Lintas India Private Limited Vs ACIT (ITAT Mumbai)
Summary : The Income Tax Appellate Tribunal (ITAT), Mumbai, in Lintas India Private Limited Vs ACIT, partly allowed the assessee’s appeal for statistical purposes in a second round of assessment proceedings for Assessment Year 2017-18. The dispute principally concerned a transfer pricing adjustment of ₹19,48,26,100 arising from payments to associated enterprises for Global Information Services (GIS), Management Service Fee (MSF) and Multinational Client Co-ordination Services. The Transfer Pricing Officer (TPO) had again determined the arm’s length price (ALP) of these services at nil, notwithstanding the Tribunal’s earlier remand directions dated 09.12.2022. Additional issues concerned limitation under Section 153, compliance with Sections 144B and 144C, disallowance under Section 14A, errors in computation of income, tax rates, interest and various tax credits.
The assessee, engaged in advertising, marketing communication and media planning services under the trade name MullenLowe, had entered into international transactions with its overseas associated enterprises. The disputed payments comprised ₹5,70,46,722 for GIS, ₹13,33,27,604 for MSF and ₹44,51,774 for multinational client co-ordination services. In the original assessment proceedings, the TPO determined the ALP of all three service categories at nil. By its order dated 09.12.2022, the Tribunal restored these issues for a fresh examination of the supporting documentation and appropriate benchmarking. However, in the consequential proceedings, the TPO once again adopted nil ALP, which was sustained by the Dispute Resolution Panel (DRP). The assessee challenged this determination, contending that the authorities had disregarded the earlier binding directions and had failed to undertake the prescribed transfer pricing analysis.
On the preliminary issue of limitation, the assessee argued that the ordinary period for completing the assessment under Section 153(3) expired on 31.03.2024 because the earlier Tribunal order had been received by the Principal Commissioner on 30.03.2023. It maintained that the AO’s subsequent reference to the TPO was unnecessary and could not attract the additional twelve months available under Section 153(4). Reliance was placed on New Delhi Television Ltd. v. Dispute Resolution Panel and United Spirits Ltd. v. DCIT. The Tribunal distinguished these authorities because the earlier operative direction in the present case was addressed jointly to the AO/TPO and the AO had made an actual reference under Section 92CA(1) on 02.05.2023 during the restored assessment proceedings. Consequently, Section 153(4) applied and the limitation period stood extended to 31.03.2025. The TPO’s order dated 22.01.2025 and draft assessment order dated 27.02.2025 were therefore within time.
The Tribunal further rejected the argument that the final assessment order dated 25.08.2025 was barred by limitation. It considered the retrospective amendments introduced by the Finance Act, 2026, inserting Sections 144C(4A) and 144C(13A) with deemed effect from 01.04.2009. The Tribunal explained that where the draft assessment order is issued within the period prescribed under Section 153, the subsequent DRP proceedings and consequential final assessment are governed by the separate timelines under Section 144C(12) and (13). Since the DRP issued directions on 28.07.2025 and the final assessment order was passed on 25.08.2025, the assessment was within the applicable period. However, the Tribunal separately addressed the assessee’s objection regarding the absence of a proper show-cause notice under Section 144B for the proposed transfer pricing variation and directed the AO to provide the required notice and effective opportunity of hearing during the fresh proceedings.
On the substantive transfer pricing dispute, the Tribunal held that the TPO and DRP had not adequately complied with the earlier remand directions. The previous order had recognised that the assessee maintained reasonably sound documentation concerning the nature of intra-group services, agreements, allocation mechanisms and expected benefits. Nevertheless, the earlier Bench had required actual benchmarking instead of directing outright deletion of the adjustment. In the second round, the authorities substantially repeated their objections concerning absence of demonstrated need, requisition, receipt and tangible benefits without adequately examining the service-wise documentary evidence. The Tribunal observed that arm’s length pricing must be determined by applying the prescribed methods under Sections 92C and 92CA and the relevant Rules. It referred to the Bombay High Court ruling in CIT v. Johnson & Johnson Ltd., which disapproved arbitrary ALP determinations unsupported by the prescribed method. A nil valuation could not be sustained merely by repeating general objections without a reasoned pricing exercise.
