SGD PHARMA INDIA PRIVATE LIMITED, ,MAHABUBNAGAR V. DCIT, CIRCLE -3 (1), HYDERABAD

ITA 130/HYD/2022

AI Insights

SGD Pharma India Private Limited filed appeals against the final assessment orders passed by the Assessing Officer under sections 143(3) and 144C(13) of the Income Tax Act, 1961, which were based on the directions of the Dispute Resolution Panel (DRP). The main issues in the appeals were the benchmarking of interest rates on ECB loans and the disallowance under Section 43B related to provisions for gratuity. The Tribunal found that the interest rates set by the assessee were at arm's length, referencing a similar case (Shakti Hormann Pvt. Ltd. vs. ACIT) where interest at LIBOR + 500 basis points was deemed acceptable for loans with a seven-year tenure. Regarding the disallowance under Section 43B, the Tribunal noted that the issue required further verification by the Assessing Officer as directed by the DRP.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 832143 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: misc
• Appeal Filed On: 21-04-2022
• Other Referred Cases: Shakti Hormann Pvt. Ltd. vs. ACIT [174 taxmann.com 427]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALIASGAR RAMPURWALA
• Keywords: Opportunity of being heard; Transfer pricing; International transaction; Period of limitation; Time period of passing order
• Section: 143(3); 43B

