ITAT Deletes Rs. 20.17 Crore Transfer Pricing Adjustment on Intra-Group Services :

The assessee is Styrenix Performance Materials Limited who filed its return of income for Assessment Year 2022–23 on November 11, 2022, declaring a total income of Rs. 439,57,12,120. During the assessment proceedings, the TPO, by an order dated January 27, 2025, passed under Section 92CA(3) of the Income Tax Act, 1961, proposed a total transfer pricing adjustment of Rs. 20,17,56,905 in respect of intra-group services received by the assessee.

The adjustment comprised Rs. 8,69,88,797 towards Global Head Office (GHO) non-IT services, Rs. 51,03,588 towards GHO IT services and Rs. 10,96,64,520 towards Regional Head Office (RHO) services. The TPO rejected the assessee’s benchmarking approach and determined the arm’s length price of the relevant services at Nil by applying the Other Method under Section 92C read with Rule 10AB of the Income Tax Rules, 1962. The DRP, through its directions dated December 5, 2025, upheld the proposed adjustment. Consequently, the AO passed the final assessment order dated January 31, 2026, under Sections 143(3), 144C(13) and 144B of the Act, confirming the adjustment.

The Tribunal noted that the issue of transfer pricing adjustments relating to intra-group services had already been examined in the assessee’s own cases for Assessment Years 2017–18 and 2018–19. In those cases, the coordinate benches of the Tribunal had deleted the corresponding transfer pricing adjustments. The Gujarat High Court, through its common judgment dated March 5, 2024, in Tax Appeal Nos. 470 of 2022 and 683 of 2023, had upheld the Tribunal’s decisions and dismissed the Revenue’s appeals.

The High Court had observed that the TPO had not undertaken the exercise contemplated under Rule 10AB before determining the arm’s length price at Nil. It also noted that the assessee had furnished substantial supporting material demonstrating that it had received India-specific services from its head office and regional office.

Considering that the facts and circumstances for the year under consideration were materially identical to those of the earlier assessment years, and that the Revenue had not brought any distinguishing feature on record, the Tribunal found no reason to take a different view.

Accordingly, the Tribunal directed the deletion of the entire transfer pricing adjustment of Rs. 20,17,56,905 relating to GHO non-IT services, GHO IT services and RHO services. The Tribunal deleted the transfer pricing adjustment of Rs. 20,17,56,905 relating to intra-group services, directed the AO to give effect to the Section 154 rectification order, deleted the disallowance under Section 36(1)(va) and directed verification of the depreciation adjustment.