Regarding GIS, the Tribunal directed examination of the underlying cost pool, allocation workings, service documentation and supporting certificate. It clarified that recovery of allocated costs without a mark-up does not automatically establish an arm’s length price, but the TPO must identify specific deficiencies rather than reject the material generally. For MSF and multinational client co-ordination services, the assessee had applied the Transactional Net Margin Method (TNMM), treating the foreign associated enterprise as the tested party and relying on a 5% mark-up. The Tribunal held that the foreign location of an associated enterprise is not, by itself, a valid ground for rejecting it as the tested party. The relevant considerations include functions, assets, risks, relative complexity and availability of reliable comparable data. Equally, the mere existence of a 5% mark-up does not establish that the foreign entity is necessarily the least complex party. The Tribunal restored the ₹19.48 crore adjustment to the AO/TPO for a limited fresh benchmarking exercise, subject to the outcome of the assessee’s pending High Court appeal against the earlier remand order.
On Section 14A read with Rule 8D, the assessee sought withdrawal of its voluntary disallowance of ₹1,00,56,473 on the ground that it had earned no exempt income during the relevant year. The Tribunal noted that the earlier order had not deleted this amount but had directed the AO to examine the claim in accordance with law. It also considered the Explanation inserted in Section 14A by the Finance Act, 2022, while expressly declining to treat its retrospective applicability to Assessment Year 2017-18 as a concluded proposition. Having regard to the assessee’s own identification and quantification of the expenditure and the scope of the earlier remand, the Tribunal directed that the voluntary disallowance of ₹1,00,56,473 be retained. It nevertheless held that no further disallowance should be made where exempt income was nil and that any additional disallowance must be restricted to the exempt income earned during the year.
The Tribunal also examined computational discrepancies. Although the assessment order determined total income at ₹93,56,94,283, the accompanying computation sheet adopted ₹94,85,78,065. The arithmetic difference was ₹1,28,83,782, whereas the assessee’s ground mentioned ₹1,28,83,783. The AO was directed to reconcile the figures and remove any unsupported excess. The Tribunal further directed verification of the applicable basic tax rate, surcharge and cess; recomputation of interest of ₹62,48,572 under Section 234B; verification of foreign tax relief of ₹5,10,655 under Section 91; TDS credit of ₹7,771; and credit for ₹10,23,13,261 representing refunds of other years allegedly adjusted against the outstanding demand. The challenge to initiation of penalty proceedings under Section 270A was dismissed as premature because no penalty order was under appeal. Accordingly, the appeal was partly allowed for statistical purposes, with the principal transfer pricing issue remanded for a reasoned determination of arm’s length price.
Cases Discussed
1. New Delhi Television Ltd. v. Dispute Resolution Panel, (2024) 465 ITR 687 (Delhi High Court). The Court held that where the ITAT directly remitted the transfer pricing issue to the TPO, an unnecessary subsequent reference by the AO could not attract additional limitation under Section 153(4). Distinguished on the facts of the present case.
2. United Spirits Ltd. v. DCIT, (2026) 184 taxmann.com 286 (Karnataka High Court). Considered the distinction between a transfer pricing remand and a fresh reference under Section 92CA(1). Distinguished because an operative AO/TPO direction was followed by an actual AO reference in the present case.
3. FCB Ulka Advertising Pvt. Ltd. v. ACIT, IT(TP)A No. 2194/Mum/2017, dated 25.06.2019 (ITAT Mumbai). Relied upon by the assessee regarding benchmarking and treatment of intra-group service payments.
4. Megger India (P.) Ltd. v. DCIT, (2020) 115 taxmann.com 631 (ITAT Mumbai). Cited by the assessee in support of its objections to the nil valuation of intra-group services.
5. CIT v. Johnson & Johnson Ltd., (2017) 80 taxmann.com 269 (Bombay High Court). The jurisdictional High Court emphasised that the TPO must determine ALP using a prescribed method and cannot substitute arbitrary or ad hoc valuation. Applied in assessing the defective benchmarking exercise.
