ITAT Chennai Remands Global IT Services TP Adjustment, Orders Verification of Section 80JJAA Claim

Ranstad India Private Limited Vs ACIT (ITAT Chennai)

Material Facts

The assessee, engaged in providing HR solutions including staffing, recruitment, outsourcing and consulting services, is a wholly owned subsidiary of Randstad Asia Pacific B.V., Netherlands. It filed its return of income for Assessment Year 2021-22 declaring nil income.

The case was selected for scrutiny and referred to the Transfer Pricing Officer (TPO). The TPO proposed:

• Downward adjustment to AE cost at entity level of ₹46,37,485.
• Downward adjustment of ₹7,64,78,442 towards Global IT Services.

The Assessing Officer (AO) incorporated these transfer pricing adjustments in the draft assessment order and also made other additions, determining the assessed income at ₹13,92,28,760. The Dispute Resolution Panel (DRP) reduced the entity-level adjustment to ₹26,85,433 but upheld the adjustment relating to Global IT Services. The assessee appealed before the ITAT.

During the hearing, the assessee did not press Grounds 2 to 5 relating to aggregation of transactions and benchmarking, and those grounds were dismissed as not pressed.

Procedural History

• Return of income filed declaring nil income.
• Reference made to the TPO for determination of arm’s length price.
• TPO proposed transfer pricing adjustments relating to entity-level AE cost and Global IT Services.
• AO passed the draft assessment order incorporating the adjustments.
• DRP granted partial relief by reducing one adjustment but upheld the Global IT Services adjustment.
• The assessee appealed before the ITAT.

Legal Issues

• Downward adjustment relating to payment for Global IT Services.
• Deduction under Section 80JJAA.
• Restriction of TDS credit.
• Levy of fee under Section 234F.
• Short grant of interest under Section 244A.
• Levy of interest under Section 234B and initiation of penalty proceedings under Section 270A.

Relevant Statutory Provisions

• Sections 143(3) and 144C(13)
• Section 80JJAA
• Sections 234F, 234B and 244A
• Section 270A

Parties’ Submissions

Assessee’s Submissions

The assessee submitted that the Global IT Services were provided by Randstad Technology Platform Services of Randstad Global IT Solutions B.V., Netherlands, and included:

• Enterprise IT applications.
• IT infrastructure and network services.
• Software licensing and maintenance.
• Group IT coordination and support.

The assessee contended that:

• The services were operational in nature and not stewardship services.
• The Global IT Services were distinct from IT-related services included in management and headquarters charges.
• The assessee did not maintain specialised in-house IT infrastructure and relied on the associated enterprise for these services.
• The Global IT service fee represented its allocated share of the group’s costs based on the ratio of Indian revenue to global revenue.
• No mark-up was charged on direct third-party IT costs and reimbursements, while indirect costs carried mark-ups of 6.6% for FY 2020 and 5% for FY 2021.
• It produced additional evidence including:
  • Master Service Agreement.
  • Invoices issued by the associated enterprise.
  • Cost breakdowns showing underlying third-party costs.
  • Sample invoices from vendors including Amazon Web Services, Microsoft, Citrix, BT and TCS.
  • Supporting invoices relating to IT assets.
• The matter should be remitted for fresh consideration in light of the additional evidence.

Revenue’s Submissions

The Departmental Representative relied upon the orders of the lower authorities.

Tribunal’s Findings and Reasoning

Global IT Services

The Tribunal observed that the principal reason for the transfer pricing adjustment was the alleged absence of documentary evidence establishing the rendering of services and the need for those services. The adjustment was also based on the view that payments for Global IT Services were made in addition to IT charges forming part of management services.

The Tribunal noted that:

• The detailed breakup indicated that the payments represented charges allocated for services utilised from third parties.
• The assessee had produced additional evidence, including third-party invoices, to substantiate that the services had been rendered.
• The additional evidence addressed the principal basis on which the lower authorities had made the adjustment.

The Tribunal admitted the additional evidence, holding that it went to the root of the dispute and was necessary for proper adjudication.

Since the additional evidence had not been produced before the lower authorities, the Tribunal remitted the issue to the AO/TPO for fresh examination. The AO/TPO was directed to:

• Examine the additional evidence.
• Consider the nature of services rendered by third parties.
• Allow the claim in accordance with law.
• Call for any further details or documentary evidence, if required.

The assessee was directed to furnish the required information and cooperate with the proceedings.

Ground No. 1 was allowed for statistical purposes.

