SERVIER INDIA PRIVATE LIMITED (FORMERLY KNOWN AS SERDIA PHARMACEUTICALS (INDIA)P. LTD ),MUMBAI V. ADDL/JT/DY/CIT/DY/ASSTT/ITO, NATIONAL E-ASSESSMENT CENTRE,DELHI, DYCIT-8(1)(1), MUMBAI

ITA 1281/MUM/2021

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Servier India Pvt. Ltd. appealed against the final assessment order passed by the National E-Assessment Centre, which included significant transfer pricing adjustments and disallowed deductions for certain cesses. The company had entered into a Unilateral Advance Pricing Agreement (UAPA) with the Central Board of Direct Taxes, which covered the international transactions for the assessment years including 2015-16 to 2023-24. The Tribunal dismissed the grounds related to transfer pricing adjustments as infructuous due to the UAPA and upheld the decision on the non-deduction of education cesses based on legal precedents and statutory amendments.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 830661 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: misc
• Appeal Filed On: 06-07-2021
• Other Referred Cases: Chambal Fertilizers and Chemicals Ltd. v. Income Tax, French (India) Ltd. v. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: PRATIK PODDAR; AW
• Keywords: Transfer pricing; International transaction; Retrospective amendment; Tax effect; Principle of natural justice
• Section: 143(3); 133(6); 37(1); 10B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 1281/MUM/2021 Assessment Year: 2016-17 Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 1703, 17th floor, B Wing, Parinee Crecenzo, Plot Nos C-38/39, “G” Block, Behind MCA, BKC, Bandra (East), Mumbai-400051. Vs. Additional/Joint/Deputy/Assistant Commissioner of Income- tax/Income-tax Officer, National E- Assessment Centre, Delhi. PAN NO. AAACS 6696 R Appellant Respondent Assessee by : Mr. Pratik Poddar, Adv. a/w Mr. Shreyas Sardesai Revenue by : Mr. Pravin Salunkhe, Sr. DR Date of Hearing : 12/01/2026 Date of pronouncement : 20/01/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against final assessment order passed by the National E-Assessment Centre, Delhi [in short ‘the Assessing Officer’] in compliance to the direction Printed from counselvise.com of the Ld. Dispute Resolution Panel dated 26.03.2021. raised by the assessee are reproduced as under: Based on the facts and circumstances of the case, the Appellant respectfully craves leave to prefer an appeal under section 253(1) of the Income under section National e-Assessment Centre on the following grounds, which are independent and without prejudice to each other: 1. On facts and circumstances of the case and in law, final assessment order passed by the under section 143(3) r.w.s 144C(13) r.w.s 144B is barred by limitation. 2. On facts and circumstances of the case and in law, the learned AO/ the learned Transfer Pricing Officer ('TPO') under the directions of the Hon'ble in computing the total income of the Appellant at Rs. 29,56,88,350/ On facts and circumstances of the case and in law, the learned Assessing Officer ('AO')/ the learned Transfer Pricing Officer under the directions of the Hon'ble Dispute Resolution Panel ('DRP') has erred in General 3. Confirming adjustment of Rs. 7,37,14,042/ Appellant under the provisions of Chapter X of the Income 1961 ('Act'); 4. Arbitrarily rejecting the economic comparability analysis/ choice of methodology/ transfer pricing study undertaken by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1961('Rules') and various submissions made by the Appellant before, lower authorities. Selection of Most Appropriate Method 5. Rejecting Transactional Net Margin Method ('TNMM') and in the alternative, Internal Comparable Uncontrolled Price ('CUP') with introducing of a new method i.e. External CUP without providing Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) of the Ld. Dispute Resolution Panel dated 26.03.2021. sed by the assessee are reproduced as under: Based on the facts and circumstances of the case, the Appellant respectfully craves leave to prefer an appeal under section 253(1) of the Income-tax Act, 1961 ('the Act') against the order passed under section 143(3) r.w.s 144C(13) r.w.s. 144B of the Act by the Assessment Centre on the following grounds, which are independent and without prejudice to each other: 1. On facts and circumstances of the case and in law, final assessment order passed by the learned Assessing Officer ('AO') under section 143(3) r.w.s 144C(13) r.w.s 144B is barred by 2. On facts and circumstances of the case and in law, the learned AO/ the learned Transfer Pricing Officer ('TPO') under the directions of the Hon'ble Dispute Resolution Panel ('DRP') has erred in computing the total income of the Appellant at Rs. 29,56,88,350/- Transfer Pricing On