Etisalat Software Solutions Pvt. Ltd. Vs ACIT (ITAT Bangalore)
Summary: The assessee, Etisalat Software Solutions Private Limited, a subsidiary of Emirates, UAE, engaged in providing software-development services to its associated enterprises, challenged the assessment for AY 2017-18, under which the Assessing Officer determined total income at ₹45.80 crore against returned income of approximately ₹22.44 crore, principally due to a transfer-pricing adjustment of ₹23.36 crore. In an earlier round, the ITAT, by order dated 20 September 2022, partly decided the comparability issues and restored the issues relating to R Systems International Limited and Sasken Technologies Limited to the AO/TPO for fresh examination; the order was received by the Commissioner on 17 October 2022. The TPO subsequently passed an order on 30 September 2024, followed by the DRP directions and final assessment order dated 12 November 2025. The assessee raised an additional jurisdictional ground contending that the assessment was barred by limitation, which the Tribunal admitted as the issue went to the root of the appeal and arose from admitted facts. The Tribunal held that the earlier ITAT order had not set aside or cancelled the entire assessment, but had partly decided comparability issues and remitted specified issues for verification. It therefore considered the matter under Section 153(5) and its second proviso, linking the applicable limitation to Section 153(3), with the order required to be passed on or before 31 March 2024. Rejecting the Revenue’s contention that the additional 12-month extension under Section 153(4) was available, the Tribunal relied on the jurisdictional Karnataka High Court decision in United Spirits Ltd. v. DCIT and distinguished a fresh reference made by the AO to the TPO under Section 92CA from a matter remitted by the Tribunal to the AO/TPO. Since the TPO order was passed on 30 September 2024 and the final assessment order on 12 November 2025, the Tribunal held that the applicable limitation had expired on 31 March 2024, quashed the assessment and the consequential ₹23.36 crore transfer-pricing adjustment, and dismissed the remaining grounds as infructuous. The appeal filed by the assessee was partly allowed.
₹23.36 Crore Transfer-Pricing Adjustment Quashed as Time-Barred: Section 153(4) Extension Unavailable for ITAT Remand to TPO
The assessee, Etisalat Software Solutions Private Limited, a subsidiary of Emirates, UAE, provided software-development services to its associated enterprises. For AY 2017-18, the AO passed a final assessment order on 12 November 2025, determining income at ₹45.80 crore against the returned income of approximately ₹22.44 crore, principally on account of a transfer-pricing adjustment of ₹23.36 crore.
In an earlier round of litigation, the ITAT, by order dated 20 September 2022, had directed the exclusion of certain comparables and restored the issues relating to R Systems International Limited and Sasken Technologies Limited to the AO/TPO for fresh examination. The order was received by the Commissioner on 17 October 2022. Pursuant to this direction, the TPO passed an order on 30 September 2024, followed by the DRP’s directions and the final assessment order dated 12 November 2025.
Before the Tribunal, the assessee raised an additional jurisdictional ground contending that the assessment was barred by limitation. Since the issue went to the root of the assessment and arose from admitted facts, the ITAT admitted the additional ground despite it not having been raised before the lower authorities.
The Tribunal observed that the earlier ITAT order had not set aside or cancelled the entire assessment. It had partly decided the comparability issues and remitted only specified issues for verification. Therefore, the matter was governed by Section 153(5) and its second proviso, which linked the limitation period to Section 153(3). The order was accordingly required to be passed on or before 31 March 2024.
Rejecting the Revenue’s contention, the Tribunal held that the additional 12-month extension under Section 153(4) was unavailable. Relying on the jurisdictional Karnataka High Court ruling in United Spirits Ltd. v. DCIT, it distinguished between a fresh reference made by the AO to the TPO under Section 92CA and a matter merely remitted by the Tribunal to the AO/TPO. A Tribunal’s remand to the TPO cannot be treated as a fresh statutory reference so as to claim the extended limitation under Section 153(4).
Since the TPO’s order was passed only on 30 September 2024 and the final assessment order on 12 November 2025, both were beyond the applicable limitation. The ITAT therefore quashed the assessment and the consequential ₹23.36 crore transfer-pricing adjustment. All other grounds became academic and were dismissed as infructuous.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. This appeal has been filed by Etisalat Software Solutions Private Limited (“the assessee/appellant”) for Assessment Year 2017– 18 against the assessment order dated 12 November 2025 passed by the Assistant Commissioner of Income-tax, Circle- 2(2)(1), Bengaluru (“the Assessing Officer/AO”). The order was passed pursuant to the directions of the whereby the issue was partly set aside to the file of the AO/ Transfer Pricing Officer. This order was received by the CIT on 17/10/2022. In accordance with those directions, the Assessing Officer passed a draft assessment order on 27/01/2025, in which TPO order dated 30/09/2024 was incorporated, against which the assessee filed objections before the Dispute Resolution Panel. The Panel issued its directions on 6 October 2025, and the final assessment order was thereafter passed under section 143(3) read with section 254 of the Income- tax Act, determining the assessee’s total income at ₹ 458,018,100 as against the returned income of ₹ 224,389,580 on 12/11/2025. The sole adjustment made was under section 92 CA of the Act, amounting to ₹ 233,628,520.
