Alepo Technology Private Limited Vs DCIT (ITAT Mumbai)
Section 68 Addition Deleted and TP Comparables Included as Evidence Supported Claims: ITAT Mumbai
The assessee appealed against the final assessment order dated 11.11.2025 passed under Sections 143(3), 144C(13), and 144B for AY 2022-23 pursuant to the directions of the Dispute Resolution Panel (DRP). The assessee challenged transfer pricing (TP) adjustments, additions under Section 68, addition relating to foreign exchange fluctuation loss, computation of interest and fee, initiation of penalty proceedings, and also contended that the assessment order was barred by limitation.
The assessee, a wholly owned subsidiary providing IT support services to its group entities, had benchmarked its international transactions using the Transactional Net Margin Method (TNMM) with nine comparables. The Transfer Pricing Officer (TPO) rejected five comparables, retained four, determined an arm’s length margin of 23.60% against the assessee’s margin of 13.82%, and proposed a TP adjustment of ₹3.88 crore. The DRP sustained the adjustment, leading to the final assessment order.
Before the Tribunal, the assessee confined its TP challenge to inclusion of two comparables, namely Rheal Software (P) Ltd. and Toxsl Technologies Private Ltd. Regarding Rheal Software, the assessee contended that it was wrongly excluded as a persistent loss-making company although it had earned operating profit in one of the relevant years and positive profit before tax in two of the relevant years. The Revenue argued that Rheal had incurred losses in two out of three years and was functionally different. The Tribunal noted that the TPO had excluded Rheal solely on the persistent loss filter and relied on the co-ordinate bench decision in Nokia Solutions and Networks India (P) Ltd. vs ACIT, observing that Rheal had reported profit in one of the last three years and therefore could not be treated as a persistent loss-making company. The Tribunal directed the AO/TPO to include Rheal Software in the final set of comparables.