6. CIT v. Lever India Exports Ltd., (2017) 78 taxmann.com 88 (Bombay High Court). Relied upon by the assessee in connection with transfer pricing methodology and intra-group service payments.
7. CIT v. Merck Ltd., Income-tax Appeal No. 272 of 2014, dated 08.08.2016 (Bombay High Court). Cited by the assessee in support of its transfer pricing submissions.
8. Virtusa Consulting Services Pvt. Ltd. v. DCIT, T.C.A. No. 996 of 2018, dated 04.02.2021 (Madras High Court). Considered in relation to selection of a foreign associated enterprise as the tested party, based on functional analysis and availability of reliable comparable data.
9. PCIT v. Almatis Alumina Pvt. Ltd., ITAT No. 35 of 2020, dated 18.02.2022 (Calcutta High Court). Considered concerning the selection of a foreign associated enterprise as the tested party for transfer pricing benchmarking.
10. CIT v. Milton Laminates Ltd., (2013) 37 taxmann.com 249 (Gujarat High Court). Relied upon by the assessee in seeking withdrawal of a Section 14A disallowance where no exempt income was earned.
11. ACIT v. Essar Ports Ltd., ITA No. 406/Mum/2024, dated 09.05.2024 (ITAT Mumbai). Relied upon by the assessee on the Section 14A issue.
12. CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., (2012) 349 ITR 366, as cited in the order (Bombay High Court). Relied upon concerning the powers of appellate authorities to entertain claims not made in the original return. The commonly reported citation is 349 ITR 336.
13. CIT v. Shelly Products, (2003) 261 ITR 367 (Supreme Court). Relied upon by the Revenue concerning the assessee’s attempt to withdraw its voluntarily offered disallowance.
14. Goetze (India) Ltd. v. CIT, (2006) 284 ITR 323 (Supreme Court). Relied upon by the DRP concerning the making of a claim before the AO otherwise than through a revised return.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT MUMBAI
18. Ground No.2 concerns the alleged failure to issue a show-cause notice under section 144B before the draft assessment order. The learned AR submitted that a notice setting out the prejudicial variations was a mandatory requirement under section 144B(1)(xii)(b), and that the draft order could not substitute that notice. According to him, the transfer pricing adjustment was incorporated without the requisite notice from the AO.
19. The learned DR relied on the assessment record and the DRP directions. The record contains a show-cause notice dated 17.02.2025, a video conference opportunity on 20.02.2025 and the assessee’s reply dated 21.02.2025. The DRP also considered the assessee’s objections after hearing its representative.
20. We have examined this objection with reference to the actual record. The notice dated 17.02.2025 reproduced in the assessment order deals with the unreconciled income and the claim under section 14A. The transfer pricing adjustment had separately been the subject of proceedings before the TPO. Accordingly, the mere existence of that notice cannot, without examining its contents, be treated as a complete answer to the assessee’s objection concerning the transfer pricing variation. At the same time, for the reasons recorded hereafter, the determination of the arm’s length price is being set aside for a limited fresh examination. The AO shall, while giving effect to our directions, communicate the proposed prejudicial variation, if any, in accordance with the applicable requirements of section 144B and allow an effective opportunity to respond before forwarding the draft assessment order. We do not rest this direction on a proposition that a hearing before the DRP dispenses with a mandatory procedure before the AO. In view of the fresh exercise directed on the transfer pricing issue, no separate relief of annulment of the entire assessment is called for on this ground. Ground No.2 is disposed of in these terms.
21. Ground Nos.4 to 7 relate to the adjustment of Rs.19,48,26,100 towards intra-group services. The learned AR submitted that the authorities had not followed the findings and directions in the first round. In respect of GIS of Rs.5,70,46,722, he referred to the agreement at pages 173 to 179 of paper book Volume I, the disclosure in Form No.3CEB, the cost allocation working at pages 1279 and 1280 of Volume III and the certificate of the Finance Director at page 1366. The services covered enterprise infrastructure, applications, messaging, service desk support, hosting and related information technology support. The chart and Exhibit A were relied upon to correlate the categories of services with the supporting correspondence and their use in the assessee’s business. It was submitted that the AE recovered the allocated cost without a mark-up and that the transaction had been benchmarked under the other method.
