Curia India Private Limited Vs DCIT (ITAT Hyderabad)
The appeal before the ITAT Hyderabad arose from the assessment order passed under Section 143(3) read with Section 144C(13) of the Income-tax Act for Assessment Year 2018-19. The assessee, a wholly owned subsidiary of the Curia Group engaged in providing contract research and development (R&D) services and contract manufacturing services to its associated enterprises (AEs), challenged multiple transfer pricing (TP) adjustments made by the Transfer Pricing Officer (TPO) and upheld substantially by the Dispute Resolution Panel (DRP). The adjustments related to contract R&D services, contract manufacturing services, interest on external commercial borrowings (ECBs), reimbursement of expenses, interest on outstanding receivables, and the non-adjustment of brought-forward business losses.
The Assessing Officer referred the international transactions to the TPO, who proposed TP adjustments aggregating to over Rs. 8.15 crore. After partial relief by the DRP on reimbursement of expenses, the final TP adjustment stood reduced to Rs. 8.10 crore, and the assessment was completed determining taxable income at Rs. 7.49 crore. The assessee appealed before the Tribunal.
The principal issue concerned the rejection of the certified segmental financial information submitted by the assessee. The assessee contended that its segmental financials, certified by a Cost and Management Accountant, provided a more accurate allocation of costs by directly identifying expenses attributable to each business segment and allocating common costs using appropriate allocation keys such as Full-Time Equivalent (FTE) hours, machine hours, and turnover where necessary. The TPO rejected these segmental results solely because they did not match the audited segmental disclosures prepared under Accounting Standard-17 and instead allocated costs on a revenue basis, resulting in identical profitability across segments.
