ITAT Delhi Upholds Segment-Based Transfer Pricing Analysis in Favor of Opterna Technologies
In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, delivered a judgment on May 7, 2025, in the case of Opterna Technologies Private Limited vs. Assessment Unit (National Faceless Assessment Centre) for the Assessment Year (AY) 2020–21. The appeal was filed by Opterna Technologies Pvt. Ltd. against the assessment order passed by the NFAC and involved critical transfer pricing and taxation issues.
Background of the Case
Opterna Technologies Pvt. Ltd., a company engaged in the business of manufacturing and trading communication systems and optical fiber cables, had reported an income of ₹51,880 for the assessment year 2020–21. The company had prepared separate transfer pricing documentation for its Trading and Service segments.
However, during the assessment proceedings, the Transfer Pricing Officer (TPO) dismissed the segmental analysis, citing lack of audited segmental data and inconsistencies such as disproportionate employee costs. The TPO instead adopted an entity-level approach for determining the Arm’s Length Price (ALP), rejecting the company’s segment-based method.
Key Issues and ITAT’s Ruling
- Segmental ALP Analysis Accepted:
The Tribunal found merit in the taxpayer’s approach of preparing segment-specific transfer pricing documentation and directed that the ALP be computed on a segmental basis, rather than at the entity level. This is a significant relief to the assessee, particularly in complex business operations involving multiple functional streams. - Inclusion of Fiberfox India Pvt. Ltd. as Comparable:
The TPO had earlier excluded Fiberfox India Pvt. Ltd. as a comparable company in the transfer pricing analysis. The ITAT overruled this exclusion, emphasizing that Fiberfox India was functionally similar and hence should be considered a valid comparable. - Notional Interest on AE Receivables Rejected:
The TPO had also made an adjustment on account of notional interest on delayed receivables from associated enterprises (AEs). However, the ITAT dismissed this adjustment, reiterating that notional interest cannot be imputed without establishing a clear case of delay beyond acceptable commercial norms. - Section 68 Addition Set Aside for Reconsideration:
The assessing authority had made an addition of ₹95.96 lakh under Section 68 of the Income Tax Act, citing unexplained credits. The Tribunal found that the issue required further verification and proper inquiry, and therefore remanded the matter back to the Assessing Officer for a fresh examination.
Conclusion
The ITAT’s judgment is a positive outcome for Opterna Technologies and sets an important precedent for taxpayers involved in multi-segment businesses. By endorsing segment-wise transfer pricing analysis and rejecting arbitrary entity-level assessments, the Tribunal reinforced the importance of functional accuracy in TP assessments. Furthermore, the rejection of notional interest on AE receivables aligns with earlier judicial views favoring commercially realistic assessments.
This case also highlights the necessity for assessing authorities to conduct thorough due diligence before invoking provisions like Section 68, and serves as a reminder that procedural fairness is crucial in income tax assessments.