22. As regards MSF of Rs.13,33,27,604 and MNC services of Rs.44,51,774, the learned AR referred to the agreements dated 01.04.2008 at pages 180 to 196 of Volume I, the allocation workings at pages 1298 and 1299 of Volume III and the certificates at pages 1300 to 1305. He submitted that the services included financial and administrative support, human resource support, business development, strategic planning, assistance in advertising concepts and co-ordination of multinational client accounts. Exhibit B to the chart identified the supporting material. An illustration of a global advertisement and its adaptation for the Indian market was also relied upon. The transactions were benchmarked under the Transactional Net Margin Method (‘TNMM’), treating the overseas AE as the tested party. According to the assessee, the mark-up of 5% was within or below the relevant range of margins of comparable service providers identified in the Asia-Pacific, North American and European regions.
23. The learned AR further submitted that the TPO had not carried out a price comparison under rule 10AB and had instead repeated the need, evidence and benefit objections which had already been considered in the earlier order. He relied on the decisions in the assessee’s own case for earlier years and on FCB Ulka Advertising Pvt. Ltd. v. ACIT in IT(TP)A No.2194/Mum/2017 dated 25.06.2019; Megger India (P.) Ltd. v. DCIT, (2020) 115 taxmann.com 631 (Mumbai); CIT v. Johnson & Johnson Ltd., (2017) 80 taxmann.com 269 (Bombay); CIT v. Lever India Exports Ltd., (2017) 78 taxmann.com 88 (Bombay); and CIT v. Merck Ltd., Income-tax Appeal No.272 of 2014 dated 08.08.2016. On the selection of the foreign AE as the tested party, reliance was placed on Virtusa Consulting Services Pvt. Ltd. v. DCIT, T.C.A. No.996 of 2018 dated 04.02.2021, and PCIT v. Almatis Alumina Pvt. Ltd., ITAT No.35 of 2020 dated 18.02.2022. It was urged that the entire adjustment be deleted.
24. The learned DR relied on the TPO’s order and the DRP directions. The Revenue’s objections, as recorded therein, are that the agreements, correspondence and allocation keys do not establish the actual cost attributable to the services rendered to the assessee; the underlying cost base was not available for verification; and the certificates do not independently establish that base. The DRP also rejected the foreign AE as the tested party and held that the assessee had not sufficiently established the nature, extent and receipt of the services. It sustained the determination of the arm’s length price at nil.
25. We have considered the rival submissions and the material referred to by the parties. The starting point in this second round must be the findings and directions in the Tribunal’s order dated 09.12.2022. Paragraph 19, dealing with the documentation, reads as under:
“019. However, in the case of the assessee. We find that the documentation of the assessee clearly shows the description of the categories of services provided, the resultant benefit arising there from, the rational for provision of such services, the reasonable description of the benefits or expected benefits of the services, the reasonableness of adoption of the allocation keys and reasons justifying that such allocation keys produce outcomes that reasonably reflect the benefit received. There are written contracts for the provision of services with respective obligations and rights of both the parties, describing the nature of services therein, manner of computing the remuneration was also documented. The description of the documentation provided by the assessee which has been described by the learned authorized representative clearly shows that assessee has maintained a reasonably sound documentation of intra group services. The learned transfer pricing officer and learned dispute resolution panel has heavily relied on their findings in the earlier years which have already been negated by the ITAT. We are not in agreement with the lower authorities by following the decisions taken by them in earlier years in determination of arm’s-length price of intra group services at Rs. nil.”