2. The Assessee has raised the following grounds of appeal:
1. The impugned assessment order dated 12.11.2025 under section 143(3) read with section 144C (13) of the Income- tax Act, 1961 is barred by limitation and deserves to be quashed as such.
2. The learned Authorities Below erred in making and upholding the transfer pricing adjustment of Rs. 23,36,28,520 in respect of the software development services rendered by the Appellant.
3. The learned Authorities Below erred in the determination of the profit level indicator of the comparable R Systems International Limited.
4. The learned Authorities Below erred in excluding Sasken Technologies Limited as a comparable.
5. For these and other grounds that may be urged either as additional grounds or otherwise and at the time of hearing, in facts and circumstance so of the case, and considering the evidence on the record allowed and that this Honourable Tribunal pass such other orders including orders as to costs as it thinks fits in the interest of justice
3. Briefly stated, the assessee, a subsidiary of Emirates UAE, is engaged in providing software development services to its associated enterprises. It filed its return of income on 28 November 2017 declaring total income of ₹ 223,389,580. The return was selected for scrutiny by issuing notice under section 143(2) of the Income- tax Act on 24 August 2018. Thereafter, a draft assessment order dated 21 April 2021 proposed a transfer pricing adjustment under section 92 CA of ₹ 382,658,668. The assessee filed objections before the Dispute Resolution Panel, which issued directions under section 144C (5) of the Act on 24 January 2022, followed by the final assessment order dated 10 February 2022. The assessee challenged that order before the ITAT in ITA No. 240/Bangalore/2022, on 20/9/2022, whereupon the Tribunal set aside the matter to the file of the Assessing Officer. Pursuant to the Tribunal’s order, the matter was referred to the Transfer Pricing Officer on 18 July 2023, who passed an order on 30 September 2024 proposing a transfer pricing adjustment of ₹ 233,628,520. A draft order under section 144C (1) was then passed on 27 January 2025 proposing the same addition. The assessee again filed objections before the Dispute Resolution Panel, which issued its directions on 6 October 2025. Consequently, the final assessment order was passed on 12 November 2025.
4. During the course of hearing the assessee filed an additional ground of appeal stating that the assessment order passed by the learned assessing officer is barred by limitation. This application was made on 17 April 2026 relying upon the decision of the honourable Supreme Court in case of National thermal Power Co Ltd versus CIT (1998) 2 29 ITR 383 (SC) stating that this ground of appeal goes to the root of the matter and therefore deserves to be admitted.
5. The grounds of appeal raised by the assessee are that the transfer pricing addition could not have been made as the order passed by the learned transfer pricing officer dated 30 September 2024 under section 92 CA (3) of the act is barred by limitation.
6. The learned authorized representative Shri Bharadwaj Seshadri, advocate reiterated the prayer stated in the application for admission of the additional ground and stated that same deserves to be admitted.
7. The learned and CIT DR Dr Divya K J vehemently opposed the additional ground and submitted that this additional ground was not raised before the learned lower authorities.
8. We have carefully considered the rival contention and perused the orders of the learned lower authorities as well as the application made by the assessee for admission of additional ground. We find that by the additional ground the assessee is challenging the order of the learned transfer pricing officer / final order of the ld Ao holding that same is barred by limitation. We find that this issue goes to the root of appeal and bona fide deserves to be admitted. Accordingly, we admit the additional ground of appeal.
9. Adverting to the additional ground, authorized representative submitted that the order of the coordinate bench is passed on 20 September 2022 wherein the issue was restored back to the file of the learned transfer pricing officer/assessing officer for the determination of the arm’s- length price of the international transaction to certain extent. He submitted that this order restored to the assessing officer was received by the CIT on 17 October 2022. He further submitted that the transfer pricing officer passed an order on 30 September 2024, DRP issued direction and consequent order of AO was passed on 12/11/2025 which would have been passed on or before 31st of March 2024 and therefore the order passed by the learned transfer pricing officer/ AO is deserves to be deleted, on this ground itself, the returned income would prevail.
