Unilever Industries Private Limited Vs ACIT (ITAT Mumbai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, arose from the final assessment order for Assessment Year 2023-24 involving transfer pricing adjustments, royalty attribution, foreign tax credit, education cess withdrawal, and computational issues.
The assessee, a wholly owned subsidiary of a UK-based group company, was engaged in providing research and development services, enterprise and technology support services in the nature of business support services and back-office support services, and design services to its associated enterprises.
For the relevant year, the assessee declared income of ₹204.14 crore. During scrutiny, the matter was referred to the Transfer Pricing Officer (TPO) for determination of arm’s length price of international transactions. The TPO proposed substantial transfer pricing adjustments under enterprise and technology support services, contract R&D services, and royalty attribution, resulting in significant additions, which were largely incorporated into the assessment order. The assessee appealed before the Tribunal.
Enterprise and Technology Support Services – Comparable selection
Under the support services segment, the assessee benchmarked its international transactions using TNMM and treated them as being at arm’s length. The TPO rejected several comparables by applying a 10-times turnover filter and functional dissimilarity tests, resulting in a narrower set of comparables and upward adjustment.
Before the Tribunal, the assessee argued for inclusion of certain comparables.
The Tribunal noted that one comparable, Keystone Integrated Marketing Services Pvt. Ltd., had been accepted by the Dispute Resolution Panel (DRP) in earlier years and, for the year under consideration as well, the DRP had directed inclusion of this comparable. Since the Assessing Officer did not follow that direction, the Tribunal directed inclusion of Keystone in the final list.
However, the Tribunal upheld rejection of Buzzworks Business Services Pvt. Ltd., observing that it was engaged in financial management consultancy services, whereas the assessee rendered finance-related back-office support services under group-defined frameworks. The functions were held to be materially different.
Similarly, Crayons Advertising Ltd. was held functionally dissimilar because it rendered advertisement services, whereas the assessee did not perform advertising functions. Its exclusion was therefore upheld.
Accordingly, this ground was partly allowed.
