Manpower Services India Pvt Ltd Vs ACIT (ITAT Delhi)
Summary: The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed a miscellaneous application filed by Manpower Services India Pvt Ltd under Section 254(2) of the Income-tax Act, 1961, seeking rectification of an inadvertent omission in the Tribunal’s earlier order dated 25 September 2025. The dispute concerned Assessment Year 2020-21 and arose from the Tribunal’s failure to adjudicate a specific ground relating to the recharacterisation of the assessee’s business activities for transfer pricing purposes. The application was heard on 19 December 2025 and decided on 11 February 2026.
The assessee contended that the Tribunal had failed to adjudicate Ground No. 5.1, which challenged the characterisation of its business as a knowledge process outsourcing (KPO) service provider. According to the assessee, it was engaged in providing information technology (IT) and information technology-enabled services (ITeS). The dispute arose because the characterisation of its services as KPO was based on factors including employees’ salaries, educational qualifications, experience and job descriptions. The assessee maintained that this characterisation required independent consideration.
The assessee explained that the Tribunal had adjudicated Grounds Nos. 5.4 and 5.5 concerning comparable companies but had overlooked Ground No. 5.1. The comparables grounds had been raised without prejudice to the principal objection regarding business recharacterisation. The assessee argued that non-adjudication of a ground of appeal constitutes a mistake apparent from the record and is therefore rectifiable under Section 254(2). The Departmental Representative raised no serious objection to the miscellaneous application.
After examining the application and the earlier order, the Tribunal accepted that Ground No. 5.1 had inadvertently remained undecided. It observed that the issue of comparable companies had already been restored to the Assessing Officer. Consequently, the Tribunal rectified its earlier order by directing the Assessing Officer to examine the issue of business recharacterisation and determine whether the assessee’s activities fell within the scope of KPO services. The Assessing Officer was expressly directed to consider the documentary evidence furnished by the assessee while making this determination.
The Tribunal accordingly allowed Miscellaneous Application No. 445/DEL/2025. The order does not finally determine whether the assessee is an IT/ITeS provider or a KPO service provider, nor does it decide the ultimate transfer pricing adjustment. Instead, it ensures that the omitted ground receives consideration alongside the already-remanded comparability issue. The decision illustrates that failure to adjudicate a substantive ground of appeal can constitute an apparent mistake capable of rectification under Section 254(2), particularly where the Tribunal has decided alternative grounds without addressing the principal objection.
FULL TEXT OF THE ORDER OF ITAT DELHI
With this order we shall dispose of the Miscellaneous Application filed by the assessee u/s 254(2) of the Income tax Act, 1961 [for short, ‘the Act’] for rectifying the mistakes apparent in the order of this Bench of the Tribunal dated 25.09.2025 for the above captioned A.Y.
2. In this MA, the assessee has pointed out that the Hon’ble ITAT inadvertently did not adjudicate on the key issue of recharacterization (Ground number 5.1) and only adjudicated on the issue of comparables (Ground number 5.4 & 5.5) which was a without prejudice argument raised by the Appellant. It is submitted that the issue of recharacterization raised vide ground 5.1 “misconstruing the business profile of the Assessee engaged in providing IT and ITeS services and thereby comparing the services provided by the Assessee to that of a knowledge process outsourcing service provider on the basis of salary, educational qualification, experience and job role description of the employees of the Assessee” was not adjudicated upon. The ld. counsel for the assessee submitted that non-adjudication of a ground of appeal is a mistake apparent from record rectifiable u/s 254(2) of the Act and prayed for rectification of the order.
3. The ld. DR raised no serious objection.
4. We have heard the rival submissions and have perused the relevant material on record. Considering the contents of the application, we are of the considered view that the ground 5.1 has not been adjudicated upon and therefore an inadvertent mistake apparent on record has crept in the Tribunal order.We have already set aside the issue of comparables to the file of the AO. We, therefore, rectify the aforesaid order by directing the AO to examine the issue of recharacterization of the assessee and then decide whether the assessee falls within the scope of KPO considering the documentary evidence furnished by the assessee, as well.
5. In the result, the appeal of the assessee in MA No. 445/DEL/2025 is allowed.
The order is pronounced in the open court on 11.02.2026.
