GMR AIRPORTS LIMITED ,BENGALURU V. DCIT, CIRCLE - 1(3)(1), BANGALORE

ITTPA 1137/BANG/2025

AI Insights

The case involves GMR Airports Limited, which appealed against the order of the Commissioner of Income Tax (Transfer Pricing), Bengaluru-1, who had set aside the TPO's earlier order regarding the transfer pricing adjustments for corporate guarantees and SBLC arrangements provided by the assessee to its AEs. The primary contention was whether the TPO had conducted adequate enquiries into the SBLC arrangements, which included the examination of terms, risks, and the arm's length price of the commissions paid. The Tribunal found that the TPO had not adequately examined these aspects, leading to the conclusion that the original order was erroneous and prejudicial to the interests of the Revenue.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840518 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 8 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Appeal Filed On: 16-05-2025
• Other Referred Cases: DCIT vs. GMR Airports Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DIVYA K.J
• Assessee Lawyers: YOGESH THAR
• Keywords: Set aside; Opportunity of being heard; Transfer pricing; International transaction; Business expenditure; Commercial expediency; Assessment record; Revision of order
• Section: 263; 37; 92; 37(1); 92B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER IT(TP)A No.1137/Bang/2025 Assessment Year: 2020-21 GMR Airports Limited, (formerly known as GMR Airports Infrastructure Limited), No.25/1, Skip House, Museum Road, Bengaluru - 560 025. PAN – AABCG 8889 P Vs. The Commissioner of Income Tax (Transfer Pricing), Bangaluru – 1. APPELLANT RESPONDENT Assessee by : Shri Yogesh Thar, CA Revenue by : Dr. Divya K.J, CIT Date of hearing : 29.01.2026 Date of Pronouncement : 24.02.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal has been instituted by the assessee challenging the order of the Ld. CIT(TP) passed u/s 263 of the Act dt. 18.03.2025 whereby the assessment order framed under section 92CA(3) of the Act dated 23.02.2023 was set aside being erroneous and prejudicial to the interest of Revenue. 2. The interconnected issue raised by the assessee is that the Ld. CIT(TP) under section 263 of the Act erred in holding assessment order framed under section 92CA(3) of the Act dated 23.02.2023 being erroneous and prejudicial to the interest of Revenue. Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 2 of 11 . 3. The brief facts of the case on hand are that the assessee is an infrastructure organisation with interest in airports, energy, highways and urban infrastructure. GMR Infrastructure Limited is the holding company of the GMR group. During the assessment year under consideration, the assessee provided corporate guarantees to banks on behalf of its Associated Enterprises. The assessee took the stand that such guarantees did not affect its profits, income or assets and therefore the transfer pricing provisions under Chapter X were not applicable. It was also stated that there was no real risk since counter-guarantees were available from the borrowing entities. 4. The TPO, however, held that after insertion of the Explanation to section 92B of the Act, guarantees fall within “capital financing” and therefore constitute international transactions. Accordingly, he proceeded to examine the corporate guaranteed issue and made an adjustment. 5. Subsequently, the learned CIT (Transfer Pricing) examined the assessment records under section 263 of the Act and observed that the TPO had made adjustment in respect of corporate guarantees, but he (TPO) had not carried out proper enquiry regarding the Standby Letter of Credit (SBLC) arrangements. During TP proceedings, details of SBLCs issued by banks in favour of the Singapore AE were on record, including one instance where bank commission of ₹63.42 lakh was borne by the assessee and not recovered from the AE. 6. The ld. Commissioner also recorded that in the transfer pricing study itself, the assessee had treated the SBLC arrangement as an international transaction. The assessee had stated that the arm’s length price should be limited to the actual charges paid by it to obtain the SBLC. Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 3 of 11 . 7. The ld. Commissioner further noted that in Form 3CEB, the assessee had reported the SBLC under transactions in the nature of guarantee. Therefore, he held that the SBLC clearly fell within the scope of section 92B, and that under section 92 and Instruction No. 3 of 2016, the responsibility to determine the arm’s length price rests with the TPO. The ld. Commissioner found that the TPO had not examined the SBLC terms, the nature of risk involved, whether the assessee ought to have recovered the commission from the AE, and the consequent arm’s length implications. Holding that there was failure to conduct necessary enquiry, the ld. Commissioner proposed that the order passed under section 92CA(3) was erroneous and prejudicial to the interests of the revenue limited to the extent of examination of the SBLC issue. 