ITAT Rules in Favour of FIL India on Transfer Pricing and PF Contribution Issues
The company, FIL India Business and Research Services Pvt. Ltd., appealed against a tax assessment order for AY 2020-21. The Assessing Officer had increased the company’s income and made transfer pricing and PF-related additions. Before the Tribunal, the assessee argued that one comparable company (SPT Investment Advisory Services Ltd.) did not meet the turnover filter. The ITAT agreed and directed the AO/TPO to remove this company and recalculate the adjustment. The Tribunal also deleted the PF disallowance since the delay was due to technical issues and not the company’s fault. The penalty issue was held premature and not decided.
The present appeal has been filed by FIL India Business and Research Services Pvt. Ltd (Appellant) against the Assessment Unit Income Tax Department, Delhi (Respondent), in the Income Tax Appellate Tribunal (ITAT) Bench: New Delhi, before Shri Satbeer Singh Godara (Judicial Member) and Shri Manish Agarwal (Account Member). The case is related to the assessment year 2020-21 and was decided on November 14, 2025. The present appeal is filed by the assessee against the final assessment order dated June 26, 2024 passed by the Assessing Officer u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961.
Background of the case:
The assessee company is involved in the business of rendering software development services, information technology-enabled services and research support services to its group companies located in India and abroad. It filed its income tax return on December 14, 2020, declaring a total income of Rs 201,40,43,870. The tax department selected the case for detailed scrutiny, and the Assessing Officer (AO) completed the assessment under section 143(3) on June 27, 2024. In this order, the AO increased the company’s income to Rs 2,20,13,31,467 by making several additions.
The company challenged this assessment by filing objections before the Dispute Resolution Panel (DRP). Since the DRP’s decision was not fully in its favour, the aggrieved assessee then filed the appeal before the Tribunal.
Before ITAT, the assessee’s lawyer did not argue Grounds 1 and 5. So, these two grounds are considered withdrawn and were dismissed. Grounds 2 and 3 were about the transfer pricing addition made on the company’s research support services to its foreign group companies.
However, A.R. submitted that DRP through its para. No. 4.2.12.1 directed the AO to re-verify the computation of income on the basis of the financials of the companies selected in the final set of comparables as available in the public domain and rectify the errors.
The TPO selected comparable companies using a turnover filter of more than Rs 5 crore and less than Rs 100 crore. When the assessee objected to some of the new comparables, saying they did not meet this turnover requirement, the TPO stated that he had selected companies based on an average turnover of around Rs 4 to 5 crore.
The assessee’s representative (AR) told the ITAT that one of the comparable companies, SPT Investment Advisory Services Ltd., should not be considered because it fails the turnover filter. Its turnover for FY 2019-20 is only Rs 3.60 crores, and the annual report supporting this is at page 16 of the Paper Book.
Therefore, the AR requested that this company should not be treated as a valid comparable. He also agreed that if the Tribunal accepts this point (Grounds 3 to 3.2), then the other issues raised in Ground No. 2 become purely academic and do not need to be decided.
However, DR for the revenue supported the order of TPO and submitted that IPO has correctly taken comparables, which deserve to be upheld.
After hearing both the parties, The Tribunal reviewed the arguments and documents and said TPO had used a turnover filter of Rs 4-5 crores for selecting comparable companies. However, SPT Investment Advisory Services Ltd has a turnover of only Rs 3.65 crores, so it does not meet this filter.
Therefore, the Tribunal instructed the AO/TPO to remove this company from the list of comparables and recalculate the adjustment after applying the filters correctly. With these instructions, Grounds 2 and 3 are resolved.
The ITAT after considering that a Co-ordinate Bench had already removed the disallowance in a similar case. The reason was that the assessee made the PF payment on time, but due to technical issues, the amount reached the EPFO’s bank account after the due date. Since the delay happened because of factors outside the assessee’s control, and the money was debited from the assessee’s bank within the due date, the Tribunal held that there was no real delay in paying the employees’ PF contribution.
The AO has relied upon the judgement of the Hon’ble Supreme Court in the case of Checkmate Services (Pvt.) Ltd vs.CIT (2022) 143 taxmann.com 178 (SC), wherein the Hon’ble Supreme Court has stated that once the payment was not made by the assessee within the prescribed time limit, no deduction is allowable.
Considering the fact, ITAT said that a similar decision by another Bench in the assessee’s earlier appeal (against the order passed under section 143(1)) was not challenged by the Revenue; the disallowance of Rs 2,21,19,425 made by the Assessing Officer in the final assessment order under section 143(3) is removed. Therefore, Grounds of Appeal 4 to 4.4 raised by the assessee are allowed.
The penalty imposed by revenue under section 270A of the Income Tax Act is premature and not adjudicated and hence Tribunal dismissed the appeal.
Citation: FIL India Business & Research Services Pvt. Ltd Vs Assessment Unit Income Tax Department (ITAT Delhi); 3245/Del/2024; 14/11/2025; 2020-21.