10. He further referred to the provisions of section 153 (3) of the act and stated that when the order is passed under section 254 of the income tax act which was received by the learned assessing officer on 17 October 2022 the order of the learned assessing officer should have been passed within 12 months from the end of the month in which the order is received by the assessee.
11. The learned authorized representative filed a case law compilation containing 126 pages and also the appeal of the principal Commissioner of income tax against the assessee before the honourable Karnataka High Court in ITA No. 325/2023 containing 160 pages.
12. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that in this case the provisions of section 153 (4) is also applicable and further extend the time limit by 12 months and therefore the time limit stated by the learned authorized representative of 31st of March 2024 would be extended by 31st of March 2025 and the TPO order is within the time limit provided by the law.
13. In rejoinder the learned authorized representative referred to the decision of the honourable Karnataka High Court in case of United spirits Ltd versus Deputy Commissioner of income tax (2026) 184 taxmann.com 286 and the decision of honourable Delhi High Court in case of New Delhi television Ltd versus DLP (2024) 465 ITR 687 (Delhi) and submitted that the time limit will expire in this case 31st of March 2024.
14. We have carefully considered the rival contention and perused the orders of the learned that lower authorities and thereafter proceed to decide the additional ground of appeal which is a jurisdictional issue about the time barring of the assessment order.
15. Admittedly in this case the return of income was filed on 28 November 2017 on which the draft assessment order was passed on 24 January 2021, the learned dispute resolution panel passed the direction on 24 January 2022 which culminated into the final assessment order on 10 February 2022. The order of the coordinate bench on appeal by the assessee was passed on 20 September 2022. Undoubtedly, the principal Commissioner of income tax has filed an appeal before the honourable Karnataka High Court in ITA No. 325 / 2023 wherein it is specifically mentioned that the order of the coordinate bench was received by the assessing officer on 17 October 2022. This was the date submitted before the honourable High Court for compliance with the limitation.
16. Section 153 (3) of the income tax act, provides that wherein the order of fresh assessment on the facts transfer pricing assessment order in pursuance of an order passed under section 254 of the income tax act setting aside or cancelling an assessment can be made at any time before the expiry of nine months from the end of the financial year in which the order under section 254 is received by the principal chief Commissioner. If such order is received on or after first day of April 2019 instead of nine months the period of 12 months is available for passing the fresh assessment order. Further, according to subsection 4 in reference under section 92 CA is required to be made the period available for completion of assessment to be further extended by 12 months.
17. Therefore, in this case the order of the coordinate bench was received by the principal Commissioner of income tax on 17 October 2022, the 12 months as provided under section 153 (3) from the end of the financial year would have been over by 31st of March 2024. Naturally the issue involved is reference to the transfer pricing officer, the provisions of section 153 (4) would have been applied and a further one year time would be available to the learned assessing officer for passing of the final assessment order, the time limit would have of the ITAT set aside or cancelling the assessment order. Therefore, it is necessary to look into the direction of the coordinate bench that whether it is set aside or cancelling the assessment order or not.
18. Further if the order of the coordinate bench is to give effect to wholly or partly other than by making a fresh assessment, the time limit shall run from three months from the end of the month in which the order passed under section 254 by the bench is received by the Chief Commissioner these are the time limit contending the provisions of section 153 (5) of the act. This time limit can be further extended by six months it is not possible for the assessing officer for reasons beyond his control to pass such an order within such time after obtaining permission of the principal Commissioner or Commissioner. Further according to the second proviso of that section where the ITAT order requires a verification of the issue by way of submission of any document by the assessee or any other person where an opportunity of being heard is to be provided to the assessee such order shall be made within the time specified in subsection 3 of the act. The time provided under subsection 3 of the act is 12 months from the end of the financial year in which the order under section 254 of the act was passed.
19. In this case the order of the income tax appellate tribunal was passed on 20 September 2022 wherein the assessee raised almost 9 Grounds for inclusion and exclusion of the several comparable and challenging some of the filters. The coordinate bench excluded the companies whose turnover is not within the range of ₹ 200 cr to ₹ 2000 crores as per paragraph No. 14 of the order. Further with respect to 5 comparables contested by the assessee for exclusion, ITAT agreed for exclusion of four comparables had resto red the exclusion of one comparable i.e. R systems International Limited to the file of the learned file of the AO/TPO. Further assessee contested before inclusion of Sasken technologies Ltd which was also restored by the ITAT to the file of the TPO for fresh consideration. Thus, part of the order directed the learned AO / TPO examination. In view of the above findings of the ITAT it is absolutely clear that ITAT did not set aside or cancelled the order of assessment or reassessment. Therefore, the case of the assessee does not fall within the provisions of section 153 (3) of the act. For this reason, there is also no effect of provisions of section 153 (4) of the act.