facts and circumstances of the case and in law, the learned Assessing Officer ('AO')/ the learned Transfer Pricing Officer under the directions of the Hon'ble Dispute Resolution Panel ('DRP') 3. Confirming adjustment of Rs. 7,37,14,042/- to the income of the Appellant under the provisions of Chapter X of the Income rily rejecting the economic comparability analysis/ choice of methodology/ transfer pricing study undertaken by the Appellant in accordance with the provisions of the Act read with tax Rules, 1961('Rules') and various submissions made ellant before, lower authorities. Selection of Most Appropriate Method 5. Rejecting Transactional Net Margin Method ('TNMM') and in the alternative, Internal Comparable Uncontrolled Price ('CUP') with introducing of a new method i.e. External CUP without providing Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 2 ITA No. 1281/MUM/2021 of the Ld. Dispute Resolution Panel dated 26.03.2021. The grounds Based on the facts and circumstances of the case, the Appellant respectfully craves leave to prefer an appeal under section 253(1) tax Act, 1961 ('the Act') against the order passed 143(3) r.w.s 144C(13) r.w.s. 144B of the Act by the Assessment Centre on the following grounds, which are 1. On facts and circumstances of the case and in law, final learned Assessing Officer ('AO') under section 143(3) r.w.s 144C(13) r.w.s 144B is barred by 2. On facts and circumstances of the case and in law, the learned AO/ the learned Transfer Pricing Officer ('TPO') under the Dispute Resolution Panel ('DRP') has erred in computing the total income of the Appellant at Rs. On facts and circumstances of the case and in law, the learned Assessing Officer ('AO')/ the learned Transfer Pricing Officer ('TPO') under the directions of the Hon'ble Dispute Resolution Panel ('DRP') to the income of the Appellant under the provisions of Chapter X of the Income-tax Act, rily rejecting the economic comparability analysis/ choice of methodology/ transfer pricing study undertaken by the Appellant in accordance with the provisions of the Act read with tax Rules, 1961('Rules') and various submissions made 5. Rejecting Transactional Net Margin Method ('TNMM') and in the alternative, Internal Comparable Uncontrolled Price ('CUP') with introducing of a new method i.e. External CUP without providing Printed from counselvise.com cogent reasons and without considering factors of comparabilit defiance to choice of most appropriate method u/s 92C(1) and under rule 10B (2) & 10B (3) of the Income 6. Ignoring the fact and circumstances that the Appellant put forth by way of reasons for non such as superiority of its APIs, longevity of its shelf life, geography, superior manufacturing facility, market positioning and terms of agreement with its foreign AE. 7. Ignoring the fact that the Appellant is a licensed manufacturer (akin to a value added distributor), thereby receiving bundle of rights (i.e. additional assistance like promotional material, clinical studies, dossiers etc) unlike the generic suppliers of APIs, with whom comparison has been drawn. Use of data not available in under section 133(6) of the Act) and denial of natural justice 8. Applying CUP method based on incomplete data/ data not available in public domain and ignoring the principles of natural justice by not providing relevant detail for cross examine to the Appellant, which is critical to use the CUP method 9. Without prejudice to above, erred in following inconsistent approach vis- by not considering the av received in exercise of power under section 133(6) of the Act, and instead considered only data received in exercise of power under section 133(6) of the Act. Appreciation of evidence on record 10. Rejecting the results third parties on the quality of the APIs imported by the Appellant and the APIs available in the local markets, which go to prove that they were qualitatively different and consequently not comparable. Adjustment due to differences 11. Not discharging burden of economic adjustments undertaken scientifically as required under Rule 10B(1)(a)(ii), 10B(2) & 10B(3) of the Rules, while applying CUP method. Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) cogent reasons and without considering factors of comparabilit defiance to choice of most appropriate method u/s 92C(1) and under rule 10B (2) & 10B (3) of the Income-tax Rules ('the Rules'); 6. Ignoring the fact and circumstances that the Appellant put forth by way of reasons for non-application of external CUP such as superiority of its APIs, longevity of its shelf life, geography, superior manufacturing facility, market positioning and terms of agreement with its foreign AE. 7. Ignoring the fact that the Appellant is a licensed manufacturer a value added distributor), thereby receiving bundle of rights (i.e. additional assistance like promotional material, clinical studies, dossiers etc) unlike the generic suppliers of APIs, with whom comparison has been drawn. Use of data not available in Public Domain (Data received under section 133(6) of the Act) and denial of natural 8. Applying CUP method based on incomplete data/ data not available in public domain and ignoring the principles of natural justice by not providing relevant details/ information/opportunity for cross examine to the Appellant, which is critical to use the CUP 9. Without prejudice to above, erred in following inconsistent -à-vis the approach undertaken in the earlier years, by not considering the average of TIPS software data and data received in exercise of power under section 133(6) of the Act, and instead considered only data received in exercise of power under section 133(6) of the Act. Appreciation of evidence on record 10. Rejecting the results of the tests conducted by the independent third parties on the quality of the APIs imported by the Appellant and the APIs available in the local markets, which go to prove that they were qualitatively different and consequently not comparable. due to differences 11. Not discharging burden of economic adjustments undertaken scientifically as required under Rule 10B(1)(a)(ii), 10B(2) & 10B(3) of the Rules, while applying CUP method. Corporate Tax Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 3 ITA No. 1281/MUM/2021 cogent reasons and without considering factors of comparability in defiance to choice of most appropriate method u/s 92C(1) and tax Rules ('the Rules'); 6. Ignoring the fact and circumstances that the Appellant put forth application of external CUP for factors such as superiority of its APIs, longevity of its shelf life, geography, superior manufacturing facility, market positioning and terms of 7. Ignoring the fact that the Appellant is a licensed manufacturer a value added distributor), thereby receiving bundle of rights (i.e. additional assistance like promotional material, clinical studies, dossiers etc) unlike the generic suppliers of APIs, with Public Domain (Data received under section 133(6) of the Act) and denial of natural 8. Applying CUP method based on incomplete data/ data not available in public domain and ignoring the principles of natural s/ information/opportunity for cross examine to the Appellant, which is critical to use the CUP 9. Without prejudice to above, erred in following inconsistent vis the approach undertaken in the earlier years, erage of TIPS software data and data received in exercise of power under section 133(6) of the Act, and instead considered only data received in exercise of power under of the tests conducted by the independent third parties on the quality of the APIs imported by the Appellant and the APIs available in the local markets, which go to prove that they were qualitatively different and consequently not comparable. 11. Not discharging burden of economic adjustments undertaken scientifically as required under Rule 10B(1)(a)(ii), 10B(2) & 10B(3) Printed from counselvise.com On facts and circumstances of the case and in law, under the directions of the Hon'ble DRP erred in 12. not allowing 'Education Cess' and 'Secondary and Higher Education Cess' as a deduction under section 37(1) of the Act. The Appellant prays that the additions made by the learned AO / TPO under the directions be deleted and consequential relief be granted. The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable th Hon'ble Income tax Appellate Tribunal to decide this appeal according to law. Tax Effect: (1) Ground no. 1 is in relation to limitation, hence separate tax effect is not calculated. (2) Ground no. 2 is a general ground, hence separate tax effect is not calculated. (3) Ground nos. 3 to 11 relate to a single transfer pricing addition of Rs. 7,37,14,042/ separate tax effect is not provided in relation to each of these grounds. (4) Ground no. 12 relates to deduction 22,37,501 and its tax effect is 7,74,354 2. At the outset, the learned counsel for the assessee submitted a written request stating that the assessee had originally challenged the transfer pricing adjustment made in respect of the transaction relating to the import of Active Pharmaceutical Ingredients (API). It was submitted that the assessee has since entered into a Unilateral Advance Pricing Agreement (UAPA) dated 27.03.2021 with the Central Board of Direct Taxes, covering the said international transactions for Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) On facts and circumstances of the case and in law, the learned AO under the directions of the Hon'ble DRP erred in 12. not allowing 'Education Cess' and 'Secondary and Higher