TP Assessments for AY 2023–24: Your TPO Submission Sets the Appeal

Introduction: The Scrutiny Has Begun

India’s tax authorities no longer look only at large multinationals. Their transfer pricing radar now covers mid-sized and emerging MNCs too, in particular those that entered into international transactions in FY 2022–23, that is, AY 2023–24. In recent weeks, many such companies have started to receive intimations and notices for transfer pricing assessments. This phase can shape more than the current audit cycle. It can shape their tax profile for years.

For some, it may feel like a routine checkpoint. For anyone who has watched a transfer pricing assessment grow into multi-year litigation, this is the moment to slow down. Go back over every document. Make sure the submission is not only compliant but airtight.

In transfer pricing, what you say at the TPO stage, and how well you say it, can set your defence all the way up to the ITAT.

Why This Matters Now: The Expanding Net and Rising Stakes

The Transfer Pricing Officer (TPO) is no longer a passive reviewer. Scrutiny has gone digital. Treaty partners exchange information, and AI-driven filters sift it. Even smaller cross-border deals, once treated as routine, are now tested for profit shifting, delayed payments, intra-group services and more.

For AY 2023–24, many companies with even modest international dealings are getting notices. What used to be a box-ticking task is now a frontline defence. A thin response can carry a high cost.

The First Line of Defence: Submissions Before the TPO

The most important part of a transfer pricing assessment is often the one most underrated: your submission before the TPO. It includes your:

• Transfer Pricing Study Report

• Supporting documentation

• Explanatory notes and factual representations

• Arguments justifying arm’s length nature

Once filed, these documents form part of your official record. You cannot change them, swap them or add a substantially new argument at a later stage, before the DRP, CIT(A) or ITAT, unless the facts themselves change.

This is where many taxpayers slip. Deadlines press, and scrutiny is easy to underrate, so they file generic, template-style papers. When an unfavourable adjustment arrives, they find no firm ground to argue from.

Key Considerations Before Filing TP Submissions

1. Review, Don’t Rely Blindly on Past Reports

You may have had the same transactions in earlier years. Do not copy the old report across. Past assessments do not bind the TPO unless a ruling says so. Check what has changed in:

• Profitability of the Indian entity

• Benchmarking

• Functional profile of the overseas AE

• Market conditions, especially the post-pandemic picture

• Changes in tax law or OECD guidance

2. Deep-Dive into Documentation

Every paper you file, whether an invoice, an agreement, a cost allocation or a benchmarking study, should tell one story that holds together. The first red flags for a TPO are gaps: between the FAR analysis and what the entity actually does, or between the intercompany agreements and the invoices.

3. Be Strategic About Your Benchmarking

If you provide services, is your cost base and markup in line with what independent firms earn? If your margin is lower, is there enough commercial reason for it? Did you weigh every method, not just TNMM?

Many taxpayers assume the TPO will not test their method. In fact, the TPO can reject it if a more reliable one is available. So set out, in your benchmarking, why you chose that method and those comparables.

4. Build the Case for Commercial Justification

Transfer pricing is not only a matter of numbers. It is a matter of economics, and of commercial sense. Why was the service charged at that rate? Why were receivables delayed? What did the Indian entity gain?

Answer these questions before they are asked, with documents, board resolutions, internal emails or market data. That is what gives a submission weight.

5. Revalidate Your Comparable Search and Filters

Outdated or poorly chosen comparables are among the most common reasons a TPO rejects a study. Reports often carry last year’s benchmarking forward without checking that the data, the business models and the margins still hold.

Before you submit:

• Revisit every filter you applied, whether turnover, employee cost, export revenue or functional similarity. Each should be justified and applied the same way.

• Exclude firms with related-party transactions, an inconsistent business model or a one-off event, unless you can justify keeping them.

• Explain the rejection matrix: why a company was dropped even though it first matched.

The quality of your benchmarking, in both the search and the write-up, can decide whether the whole study stands or is set aside. A well-defended set of comparables makes arbitrary additions by the TPO less likely. It also strengthens your case at every later stage of appeal.

What Happens If You Don’t Get This Right?

If the TPO makes an adverse adjustment, often on thin or flawed papers, you move to the next round. That means a hearing before the Dispute Resolution Panel (DRP), then the CIT(A), and in time the ITAT.

If the original submission lacked depth or order, your room to argue shrinks. The ground may be sound in law. But without facts placed on record at the TPO stage, higher authorities often refuse new arguments or new evidence, citing procedure.

That is why many sound TP cases fail. The case is right. It was not built to fight from the first round.

Looking Ahead: What Companies Should Do Now

If you have received a TP notice for AY 2023–24:

1. Log in to the income tax portal often, so you do not miss a deadline or an intimation notice.

2. Start at once with your in-house finance or tax team, or with outside advisers, on the submission.

3. Read the TP documentation line by line. Check that it is sound in law and true in fact.

4. Prepare a second line of argument, such as another benchmarking method or another set of comparables, to back your position.

5. Write it all down: the economic rationale, the management discussions, the board approvals. In TP the story behind the numbers counts as much as the numbers.

Conclusion: The TPO Is the Strongest Ground You’ll Stand On

A transfer pricing assessment is no longer a formality. It is the base of your company’s tax defence. As scrutiny reaches smaller companies, the first submission should be treated not as compliance but as advocacy.

The plain point is this. If your TP report cannot stand on its own at the TPO stage, it will not carry you through litigation.

So make the submission count. Review it, revise it, rethink it. In transfer pricing, the surest way to avoid a long dispute is to win the first round well prepared.