GIA India Laboratory Pvt. Ltd. Vs DCIT (ITAT Mumbai)
The appeal concerned three principal issues: (i) a transfer pricing adjustment relating to royalty payments to an Associated Enterprise (AE), (ii) denial of deduction under Section 80G, and (iii) issues relating to grant of TDS credit, credit for taxes paid, and interest under Section 244A.
Transfer Pricing Adjustment on Royalty Payment
The Assessing Officer (AO), through a draft assessment order dated 25 September 2023 under Section 144C(1), made an upward adjustment of ₹66,96,52,179 to the appellant’s income in relation to royalty paid to its AE. The adjustment was made by computing the arm’s length price (ALP) of royalty at 53% based on an earlier Advance Pricing Agreement (APA) dated 7 May 2018. The Dispute Resolution Panel (DRP) confirmed the adjustment.
Before the Tribunal, the appellant submitted that it had entered into a Unilateral Advance Pricing Agreement with the CBDT on 27 March 2025, under which royalty payment to the AE was a covered transaction. The APA provided that the royalty payment would be considered at arm’s length if it did not exceed 53.5% of the operating profit of the India Graded Segment, determined after reducing all operating expenses but before deduction of royalty.
