BOSTON SCIENTIFIC TECHNOLOGY AND ENGINEERING SERVICES PRIVATE LIMITED,DELHI V. DCIT CIRCLE-4(2), DELHI

ITA 3795/DEL/2024

AI Insights

The case involves Boston Scientific Technology And Engineering Services Private Limited, which appealed against the assessment order passed by the Assessing Officer following the directions of the Dispute Resolution Panel (DRP) and the TPO. The primary contention was regarding the adjustments made to the income declared by the assessee, which was significantly higher than the returned income due to transfer pricing adjustments related to international transactions in contract research and development services. The Tribunal examined the comparables used by the TPO for benchmarking these transactions and found discrepancies in the inclusion and exclusion of certain companies, leading to the decision to allow the appeal partly and direct a re-evaluation of the comparables.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314400 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2020-2021
• Other Referred Cases: Philips India Ltd. vs DCIT [2025] 172 taxmann.com 340(Kolkata)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JADHAV
• Assessee Lawyers: VISHAL KALRA
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘H’: NEW DELHI BEFORE SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.3795/DEL/2024 [Assessment Year: 2020-21] Boston Scientific Technology And Engineering Services Private Limited, Unit No.302, 3rd Floor, Chiranjiv Tower-43, Nehru Place, New Delhi-110019 Vs Assessment Unit, Income Tax Department, Delhi PAN-AAGCB3151N Appellant Respondent Appellant by Shri Vishal Kalra, Adv. Ms. Sumish Murgal, Adv. & Ms. Tranjeet Kaur, Adv. Respondent by Shri S K Jadhav, CIT-DR Date of Hearing 01.05.2025 Date of Pronouncement 07.05.2025 ORDER PER PRAKASH CHAND YADAV, JM The present appeal of the assessee as arising out of the order of the Ld. Assessing Officer dated 26.06.2024 having DIN No.ITBA/AST/S/ 143(3)/2024-25/1066102804(1) and relates to Assessment year 2020-21. 2. Brief facts of the case as coming out of the orders of the authorities below are that the assessee is a company and engaged in conducting research and development and engineering services related to medical devices. For the impugned assessment year, it has filed the return of 2 ITA No.3795/Del/2024 income declaring income of Rs.22,77,21,720/- on 22.12.2020. The return of income filed by the assessee was selected for scrutiny, since there are international transactions with Associated Enterprises (in short ‘AE’) during the year under consideration, the case of the assessee was referred to the Transfer Pricing Officer (in short ‘TPO’). 3. The ld. TPO while adjudicating the TP study has not at all disputed the method adopted by the assessee for computing the Arm’s Length Price (in short ‘ALP’). Further, the TPO has also not objected to the profit level indicator adopted by the assessee i.e. Operating Profit by Operating Cost (in short ‘OP/OC’). However, while adjudicating the TP study, the ld. TPO has rejected few of the comparables taken by the assessee for benchmarking the international transaction. Similarly, the TPO has included one comparable while computing the ALP for benchmarking the international transactions. 4. Aggrieved with the order of the TPO, the assessee filed objections to the Learned Dispute Resolution Panel (in short ‘DRP'). However, the ld. DRP sustained the order of the TPO and thereafter the Assessing Officer passed the final assessment order after making adjustments as suggested by the TPO and confirmed by the Ld. Dispute Resolution Panel. 5. Aggrieved with the order of the Assessing Officer, the assessee has come up in appeal before us and has raised following grounds of appeal:- 1. That on the facts and circumstances of the case and in law, the Assessing Officer had erred in assessing the total income of the Appellant at INR 27,47,32,472/- in pursuance to the directions issued by the Dispute Resolution Panel, as against the returned income of INR 22,77,21,720. 3 ITA No.3795/Del/2024 2. That on the facts and circumstances of the case and in law, the order dated June 26, 2024 passed by the AO under section 143(3) r.w.s 144C(13) read with section 144B of the Act is without jurisdiction, bad in law and thus, liable to be quashed 3. Transfer Pricing adjustment amounting to INR 4,70,10,753 in respect of the international transaction pertaining to provision of contract research and development services: 3.1 That on the facts and circumstances of the case and in law, the AO/ DRP/ TPO have erred in determining the Transfer Pricing (TP\") adjustment of INR 4,70,10,753 in respect of the international transactions pertaining to provision of contract research and development services alleging the same to be not at arm's length. 3.2 That on the facts and circumstances of the case and in law, the TPO has erred in not discharging the statutory onus of establishing that the conditions specified in clauses (a) to (d) of section 92C(3) of the Act are satisfied in the Appellant's case. before disregarding the arm's length price determined by the Appellant. The AO/ DRP further erred in upholding the action of the TPO. 3.3. That on the facts and circumstances of the case and in law, the AO/ DRP/ TPO have erred in arbitrarily rejecting, functionally comparable companies selected by the Appellant, Choksi Laboratories Ltd. and Synchron Research Services Pvt. Ltd., for the purpose of benchmarking the international transaction pertaining to provision of contract research and development services. 3.4. That on the facts and circumstances and in law, the AO/ DRP/ TPO have erred in not appreciating that Aurigene Discovery Technologies Ltd. fails the test of comparability and filters applied by the TPO himself during the Financial Year 2019-20 and subsequently erred in retaining the same as comparable company for benchmarking the subject international transaction. 3.5. That on the facts and circumstances and in law, the AO/ DRP/ TPO have erred in not accepting JSS Medical Research India Pvt Ltd. as a comparable company without appreciating that the same meets the test of comparability and the quantitative filters applied by the TPO himself. 4. Without prejudice to the above, the AO has erred in computing the tax demand for the subject assessment year at INR 1,77,90,696 instead of the correct tax demand of INR 1,76,53,670 by erroneously calculating the total interest and fee payable at INR 59,59,033, being item 42 of the computation sheet. 4 ITA No.3795/Del/2024 6. Ground no.1 and 2 are general in nature and hence not requires any specific adjudication. 7. In rest of the grounds, the assessee has challenged the inclusion of one comparable i.e. Aurigene Discovery Technologies Ltd. and exclusion of three comparables namely Choksi Laboratories Ltd, Synchron Research Services Pvt. Ltd. and JSS Medical Research India Pvt. Ltd. The ld. Counsel for the assessee pointed out that the TPO has erred in including M/s Aurigene Discovery Technologies Ltd. as a comparable in as much as this comparable is functionally different from the assessee. It is further pointed out by the ld. Counsel for the assessee that the filter of income from service revenue is also not in consonance with the figures as involved in the case of the assessee. The Ld. Counsel for the assessee further pointed out that the TPO on one hand has adopted the filter which have operating revenue from service at least 75% and on the other hand has taken this comparable which has only 41% operating revenue from services. Therefore, the approach of the TPO is self contradictory. 7.1. So far as the inclusion of the comparables, which the assessee wants to be included, the ld. Counsel for the assessee taken the Bench towards the synopsis filed with the Bench and pointed out that these comparables should be included since they are functionally similar to the assessee. 8. The learned CIT-DR appearing on behalf of the Revenue, relied upon the orders of the authorities below and contended that the this comparable i.e. M/s Aurigene Discovery Technologies Ltd. was itself taken by the assessee as comparable in its TP documentation and hence it is incorrect 5 ITA No.3795/Del/2024 on behalf of the assessee to argue that this comparable should excluded from the TP study. -:Finding of the Bench:- 9. We have heard the rival submissions and perused the materials available on record. We observed that so far as the inclusion of M/s Aurigene Discovery Technologies Ltd., the functions of that company are not akin to the assessee company. We further observe that Co-ordinate Bench of Kolkota Tribunal in the case of Philips India Ltd. vs DCIT [2025] 172 taxmann.com 340(Kolkata) in para no.19 has held that Aurigene Discovery Technologies Ltd. (ADTL) is not functionally similar to the entities which are engaged in research and development services contract. The Co- ordinate Bench has excluded this comparable from the list of comparables. Therefore, we are of the firm opinion that this comparable is to be excluded from the list of the comparables in the case of the present assessee. 10. So far as the inclusion of three comparables, we are of the view that so far as the inclusion of Choksi Laboratories Ltd. is considered, we do not find any force in the arguments of the assessee hence, we could not include this as comparable. Now the inclusion Synchrony Research Services Pvt Ltd. and JSS Medical Research India Pvt. Ltd., we observed that these comparables are functionally similar to the assessee and hence we direct the TPO to include these comparables in the list of comparables and then for the purpose of verification only, we restore this issue to the file of the TPO. The Ld. TPO will verify the Arm’s Length Price of the assessee after 6 ITA No.3795/Del/2024 inclusion of these comparables. Hence, these grounds raised by the assessee are allowed in terms indicated above. 11. In the result, the appeal of the assessee is allowed as indicated above. Order pronounced in the open court on 07th May, 2025. Sd/- Sd/- [BRAJESH KUMAR SINGH] [PRAKSAH CHAND YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 07.05.2025. f{x~{tÜ f{x~{tÜ f{x~{tÜ f{x~{tÜ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "