Precision Hydraulics Private Limited, CHENNAI V. ACIT Corporate Circle 5(2), CHENNAI

ITA 1841/CHNY/2017

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1082 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 92CA

Judgement Text

आयकरअपीलीयअिधकरण,‘ डी’ ायपीठ,चे ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ी जी मंजूनाथा, लेखा सद ,एवं ी रा#ल चौधरी, ाियक सद के सम% BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER आयकरअपीलसं./I.T.A No.:1841/CHNY/2017 िनधा&रणवष&/Assessment Year: 2013 - 2014 M/s. Precision Hydraulics Private Limited, No.83 & 84 & 117, SIPCOT Industrial Complex, Gummidipoondi Chennai – 600 102 PAN: AADCP 7054M ............... अपीलाथ(/Appellant Vs. The Assistant Commissioner of Income Tax - Corporate Circle 5(2), 4 th Floor, Aayakar Bhawan, No.121, M.G. Road, Nungambakkam, Chennai – 600 034 ............... )*थ(/Respondent Appearances : For the Appellant/Assessee : Mr. T. Banushekar, C.A For the Respondent/Department : Dr. S. Palani Kumar, CIT-DR Date of conclusion of hearing : 30.05.2022 Date of pronouncement of order : 02.06.2022 आदेश /O R D E R Per Rahul Chaudhary, Judicial Member : 1. By way of the present appeal the Appellant/Assessee has challenged the final assessment order, dated 02.06.2017, for the Assessment Year 2013-2014 passed under Section 143(3) read with Section 92CA and Section 144C(13) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] in pursuance of the directions issued by the Dispute Resolution Panel (DRP) on 24.04.2017. I.T.A. No.1841/CHNY/2017 Assessment Year :2013 - 2014 - 2 - 2. The brief fact of the case are that the Appellant, a private limited company, was engaged in the business of manufacturing hydraulic cylinders and components during the relevant previous year. The Appellant is a wholly owned subsidiary of Precision Hydraulic Cylinders Inc. USA. During the relevant previous year the Appellant entered into the international transactions with the Associated Enterprises which can be classified as under: S.No. Nature of Transaction Amount (INR) 1. Purchase of Tubes, Rods and Spares 3,11,88,388/- 2. Sale of Cylinder components 17,47,16,018/- 3. Interest on external commercial borrowings 32,18,176/- 4. Outstanding payables 17,44,53,373/- 5. Outstanding receivables 13,11,18,172/- Total 51,46,94,127/- 3. The Appellant filed return of income declaring ‘Nil’ income after adjusting the brought forward business loss of INR 11,26,753/- and unabsorbed depreciation of INR 352,389/-. The case of the Appellant was selected for scrutiny and during the assessment proceedings, reference was made to the Transfer Pricing Officer (TPO) under Section 92CA(1) of the Act for the determination of the arm’s length price. The TPO, vide order dated 31.10.2016, proposed upwards transfer pricing adjustment of INR 1,48,33,077/-, inter alia, by rejecting the segmental data submitted by the Appellant. Accordingly, Draft Assessment Order, dated 23.12.2016, was passed by the Assessing Officer proposing an addition of INR 15,315,803/-, comprising of transfer pricing adjustment of INR 14,833,077/- and corporate tax additions of INR 482,726/-. 4. The Appellant filed objections against the Draft Assessment Order before the DRP contesting the adjustment proposed by the Assessing I.T.A. No.1841/CHNY/2017 Assessment Year :2013 - 2014 - 3 - Officer/TPO. The DRP, vide order dated 24.04.2017, directed the TPO to compute the transfer pricing adjustment by adopting entity level margins. Based on the directions of the DRP, Assessing Officer passed the Final Assessment Order, dated 02.06.2017 which has been challenged by way of the present appeal. 5. At the outset, the Ld. Authorized Representative of the Appellant appearing before us submitted that the matter can be remanded back to the file of the TPO for fresh determination in view of the additional evidences filed by the Assessee before the Tribunal. He submitted that the segmental data provided by the Appellant before TPO/DRP was rejected on the ground that the same was revised during the course of assessment proceedings and was not audited. The Appellant has filed audited segmental financials statement as additional evidence before the Tribunal. In view of the aforesaid the Ld. Authorized Representative of the Appellant submitted that the matter be remanded back to the TPO. In response, the Ld. DR submitted that all the issues be left open for fresh determination of arm’s length price by the TPO in case the matter is remanded to the file of the TPO. 6. We note that TPO/DRP rejected the segmental data provided by the Appellant and adopted the entity-level margins primarily on the ground that the data provided was not accompanied by a chartered accountant’s certificate or report and was, therefore, not a reliable. In view of the submission of the parties recorded hereinabove, we deem it appropriate and in the interest of justice to remand the matter to the file of the TPO for determination of arm’s price afresh after taking into I.T.A. No.1841/CHNY/2017 Assessment Year :2013 - 2014 - 4 - consideration the audited segmental financials statement filed by the Appellant. We clarify that we have not expressed any views about the suitability or otherwise of the segmental data furnished by the Appellant. The TPO would be free to examine the same while determining the arm’s length price. In view of the aforesaid directions, the present appeal is disposed. 7. In result, in terms of paragraph 7 above, the present appeal is allowed for statistical purposes. Order pronounced in the court on 02.06.2022 at Chennai. Sd/- Sd/- (जीमंजूनाथा) (G. MANJUNATHA) लेखासद /ACCOUNTANT MEMBER (रा#लचौधरी) (RAHUL CHAUDHARY) ाियकसद एवं /JUDICIAL MEMBER चे ई/Chennai, िदनांक/Dated, 2 nd June, 2022 IA, Sr. PS आदेशकी)ितिलिपअ-ेिषत/Copy to: 1. अपीलाथ(/Appellant 2. )*थ(/Respondent 3. आयकरआयु/ (अपील)/CIT(A) 4. आयकरआयु//CIT 5. िवभागीय)ितिनिध/DR 6. गाड&फाईल/GF