Your APA for a later year accepts the foreign associated enterprise as the tested party. Can the TPO still make you the tested party in an open earlier year?
Not without the question being looked at again on the APA's basis. Following the Ahmedabad Bench's order in the assessee's own group for assessment year 2009-10, this Bench took the same view and restored the tested party issue to the Transfer Pricing Officer for fresh adjudication treating the associated enterprises as the tested party. The ground was allowed for statistical purposes.
Decided by the ITAT (Mahavir Prasad, Judicial Member and Amarjit Singh, Accountant Member (Ahmedabad 'D' Bench, conducted through virtual court)) on 2021-04-08, reported as ITA No. 702/Ahd/2016 (assessee's appeal) and ITA No. 729/Ahd/2016 (Revenue's appeal), assessment year 2011-12. It bears on section 92C, section 92CA, section 92CC, section Rule 10MA, section 14A of the Income Tax Act 1961, in Assessment & Scrutiny and How Tax Law Is Read matters.
It confirms the Ranbaxy line in the same taxpayer's own case for a later year and shows the relief that line actually produces: not deletion of the adjustment, but a remand to redo the benchmarking on the APA's own footing, including the choice of tested party.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For assessment year 2011-12 the assessee, the erstwhile Ranbaxy Laboratories Ltd., returned nil taxable income with a carried forward loss of Rs 3,02,66,75,211 and book profit under s.115JB of Rs 7,18,44,50,980. The Transfer Pricing Officer made an upward adjustment of Rs 1,80,82,00,000, taking the assessee as the tested party rather than the overseas associated enterprises. By ground 3 the assessee contended that the Officer had erred in not treating the overseas associated enterprise as the tested party, being the least complex of the transacting entities, and had thereby violated basic transfer pricing principles. The assessee had signed an Advance Pricing Agreement with the Central Board of Direct Taxes on 7 August 2015 for assessment year 2014-15, relevant to previous year 2013-14, which accepted the foreign associated enterprises as the tested party and a regional benchmarking approach, and which carried no rollback for the year in appeal. The Revenue's cross appeal in ITA No. 729/Ahd/2016 was heard with it. Other grounds concerned a disallowance under s.14A where no dividend income had been earned and a contribution issue, and there was a further ground on deductions under ss.80-IB and 80-IC.
The tested party ground was allowed for statistical purposes. Having gone through the order of the Ahmedabad Bench in IT(TP)A No. 1782/Del/2014 for assessment year 2009-10 and taking the same view, the Bench restored the issue to the file of the Transfer Pricing Officer for fresh adjudication considering the associated enterprises as the tested party (para 6 of this order). On the s.14A ground the Bench followed the Gujarat High Court in Corrtech Energy Ltd. and allowed the ground, no dividend income having been earned.
The Bench did not reason the APA question afresh. It recorded that with the assistance of the representatives it had gone through the order of the Ahmedabad Bench in IT(TP)A No. 1782/Del/2014 for assessment year 2009-10, reproduced the relevant part of that decision on the issue, and then took the same view. The reproduced part is the Ranbaxy reasoning that although the APA for assessment year 2014-15 carried no rollback for the year under appeal, the principles laid down in it for comparability analysis have persuasive value, that support is drawn from Rule 10MA in applying the methodology accepted in the APA to the year in appeal, and that as the FAR analysis of the APA year and the year under appeal are similar and adequate region and country data is available, the foreign associated enterprise is to be the tested party. On that footing this Bench remitted the issue.
we restore this issue to the file of the TPO for fresh adjudication considering A.E's. as tested party
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Handle my notice → Ask a CA on WhatsAppNot without the question being looked at again on the APA's basis. Following the Ahmedabad Bench's order in the assessee's own group for assessment year 2009-10, this Bench took the same view and restored the tested party issue to the Transfer Pricing Officer for fresh adjudication treating the associated enterprises as the tested party. The ground was allowed for statistical purposes. This was decided by the ITAT (Mahavir Prasad, Judicial Member and Amarjit Singh, Accountant Member (Ahmedabad 'D' Bench, conducted through virtual court)) and bears on section 92C, section 92CA, section 92CC, section Rule 10MA, section 14A of the Income Tax Act 1961. It is reported as ITA No. 702/Ahd/2016 (assessee's appeal) and ITA No. 729/Ahd/2016 (Revenue's appeal), assessment year 2011-12. It confirms the Ranbaxy line in the same taxpayer's own case for a later year and shows the relief that line actually produces: not deletion of the adjustment, but a remand to redo the benchmarking on the APA's own footing, including the choice of tested party. If it applies to you, the first step is this: Identify the earlier order of the coordinate Bench in your own case or group on the same issue and put it before the Bench; that is what carried this appeal.
For assessment year 2011-12 the assessee, the erstwhile Ranbaxy Laboratories Ltd., returned nil taxable income with a carried forward loss of Rs 3,02,66,75,211 and book profit under s.115JB of Rs 7,18,44,50,980. The Transfer Pricing Officer made an upward adjustment of Rs 1,80,82,00,000, taking the assessee as the tested party rather than the overseas associated enterprises. By ground 3 the assessee contended that the Officer had erred in not treating the overseas associated enterprise as the tested party, being the least complex of the transacting entities, and had thereby violated basic transfer pricing principles. The assessee had signed an Advance Pricing Agreement with the Central Board of Direct Taxes on 7 August 2015 for assessment year 2014-15, relevant to previous year 2013-14, which accepted the foreign associated enterprises as the tested party and a regional benchmarking approach, and which carried no rollback for the year in appeal. The Revenue's cross appeal in ITA No. 729/Ahd/2016 was heard with it. Other grounds concerned a disallowance under s.14A where no dividend income had been earned and a contribution issue, and there was a further ground on deductions under ss.80-IB and 80-IC. The matter was decided on 2021-04-08 by the ITAT (Mahavir Prasad, Judicial Member and Amarjit Singh, Accountant Member (Ahmedabad 'D' Bench, conducted through virtual court)). On those facts the ITAT held as follows. The tested party ground was allowed for statistical purposes. Having gone through the order of the Ahmedabad Bench in IT(TP)A No. 1782/Del/2014 for assessment year 2009-10 and taking the same view, the Bench restored the issue to the file of the Transfer Pricing Officer for fresh adjudication considering the associated enterprises as the tested party (para 6 of this order). On the s.14A ground the Bench followed the Gujarat High Court in Corrtech Energy Ltd. and allowed the ground, no dividend income having been earned.
