted the computation to the TPO with a direction to give due weight to the APA on the other issues as well.
Decided by the ITAT (Justice P.P. Bhatt, President and Waseem Ahmed, Accountant Member (Ahmedabad 'D' Bench)) on 2019-09-05, reported as IT(TP)A No. 1782/Del/2014 (assessment year 2009-10) and IT(TP)A No. 781/Del/2015 (assessment year 2010-11). It bears on section 92C, section 92CA, section 92CC, section Rule 10MA of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
It is the leading Tribunal reasoning for borrowing an APA's method into a year the agreement does not cover, and it does the work through Rule 10MA rather than around it. It is the order the Ahmedabad Bench reproduced two years later in Sun Pharmaceutical Industries, and the one to cite when the TPO answers that an APA without rollback is irrelevant.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee, a pharmaceutical manufacturer, had fourteen categories of international transactions with some thirty associated enterprises across several countries, of an aggregate value of about Rs 17,006.8 crore. It benchmarked by treating the foreign associated enterprises as the tested party, on the footing that they were the least complex of the transacting entities. The Transfer Pricing Officer rejected that and took the assessee itself as the tested party, making an upward adjustment of Rs 145,13,17,725; the Dispute Resolution Panel gave partial relief. Separately, the assessee had signed an Advance Pricing Agreement with the Central Board of Direct Taxes for assessment year 2014-15, relevant to previous year 2013-14, in which the foreign associated enterprises were accepted as the tested party and a transactional net margin approach with regional and country benchmarking was agreed. That agreement contained no rollback provision for assessment years 2009-10 and 2010-11, the years in appeal.
Ground 2.2 was allowed with a direction that the overseas associated enterprises are accepted as the tested party, being the least complex of the transacting entities, for the comparability analysis of the international transactions (para 35). The remaining grounds 2 to 7, other than 2.2, were set aside to the file of the Transfer Pricing Officer to compute the arm's length price accordingly and were allowed for statistical purposes, with a direction that the TPO and the Assessing Officer give due weight to the Advance Pricing Agreement on the other issues as well, and that where a divergent view is taken the assessee be given adequate opportunity to substantiate its position on the manner of determining the arm's length price (para 36).
The Bench framed the question at para 28: though the APA is signed for assessment year 2014-15, can it have any impact on the transactions of the year under appeal - and answered that while the agreement applies in respect of previous year 2013-14, the principles laid down in it for comparability analysis have a greater persuasive value. At para 29 it recorded that there is no rollback provision in the APA for the year under appeal and then analysed the circumstances which provide for applying that rule, reproducing Rule 10MA, listing its conditions - that the international transactions be the same, the returns be filed in time, the report under s.92E be furnished, the rollback be sought for all the applicable years and the application be in the prescribed form - and noting the restrictions, including that rollback is not available where its effect would be to reduce the income declared. It concluded that it drew support from Rule 10MA in applying the methodology accepted in the APA to the year in appeal. At para 30 it held that as the FAR analysis of the APA year and of the year under appeal were similar, the foreign associated enterprises were the least complex entities and adequate financial data for comparison on a region and country basis was available, the tested party for the year under appeal should likewise be the foreign associated enterprise. It supported the tested party principle from the OECD Transfer Pricing Guidelines 2010 and the United Nations Practical Manual, which put the tested party as the less complex party for which the most reliable data is available, and from the coordinate Bench in General Motors India (P.) Ltd. (para 33). The earlier coordinate Bench decision for assessment year 2004-05, which had upheld the assessee as tested party, was distinguished on the footing that reasonably comparable region and country data for the foreign associated enterprises was now available (para 32).
