Aegis Limited Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, adjudicated cross appeals filed by the assessee and the Revenue for Assessment Year 2010–11 arising from an assessment completed under section 143(3) read with section 144C(13), based on directions of the Dispute Resolution Panel (DRP). The assessee’s returned income was significantly enhanced following transfer pricing adjustments and other disallowances.
The primary dispute related to transfer pricing adjustments of ₹88.02 crore concerning IT-enabled services (ITeS), preference share transactions, and corporate guarantees. In respect of ITeS, the Tribunal examined the selection of comparables. It directed exclusion of certain companies due to functional differences, extraordinary events, outsourcing models, scale, and brand value, and allowed inclusion of a company where relevant financial data could be aligned. Consequently, the matter was remanded for recomputation of the arm’s length price.
On preference share transactions, the Transfer Pricing Officer had re-characterized subscription and redemption of shares as loans and imputed interest. The Tribunal rejected this approach, holding that such re-characterization without evidence of exceptional circumstances was not justified, and deleted the adjustment.
Regarding corporate guarantees, the Tribunal followed earlier precedent and held that guarantee commission should be benchmarked at 1% of the outstanding guaranteed amount, partly allowing the assessee’s claim while dismissing the Revenue’s appeal on this issue.