Education Cess' as a deduction under section 37(1) of the Act. The Appellant prays that the additions made by the learned AO / nder the directions be deleted and consequential relief be The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable th Hon'ble Income tax Appellate Tribunal to decide this appeal according to law. (1) Ground no. 1 is in relation to limitation, hence separate tax calculated. (2) Ground no. 2 is a general ground, hence separate tax effect is alculated. (3) Ground nos. 3 to 11 relate to a single transfer pricing addition of Rs. 7,37,14,042/- and its tax effect is Rs. 2,55,10,956/ separate tax effect is not provided in relation to each of these (4) Ground no. 12 relates to deduction of education cess of Rs. 22,37,501 and its tax effect is 7,74,354. At the outset, the learned counsel for the assessee submitted a written request stating that the assessee had originally challenged the transfer pricing adjustment made in respect of the transaction relating to the import of Active Pharmaceutical Ingredients (API). It was submitted that the assessee has since Unilateral Advance Pricing Agreement (UAPA) with the Central Board of Direct Taxes, covering the said international transactions for Assessment Years 2015 Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 4 ITA No. 1281/MUM/2021 the learned AO 12. not allowing 'Education Cess' and 'Secondary and Higher Education Cess' as a deduction under section 37(1) of the Act. The Appellant prays that the additions made by the learned AO / nder the directions be deleted and consequential relief be The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Income tax Appellate Tribunal to decide this appeal (1) Ground no. 1 is in relation to limitation, hence separate tax (2) Ground no. 2 is a general ground, hence separate tax effect is (3) Ground nos. 3 to 11 relate to a single transfer pricing addition and its tax effect is Rs. 2,55,10,956/-, separate tax effect is not provided in relation to each of these of education cess of Rs. At the outset, the learned counsel for the assessee submitted a written request stating that the assessee had originally challenged the transfer pricing adjustment made in respect of the international transaction relating to the import of Active Pharmaceutical Ingredients (API). It was submitted that the assessee has since Unilateral Advance Pricing Agreement (UAPA) with the Central Board of Direct Taxes, covering Assessment Years 2015-16 to Printed from counselvise.com 2023-24, including the rollback years. In view thereof, the learned counsel sought leave to withdraw the grounds raised against the transfer pricing adjustment in the present appeal. 2.1 In view of the above submission and withdrawal of the grounds by the assessee, pricing adjustment are dismissed as 3. Ground No. 12 education cess and secondary and higher education cess section 37(1) of the Income reliance on the decision of the Hon’ble Rajasthan High Court in Chambal Fertilizers and Chemicals Ltd. v Income Tax, Income 31.07.2018. 3.1 We have considered the submissions and perused the record. On merits, the claim is no longer legally sustainable. The Dispute Resolution Panel has correctly he under the Finance Act as an additional charge computed on income tax and surcharge under the chapter “Rates of Income therefore, partakes the character of within the mischief of as a deduction. Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) including the rollback years. In view thereof, the learned counsel sought leave to withdraw the grounds raised against the er pricing adjustment in the present appeal. In view of the above submission and withdrawal of the grounds by the assessee, Ground Nos. 1 to 11 relating to transfer pricing adjustment are dismissed as infructuous. relates to the assessee’s claim for deduction of education cess and secondary and higher education cess section 37(1) of the Income-tax Act, 1961. The assessee placed reliance on the decision of the Hon’ble Rajasthan High Court in Chambal Fertilizers and Chemicals Ltd. v. Joint Commissioner of , Income-tax Appeal No. 52 of 2018, decided on We have considered the submissions and perused the record. On merits, the claim is no longer legally sustainable. The Dispute Resolution Panel has correctly held that education cess is levied under the Finance Act as an additional charge computed on income tax and surcharge under the chapter “Rates of Income therefore, partakes the character of tax. Such levy clearly falls within the mischief of section 40(a)(ii) of the Act and is not allowable Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 5 ITA No. 1281/MUM/2021 including the rollback years. In view thereof, the learned counsel sought leave to withdraw the grounds raised against the