Though in the APA signed by the assessee there is no "roll back provisions" for the year under appeal
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Handle my notice → Ask a CA on WhatsAppOn this order, yes. The Bench held that although the APA signed for assessment year 2014-15 carried no rollback for the years in appeal, the principles it laid down for comparability analysis have persuasive value, and it drew support from Rule 10MA in applying the methodology accepted in the APA to the year in appeal. It held that the foreign associated enterprises, accepted as the tested party in the APA, were to be the tested party for the year in appeal too, and remitted the computation to the TPO with a direction to give due weight to the APA on the other issues as well. This was decided by the ITAT (Justice P.P. Bhatt, President and Waseem Ahmed, Accountant Member (Ahmedabad 'D' Bench)) and bears on section 92C, section 92CA, section 92CC, section Rule 10MA of the Income Tax Act 1961. It is reported as IT(TP)A No. 1782/Del/2014 (assessment year 2009-10) and IT(TP)A No. 781/Del/2015 (assessment year 2010-11). It is the leading Tribunal reasoning for borrowing an APA's method into a year the agreement does not cover, and it does the work through Rule 10MA rather than around it. It is the order the Ahmedabad Bench reproduced two years later in Sun Pharmaceutical Industries, and the one to cite when the TPO answers that an APA without rollback is irrelevant. If it applies to you, the first step is this: Set out the APA's terms for the Bench: the covered years, the tested party, the method and the benchmarking basis, and identify what is to be carried across.
The assessee, a pharmaceutical manufacturer, had fourteen categories of international transactions with some thirty associated enterprises across several countries, of an aggregate value of about Rs 17,006.8 crore. It benchmarked by treating the foreign associated enterprises as the tested party, on the footing that they were the least complex of the transacting entities. The Transfer Pricing Officer rejected that and took the assessee itself as the tested party, making an upward adjustment of Rs 145,13,17,725; the Dispute Resolution Panel gave partial relief. Separately, the assessee had signed an Advance Pricing Agreement with the Central Board of Direct Taxes for assessment year 2014-15, relevant to previous year 2013-14, in which the foreign associated enterprises were accepted as the tested party and a transactional net margin approach with regional and country benchmarking was agreed. That agreement contained no rollback provision for assessment years 2009-10 and 2010-11, the years in appeal. The matter was decided on 2019-09-05 by the ITAT (Justice P.P. Bhatt, President and Waseem Ahmed, Accountant Member (Ahmedabad 'D' Bench)). On those facts the ITAT held as follows. Ground 2.2 was allowed with a direction that the overseas associated enterprises are accepted as the tested party, being the least complex of the transacting entities, for the comparability analysis of the international transactions (para 35). The remaining grounds 2 to 7, other than 2.2, were set aside to the file of the Transfer Pricing Officer to compute the arm's length price accordingly and were allowed for statistical purposes, with a direction that the TPO and the Assessing Officer give due weight to the Advance Pricing Agreement on the other issues as well, and that where a divergent view is taken the assessee be given adequate opportunity to substantiate its position on the manner of determining the arm's length price (para 36).
The Bench framed the question at para 28: though the APA is signed for assessment year 2014-15, can it have any impact on the transactions of the year under appeal - and answered that while the agreement applies in respect of previous year 2013-14, the principles laid down in it for comparability analysis have a greater persuasive value. At para 29 it recorded that there is no rollback provision in the APA for the year under appeal and then analysed the circumstances which provide for applying that rule, reproducing Rule 10MA, listing its conditions - that the international transactions be the same, the returns be filed in time, the report under s.92E be furnished, the rollback be sought for all the applicable years and the application be in the prescribed form - and noting the restrictions, including that rollback is not available where its effect would be to reduce the income declared. It concluded that it drew support from Rule 10MA in applying the methodology accepted in the APA to the year in appeal. At para 30 it held that as the FAR analysis of the APA year and of the year under appeal were similar, the foreign associated enterprises were the least complex entities and adequate financial data for comparison on a region and country basis was available, the tested party for the year under appeal should likewise be the foreign associated enterprise. It supported the tested party principle from the OECD Transfer Pricing Guidelines 2010 and the United Nations Practical Manual, which put the tested party as the less complex party for which the most reliable data is available, and from the coordinate Bench in General Motors India (P.) Ltd. (para 33). The earlier coordinate Bench decision for assessment year 2004-05, which had upheld the assessee as tested party, was distinguished on the footing that reasonably comparable region and country data for the foreign associated enterprises was now available (para 32). In the words reproduced by the source cited on this page: "Though in the APA signed by the assessee there is no "roll back provisions" for the year under appeal" The decision followed or applied General Motors India (P.) Ltd. (Ahmedabad Bench) - coordinate Bench synthesis on selection of the tested party, adopted at para 33; OECD Transfer Pricing Guidelines 2010 and the UN Practical Manual on Transfer Pricing 2013 - relied on for the less complex tested party; CIT v. L.G. Ramamurthi and Ambika Prasad Mishra v. State of U.P. - relied on for consistency between coordinate Benches.
It was decided by the ITAT on 2019-09-05 and is reported as IT(TP)A No. 1782/Del/2014 (assessment year 2009-10) and IT(TP)A No. 781/Del/2015 (assessment year 2010-11). Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 92C, section 92CA, section 92CC, section Rule 10MA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Ground 2.2 was allowed with a direction that the overseas associated enterprises are accepted as the tested party, being the least complex of the transacting entities, for the comparability analysis of the international transactions (para 35). The remaining grounds 2 to 7, other than 2.2, were set aside to the file of the Transfer Pricing Officer to compute the arm's length price accordingly and were allowed for statistical purposes, with a direction that the TPO and the Assessing Officer give due weight to the Advance Pricing Agreement on the other issues as well, and that where a divergent view is taken the assessee be given adequate opportunity to substantiate its position on the manner of determining the arm's length price (para 36). It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 92C, section 92CA, section 92CC, section Rule 10MA of the Income Tax Act 1961, and was decided by Justice P.P. Bhatt, President and Waseem Ahmed, Accountant Member (Ahmedabad 'D' Bench). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show that the FAR analysis and the nature of the transactions in the year under appeal are similar to the APA year, and that reliable comparable data on the same basis is available for the earlier year. Take Rule 10MA head on - reproduce its conditions, show which are met, and meet the sub-rule (3) bar squarely where the rollback would reduce the returned income. Ask for the direction in the form given here: the tested party settled as a matter of principle and the computation remitted to the TPO, with the APA to be given due weight on the remaining issues. Where a coordinate Bench has decided the tested party against you in an earlier year, distinguish it on the availability of region and country comparable data, which is what carried the point here.
Still good law. Applied by the Ahmedabad Bench in the same group's own case, Sun Pharmaceutical Industries Ltd. (erstwhile Ranbaxy Laboratories Ltd.) v. ACIT, ITA No. 702/Ahd/2016 for assessment year 2011-12, decided 8 April 2021, which reproduced this order's paragraphs on the APA and the tested party, said in terms that it was taking the same view, and restored that year to the TPO on the same basis. That order was read here. No decision doubting or overruling this one was located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The document truncates. The print page runs to internal page 41 and then trails off in the middle of a long quotation from a Supreme Court judgment on Article 31A of the Constitution, with no 'order pronounced' line. The paragraphs that matter - 28 to 30 on the APA and Rule 10MA, and the directions at 35 and 36 - were reached and read, but the disposition of any grounds beyond ground 7 and the formal pronouncement could not be seen, so this is recorded as a partial reading. One sentence in para 29 as it appears on that page reads that it is not disputed that the international transactions in both years are not same, immediately before the Bench draws support from Rule 10MA. That reading does not sit with paras 28 and 30, where the Bench proceeds throughout on the footing that the FAR and the transactions are similar; the sentence should be checked against a certified copy before it is quoted either way. Note also that although the appeals are Delhi appeals numbered IT(TP)A Nos. 1782/Del/2014 and 781/Del/2015, the order was passed by the Ahmedabad 'D' Bench presided over by the President. The discovery record is accurate on the bench, the date and the appeal numbers. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Ground 2.2 was allowed with a direction that the overseas associated enterprises are accepted as the tested party, being the least complex of the transacting entities, for the comparability analysis of the international transactions (para 35). The remaining grounds 2 to 7, other than 2.2, were set aside to the file of the Transfer Pricing Officer to compute the arm's length price accordingly and were allowed for statistical purposes, with a direction that the TPO and the Assessing Officer give due weight to the Advance Pricing Agreement on the other issues as well, and that where a divergent view is taken the assessee be given adequate opportunity to substantiate its position on the manner of determining the arm's length price (para 36).
TaxSphere, “Ranbaxy Laboratories Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/ranbaxy-laboratories-v-dcit-apa-method-outside-the-rollback/ (validity last checked 2026-09-16)
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