The ITAT Hyderabad has excluded KPO recharacterisation, allowed PLI adjustments in a transfer pricing case, and directed LIBOR+200 bps on receivables.
ITAT Hyderabad Excludes KPO Recharacterisation in Transfer Pricing Case
The ITAT Hyderabad has recently made a pivotal ruling in a transfer pricing matter where it excluded the recharacterisation of services as Knowledge Process Outsourcing (KPO) work. Additionally, the tribunal allowed profit level indicator (PLI) adjustments and directed that a LIBOR margin of 200 basis points be applied to foreign receivables.
This decision is grounded in a thorough analysis of what constitutes low-end IT enabling services versus more complex KPO functions. The tribunal illustrated the boundaries between various service categories and highlighted the significance of accurately classifying services for appropriate transfer pricing methodologies.
This ruling serves as a guide for multinational enterprises and tax practitioners, emphasizing the importance of service classification in transfer pricing arrangements. It underscores that careful evaluation of the nature and complexity of services is crucial in determining compliance with applicable transfer pricing regulations.
Citations
- ITAT Hyderabad (2026) – Transfer Pricing Case
