ITAT Ahmedabad Upholds Rule of Consistency in Zydus Lifesciences Appeal: Rejects Revenue's 15-Ground Challenge

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, recently delivered a comprehensive ruling in the case of ACIT Vs Zydus Lifesciences Limited, dismissing a voluminous 15-ground appeal filed by the Revenue department. The judgment, pronounced on 03.09.2026, pertains to the Assessment Year (AY) 2011-12 and addresses a wide spectrum of complex corporate taxation issues, including transfer pricing adjustments, disallowances under Section 14A, weighted deductions under Section 35(2AB), and the evidentiary burden required to classify foreign currency receipts as unaccounted income.

The primary foundation of the Tribunal's decision rested heavily on the judicial principle of consistency. The ITAT observed that the Assessing Officer (AO) had repeatedly raised disputes on factual matrixes that had already been conclusively settled in the assessee's own cases during prior and subsequent assessment years. By upholding the order dated 23.12.2025 passed by the Commissioner of Income Tax (Appeals) [CIT(A)], the Tribunal reinforced the mandate that tax authorities cannot endlessly litigate identical issues without demonstrating a material change in facts or law.

The Principle of Judicial Consistency in Tax Assessments

A recurring theme throughout the assessment order dated 21.05.2015, passed under Section 143(3) read with Section 144C of the Income Tax Act 1961, was the Revenue's attempt to disallow expenses and make additions on grounds that higher appellate forums had already adjudicated in favor of the assessee in previous years.

The assessee successfully demonstrated before the ITAT that the majority of the Revenue's grounds were no longer res integra (a matter not yet decided). The Tribunal noted that unless the Revenue could highlight distinguishing features in the transactions executed during AY 2011-12 compared to the years where relief was previously granted, revisiting the same additions would violate the established norms of judicial discipline.

Transfer Pricing Adjustments: Corporate Guarantees and Convertible Loans

The Revenue's initial grounds of appeal (Grounds 1 to 5) centered on substantial transfer pricing (TP) adjustments proposed by the Transfer Pricing Officer (TPO).

Corporate Guarantee Commission

The AO had made an addition of ₹18,95,02,413 (referred to in the summary as ₹18.95 crore) concerning corporate guarantee fee charges. The Revenue contended that providing a corporate guarantee constitutes an international transaction that increases the asset and tax base in India, thereby necessitating benchmarking under Section 92B and Rule 10B & Rule 10C of the Income Tax Rules. Furthermore, the Revenue argued against the CIT(A)'s finding that a guarantee does not constitute a service under Section 92C.

However, the assessee pointed out that identical adjustments had been struck down by the Tribunal in its own cases for AYs 2009-10, 2010-11, and consecutively from AYs 2012-13 to 2015-16. Finding no deviation in the factual circumstances for AY 2011-12, the ITAT dismissed the Revenue's grounds, maintaining the deletion of the ₹18,95,02,413 adjustment.