26. The scope of the exercise that nevertheless remained to be undertaken was stated in paragraph 23, which reads as under:
“023. As the services of the assessee has not been benchmarked by examining the documents produced by the assessee for this year, we are not inclined and impressed with the argument of the learned authorized representative that the addition deserves to be deleted. According to us, the transactions deserves to be tested for its arm’s-length price for this year. Therefore, we set-aside the issue of determination of the arm’s-length price of the international transaction of intragroup services back to the file of the learned transfer pricing officer who has to examine the same from the perspective stated by us earlier. Hence, we set aside ground number 4 – 10 of the appeal of the assessee back to the file of the learned transfer pricing officer to determine the arm’s length price of the intragroup services based on the documents already produced by the assessee. The learned TPO/AO is directed to examine the same for determination of the arm’s-length price. Accordingly, ground number 4 – 10 of the appeal of the assessee is allowed with above direction.”
27. These directions were adopted for assessment year 2017-18 by paragraph 37, reproduced earlier. The two findings must be read together. The Tribunal did not approve a wholesale rejection of the service documentation or the repetition of the earlier nil valuation merely on that basis. Equally, it did not hold that the contractual payments necessarily represented the arm’s length price for the year. On the contrary, it expressly declined outright deletion and directed an examination of the documents for benchmarking. The pending appeal before the Hon’ble High Court does not permit either the departmental authorities or this Bench, in the present appeal, to proceed as though those directions had ceased to operate.
28. The approach in the second round has not adequately given effect to that distinction. The TPO and the DRP have again substantially rested the nil valuation on the absence of demonstrated need, requisition, receipt and tangible benefit. The correspondence and the service-wise chart identify, amongst other matters, support for messaging and user accounts, applications and systems, business planning, advertising adaptation and multinational client co-ordination. Such material could not be rejected generally by repeating that no specific service had been identified, without dealing with the identified material and the earlier findings. Whether particular costs are attributable to the assessee and whether the resulting charge is at arm’s length remain matters for examination; they require a reasoned analysis of the costs, allocation and pricing, within the earlier directions.
29. In CIT v. Johnson & Johnson Ltd. (supra), the Hon’ble jurisdictional High Court explained the requirement of determining the arm’s length price by a prescribed method. The relevant sub-paragraph 4(d), reproduced in the DRP record, reads as under:
“(d) We find that the impugned order of the Tribunal upholding the order of the CIT(A) in the present facts cannot be found fault with. The TPO is mandated by law to determine the ALP by following one of the methods prescribed in Section 92C of the Act read with Rule 10B of the Income Tax Rules. However, the aforesaid exercise of determining the ALP in respect of the royalty payable for technical knowhow has not been carried out as required under the Act. Further, as held by the CIT(A) and upheld by the impugned order of the Tribunal, the TPO has given no reasons justifying the technical knowhow royalty paid by the Assessing Officer to its Associated Enterprise being restricted to 1% instead of 2%, as claimed by the respondent assessee. This determination of ALP of technical knowhow royalty by the TPO was adhoc and arbitrary as held by the CIT(A) and the Tribunal.”
30. The use of the expression ‘other method’ does not dispense with a pricing exercise. Rule 10AB requires consideration of the price charged or paid, or which would have been charged or paid, for the same or a similar uncontrolled transaction in comparable circumstances. A general conclusion that an independent enterprise would pay nothing, founded on the very objections which the earlier order required to be considered differently, is not by itself the prescribed analysis. At the same time, recovery at cost does not, without examining the cost pool and its allocation, conclusively establish the arm’s length price of GIS. The cost allocation working and the supporting certificate must therefore be considered for what they establish, and any specific deficiency must be identified and put to the assessee.
31. For MSF and MNC services, the foreign location of the AE cannot by itself be a sufficient reason to reject it as the tested party. The selection depends upon the functions, assets and risks relating to the transaction, the relative complexity of the parties and the availability of reliable financial and comparable data. The decisions in Virtusa Consulting Services Pvt. Ltd. and Almatis Alumina Pvt. Ltd. relied upon by the learned AR require consideration of that factual exercise. Conversely, the mere fact that the AE charged a mark-up of 5% does not, by itself, establish that it is the least complex entity or that the selected comparables and geographical sets are appropriate. The assessee’s TNMM analysis has to be examined on those considerations. Likewise, a certificate cannot be rejected merely because the professional issuing it was remunerated by the assessee or the AE. Its basis, scope, underlying records and reconciliation with the amount allocated are the relevant matters.
