Verifone India Technology Private Limited Vs DCIT (ITAT Bangalore)
Rectification Removed the Working Capital Adjustment, but Where Was the Appeal-Effect Order?
Bangalore ITAT directs the AO to give effect within 15 days and preserves the assessee’s right to revive its appeal
A favourable appellate order does not complete a tax dispute until its effect is reflected in the assessment computation. That gap was at the centre of Verifone India Technology Private Limited v. DCIT, ITA No. 1879/Bang/2024, decided by the Bangalore ITAT on 21 September 2026 for AY 2013–14.
The assessee had challenged a transfer pricing adjustment of ₹3,00,75,897. During the pendency of its appeal before the Tribunal, the CIT(A) passed a subsequent rectification order dated 20 February 2025 deleting the negative working capital adjustment. The assessee submitted that, once this relief was given effect to, its margin would fall within the permissible arm’s length range and no transfer pricing adjustment would survive. The Assessing Officer, however, had not passed the consequential appeal-effect order.
The Tribunal directed the AO to pass that order within 15 days of receiving its order. It also protected the assessee’s position: if the resulting computation remained adverse, the assessee could seek revival of its appeal.
The original transfer pricing dispute
The assessee’s appeal arose from an assessment order passed under section 143(3) read with section 144C(3). Before the Tribunal, it raised several objections to the transfer pricing analysis, including rejection of its documentation, selection and exclusion of comparables, application of export and turnover filters, and denial of a risk adjustment.
One objection concerned a negative working capital adjustment. The assessee argued that such an adjustment should not have been made in its case as a captive service provider. The original CIT(A) order dated 30 July 2024 had rejected that ground. The assessee therefore included it in the appeal before the ITAT, along with its other objections to the transfer pricing adjustment.
The position changed while the Tribunal appeal was pending. On 20 February 2025, the CIT(A) passed an order under section 154 read with section 250 and directed deletion of the negative working capital adjustment, following a coordinate Bench decision. The assessee placed that rectification order before the Tribunal and explained that the revised computation should bring its margin within the permissible range.
That assertion still required an appeal-effect computation by the AO. Without it, the parties did not have a final consequential figure establishing whether any adjustment remained.
The Tribunal’s limited direction
The Departmental Representative accepted that, if the assessee’s margin fell within the permissible range after the consequential order, the appeal would become infructuous. The Tribunal therefore focused on securing implementation of the CIT(A)’s rectification order.
It directed the AO to pass the appeal-effect order within 15 days from receipt of the Tribunal’s order and to consider the assessee’s claim that no transfer pricing adjustment would survive. If the AO arrived at a different conclusion, the assessee must be given a reasonable opportunity of being heard. If the assessee remained aggrieved by the consequential order, it was granted liberty to seek revival of the pending appeal.
The Tribunal allowed the appeal in those terms. It did not itself recompute the arm’s length margin or decide the challenges to the comparables, filters and other transfer pricing issues. Nor did it make a final finding that the adjustment of ₹3,00,75,897 had already been reduced to nil.
An unusual observation in the order deserves attention. The Tribunal stated that it might not agree with the CIT(A)’s view that no negative working capital adjustment was required, but observed that it was now for the Revenue to challenge that relief. The Tribunal proceeded on the operative CIT(A) rectification order and confined its direction to giving effect to that order and checking the resulting computation.
Author’s comment
This decision concerns the stage between appellate relief and its implementation. The assessee had obtained a rectification order on a significant component of its transfer pricing computation, yet the absence of an appeal-effect order left the practical result unresolved. The Tribunal supplied a definite timeline and required the AO to examine the revised margin.
The liberty to seek revival is equally significant. If giving effect to the rectification order eliminates the adjustment, the remaining transfer pricing grounds may no longer need adjudication. If the AO’s computation leaves an adjustment in place, the assessee’s objections have not been treated as abandoned merely because it sought implementation of the intervening relief. The immediate next step is therefore the consequential computation, which will determine whether the broader appeal has any surviving purpose.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. VeriFone India Technology Private Limited (the assessee/appellant) has filed this appeal for assessment year 2013–14 against the appellate order dated 30 July 2024 passed by the Commissioner of Income Tax (Appeals), Bengaluru (the learned CIT(A)). By that order, the learned CIT(A) partly allowed the assessee’s appeal against the assessment order dated 30 January 2017 passed under section 143(3) read with section 144C(3) by the Assistant Commissioner of Income Tax, Circle- 7(1)(2), Bengaluru (the learned Assessing Officer).
2. The Assessee has raised the following grounds of appeal:
General grounds:
1. The assessment order dated 30 July 2024 passed by the Honourable Commissioner of Income Tax (Appeals) [‘Hon’ble CIT(A)’] under section 250 of the Income- tax Act, 1961 (‘the Act’) is contrary to the facts and circumstances of the present case and is not in accordance with law.
