STOTLAND | GLOBAL TP MONITOR. A weekly Review of Global Transfer Pricing Developments

Issue No. 04 | October 9, 2026

This week’s review focuses on an Indian Tribunal decision concerning a familiar area of transfer pricing controversy: intra-group management and support services, and the tendency of tax authorities to assign a NIL arm’s-length value to such arrangements.

The decision does not break new ground, but it reinforces an important distinction. Establishing that services were actually rendered is one question; determining the arm’s-length consideration for those services is another. The two should not be confused, and neither should be addressed through shortcuts.

I. Case Law

1. India — Styrenix Performance Materials Ltd. v. ACIT

Jurisdiction: India

Court: Income Tax Appellate Tribunal, Ahmedabad

Order date: 1 October 2026

Case: ITA No. 1066/Ahd/2026, AY 2022–23

Topic: Intra-group services | Management fees | NIL arm’s-length pricing

Background

The case concerned management, IT and regional head-office support services received by Styrenix Performance Materials Ltd. from associated enterprises located in Germany and Singapore.

The Indian tax authorities challenged the arm’s-length value of certain services and determined their value at NIL under the Other Method, resulting in a transfer pricing adjustment of approximately INR 201.76 million (INR 20.18 crore).

The taxpayer maintained that the services had been received, that they provided an economic benefit to the Indian entity, and that their arm’s-length value could not simply be disregarded without an appropriate benchmarking exercise.

Importantly, substantially identical transactions had already been the subject of litigation in earlier assessment years, with decisions in favour of the taxpayer subsequently upheld by the Gujarat High Court.

Tribunal decision

The Ahmedabad Tribunal deleted the adjustment.

In reaching its conclusion, the Tribunal placed considerable weight on the treatment of substantially identical transactions in earlier assessment years. Revenue had not demonstrated any material change in the underlying facts that would justify departing from those earlier decisions.

The Tribunal also relied on earlier judicial findings rejecting a NIL arm’s-length determination without an appropriate benchmarking exercise under Rule 10AB, where the taxpayer had demonstrated that the services were actually received.

The outcome therefore rested on two related considerations: the absence of a defensible basis for assigning a NIL value to the services, and the importance of consistency where the relevant facts and circumstances remained unchanged.

Why it matters

Intra-group management and support services remain a recurring source of transfer pricing disputes, particularly where charges relate to regional management functions, centralized IT infrastructure, administrative support and shared corporate resources.

The underlying difficulty is often not the pricing methodology itself, but the distinction between demonstrating that a service was actually provided and establishing the appropriate consideration for that service.

A taxpayer cannot necessarily justify a charge merely because an intercompany agreement exists or an allocation has been recorded in its accounting system. Evidence of the services performed and the benefit received remains essential.

Equally, a tax authority’s disagreement with the commercial usefulness or perceived value of those services does not, in itself, constitute an arm’s-length pricing analysis.

The existence of a service does not automatically validate the amount charged. But neither does skepticism regarding its value justify assigning an arm’s-length price of zero without a defensible analytical basis.

Practitioner’s note

The practical lesson is straightforward: document the services, substantiate the benefit, and support the charge.

For multinational groups operating centralized service arrangements, this means maintaining more than a service agreement and an annual cost allocation spreadsheet. Supporting documentation should identify the activities performed, the relevant beneficiaries, the underlying cost base, the allocation methodology and the basis for determining the arm’s-length consideration.

The decision also highlights the importance of consistency across assessment years. Where substantially identical transactions have already been examined and adjudicated, a departure from the earlier treatment should be supported by a material change in facts or circumstances.

A NIL adjustment may be an attractive shortcut. It is not, however, a substitute for transfer pricing analysis.

Source: Styrenix Performance Materials Ltd. v. ACIT, ITA No. 1066/Ahd/2026, order dated 1 October 2026.

Overall takeaway

This week’s decision serves as a reminder that the benefit test and the arm’s-length pricing of intra-group services are related, but distinct, considerations.

Taxpayers must be able to demonstrate that the services were actually rendered and that the resulting charges are commercially and economically supportable. Tax authorities, in turn, must apply an appropriate analytical framework when challenging the arm’s-length value of those arrangements.

The decision is also a useful reminder that consistency matters. Where the facts have not materially changed, previously adjudicated transactions should not become an entirely new controversy with every assessment year.

The documentation should establish what was done, why it mattered, and how the charge was determined.

Everything else is an invitation to dispute.