32. We are, therefore, unable to sustain the determination of the arm’s length price at nil on the reasoning adopted. However, accepting the contractual amounts as the final arm’s length price without completing the benchmarking would also bypass the exercise expressly directed in the first round. Accordingly, we set aside the impugned determination on this issue and restore it to the AO/TPO for the limited purpose of determining the arm’s length price in accordance with sections 92C and 92CA and the applicable Rules, giving effect to paragraphs 19, 23 and 37 of the earlier order. The GIS cost pool and allocation shall be examined with the relevant working and certificate. The TNMM analysis for MSF and MNC services, including the tested party, comparable data, geographical comparability and mark-up, shall be examined by recording specific reasons for acceptance or rejection. Any adjustment shall emerge from the prescribed benchmarking exercise.
33. The AO/TPO shall consider the material already furnished, including the service-wise chart and the certificates referred to by the learned AR, and may seek particulars necessary to verify the pricing and allocation. The remand shall not be used to repeat a general rejection of the service documentation contrary to the earlier findings. The assessee shall be afforded a reasonable opportunity to explain any identified deficiency and any proposed adjustment. These directions are subject to the orders of the Hon’ble High Court in the assessee’s appeal against the order dated 09.12.2022. We have not expressed any view on the correctness of the earlier remand challenged before the Hon’ble High Court. Ground Nos.4 to 7 are allowed for statistical purposes in these terms.
34. Ground No.8 concerns section 14A. The learned AR submitted that the assessee had not earned any exempt income during the year and that the voluntary disallowance of Rs.1,00,56,473 ought also to be withdrawn. He referred to the profit and loss account, the schedule of other income, the exempt-income schedule in the return and the submissions made before the AO. He relied on paragraph 39 of the earlier order and submitted that the issue had been restored specifically to verify the absence of exempt income. He also relied on CIT v. Milton Laminates Ltd., (2013) 37 taxmann.com 249 (Gujarat), ACIT v. Essar Ports Ltd., ITA No.406/Mum/2024 dated 09.05.2024, and CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., (2012) 349 ITR 366 (Bombay), in support of the claim and the power of the appellate authorities to entertain it.
35. The learned DR relied on the orders of the AO and the DRP. The AO retained the voluntary disallowance on the footing that it formed part of the income offered in the return and referred to CIT v. Shelly Products, (2003) 261 ITR 367 (SC). The DRP also relied on Goetze (India) Ltd. v. CIT, (2006) 284 ITR 323 (SC), concerning a claim before the AO otherwise than through a revised return.
36. We have considered the submissions. The earlier order dealt expressly with the voluntary disallowance. For completeness, paragraph 39 is reproduced below:
“039. Ground number 17 is with respect to the disallowance u/s 14 A of the act amounting to Rs.10,056,473/-. No such addition was made by the learned assessing officer in the draft assessment order passed on 15/4/2021 and similarly, no addition was found in the final assessment order dated 3/2/2022. Ground of appeal suggest that the assessee has made the fresh claim during the assessment proceedings, that it has not earned any income during the year Under consideration on which the exemption is claimed. If that be the fact, there cannot be any disallowance in the hence of the assessee u/s 14 A of the act. Accordingly, we direct the learned assessing officer to consider the claim of the assessee and if there is any disallowance offered by the assessee, it needs to be tested that if assessee has not earned any exempt income. There should not have been any disallowances u/s 14 A of the act. Therefore, direction is given to the assessee to show the facts of not having any exempt income but having made the disallowance u/s 14 A of the act in the return of income, the learned AO may examine the same and decide the issue in accordance with the law. Accordingly ground number 17 of the appeal is allowed.”
