UBS Business Solutions (India) Pvt. Ltd. Vs PCIT (ITAT Pune)
ITAT Pune Quashes 263: Cost-Plus Model Saves ₹21 Cr Repairs from Revision- 263 Fails Basic Test—Plausible AO View & Captive TP Model Protect Assessment
Assessment u/s 143(3) r.w.s 144B was completed on 06.09.2022. PCIT initiated revision u/s 263 alleging that the AO had not verified whether repairs & maintenance expenditure of ₹21,02,01,617—including items like headsets, mouse, tiles, computer peripherals, & minor furniture—was capital in nature, & that the high proportion of repairs required deeper scrutiny. PCIT further relied on accounting policy disclosures & Form 3CEB to conclude that AO failed to enquire into short recovery of expenses from AEs.
Assessee argued that the case was selected under CASS only for 80G & refund verification, & both issues were fully examined in assessment. All details of repairs were filed before PCIT. It was also shown—supported by Transfer Pricing Report & P&L account —that the company is a 100% captive service provider, & entire operating cost is billed to AEs on cost + 14.5% markup. Therefore, any disallowance of expenditure would reduce markup income & cannot be prejudicial to Revenue—a point to which DR had no answer when specifically questioned by Bench.
