GLEASON WORKS INDIA PRIVATE LIMITED,BANGALORE V. DCIT, CIRCLE-3(1)(1), BANGALORE

ITTPA 2140/BANG/2024

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The case involves Gleason Works (India) Pvt. Ltd., a company engaged in manufacturing and selling gear cutting tools, which appealed against the order of the Dispute Resolution Panel (DRP) that upheld the adjustments made by the TPO regarding the interest rate applied to External Commercial Borrowing (ECB) loans from its Associated Enterprise (AE). The TPO had adjusted the interest rate to 3%, which the assessee contested, arguing that the rate prescribed by the RBI should apply. The Tribunal found that the TPO and DRP had not performed a proper FAR test to select comparables for benchmarking the interest rate and directed a re-examination of the case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706848 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 07-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2021-2022
• Appeal Filed On: 08-11-2024
• Other Referred Cases: CIT Vs. GE Technology
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARSHI PRASAD
• Assessee Lawyers: RAJESHWARI
• Keywords: Transfer pricing; International transaction

Judgement Text

"IT(TP)A No.2140/Bang/2024 Gleason Works (India) Pvt. Ltd., Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER IT(TP) No.2140/Bang/2024 Assessment Year: 2021-22 Gleason Works (India) Pvt. Ltd. Plot No.70A, KIADB Aerospace Park Devanahalli Taluk Devanahalli Bangalore Karnataka 562 129 PAN NO : AAACG6660P Vs. DCIT Circle-3(1)(1) Bangalore APPELLANT RESPONDENT Appellant by : Smt. Rajeshwari, A.R. Respondent by : Sri Aarshi Prasad, D.R. Date of Hearing : 03.07.2025 Date of Pronouncement : 07.07.2025 O R D E R PER PRAKASH CHAND YADAV, JUDICIAL MEMBER: Present appeal of the assessee is arising from the order of ld. AO dated 11.09.2024 having DIN No. ITBA/AST/S/143(3)/ 2024- 25/1068613468(1) and relates to assessment year 2021-22. 2. The assessee has raised following grounds of appeal: IT(TP)A No.2140/Bang/2024 Gleason Works (India) Pvt. Ltd., Bangalore Page 2 of 5 3. Brief facts of the case as coming out from the orders of authorities below are that the assessee is a company engaged in manufacture and sale of gear cutting tools and servicing of Gelson Gear Processing Machines. It has filed its income tax return for the impugned assessment year on 14.3.2022 declaring an income of Rs.1.04 crores. Thereafter, the case of the assessee was selected for IT(TP)A No.2140/Bang/2024 Gleason Works (India) Pvt. Ltd., Bangalore Page 3 of 5 scrutiny. Observing international transactions, a reference was made to the Transfer Pricing Officer (“TPO”) on 7.10.2022 with the approval of concerned ld. PCIT. Thereafter, the TPO vide its order dated 10.10.2023 made certain adjustments with respect to the transactions interest paid on External Commercial Borrowing (ECB) loans. The TPO made an adjustment of Rs.19,86,084/- and determined the ALP of the assessee. Thereafter, the AO passed the draft assessment order on 30.11.2023 after adding the ALP adjustments made by the TPO. Against the draft assessment order, the assessee filed its objection before the ld. DRP and the ld. DRP vide its order dated 28.10.2024 decided the objections raised by the assessee. The ld. DRP has affirmed the view of the TPO and sustained the adjustments made by the ld. TPO. 4. Aggrieved with the order of the ld. DRP, assessee has come up in appeal before us and has raised so many grounds as mentioned above. However, the solitary issue involved in this case is the rate of interest to be made applicable with respect to the ECB loans obtained by the assessee from its AE. 5. Counsel for the assessee argued that rate of interest as prescribed by the RBI shall be made applicable for benchmarking the rate of interest paid by the assessee to its AE. Further, counsel for the assessee argued that ld. TPO has selected 97 comparables and has wrongly calculated the rate of interest @ 3%. It is the submission of the counsel for the assessee that the ld. TPO has not yet all performed the FAR test, which is required for selecting the comparables. All the comparables selected by the TPO are not similar to the profile of the assessee. Counsel for the assessee drawn the attention of the bench towards voluminous paper books filed before the lower authorities. IT(TP)A No.2140/Bang/2024 Gleason Works (India) Pvt. Ltd., Bangalore Page 4 of 5 6. Ld. D.R. relied upon the orders of the lower authorities. 7. After considering rival submissions, we observe that neither the TPO nor the DRP has dealt with the issue of FAR test, to be applied for selecting the comparables in order to benchmark the international transactions. Further, it is an admitted position of fact that the assessee has obtained RBI approvals for making payments to its AE. Therefore, we are of the view that the ld. TPO would examine the case of the assessee afresh after applying FAR test. It is worthy to mention here the judgement of Hon’ble jurisdictional High Court in the case of CIT Vs. GE Technology reported in 125 taxmann.com 168 (2021), wherein the Hon’ble jurisdictional High Court has held that the rates prescribed by RBI are relevant factor for determining the rate of interest applicable to the commercial borrowings. The ld. TPO will examine the case in the light of these observations. 8. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 7th July, 2025 Sd/- (Laxmi Prasad Sahu) Accountant Member Sd/- (Prakash Chand Yadav) Judicial Member Bangalore, Dated 7th July, 2025. VG/SPS IT(TP)A No.2140/Bang/2024 Gleason Works (India) Pvt. Ltd., Bangalore Page 5 of 5 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. "