8. However, the assessee argued that all documents were already examined and that the SBLC charges were only business expenses allowable under section 37(1) of the Act. 9. However, the ld. CIT rejected the assessee’s argument that the expenditure was allowable under section 37(1) of the Act and therefore outside the transfer pricing provisions. According to him, section 37 and section 92 operate in different areas. The main question, in his view, was whether the assessee should have recovered the SBLC cost from its AE at arm’s length. 9.1 The ld. Commissioner pointed out that there was no evidence on record to show that the TPO had made any further enquiry on the SBLC issue after receiving the assessee’s submissions in October–November 2022. There were no follow-up questionnaires, notices, or further verification carried out on this matter. 9.2 Relying on Explanation 2 to section 263 of the Act, the Commissioner held that if necessary, enquiry or verification is not made, Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 4 of 11 . the order becomes erroneous and prejudicial to the interests of the revenue. 9.3 The ld. Commissioner also placed strong reliance on an earlier order of the Bangalore ITAT in the assessee’s own case for AY 2014-15 in DCIT vs. GMR Airports Ltd. reported in [2025] 181 taxmann.com 630 (Bangalore - Trib.)[28-11-2025] In that year, the Tribunal had held that the SBLC commission paid by the assessee and not recovered from the AE was an international transaction and was liable for transfer pricing adjustment. The Tribunal had also rejected the arguments that the SBLC was merely a shareholder activity or was given for commercial expediency. In conclusion, the ld. Commissioner held that the TPO had not made the required enquiries or verification regarding the SBLC arrangements under the transfer pricing provisions. He therefore exercised his powers under section 263 and held that the order passed under section 92CA(3) dated 23.02.2023 was erroneous and prejudicial to the interests of the revenue. Accordingly, he set aside the order to the limited extent of examining the SBLC arrangements. The TPO was directed to conduct a fresh transfer pricing analysis on the SBLC commission borne by the assessee and not recovered from the AE, and to pass a new order after giving the assessee a proper opportunity of being heard. 10. Aggrieved by the order passed by the Ld. CIT(TP), the assessee has preferred the present appeal before us. 11. The Ld. LR argued before us that the Commissioner of Income Tax (Transfer Pricing), Bengaluru-1 was wrong in invoking section 263 of the Act. Assessee contended that the Commissioner had wrongly set aside the transfer pricing order dated 23 February 2023 (passed under section 92CA(3)) and wrongly directed the TPO to re-check the SBLC Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 5 of 11 . arrangements and to make a transfer pricing adjustment for the SBLC commission that the assessee had paid but allegedly did not recover from its Associated Enterprises. 12. The assessee further contended that the learned CIT failed to appreciate that the original transfer-pricing order dated 23 February 2023 was neither erroneous nor prejudicial to the interests of the Revenue. According to the assessee, the issue had already been examined during the transfer-pricing proceedings and therefore the twin conditions prescribed under section 263 of the Act were not satisfied. 12.1 It was accordingly prayed that the revisionary order passed under section 263 be held to be arbitrary, contrary to law and the settled legal position, void ab initio, and liable to be quashed in entirety. 12.2 The assessee further contended that the ld. Commissioner had no jurisdiction to invoke section 263 in the present case since the revision was directed only against the order of the Transfer Pricing Officer passed under section 92CA(3) and not against the assessment order passed by the Assessing Officer. It was argued that section 263 permits revision only of an order passed by the Assessing Officer, and that a TPO is not an Assessing Officer under the scheme of the Act. 12.3 The assessee further submitted that the assessment year involved is AY 2020-21 and that, at the relevant time, the legal position did not permit/ direct revision of a TPO’s order under section 263 of the Act. According to the assessee, the amendment inserting reference to the Transfer Pricing Officer with effect from 1-4-2022 cannot be applied retrospectively so as to enlarge the powers of the ld. Commissioner for earlier years. 12.4 It was also argued that the Explanation relied upon by the ld. Commissioner cannot override or expand the main provision of section Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 6 of 11 . 263 of the Act. Since the section refers only to revision of an order passed by the Assessing Officer, the Explanation cannot be interpreted to create a new power to revise TPO orders. 