THE HON’BLE THE CHIEF JUSTICE SRI APARESH KUMAR SINGH AND THE HON’BLE SRI JUSTICE G.M.MOHIUDDIN Writ Petition No.37108 of 2024

Order

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Heard Mr. Vishal Kalra, learned counsel appearing for Mr. M.Naga Deepak, learned counsel for the petitioner and Mr. K.Sudhakar Reddy, learned Senior Standing Counsel for Income Tax Department appearing for the respondent.

2. The present challenge is to the consequential order dated 26.09.2024, passed by the respondent- Assistant Commissioner of Income Tax, Circle-5(1), Hyderabad (for short ‘the respondent-ACIT’), in respect of the assessment year 2005- 06 upon remand by the Income Tax Appellate Tribunal, Bench ‘A’, Hyderabad (for short ‘the ITAT’), in I.T.A.No.1451/Hyd/2010 dated 13.06.2014. Consequent to the relief allowed by the ITAT, the assessment order under Section 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) dated 14.10.2008, was modified by treating the revised income of the petitioner as Rs.3,97,79,542/-, by deducting a sum of Rs.3,45,51,636/- towards the relief allowed by the ITAT of ::2::

Rs.7,43,31,178/-, as per rectification order dated 13.02.2012, under Section 154 r/w Section 143(3) of the Act. The respondent- ACIT has computed the total tax and interest refundable as Rs.4,09,49,631/-.

3. Petitioner is a company engaged in software development. It filed its return of income for the subject assessment year on 01.11.2025. The case of the petitioner was referred to a Transfer Pricing Officer (TPO) on 08.05.2006 for determining the Arm’s Length Price (ALP) of the international transactions undertaken during the subject year. The TPO vide order dated 31.03.2008, passed under Section 92CA(3) of the Act, determined the ALP of the transactions pertaining to provisions of software services at Rs.44,11,05,783/- and consequently, computed the adjustment at Rs.7,07,47,467/- under Section 92CA of the Act. Consequent to the order of the TPO, the respondent-ACIT completed the assessment vide Order dated 14.10.2008 under Section 143(3) of the Act at a total income of Rs.7,20,86,690/- as against the returned income of Rs.9,61,490/-. The petitioner preferred an appeal before the ::3::

Commissioner of Income Tax (Appeals) (for short ‘the CIT(A)’), which partly allowed the issue pertaining to transfer pricing adjustment and granted exemption under Section 10A of the Act as claimed by the petitioner in its return, vide order dated 21.09.2010. Consequent thereto, the Assessment Officer modified the order passed under Section 143(3) of the Act, giving effect to the order passed by the CIT(A) determining the total revised income of the petitioner at Rs.7,10,57,050/-, vide order dated 30.11.2010. Petitioner carried the matter in appeal before the ITAT in I.T.A.No.1451/Hyd/2010 challenging the transfer price adjustment upheld by the CIT(A) vide order dated 21.09.2010. In the meantime, petitioner deposited Rs.3,71,12,067/- vide challans at Ex.P.5. Further refund amount of Rs.58,49,229/- pertaining to other years was adjusted against demand raised by the respondent-ACIT on various dates as also specified in the order dated 30.11.2010. The learned ITAT vide its order dated 13.06.2014 partly allowed the appeal whereby the issue of transfer pricing adjustments was remitted back to the file of AO/TPO for fresh consideration.

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4. The relevant portion of the order dated 13.06.2014, passed by the learned ITAT, is reproduced hereunder:

“17.1. With reference to quantification of risk adjustment, assessee arrived at the same at 4.63% based on difference in the average prime lending rate and the average bank rate. Even though, we cannot accept that the difference in prime lending rate and bank rate has to be considered as risk adjustment, we are, however of the opinion that TPO should examine the risk profile of the assessee and other comparables and arrive at appropriate risk adjustment if it can be quantified on any reasonable basis. He is also directed to see whether assessee has done any risk adjustments i