Judgement Text

" ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 1 of 14 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad ŵी रिवश सूद,Ɋाियक सद˟ एवं ŵी मधुसूदन साविड़या लेखा सद˟ समƗ | Before Shri Ravish Sood, Judicial Member A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA-TP Nos.130 & 447/Hyd/2022 (िनधाŊरण वषŊ/Assessment Years: 2017-18 & 2018-19) M/s. SGD Pharma India Private Limited, Mahabubnagar PAN:AADCC7815K Vs. Dy.CIT/I.T.O Ward/Circle 3 (1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri Aliasgar Rampurwala, CA राज̾ व Ȫारा/Revenue by:: Smt. K. Haritha, CIT(DR) सुनवाई की तारीख/Date of hearing: 17/12/2025 घोषणा की तारीख/Pronouncement: 21/01/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.: Both these appeals are filed by M/s. SGD Pharma India Private Limited (“the assessee”), feeling aggrieved by the separate final assessment orders passed by the Learned Assessing Officer (“Ld. AO”) under section 143(3) read with sections 144C(13) of the Income Tax Act, 1961 (“the Act”) dated 25.02.2022 and 27.07.2022 for A.Y 2017-18 & 2018-19 respectively in pursuance of the directions issued by the Learned Dispute Resolution Panel Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 2 of 14 (“Ld. DRP”). Since identical issues are involved in these two appeals, for the sake of convenience, these were heard together and are being disposed of by this common consolidated order. ITA-TP No. 130/Hyd/2022 (A.Y. 2017-18): 2. The assessee has raised the following grounds of appeal: 3. The assessee has raised the following additional grounds: Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 3 of 14 “8. On the facts and in the circumstances of the case and in law, the Ld. Panel erred in not quoting a valid computer generated DIN on the body of DRP directions dated 28 January 2022 under section l44C(5) of the Act, in contravention to the Circular No. 19 of 2019 by the CBDT, thus rendering such an order/direction to be invalid and never to have been issued as per para 4 of the said circular. 9. On the facts and in the circumstances of the case and in law, the final assessment order dated 25 February 2022 passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act pursuant to invalid and non-est directions passed by the Ld. Panel, is bad in law, null and void and liable to be quashed. 10. Without prejudice to ground no. 8 and 9, on the facts and in the circumstances of the case and in law, the final assessment order dated 25 February 2022 passed by the Ld. AO under section 143(3) read with section 144C(13) of the Act, is bad in law as it is not passed in conformity with the directions issued by the Ld. Panel, as per the provisions of section 144C(1) r.w.s. 144C(13) of the Aet and hence liable to be quashed. 11. On the facts and in the circumstances of the case and in law, the final assessment order dated 25th February 2022 passed by the Ld. A.O under section 143(3) r.w.s. 144C(13) of the Act having been passed beyond the limitation period provided in terms of section 153 of the Act, is void-ab-initio, illegal and bad in law and is therefore liable to be quashed”. 4. The brief facts of the case are that the assessee is a company engaged in the manufacture and sale of borosilicate type-I glass moulded vials, glass tubular vials and ampoules for pharmaceuticals and biological companies. The assessee filed its return of income for Assessment Year 2017–18 on 30.11.2017, declaring a loss of Rs.2,21,78,327/-. The case of the assessee was selected for complete scrutiny, and accordingly, a notice under section 143(2) of the Act was issued to the assessee. In view of the involvement of international transactions with the Associated Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 4 of 14 Enterprises (“AEs”), the case of the assessee was thereafter referred to the Learned Transfer Pricing Officer (“Ld. TPO”) under section 92CA(1) of the Act. The Ld. TPO, vide order dated 28.01.2021, proposed an upward adjustment of Rs.2,28,23,848/- in respect of the international transaction relating to interest on External Commercial Borrowings (“ECB”). Based on the said order, the Ld. AO passed a draft assessment order dated 13.04.2021. 5. Aggrieved by the order of the Ld. AO, the assessee filed objections before the Ld. DRP. The Ld. DRP disposed of the objections of the assessee vide directions dated 28.01.2022. Pursuant thereto, the Ld. AO finalized the assessment under section 143(3) read with sections 144C(13) and 144B of the Act on 25.02.2022, making, inter alia, the following additions/disallowances: a. Addition of Rs.2,28,23,848/- towards adjustment in respect of interest on ECB loans; and b. Disallowance of Rs.20,32,596/- under section 43B of the Act. 6. Aggrieved with the order of the Ld. AO, the assessee is in appeal before this Tribunal. We noted that the assessee has filed request letter dated 17.12.2025 for withdrawal of additional grounds, which is to the following effect: Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 5 of 14 Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 6 of 14 7. As the assessee has already withdrawn the additional grounds of the appeal, no separate adjudication is required on the same. Hence, the additional grounds of appeal of the assessee are dismissed as withdrawn. 8. At the outset, the Learned Authorised Representative (“Ld. AR”) submitted that after withdrawal of additional grounds, two issues alone survive for adjudication i.e. (a) Benchmarking of Interest on ECB Loans and (b) Disallowance under Section 43B of the Act. With regard to Benchmarking of Interest on ECB Loans, the Ld. AR submitted that the assessee had availed three ECB loans, namely ECB-I, ECB-II and ECB-III. It was submitted that the assessee benchmarked the rate of interest on ECB-I and ECB- II at LIBOR + 500 basis points, and on ECB-III at LIBOR + 450 basis points. It was submitted that the Ld. TPO benchmarked the interest at LIBOR + 200 basis points, which was enhanced by the Ld. DRP to LIBOR + 250 basis points. In this regard, reliance was placed on para no. 2.4.6 of the DRP’s order, wherein the Ld. DRP benchmarked the interest on the assumption that the tenure of the ECB loans was less than five years. The Ld. AR submitted that the assumption of the Ld. DRP that the tenure of ECB Loans are for less than five years is factually incorrect. In this regard, the Ld. AR invited our attention to the loan agreement dated 09.04.2014 placed at Page no. 210, the loan agreement dated 24.11.2014 placed at Page no. 231 and the loan agreement dated 23.06.2016 placed at Page no. 252 and it was demonstrated that the ECB loans were for a tenure of seven years, and not for a period of less than five years. It was further submitted that this Tribunal, under Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 7 of 14 identical facts, for the same assessment year, in the case of Shakti Hormann Pvt. Ltd. vs. ACIT [174 taxmann.com 427], has held that benchmarking of interest on ECB loans at LIBOR + 500 basis points is justified. The Ld. AR argued that the Benchmarking of interest on ECB loans by the assessee is not more than LIBOR + 500 basis points. Accordingly, it was prayed that the adjustment made by the Ld. TPO/Ld. AO be deleted. 9. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities. 10. We have heard the rival submissions and perused the material available on record including the case law relied upon. In this regard, we have also gone through para no. 2.4.6 of the order of the Ld. DRP, which is to the following effect: 11. On perusal of the above, we find that the Ld. DRP benchmarked the interest on ECB loans at LIBOR + 250 basis Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 8 of 14 points on the premise that the loans were for a tenure of less than five years. However, on perusal of the loan agreements placed at page nos. 210, 231 and 252 of the paper book, it is evident that the tenure of the ECB loans is seven years. Thus, the factual basis adopted by the Ld. DRP is incorrect. We have also gone through para nos. 8 to 11 of the order of this Tribunal, in the case of Shakti Hormann Pvt. Ltd. vs. ACIT (supra), which is to the following effect: Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 9 of 14 Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 10 of 14 Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 11 of 14 12. On perusal of the above, we find that this Tribunal for the same assessment year and for ECB loans having a tenure of seven years, has held that benchmarking of interest at LIBOR + 500 basis points is justified. In the present case, the assessee has Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 12 of 14 benchmarked the ECB loans at LIBOR + 500 / 450 basis points, which is not higher than the rate approved by the Tribunal. Therefore, respectfully following the said decision, we hold that the benchmarking adopted by the assessee is at arm’s length. Accordingly, the addition of Rs.2,28,23,848/- made on account of interest on ECB loans is directed to be deleted. 13. With regard to the disallowance of Rs.20,32,596/- under section 43B of the Act, the Ld. AR submitted that the said amount pertains to provision for gratuity, which was already disallowed by the assessee itself while computing the total income in the return of income. However, due to incorrect reporting in the tax audit report, the said amount was once again disallowed by the Ld. AO, resulting in double disallowance. In this regard, the Ld. AR invited our attention to para nos. 2.8.1 and 2.8.2 of the directions of the Ld. DRP, wherein the Ld. DRP had directed the Ld. AO to verify the factual position and decide the issue as per law. It was prayed that the matter be restored to the file of the Ld. AO for verification in accordance with the DRP’s directions. 14. Per contra, the Ld. DR did not object to such a remand. 15. We have considered the rival submissions and gone through the directions of the Ld. DRP. We find that the Ld. DRP had specifically directed the Ld. AO to verify the claim of the assessee regarding disallowance under section 43B of the Act. Since the said verification has not been carried out, we deem it appropriate, in the interest of justice, to restore this issue to the Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 13 of 14 file of the Ld. AO. The Ld. AO is directed to verify from the records whether the amount of Rs.20,32,596/- towards provision for gratuity has already been disallowed by the assessee in the return of income and to decide the issue in accordance with law, after giving due effect to the directions of the Ld. DRP and after providing adequate opportunity of being heard to the assessee. 16. In the result, the appeal of the assessee in ITA No. 130/ Hyd/2022 is allowed for statistical purposes. ITA-TP No. 477/Hyd/2022 (A.Y. 2018-19): 17. At the outset, the Ld. AR submitted that the solitary issue involved in the present appeal relates to the benchmarking of the rate of interest on ECB loans. It was further submitted that the issue involved in this appeal is identical to the issue involved in ITA No. 130/Hyd/2022 for Assessment Year 2017-18. Accordingly, he submitted that the findings of the Tribunal in ITA No.130/Hyd/2022 on this issue may be mutatis mutandis apply to this appeal also. 18. Per contra, the Ld. DR did not dispute the factual position that the issue involved in the present appeal is identical to the issue involved in ITA No. 130/Hyd/2022. 19. As there is no dispute about the facts that the issue involved in this appeal is identical to the issue involved in ITA No. 130/Hyd/2022, therefore, we hold that our observations and findings in ITA No. 130/Hyd/2022 for Assessment Year 2017-18 apply mutatis mutandis to this appeal also. Accordingly, we hold Printed from counselvise.com ITA No 130 and 447 of 2022 SGD Pharma India P Ltd Page 14 of 14 that the benchmarking adopted by the assessee is at arm’s length and direct the Ld. TPO / Ld. AO to delete the addition made on account of benchmarking of interest on ECB loans. 20. In the result, the appeal of the assessee in ITA No.477/Hyd/2022 is allowed. 21 To sum up, the appeal of the assessee in ITA No. 130/ Hyd/2022 is allowed for statistical purposes and the appeal in ITA No.477/Hyd/2022 is allowed. Order pronounced in the Open Court on 21st January 2026. Sd/- Sd/- (RAVISH SOOD) JUDICIAL MEMBER (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER Hyderabad, dated 21st January 2026 Vinodan/sps Copy to: S.No Addresses 1 SGD Pharma India Private Ltd, SY Nos. 266, 267, 269, 271 /1E 272-275, 277, 281/2, 283, 285, 289 Vemula Village, Moosapet Mandal, Mahabubnagar Distt. Telangana 509380 2 A.O Circle 3(1) Income Tax Office, Signature Towers, Kondapur Hyderabad 500084 3 Pr. CIT – Hyderabad/Director (IT & TP) Hyderabad 4 DRP – 1, Kendriya Sadan, C Wing, Bengaluru 560034 5 DR, ITAT Hyderabad Benches 6 Guard File By Order Printed from counselvise.com "