12.5 Lastly, the assessee pointed out that the impugned revision order merely sets aside the TPO’s order dated 23-02-2023 and does not revise or cancel the assessment order passed by the Assessing Officer. As the assessment order continues to remain intact, the assessee submitted that the exercise of jurisdiction under section 263 is legally unsustainable. 13. On the other hand, the learned Departmental Representative (DR) strongly defended the revisionary order passed by the learned CIT (Transfer Pricing) under section 263 of the Income-tax Act. According to the DR, the revision was validly invoked because the order passed by the Transfer Pricing Officer (TPO) under section 92CA(3) suffered from lack of proper enquiry in respect of the Standby Letter of Credit (SBLC) arrangements entered into by the assessee for its Associated Enterprises (AEs). 13.1 The ld. DR submitted that the SBLC transaction was admittedly reported by the assessee itself as an international transaction in Form 3CEB and in its transfer pricing study report. Once the assessee had treated the SBLC arrangement as an international transaction, it was incumbent upon the TPO to independently determine the arm’s length price (ALP) in accordance with Chapter X of the Act. However, the TPO merely reproduced the details furnished by the assessee and did not examine critical aspects such as the terms and conditions of the SBLC agreements, the nature and extent of risk assumed by the assessee, whether the bank commission paid by the assessee ought to have been recovered from the AE, and whether an independent enterprise would Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 7 of 11 . have charged compensation for extending such credit support. This, according to the ld. DR, amounted to absence of enquiry on a material issue. 13.2 The DR argued that Explanation 2 to section 263 clearly provides that an order shall be deemed erroneous and prejudicial to the interests of the Revenue if it is passed without making enquiries or verification which ought to have been made. Since the SBLC commission borne by the assessee was a significant international transaction and no meaningful verification was undertaken by the TPO, the twin conditions of section 263 were satisfied. 13.3 It was further contended that the assessee’s reliance on section 37(1) of the Act was misconceived. The allowability of expenditure under section 37 operates in a different sphere from determination of ALP under section 92 of the Act. Even if an expenditure is commercially expedient and otherwise allowable, it must still comply with the arm’s length principle where it arises from an international transaction. Therefore, the ld. CIT(TP) was correct in holding that section 37 considerations do not override Chapter X provisions. 13.4 The ld. DR also relied on the earlier decision of the Bangalore Tribunal in DCIT vs. GMR Airports Ltd., wherein it was held that SBLC commission borne by the assessee and not recovered from the AE constituted an international transaction liable for transfer pricing adjustment. In light of this binding precedent, it was all the more necessary for the TPO to examine the issue in detail, which he failed to do. 13.5 On the question of jurisdiction, the ld. DR submitted that Explanation 1 to section 263, inserted with effect from 01.04.2022, expressly clarifies that an order passed by the Assessing Officer or the Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 8 of 11 . TPO is amenable to revision. Since the revisionary order was passed in March 2025, the ld. CIT(TP) had full jurisdiction to revise the TPO’s order. 13.6 Lastly, the ld. DR emphasized that the ld. CIT(TP) had not made any addition himself but had merely set aside the order to the limited extent of fresh examination after proper enquiry and opportunity to the assessee. Accordingly, the appeal of the assessee deserved to be dismissed. 14. We have carefully considered the rival submissions of both the parties, perused the materials placed on record and examined the revisionary order passed under section 263 of the Act. The limited issue before us is whether the learned CIT(TP) was justified in holding that the order passed by the TPO under section 92CA(3) of the Act was erroneous insofar as it was prejudicial to the interests of the Revenue on account of lack of enquiry in respect of the Standby Letter of Credit (SBLC) arrangements. 14.1 From the record reproduced in the revision order, it is evident that though the assessee had furnished certain details of SBLC facilities obtained from Yes Bank and Axis Bank in favour of its Singapore AE, the TPO had merely reproduced the tabular information in the transfer- pricing order. There is nothing to show that the TPO examined the underlying SBLC agreements, the terms and conditions thereof, the nature of risk assumed by the assessee, the basis of bank commission, the extent to which such commission was recovered or not recovered from the AE, or whether any independent party in similar circumstances would have charged compensation for extending such non-fund-based facilities. No follow-up questionnaire or specific verification on these Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 9 of 11 . aspects is found on record. In our view, such omission squarely amounts to absence of enquiry on a material international transaction. 