The Bench did not reason the APA question afresh. It recorded that with the assistance of the representatives it had gone through the order of the Ahmedabad Bench in IT(TP)A No. 1782/Del/2014 for assessment year 2009-10, reproduced the relevant part of that decision on the issue, and then took the same view. The reproduced part is the Ranbaxy reasoning that although the APA for assessment year 2014-15 carried no rollback for the year under appeal, the principles laid down in it for comparability analysis have persuasive value, that support is drawn from Rule 10MA in applying the methodology accepted in the APA to the year in appeal, and that as the FAR analysis of the APA year and the year under appeal are similar and adequate region and country data is available, the foreign associated enterprise is to be the tested party. On that footing this Bench remitted the issue. In the words reproduced by the source cited on this page: "we restore this issue to the file of the TPO for fresh adjudication considering A.E's. as tested party" The decision followed or applied Ranbaxy Laboratories Ltd. (Ahmedabad Bench, IT(TP)A No. 1782/Del/2014, assessment year 2009-10, order dated 5 September 2019) - reproduced and the same view taken; CIT v. Corrtech Energy Ltd., 372 ITR 97 (Guj) - followed on the separate s.14A ground.
It was decided by the ITAT on 2021-04-08 and is reported as ITA No. 702/Ahd/2016 (assessee's appeal) and ITA No. 729/Ahd/2016 (Revenue's appeal), assessment year 2011-12. 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, section 14A, 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. The tested party ground was allowed for statistical purposes. Having gone through the order of the Ahmedabad Bench in IT(TP)A No. 1782/Del/2014 for assessment year 2009-10 and taking the same view, the Bench restored the issue to the file of the Transfer Pricing Officer for fresh adjudication considering the associated enterprises as the tested party (para 6 of this order). On the s.14A ground the Bench followed the Gujarat High Court in Corrtech Energy Ltd. and allowed the ground, no dividend income having been earned. It arises in Assessment & Scrutiny and How Tax Law Is Read matters, on section 92C, section 92CA, section 92CC, section Rule 10MA, section 14A of the Income Tax Act 1961, and was decided by Mahavir Prasad, Judicial Member and Amarjit Singh, Accountant Member (Ahmedabad 'D' Bench, conducted through virtual court). 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. Frame the ground as the TPO having wrongly taken the assessee rather than the least complex overseas associated enterprise as the tested party, which is how ground 3 was framed here. Expect a remand: ask for a direction that the fresh adjudication proceed on the associated enterprises as the tested party, so the TPO cannot reopen that question. When quoting the Rule 10MA reasoning, attribute it to the Ranbaxy order of 5 September 2019 and not to this order - see the note below.
Searched for later treatment; none was found. That is not the same as a source affirming it. No decision applying, doubting or overruling this order was located and opened. Its value is as a second application of the Ranbaxy reasoning in the same taxpayer's own case, not as an independent authority. 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 single most important thing about this order, and the thing the discovery record gets wrong. The paragraphs numbered 28 to 36 in the text of this order - including the sentence 'Therefore, we draw support from Rule 10 MA of Income tax Rules 1962 in applying the methodology as accepted in APA for the impugned year in appeal' - are NOT this Bench's words. They form part of the order of the Ahmedabad Bench in ITA No. 1782/Del/2014 (Ranbaxy Laboratories, assessment year 2009-10), reproduced after the sentence 'With the assistance of representatives, we have gone through order of ITAT Ahmedabad vide ITA No. 1782/Del/2014 for assessment year 2009-10. The relevant part of the decision on this issue is reproduced as under'. This Bench's own holding on the issue is in its para 6, quoted above. Anyone citing the Rule 10MA passage should attribute it to the Ranbaxy order of 5 September 2019; it is nonetheless reasoning this Bench adopted, having said it was taking the same view. Two further points. The order was passed in the assessee's appeal ITA No. 702/Ahd/2016 together with the Revenue's appeal ITA No. 729/Ahd/2016, which the discovery record omits. And the print page truncates inside a table in the discussion of the ss.80-IB and 80-IC ground, so the disposition of the remaining grounds, of the Revenue's appeal and the formal pronouncement could not be read; the entry is marked as a partial reading for that reason. 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.
The tested party ground was allowed for statistical purposes. Having gone through the order of the Ahmedabad Bench in IT(TP)A No. 1782/Del/2014 for assessment year 2009-10 and taking the same view, the Bench restored the issue to the file of the Transfer Pricing Officer for fresh adjudication considering the associated enterprises as the tested party (para 6 of this order). On the s.14A ground the Bench followed the Gujarat High Court in Corrtech Energy Ltd. and allowed the ground, no dividend income having been earned.
TaxSphere, “Sun Pharmaceutical Industries Ltd v ACIT”, https://taxnotice.vittsphere.com/caselaw/case/sun-pharmaceutical-industries-v-acit-apa-tested-party-remand/ (validity last checked 2026-09-16)
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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?
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