20. The above ITAT order was into the realm of provisions of section 153 (5) of the act as order is passed by ITAT where in the effect is to be given by the AO and the transfer pricing officer wholly or partly other way than by making a fresh assessment of reassessment. Therefore, such order is required to be passed within three months from the end of the month in which the order under section 254 of the act is received by the PCIT. Undoubtedly the order of the ITAT was received on 17 October 2022 therefore such order in terms of provisions of section 153 (5) of the act. However, as the order of the coordinate bench directed the learned transfer pricing officer to grant on examination certain issues, naturally the order needs to be passed in terms of second proviso to the provisions of section 153 (5) of the act. Thus, the time limit once again links to the time limit u/s 153(3) of the Act. Thus, the order should have been passed on or before 31/3/2024.
21. Now the issue is whether in this case the provision of section 153 (4) would further extend the time limit for passing the order or not by 12 months. Interestingly even otherwise in this case the assessment order is passed on 12/11/2025.
22. The honourable Karnataka High Court in United spirits Ltd vs CIT 184 taxmann.com 286 decided in issue where for assessment year 2013 – 14 and 2014 – 15 the tribunal remitted the issue to the file of the learned assessing officer on certain grounds which was passed by the ITAT received by the revenue on 5 April 2022 and 22 November 2022 for two assessment years and the tribunal partly remitted the matter back to the AO and TPO. The assessee contended that the time limit for passing order would be 31st of March 2024, whereas the revenue contended that it would be 31st honourable High Court in this case held that the extension of one year as stated in 153 (5) of the acts is not acceptable merely because the documents were called for by the AO and reply was called by the assessee for the documents. In that case the tribunal set aside the adjustment of ₹ 686,016,563 to the file of the AO/TPO for proper consideration of facts and decided as per law after giving sufficient opportunity of hearing to the assessee. The disallowance under section 14 A also restored to the file of the AO. Thus, the appeal of the assessee was allowed for statistical purposes. In that circumstances also the honourable High Court held in paragraph No. 9 of the order that whether there has been a reference under section 92 CA (1) to the transfer pricing officer or the matter being remitted to the transfer pricing officer by the tribunal to decide the issue under section 92 CA (3). There is a world of difference between the matter being remitted by the tribunal to the transfer pricing officer under section 92 CA and reference by the assessing officer to the transfer pricing officer under the same provisions of section 92 CA. The honourable High Court referred to the decision of the honourable Delhi High Court in New Delhi television Ltd versus DRP 162 taxmann.com 692 and extensively quoted paragraph No. 63 – 81 of that order and reached at the conclusion that that the matter remitting back to the transfer pricing officer by the tribunal is not the same as the reference by the assessing officer to the transfer pricing officer. Further in paragraph No. 10 the honourable High Court considered whether the limitation would expire on 31 March 2024 is contended by the assessee or on 31 March 2025 is contended by the revenue authorities. H onourable High Court considered the decision of the same High Court in case of Wipro Ltd versus DRP 438 ITR 581 and quoting extensively from paragraph No. eight onwards and in paragraph No. 13 confirmed that the limitation in this case expired 31/03/2024.
23. Though we are concerned that neither the transfer pricing officer is before the coordinate bench, nor the ITAT rules allow the issue to be set- aside to the file the file of the learned assessing officer, the coordinate bench in paragraph No. 31 and paragraph No. 34 restored the issue to the TPO and AO jointly.
24. Therefore respectfully following the decision of the honourable jurisdictional High Court, we hold that in this case also the time limit to pass the order expired on 31st of March 2024 this is for the reason that though the provisions of section 153 (5) of the act would be invoked but second proviso that section we take the time limit to the provisions of section 153 (3) of the act which would be 12 months from the end of the financial year in which the order is received by the CIT. In this case the extension further as provided by section 153 (4) of the act of further 12 months would not be available. Therefore, the time limit would expire for passing the assessment order on 31st of March 2024 whereas the order was passed on 30 September 2024, the assessment deserves to be quashed and hence quashed.
25. Even according to the ld DR the time limit for passing the order is available up to 31/3/2025, but in this case it is passed on 12/11/2025, therefore also the order cannot be saved.
26. As the assessment order is quashed, all other grounds of appeal become infructuous and therefore dismissed.
27. In the result appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 24th August, 2026.