37. The assessee itself has computed and disallowed a sum of Rs.1,00,56,473 under section 14A read with rule 8D while determining its total income in the return. Thus, the amount in question represents expenditure identified and quantified by the assessee itself as relatable to its investments. The claim now made is for withdrawal of that disallowance on the ground that no exempt income was earned during the year. The earlier order of the Tribunal has to be read in its entirety. While referring to the absence of exempt income, the Tribunal also expressly observed that the assessee, having made the disallowance under section 14A in its return, was required to place the relevant facts before the AO, who was to examine the same and decide the issue in accordance with law. The Tribunal did not itself delete the quantified amount of the voluntary disallowance; it restored the claim for examination according to law. In this context, we also take note of the Explanation inserted in section 14A by the Finance Act, 2022, with effect from 01.04.2022, which provides that the section shall apply and shall be deemed to have always applied even where income not forming part of the total income has not accrued or arisen or has not been received during the relevant previous year, provided expenditure has been incurred in relation to such income. The legislative clarification emphasises the relationship between the expenditure and the income of the exempt category. We refer to that clarification in considering the assessee’s own identification and quantification of such expenditure; we are not invoking it to impose a fresh disallowance by treating its retrospective application to assessment year 2017-18 as a concluded proposition. The voluntary computation is a relevant circumstance which cannot be disregarded while examining the subsequent claim for its withdrawal. Having regard to that computation and the direction in the earlier order to examine the claim in accordance with law, we do not find sufficient reason to disturb the amount already disallowed by the assessee. Accordingly, the suo motu disallowance of Rs.1,00,56,473 shall be retained. Any further disallowance proposed by the AO shall be restricted to the exempt income earned during the year, and no further disallowance shall be made where such income is nil. Ground No.8 is disposed of in these terms.
38. Ground Nos.3 and 9 concern the difference between the income determined in the assessment order and the amount adopted in the computation sheet. The learned AR submitted that the order determined total income at Rs.93,56,94,283, whereas the computation sheet adopted Rs.94,85,78,065 without any corresponding finding or reason. The additional amount was stated in ground No.9 to be Rs.1,28,83,783. The learned DR relied on the assessment order.
39. The computation sheet must give effect to the income determined in the assessment order and cannot independently introduce an addition unsupported by that order. The arithmetic difference between the two stated totals is Rs.1,28,83,782. The AO shall reconcile the figures with the actual computation sheet and remove the excess, if it has no basis in the assessment order. The total income shall then be recomputed in accordance with our findings on the substantive grounds. Ground Nos.3 and 9 are allowed for statistical purposes.
40. In ground Nos.10 and 11, the assessee contends that the computation incorrectly applies a basic tax rate of 25%, whereas the applicable rate is 30%, with a consequential error in surcharge and cess. The AO shall verify the applicable rate for the assessee for assessment year 2017-18 under the relevant Finance Act and apply the correct rate, together with the applicable surcharge and cess, to the income finally determined. The assessee shall be given an opportunity to explain the discrepancy. These grounds are allowed for statistical purposes.
41. Ground No.12 relates to interest of Rs.62,48,572 under section 234B. The learned AR submitted that the issue is consequential. The AO shall recompute the interest, if leviable, in accordance with law on the basis of the income, tax liability and credits determined while giving effect to this order. This ground is disposed of accordingly.
42. Ground Nos.13 to 15 relate respectively to relief under section 91 in respect of foreign taxes of Rs.5,10,655, short grant of TDS credit of Rs.7,771 and credit of Rs.10,23,13,261 representing refunds of other years stated to have been adjusted against the demand for the year under consideration. The learned AR requested that the claims be verified by the AO. The AO shall examine the foreign-tax documents, the conditions applicable to the claim under section 91, the TDS particulars and the records of adjustment of refunds. Credit or relief found due shall be granted after reconciliation, ensuring that no credit is omitted or duplicated. The assessee shall furnish the necessary particulars and be afforded a reasonable opportunity. These grounds are allowed for statistical purposes.
43. Ground No.16 challenges the initiation of penalty proceedings under section 270A. As no order imposing the penalty is under appeal before us, the ground is premature and is dismissed. Nothing stated in this order shall be treated as a finding on the merits of any separate penalty proceedings.
44. In the result, the appeal of the assessee is partly allowed for statistical purposes in the terms indicated above.
Order pronounced in the open court on 22/10/2026.
