Virinchi Ltd Vs DCIT (ITAT Hyderabad)
TPO Cannot Question Commercial Expediency- ITAT Hyderabad Deletes ₹10 Cr TP Addition – AE Services Held Genuine
Virinchi Ltd, a listed company engaged in IT solutions & software development, filed appeal against the final assessment order passed u/s 143(3) r.w.s. 144C(3) for AY 2021-22, based on DRP directions.
The first issue raised was that the assessment order dated 09.10.2024 was barred by limitation u/s 153. The Tribunal noted that this legal question is pending before the Supreme Court in the case of CIT Vs Roca Bathroom Products (P) Ltd, where divergent views have been expressed by coordinate benches. As the matter is before a Larger Bench, the Tribunal kept this issue open & directed AO to give effect to the final outcome of the Apex Court’s ruling.
The main dispute pertained to TP adjustment of ₹10.10 crores on account of consultancy services obtained by the Assessee from its wholly-owned US subsidiary, K Soft Systems Inc. The Assessee had benchmarked the transaction under TNMM, showing its margin (12.83%) was well above the median of comparables (6.32%). The TPO, however, rejected the benchmarking & determined ALP of services at Nil, on the ground that Assessee failed to prove actual rendering of services by AE, & consequently proposed adjustment of the entire payment. DRP confirmed the adjustment.