Deduction under Section 80JJAA

The Tribunal noted that the DRP had already directed the AO to allow deduction under Section 80JJAA in accordance with law.

The AO was directed to verify the claim, give full effect to the DRP’s directions and allow the deduction after providing the assessee a reasonable opportunity of being heard.

TDS Credit

The Tribunal directed the AO to verify the claim for TDS credit and grant credit in accordance with law.

Fee under Section 234F and Interest under Section 244A

The assessee submitted that the return had been filed on 14.03.2022, within the extended due date of 15.03.2022 under CBDT Circular No. 1/2022 dated 11.01.2022, and therefore fee under Section 234F was not leviable. The assessee also sought recomputation of interest under Section 244A.

The Tribunal remitted both issues to the AO for verification and disposal in accordance with law.

Interest under Section 234B and Penalty under Section 270A

The Tribunal held that these issues were consequential and required no separate adjudication.

Final Ruling

The ITAT:

• Admitted the additional evidence relating to Global IT Services.
• Remanded the transfer pricing adjustment relating to Global IT Services to the AO/TPO for fresh examination.
• Directed the AO to verify and allow deduction under Section 80JJAA in accordance with the DRP’s directions and law.
• Directed verification and grant of TDS credit.
• Remanded the issues relating to fee under Section 234F and interest under Section 244A to the AO for verification.
• Held that the issues relating to interest under Section 234B and initiation of penalty proceedings under Section 270A were consequential.
• Partly allowed the appeal for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal by the assessee is against the final order of the assessment passed by Asst. Commissioner of Income Tax, Circle-1, LTU, Chennai (in short “AO”) passed u/s. 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (in short “the Act”) dated 29.10.2024 for Assessment Year (AY) 2021-22. The assessee raised various grounds pertaining to the following issues:

• Ground No.]: Downward adjustment to AE cost on account of Global IT Services;
• Ground No.2: Erroneous aggregation of transitions for benchmarking instead of transaction by-transaction analysis;
• Ground No.3: Erroneous consideration of functionally dissimilar companies;
• Ground No.4: Erroneous computation of operating margin for comparable companies chosen by the learned A.O/TPO/Hon’ble DRP;
• Ground No.5: Erroneous computation of operating profit margin of the appellant ;
• Ground No.6:Restriction in claim of deduction applied under section 80JJAA of the Act;
• Ground No.7: Restriction of TDS Credit;
• 8: Wrongful levy of fee u/s. 234F
• Ground No.9: Wrongful levy of interest;
• Ground No.10″ Short grant of interest u/s. 244A
• Ground No.11: initiation of penalty proceedings under section 270A of the Act.

2. The assessee is a company engaged in the business of providing HR solutions including staffing, recruitment, outsourcing and consulting services. The assessee is a wholly owned subsidiary of Ranstad Asia Pacific B.V, Netherlands. The assessee filed a return of income for AY 2021-22 on 14.03.2022 declaring Nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions, the A.0 made a reference to the Transfer Pricing Officer (TPO) to complete the Arm’s Length Price (ALP) of the international transactions. The TPO proposed the following TP adjustments:

i. Downward adjustment to AE cost at entity level for the transitions considered — Rs. 46,37,485/-;

ii. Downward adjustment to AE cost on account of global IT services — Rs. 7,64,78,442/-.

3. The A.O passed the draft assessment order incorporating the TP adjustments. The A.O also made certain concrete additions to arrive at the assessed income at Rs. 13,92,28,760/-. Aggrieved, the assessee raised its objections before the DRP. The DRP gave partial relief to the assessee whereby the TP adjustment towards AE cost at entity level was reduced to Rs. 26,85,433/-. The assessee is in appeal against the final order of assessment passed by the A.O giving effect to the directions of the DRP.

4. The Ld. Authorized Representative (AR) of the assessee submitted that during the course of hearing submitted that ground No. 2 to 5 towards the downward adjustment to AE cost on aggregation of transactions is not pressed considering the smallness of the amount. Accordingly, these grounds are dismissed as not pressed.

Downward adjustment on account of Global IT services — Ground No.1

5. The TPO noticed that the assessee has paid a sum of Rs. 7.64 Crores towards global IT services. The TPO further noticed that the assessee has also paid a sum of Rs. 1.74 Crores towards IT charges as part of management charges. The TPO was of the view that the assessee has not produced the need benefit analysis for payment of global IT services besides in addition to the IT charges. The TPO further held that the assessee has not substantiated the payment with any documentary evidences to the effect that the payment has resulted in any tangible benefits to the assessee. Accordingly, the TPO computed the ALP at Nil. The DRP upheld the TP adjustment on similar grounds.