In view of the above submission and withdrawal of the relating to transfer ee’s claim for deduction of education cess and secondary and higher education cess under tax Act, 1961. The assessee placed reliance on the decision of the Hon’ble Rajasthan High Court in . Joint Commissioner of tax Appeal No. 52 of 2018, decided on We have considered the submissions and perused the record. On merits, the claim is no longer legally sustainable. The Dispute ld that education cess is levied under the Finance Act as an additional charge computed on income tax and surcharge under the chapter “Rates of Income-tax” and, . Such levy clearly falls of the Act and is not allowable Printed from counselvise.com 3.2 The reliance placed by the assessee on the decision of the Hon’ble Rajasthan High Court in Ltd. (supra) stands correctly distinguished by the DRP in light of binding judgment of the Hon’ble Supreme Court in French (India) Ltd. v. CIT held that surtax levied on profits is not deductible in view of the express bar contained in section 40(a)(ii) of the Act. 3.3 The controversy now stands conclusively settled by the Hon’ble Supreme Court in Chambal Fertilizers & Chemicals Limited order dated 14.12.2022], wherein it has been held that the expression “tax” used in section 40(a)(ii) of the Act includes 3.4 The position has been further clarified by the Legislature by insertion of Explanation 3 to section 40(a)(ii) 2022, with retrospective effect from 01.04.2005 term “tax” includes and shall be deemed always to have included any surcharge or cess 3.5 In view of the binding decision of the Hon’ble Supreme Court and the clarificatory statutory amendment having retrospect operation, the claim of deduction of education cess and secondary and higher education cess is Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) The reliance placed by the assessee on the decision of the Hon’ble Rajasthan High Court in Chambal Fertilizers and Chemicals (supra) stands correctly distinguished by the DRP in light of binding judgment of the Hon’ble Supreme Court in French (India) Ltd. v. CIT [1996] 219 ITR 581 (SC), wherein it was held that surtax levied on profits is not deductible in view of the express bar contained in section 40(a)(ii) of the Act. The controversy now stands conclusively settled by the Hon’ble Supreme Court in Joint Commissioner of Income Tax v. M/s Chambal Fertilizers & Chemicals Limited [SLP (C) No. 7379 of 2019, order dated 14.12.2022], wherein it has been held that the ssion “tax” used in section 40(a)(ii) of the Act includes The position has been further clarified by the Legislature by Explanation 3 to section 40(a)(ii) by the Finance Act, retrospective effect from 01.04.2005, declaring that the term “tax” includes and shall be deemed always to have included any surcharge or cess, by whatever name called. In view of the binding decision of the Hon’ble Supreme Court and the clarificatory statutory amendment having retrospect operation, the claim of deduction of education cess and secondary and higher education cess is untenable in law. Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 6 ITA No. 1281/MUM/2021 The reliance placed by the assessee on the decision of the Chambal Fertilizers and Chemicals (supra) stands correctly distinguished by the DRP in light of the binding judgment of the Hon’ble Supreme Court in Smith Kline & [1996] 219 ITR 581 (SC), wherein it was held that surtax levied on profits is not deductible in view of the The controversy now stands conclusively settled by the Joint Commissioner of Income Tax v. M/s [SLP (C) No. 7379 of 2019, order dated 14.12.2022], wherein it has been held that the ssion “tax” used in section 40(a)(ii) of the Act includes cess. The position has been further clarified by the Legislature by by the Finance Act, declaring that the term “tax” includes and shall be deemed always to have included In view of the binding decision of the Hon’ble Supreme Court and the clarificatory statutory amendment having retrospective operation, the claim of deduction of education cess and secondary Printed from counselvise.com 3.6 Accordingly, Ground No. 12 raised by the assessee is dismissed. 4. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 20/01/2026 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) Accordingly, Ground No. 12 raised by the assessee is In the result, the appeal of the assessee is dismissed. ounced in the open Court on 20/01/2026. Sd/ (SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Servier India Pvt. Ltd. (Formerly known as Serdia Pharmaceuticals (India) Pvt. Ltd.) 7 ITA No. 1281/MUM/2021 Accordingly, Ground No. 12 raised by the assessee is In the result, the appeal of the assessee is dismissed. /01/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "