ITAT Kolkata: APA Binding on Transfer Pricing—DIC Fine Chemicals Case Remanded for Fresh ALP Determination

April 6, 2026 : The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that where an Advance Pricing Agreement (APA) covers the relevant assessment year, transfer pricing issues must be revisited in accordance with the agreed terms. In M/s. DIC Fine Chemicals Pvt. Ltd. v. DCIT, the Tribunal partly allowed the assessee’s appeal for Assessment Year 2021–22 and remanded key issues to the Assessing Officer for fresh adjudication.

The assessee, DIC Fine Chemicals Pvt. Ltd., a wholly owned subsidiary of DIC Singapore and part of the global DIC Group, is engaged in the manufacture and export of sheet-fed ink and operates as a manufacturing hub. For AY 2021–22, it declared an income of ₹3.73 crore, which was enhanced to ₹18.71 crore following transfer pricing adjustments of ₹14.97 crore made by the Assessing Officer pursuant to directions of the Dispute Resolution Panel.

During appellate proceedings, the assessee highlighted that it had entered into an APA with the Central Board of Direct Taxes dated 24 March 2025, covering AYs 2019–20 to 2023–24, including the year under consideration. The APA stipulated that international transactions would be considered at arm’s length if the operating profit margin was at least 4.25% for the covered transactions.

Accepting this contention, the Tribunal observed that the APA governed the relevant assessment year and therefore the determination of the arm’s length price (ALP) required reconsideration. It directed the Assessing Officer to recompute the ALP in accordance with Sections 92CD and 92CE of the Income Tax Act, after examining the terms of the APA.

On the issue of Minimum Alternate Tax (MAT), the Tribunal noted that the addition of ₹9.13 crore to book profits under Section 115JB had neither been discussed in the assessment order nor proposed in the show cause notice or DRP directions. Holding this procedurally deficient, the Tribunal remanded the matter to the Assessing Officer to reconsider the computation of book profits after granting the assessee an opportunity of hearing.

Regarding interest computation, the Tribunal took note of the assessee’s submission that the return was filed within the extended due date of 15 March 2022. It directed the Assessing Officer to verify the applicable due date and recompute interest and fees accordingly. Further, interest under Section 234B was ordered to be recalculated after giving effect to transfer pricing adjustments in line with the APA.

The Tribunal dismissed general grounds as not pressed and treated the penalty issue as premature. Ultimately, the appeal was partly allowed for statistical purposes, with all substantive issues remanded for fresh adjudication in light of the APA framework.