Akamai Technologies Solutions (India) Private Limited Vs ACIT (ITAT Bangalore)
Summary: For assessment year 2011-12, Akamai Technologies Solutions (India) Private Limited challenged the transfer-pricing adjustment arising after the TPO rejected its characterisation as a reseller of services purchased from associated enterprises and instead treated it as an IT-enabled services provider. The assessee had reported purchase of services for resale of ₹256,717,524 and had benchmarked its international transactions under the Transactional Net Margin Method using 18 comparables, whereas the TPO selected 10 comparables with an average margin of 18.54% and made an adjustment of ₹44,666,385. The Bangalore ITAT noted that, in the immediately preceding year, the DRP had characterised the assessee as a marketing support service provider after detailed examination, while in the year under appeal it accepted the TPO’s ITeS characterisation without explaining its departure despite there being no change in the facts, circumstances or FAR profile. The Tribunal held that the DRP’s directions, being unsupported by reasons, could not be sustained. During the hearing, the assessee also produced a unilateral Advance Pricing Agreement dated 10 December 2024 entered into with the CBDT under section 92CC, covering assessment years 2012-13 to 2015-16, under which the assessee was characterised as a reseller, TNMM was accepted as the appropriate method and a minimum operating-profit margin of 6% was prescribed. Although the APA did not cover assessment year 2011-12 and therefore did not govern determination of the arm’s-length price for that year, the Tribunal considered its findings relevant because the CBDT had examined the assessee’s functions, assets and risks. The entire issue concerning characterisation was accordingly restored to the Assessing Officer for fresh adjudication, with directions to consider the APA terms if the assessee was found to be a reseller and, if the APA was considered inapplicable, to independently examine the transfer-pricing study. The assessee was also permitted to contend that the 6% margin should apply to the year under appeal because there was no change in the relevant facts or circumstances. The remaining grounds were dismissed as largely premature, and the appeal was allowed for statistical purposes.