6. The Ld. AR made a written submission as extracted herein below:

a. Nature of Services & Benefit to Appellant: The global IT services are provided by the Randstad Technology Platform Services (`RTPS’) department of Randstad Global IT Solutions B.V. Netherlands to various affiliated operating companies within the Randstad group.

The Global IT Services availed by RIPL India encompassed a suite of IT infrastructure and digital platform services provided by the RTPS department to all Randstad Group companies. These included, inter alia (detailed description provided in DRP Appeal in Pg 79 to 82 of TTAT Appeal docs):

– Enterprise IT Applications: Access to globally standard HR & staffing software, recruitment management systems, digital platforms (e.g. online job boards, Randstad’s career portal), data analytics tools, etc., enabling RIPL India to carry out its day-to-day business efficiently.

– IT Infrastructure & Network Services: Centralized cloud computing resources (e.g. AWS/Azure), data center hosting, leased network circuits & bandwidth (e.g. global contracts with BT for network connectivity) and telecommunications support.

– Software Licensing & Maintenance: Provision and maintenance of enterprise software licenses (e.g. Microsoft software, Cisco network security, Citrix remote access) on a group scale, giving RIPL India cost-effective access to technology.

– Group IT Coordination & Support: Services like global helpdesk, cyber-security oversight, IT policy setting, vendor management, and implementation of global IT projects/updates, which improve RIPL India’s operational efficiency and ensure standardization across the Randstad network

b. Stewardship Rebuttal: The Appellant strenuously rebuts the characterization of these charges as stewardship. The Appellant’s own IT team in India is limited in scale and does not perform these high-end functions; in fact, RIPL relies on the AE’s IT expertise and global systems to run its business efficiently, confirming these services are necessary and not duplicative of any in-house function(detailed explanation related to excluding stewardship cost is given in DRP Appeal forming part in Pg 86 & 87 of TTAT appeal docs).

Duplication Rebuttal: The Ld. TPO has erroneously concluded that the services availed by the Appellant are duplicative in nature by alleging that a sum of V.74 crores towards IT services is already included in the Management & HQ charges, while a further X7.64 crores has been separately paid towards Global IT services (Para 7 in TP Order forming part of Pg 162-163 of the ITAT Appeal docs)

The aforesaid conclusion is factually incorrect and arises from a misunderstanding of the nature of services. The IT-related services forming part of Management & HQ services are limited to ICT strategy, governance, and corporate-level guidance (refer Para 5.1, Page 260 of the Paperbook). These are high level, strategic functions relating to group-wide direction and oversight.

In contrast, the Global IT services pertain to day-to-day operational execution, including provision and maintenance of IT infrastructure, applications, network connectivity and system support, which are directly utilized in the Appellant’s business operations.

The IT services rendered by the AEs are critical to the functioning of the Appellant, enabling smooth day-to-day operations and supporting core business activities. These services are neither routine nor duplicative but rather complement the business functions of the Appellant.

It is further relevant that the Appellant does not maintain any specialized in-house IT team or infrastructure to perform such functions and is therefore dependent on the AEs for such services, which are essential for its operations and growth (refer detailed submissions in DRP objections at Pages 77 and 87 of the ITAT Appeal Documents).

c. Cost Base & Allocation Methodology: The Global IT service fee charged to RIPL India represents its share of the total costs incurred by the AE’s RTPS on providing IT services group-wide. The Appellant’s share was determined using allocation key of on ratio of Indian revenue to total global revenue.

The Global IT service fee is allocated to RIPL India based on ratio of RIPL India’s revenue to total global revenue of the Group as provided below (detailed workings provided in DRP Appeal forming part in Pg 92 to 97 of ITAT Appeal docs):

* FY 2020 represents a 9-month period ** FY 2021 represents 3-month period

d. Evidence of Services Rendered: To substantiate the nature and extent of services rendered, the Appellant has placed on record contemporaneous evidence in the Paper Book and additional evidence petition. This includes:

i. the Master Service Agreement for Global IT Services was submitted as annexure 3 to the submission dated 11 January 2023(P g 275 of the Paperbook).

ii. Copy of invoices issued by the AE to RIPL India for the IT charges during FY 2020-21 were submitted as annexure 7 in the submission dated 30 MAY 2023 (Pg 240-244 of Paperbook).

iii. As part of additional evidence petition dated 10 February 2026, cost breakdowns at the AE’s end (e.g. bills from Amazon Web Services, BT, Citrix, Microsoft, TCS etc.) to demonstrate the underlying costs incurred to serve RIPL India.

