A Bilateral Advance Pricing Agreement negotiated with the CBDT and a foreign competent authority, usually the US given where most AE relationships sit, can cover more than 90 percent of a captive service provider's international transactions. The remainder, revenue earned from AEs in other jurisdictions such as the UK or Singapore, falls outside the agreement's scope. This residual portion must be benchmarked afresh each year and remains open to TPO scrutiny, since the certainty negotiated under the BAPA does not formally extend to it.
The ITAT Hyderabad Bench addressed this fact pattern in Synchrony International Services Private Limited v. ACIT, an order pronounced on 30 March 2026. Synchrony had a BAPA with the US covering roughly 95.75 percent of its revenue as a captive ITeS provider. The remaining 4.25 percent came from non-US AEs and sat outside the agreement. The TPO did not conduct a separate benchmarking exercise for this residual portion and proposed an adjustment on it. The Tribunal held that a BAPA margin negotiated for one country's AEs cannot be restricted to that country alone where the functions, assets and risk (FAR) profile of the non-covered AE transactions is identical, and directed the TPO to apply the BAPA rate across all three assessment years under appeal.
The outcome favours taxpayers: if a captive performs identical back-office work for a UK entity and a US entity, the pricing need not differ merely because only one entity's AE relationship is covered by the signed APA. But the ruling shifts the locus of the next dispute rather than removing it. The burden of proof on non-covered transactions is relocated, not eliminated.
Instead of a fresh comparables search each year, the taxpayer must now build and defend a case that the FAR profile across AEs is genuinely identical, covering service descriptions, decision rights, risk allocation, contractual terms, and reporting lines. This is a different exercise from a standard benchmarking study, and in some respects a harder one, because there is no external database of third-party comparables to draw on. The comparison is intra-group, AE to AE, and the evidence must come from internal documentation: service agreements, organisation charts, SLAs, cost allocation keys, and correspondence showing who directed the work.
Current AI-enabled TP tools, including benchmarking platforms that automate comparable searches and NLP tools that flag inconsistent documentation, are built mainly to address a different problem: finding and screening third-party comparables faster, or checking a local file against a jurisdiction's formatting requirements. Few, if any, are designed to assess whether AE-A's functional profile is identical to AE-B's functional profile within a single multinational group. That is a more bespoke comparability question, closer to internal audit than to database screening, and it now sits at the centre of the scope this ruling has opened.
India's APA programme has crossed 1,034 agreements since inception, with 284 bilateral, a population of taxpayers who may now have grounds to extend negotiated certainty to residual AE transactions. Doing so will require a FAR-identity case capable of withstanding scrutiny on points such as a contractual clause, headcount difference, or decision-rights nuance that could break the claim of identity.
CBDT has not yet addressed BAPA scope in this context. The Board has previously issued administrative clarifications where APA and Safe Harbour regimes interact awkwardly; the March 2026 Office Memorandum permitting taxpayers with UAPAs spanning the Safe Harbour transition to opt into the new regime for later years is a precedent for this kind of housekeeping.
A similar clarification on BAPA scope, an administrative mechanism to formally extend or fast-track non-covered AE transactions where FAR identity is not seriously disputed, could save taxpayers from re-litigating this question bench by bench, year by year, across every captive with a partial BAPA. Absent such clarification, Synchrony is likely to become a citation that captives with partial-scope BAPAs raise routinely, and one that TPOs will need to engage with on the merits rather than dismiss at the threshold.
For practitioners advising captives with partial-scope BAPAs, the practical task is to assemble FAR-identity documentation now, before the TPO raises the issue, rather than treat the Tribunal's reasoning as self-executing.
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