Grounds related to transfer pricing:
2. The learned Assessing Officer (‘learned AO’), the learned Transfer Pricing Officer (‘learned TPO’) and the Hon’ble CIT(A) grossly erred in law and on facts, in adjusting the transfer price by INR 3,00,75,897/- with respect to the international transaction rendered by the Appellant under section 92CA of the Income- tax Act, 1961 (‘the Act’).
3. The learned AO/learned TPO/ Hon’ble CIT(A) grossly erred in rejecting the Transfer Pricing (TP’) documentation maintained by the Appellant by invoking provisions of sub-section (3) of section 92C of the Act.
4. The learned AO/ learned TPO/ Hon’ble CIT(A) grossly erred in rejecting comparability analysis undertaken in the TP documentation and in conducting a fresh comparability analysis by introducing various filters for the purpose of determining the Arm’s Length Price (‘ALP’) of the international transaction thereby following a non-transparent approach.
5. The learned AO/learned TPO/ Hon’ble CIT(A) should have restricted the threshold limit of export earnings filter to 25 percent of the total sales.
6. The learned AO/learned TPO/Hon’ble CIT(A) erred in not applying the upper limit for the turnover filter. The learned AO/ learned TPO/ Hon’ble CIT(A) erred in not considering the underlying factor that the companies having high turnover has the benefit of economies of scale.
7. The learned AO/ learned TPO/ Hon’ble CIT(A) erred in determining negative working capital adjustment despite the fact that the Appellant is captive service provider unlike the entrepreneurial companies selected as comparable.
8. The learned AO/learned TPO/ Hon’ble CIT(A) grossly erred in not providing an adjustment towards risk differential between the Appellant and the comparable companies.
9. The learned AO/ learned TPO/ Hon’ble CIT(A) has grossly erred in not rejecting the following companies
a) Tech Mahindra Limited
b) Mindtree Limited
10. The learned AO /learned TPO/ Hon’ble CIT(A) has grossly erred in rejecting companies that ought to have been accepted as comparable:
a) Cigniti Technologies Limited
b) CTIL Limited
c) CAT Technologies Ltd.
d) Bells Softech Ltd.
e) Sankhya Infotech Ltd.
11. Without prejudice to the above grounds of appeal, the Appellant retains the right to apply the tolerance range of +/- 3% in determination of arm’s length price.
Grounds related to levy of consequential interest under Sec. 2348 of the Act
12. The learned AO/ Hon’ble CIT(A) erred in levying interest under section 234B amounting to INR 43,62,364/- in the final assessment order, which is consequential to the above grounds of appeal.
The Appellant craves leave to add, alter, rescind and modify the grounds herein above or produce further documents, facts and evidence before or at the time of hearing of this appeal.
For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided.
3. At the time of hearing, the assessee submitted that the learned CIT(A) had subsequently passed an order under section 154 of the Income- tax Act on 20 February 2025. In that order, the learned CIT(A) deleted the negative working capital adjustment; consequently, the assessee’s margin falls within the arm’s length range and no transfer pricing adjustment survives. It was further submitted that the learned Assessing Officer has not yet passed the order giving effect to the said order, and that once such order is passed, the present appeal would become redundant.
4. The learned authorized representative, Shri Ninad Patade, chartered accountant, reiterated these submissions and placed before us the order dated 20 February 2025 passed by the learned CIT(A) under section 154 read with section 250 of the Income- tax Act. Paragraph 5.2.1 of that order records that the learned CIT (A), following the decision of a coordinate Bench, deleted the negative working capital adjustment.
5. Dr. Divya K.J., the learned CIT- DR, submitted that if, Officer, the assessee’s margin falls within the permissible range, the appeal would become infructuous.
6. We have considered the rival submissions and perused the orders passed by the learned CIT(A). In the order dated 30 July 2024, paragraph 5.2.1 rejected the assessee’s ground relating to the negative working capital adjustment. Thereafter, by order dated 20 February 2025 passed under section 154 read with section 250 of the Income- tax Act, 1961, the learned CIT(A) directed the learned Assessing Officer to delete the negative working capital adjustment. The consequential appeal- effect order has not yet been p assed. Although we may not agree with the learned CIT(A)’s view that no negative working capital adjustment is required, now it is turn of the revenue to challenge it, the limited issue before us is that, once the appeal- effect order is passed, the assessee contends that its margins would fall within the permissible range and no transfer pricing adjustment would survive.
7. In view of the above, we direct the learned Assessing Officer to pass the appeal- effect order within 15 days from the date of receipt of this order. While doing so, the learned Assessing Officer shall consider the assessee’s claim that, after giving effect to the CIT(A)’s order, its margin falls within the permissible range. If the learned Assessing Officer reaches a different conclusion, the assessee shall assessee remains aggrieved by the consequential order, it is granted liberty to seek revival of this appeal.
8. In the result, the appeal filed by the assessee is allowed in the terms indicated above.
Order pronounced in the open court on 21st September, 2026.