The detailed break-up of the direct third-party IT cost components allocated to the Appellant by the AE for the period 1 January 2020 to 31 December 2020 is provided below (amounts in Euros):

* The IT cost is allocated to RIPL India based on the ratio of RIPL India’s revenue to total revenue of user entities

iv. Sample third-party vendor invoices in respect of direct IT costs have been submitted (Pg 1-48 of the annexure to the additional evidence).The underlying costs incurred by the AE are supported through invoices from independent third-party service providers such as Amazon Web Services (AWS), Microsoft, Citrix, BT, TCS, etc., demonstrating that the services are not notional allocations. These costs span across cloud infrastructure, connectivity, software licensing, cybersecurity, IT support and tooling, which are essential for business operations. In addition, sample invoices evidencing purchase of IT assets forming part of depreciation have also been provided (Pg 49 -123 of the annexure to the additional evidence).

The Ld. AR prayed the issue may be remitted for fresh consideration in the light of the additional evidences now submitted.

7. The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

8. We have heard the parties, and perused the material available on record. The main ground on which the TPO has made the downward adjustment is that the assessee has not provided proper documentary evidences is to substantiate the rendering of services and the need for the services. The downward adjustment is also made for the reason that the assessee has made payments towards global IT services in addition to making payments towards IT charges which are part of managing services. From the perusal of the detailed breakup of the global IT services as extracted in the earlier part of this order, we notice that these are charges paid and allocated to the assessee towards services utilized from the third parties. We also notice that the assessee as part of additional evidences has now submitted the third party invoices to substantiate that the services are indeed rendered by third parties. The additional evidences now produced go the root of the issue and the core reason for making the adjustment by the lower authorities. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. Considering that these additional evidences were not submitted before the lower authorities, we are of the view that the issue needs to be examined afresh. Accordingly, we remit the issue back to the A.O/TPO for fresh consideration. The A.O/TPO is directed to examine the additional evidences keeping in mind the nature of services rendered by the third parties and allow the claim of the assessee in accordance with law. The AO/TPO is further directed to call for any addition details/documentary evidence as may be required. The assessee is directed to furnish the details as may be called for and cooperate with the assessment/TP proceedings. It is ordered accordingly. Ground No.1 is allowed for statistical purposes only.

Deduction u/s. 80JJAA of the Act — Ground No.6

9. The assessee in the return of income has claimed deduction u/s. 80JJAA of the Act for a lesser amount to the extent of gross total income. The assessee contended before the DRP that though the assessee is eligible for deduction to the tune of Rs.9,93,43,314/-, the A.O has restricted the deduction to Rs.48,33,640/- without considering the enhanced gross total income as assessed by the A.O. We notice in this regard that the DRP has given direction to the A.O to allow the deduction as per law (page 14 para 7.1 of DRP directions). Accordingly, we direct the A.O to verify and give full effect to the DRP directions, and allow deduction under section 80JJAA as per law. Needless to say that the assessee be given a reasonable opportunity of being heard.

10. The assessee through Ground No.7 is contending the short grant of TDS. We in this regard direct the A.O to grant the credit for TDS after verification and allow the credit in accordance with law.

11. The assessee through ground No.8 is contending the levy of fee u/s.234F and through Ground No.10 is contending the short grant of interest under section 244A of the Act. With regard to levy of fee under section 234F the Ld. AR in this regard submitted that the assessee for the AY under consideration has filed the return of income on 14.03.2022 which is within the extended due date of 15.03.2022 as allowed by CBDT Circular No.1/2022 dated 11.01.2022. Accordingly, the Ld. AR argued that levy of fees u/s. 234F is not warranted. With regard to interest under section 244A the ld AR submitted that the interest has not been correctly granted and requires re-computation. Considering the submissions of the assessee we deem it fit to remit these two issues back to the AO with a direction to verify the claim of the assessee and allow the same in accordance with law.

12. Ground No.9 is with regard to interest u/s. 234B and ground No.11 is with regard to initiation of penalty proceedings u/s. 270A of the Act. Since these issues are consequential, the grounds do not warrant any separate adjudication.

13. In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced on 05^th day of June, 2026 at Chennai.