14.2 We further note that the assessee itself had reported the SBLC arrangements as international transactions in Form 3CEB and in its TP study and had stated that the arm’s length price should be restricted to the charges borne by it for obtaining such SBLCs. Once the transaction was admittedly within the scope of section 92B of the Act, it was incumbent upon the TPO to independently examine and determine the arm’s length price in accordance with law. Merely reproducing the assessee’s working without undertaking verification cannot be regarded as due application of mind. 14.3 The contention of the assessee that the SBLC charges were allowable under section 37(1) of the Act on grounds of commercial expediency is also misplaced at this stage. The determination of arm’s length price under Chapter X operates in a different field, and the allowability of expenditure under section 37 is irrelevant for the purpose of benchmarking an international transaction. The ld. CIT(TP) was therefore justified in rejecting the argument that section 37 considerations could override the statutory mandate of section 92 of the Act. 14.4 We also find merit in the reliance placed by the learned CIT(TP) on Explanation 2 to section 263 of the Act, which clarifies that an order shall be deemed to be erroneous and prejudicial to the interests of the Revenue where it is passed without making enquiries or verification which ought to have been made. The present case clearly falls within the said Explanation, as the SBLC arrangements were a significant transaction and yet no proper enquiry was carried out by the TPO on crucial aspects affecting arm’s length pricing. Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 10 of 11 . 14.5 Further, the learned CIT(TP) has referred to earlier orders of this Tribunal in the assessee’s own case for prior assessment years, wherein it was held that SBLC commission borne by the assessee and not recovered from the AE constituted an international transaction liable for transfer-pricing adjustment and that the pleas of shareholder activity and commercial expediency were rejected. The existence of such binding precedents made it all the more necessary for the TPO to examine the issue in detail for the year under consideration, which admittedly was not done. 14.6 We also take note that in subsequent proceedings before the TPO, the assessee itself acknowledged that SBLC commission borne by it and not reimbursed by the AE was liable for adjustment in view of earlier Tribunal orders. This conduct further supports the conclusion of the learned CIT(TP) that the matter had not been properly examined in the original order. 14.7 Importantly, the ld. CIT(TP) has not substituted his own computation of arm’s length price but has only set aside the TPO’s order to the limited extent of SBLC arrangements and directed fresh examination after conducting necessary enquiries and after granting opportunity of hearing to the assessee. Such a limited remand, aimed at curing the defect of lack of enquiry, is well within the scope of section 263 of the Act. 14.8 In view of the foregoing discussion, we hold that the order passed by the TPO under section 92CA(3) of the Act suffered from lack of proper enquiry in respect of the SBLC transactions and was therefore erroneous insofar as it was prejudicial to the interests of the Revenue. The learned CIT(TP) was fully justified in invoking the revisionary jurisdiction under section 263 of the Act and in directing the TPO to Printed from counselvise.com IT(TP)A No.1137/Bang/2025 Page 11 of 11 . carry out fresh verification and determination of arm’s length price in accordance with law. 14.9 Further, the assessee’s objection that section 263 of the Act cannot be invoked against an order passed by the TPO is untenable. Explanation 1 to section 263, inserted w.e.f. 1-4-2022, clarifies that for the purposes of the said section, an order passed by the Assessing Officer or the Transfer Pricing Officer, whether before or after 1-6-1988, is amenable to revision. The revisionary order in the present case was passed on 27-03-2025, i.e., after the said amendment came into force. Therefore, the ld. Commissioner had jurisdiction to revise the order of the TPO passed u/s 92CA(3) of the Act. Accordingly, the revision order passed under section 263 is upheld and the grounds raised by the assessee are dismissed. 15. In the result, the appeal of the assessee is hereby dismissed. Order pronounced in court on 24th day of February, 2026 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 24th February, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore Printed from counselvise.com "