HITACHI HI REL POWER ELECTRONICS PVT. LTD.,AHMEDABAD V. THE ACIT/DCIT, CIRCLE-2(1)(1), AHMEDABAD

ITA 1602/AHD/2024

AI Insights

The case involves Hitachi Hi Rel Power Electronics P.Ltd., which appealed against the order of the Assessing Officer concerning the arm's length price (ALP) of international transactions for the Assessment Year 2020-21. The Assessing Officer had proposed an upward adjustment of INR 88,66,039 to the ALP, which the assessee contested. The main contention was the non-application of the "+/- 3% adjustment" as per the second proviso to section 92C(1) of the Income Tax Act, 1961, which the DRP had directed but was not implemented by the Assessing Officer. The Tribunal restored the matter to the Assessing Officer to apply the DRP's direction.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298729 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATHVI RAJ MEENA
• Assessee Lawyers: DHINAL SHAH; R
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 92C

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘D’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.1602/Ahd/2024 Assessment Year : 2020-21 Hitachi Hi Rel Power Electronics P.Ltd. B/52, Corporate House Judges Bungalow Road Bodakdev, Ahmedabad. PAN : AAACH 3875 M Vs ACIT/DCIT, Cir.2(1)(1) Ahmedabad. (Applicant) (Responent) Assessee by : Shri Dhinal Shah, R Revenue by : Shri Prathvi Raj Meena, CIT-DR सुनवाई क तारीख/Date of Hearing : 26/12/2024 घोषणा क तारीख /Date of Pronouncement: 10/01/2025 आदेश आदेश आदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The above appeal has been filed by the Assessee against order passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) read with section 144B of the Income Tax Act, 1961 (\"the Act\" for short) pertaining to Assessment Year 2020-21. 2. The grounds raised by the assessee are as under: “1.1. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in re-computation of the arm's length price ('ALP') of the international transactions entered by the Appellant, by proposing an upward adjustment of INR 88,66,039. 1.2. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in not granting the benefit of second proviso to section 92C(1) of the Act which states that if variation between the arm's length price so determined and price at which the international transaction has actually been undertaken does not exceed three percent (3%), arm's length price shall be deemed to be the price at which the international transaction has actually been undertaken. ITA No.1602/Ahd/2024 2 1.3. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in not considering Ador Powerton Ltd as comparable company in the final set of comparable companies. 1.4. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in not considering Fuji Electric Consul Neowatt Private Limited as comparable company in the final set of comparable companies. 2. Ground No 2 - Initiation of penalty under section 270A of the Act/” 3. Briefly explaining the facts of the case before us, Ld.Counsel for the assessee pointed out that the assessee company is a manufacturer of UPS, Drive and automation and solution provider for these products in local as well as overseas market. The assessee , he pointed out, had reported international transactions with associate enterprises in its report filed in Form 3CEB ,reporting both purchases of material and sale of finished goods totalling in all To Rs.49,41,05,222/-.The details of the same were pointed out to be listed at page 2-4 of the TPO’s order. He pointed out that the assessee had benchmarked the transactions using TNMM as the Most Appropriate Method and using Operating Profit/ Operating Cost as the Profit Level Indicator. The PLI of the assessee was 3.10% that of the comparables selected by the assessee in its TP report was shown to be in the range of 1.77% to 4.30%. Ld.Counsel for the assessee pointed out that the assessee had selected 9 comparables for the purpose. That the TPO while examining the ALP determination by the assessee rejected two comparables selected by the assessee thus resulting in the PLI of the comparables arriving at 5.24%.Applying this PLI he determined the adjustment to be made to the international transaction of the assessee at Rs.7,37,64,846/-.The calculation of the same is reproduced at para 4.9 of the TPO’s order as under: ITA No.1602/Ahd/2024 3 4. Ld.Counsel for the assessee stated that the assessee objected to this adjustment to the DRP raising several grounds, one of which was in respect of the TPO not granting the benefit of second proviso to section 92C(1) of the Act as per which no adjustment was to be made to the international transaction if the variance between the ALP determined and the actual price of the transaction did not exceed 3%. He drew our attention to ground No.1.4 wherein this objection was raised by the assessee before the DRP as under: “1.4. Without prejudice to the above, the learned TPO has erred in not granting the benefit of second proviso to section 92C(1) of the Act which states that if variation between the arm's length price so determined and price at which the international transaction has actually been undertaken does not exceed three percent (3%), arm's length price shall be deemed to be the price at which the international transaction has actually been undertaken.” 5. Ld.Counsel for the assessee pointed out that the DRP in turn directed the TPO to provide the necessary adjustment at para 6.3.4 of its order as under: “ 6.3.4 Ground No.1.4 ITA No.1602/Ahd/2024 4 The TPO is directed to provide the adjustment of ± 3% as per section 92C and relevant rules. 6. Ld.Counsel for the assessee stated that despite the specific direction of the DRP, the AO failed to do so in the final order passed by him. The ld.counsel for the assessee submitted that his only plea in the present appeal was to restore the matter back to the AO to apply the direction of the DRP to grant adjustment to the arm’s length price of the transaction by ± 3% in terms of section 92C(1) of the Act. 7. The ld.DR when confronted with this fact, during the course of hearing on 12.12.2024 sought some time to go through the facts of the case. Accordingly, the case was adjourned for hearing to 26.12.2024, noting the pleading of the ld.counsel for the assessee vide order sheet entry as under: ITA No.1602/Ahd/2024 5 8. Today, on 26.12.2024, when the matter came up for hearing, the ld.DR fairly conceded that the AO had failed to comply with the direction of the DRP to grant ± 3%adjustment to the ALP of the international transaction. Accordingly, in view of the above, the matter is restored back to the file of the AO to comply with the direction of the DRP noted at para 6.3.4 of his order as reproduced above in our order. 9. The appeal of the assessee is accordingly allowed in above terms for statistical purposes. Order pronounced in the Court on 10th January, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 10/01/2025 "