EATON FLUID POWER LIMITED, PUNE V. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-8, PUNE

ITA 392/PUN/2022

AI Insights

Eaton Fluid Power Limited appealed against the assessment order dated 30.03.2022 by the ACIT, Circle-8, Pune, which included an ALP adjustment of Rs.7,77,78,194 concerning international transactions with its overseas Associated Enterprises in the manufacturing segment. The Tribunal referenced its previous decisions in similar cases involving the same assessee, where it upheld the use of internal Transactional Net Margin Method (TNMM) for demonstrating the arm's length price of international transactions. The Tribunal noted that the Revenue did not present any distinguishing features or contrary orders that would necessitate a different approach in this case. Consequently, the Tribunal directed the TPO to adopt the internal comparables as the most appropriate method for determining the ALP of the assessee's transactions.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 137942 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowedPartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 26-12-2022
• Assessment Year: misc
• Appeal Filed On: 22-05-2022
• Other Referred Cases: Gemstone Glass (P.) Ltd. vs. JCIT [2015] 63 taxmann.com (Ahd. Tribunal)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “C” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI G.D. PADMASHALI, ACCOUNTANT MEMBER ITA No.392/PUN./2022 Assessment Year 2017-18 Eaton Fluid Power Limited, 145, Off Mumbai Pune Road, Pimpri, Pune. PIN 411 018 Maharashtra. PAN AAACV8426E vs The ACIT, Circle-8, Pratyakshakar Bhavan, Dr. Ambedkar Marg, Near Akurdi Railway Station, Pune – 411 044. Maharashtra. Appellant Respondent Assessee by : Shri Vishal Kalra Revenue by : Shri Naveen Gupta, CIT Date of hearing : 27.12.2022 Date of pronouncement : 30.12.2022 ORDER PER SATBEER SINGH GODARA, J.M. : This assessee’s appeal for Assessment Year 2017-18 arises from the ACIT, Circle-8, Pune’s assessment dated 30.03.2022 as per DIN & Order No.ITBA/AST/S/143(3)/2021-22/1042108664 (1), in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”], framed as per CIT-(DRP-3), Mumbai-2, Mumbai’s directions dated 16.02.2022 involving DIN & Order No.ITBA/DRP/ F/144C(5)/2021-22/1039822679(1), in proceedings u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 (in short "the Act"). 2. Heard both the parties. Case file perused. 3. The assessee raises the following substantive grounds in the instant appeal : 2 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. 3 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. 4. Learned counsel submits at the outset that the assessee’s ground nos.1 and 5 to 7 inter alia are general, not pressed consequently and premature, respectively. Rejected accordingly. 5. This leaves us with the assessee’s next substantive ground nos.2 to 2.5, 3 and 4 challenging correctness of the learned lower authorities action making ALP adjustment of Rs.7,77,78,194/- in respect of it’s international transactions with overseas Associated Enterprises [in short “AE's”] pertaining to manufacturing segment. Learned counsel invited our attention to this tribunal’s recent coordinate bench’s order in assessee’s recent common order in ITA.Nos.204 & 1882/PUN./2018 for assessment years 2013-14 and 2014-15 directing the TPO to adopt its internal comparables only as follows : “4. The very factual position continues regarding the next twin issues of “ALP” adjustments of Rs.6,26,38,000/- and 3,85,97,146/- inter alia pertaining to manufacturing segment and disallowance of corporate cost allocation; respectively 4 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. wherein the department once again has lost in its arguments in all the preceding assessment years. Learned co-ordinate bench hereinabove has dealt with the instant issue(s) as follows:- “4. The brief facts of the case as emanating from the record are that the assessee company is engaged in the manufacture and distribution of fluid power equipment such as pumps, gear pumps, valves, cylinders an related components for mobile and industrial markets. The assessee company is a joint venture of Mahindra & Mahindra Ltd. Presently, the assessee has become a wholly owned subsidiary of Eaton Corporation. During the year under consideration, the assessee reported international transactions with its AE pertaining to import of raw materials, trading goods and components. In manufacturing activity, the assessee submitted segmental profitability of accounts of AE transactions and Non-AE transactions and applied internal TNMM comparing loss incurred with Non-AE segment with profit that arrived in AE segment. The TPO noticed certain errors and after detailed discussion he rejected the internal TNMM. Before the DRP, the assessee submitted that the ITAT, Pune Benches in assessee’s own case for A.Y. 2007-08 upheld the use of internal TNMM for demonstrating arm’s length price of its international transactions pertaining to 5 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. manufacturing segment. Further, it was submitted that the DRP for A.Y. 2011-12 upheld the applicability of internal TNMM but however the DRP upheld the action of TPO in rejecting the internal TNMM selected by the assessee as most appropriate method for determining ALP of its international transactions vide para 3.2.4. 5. Before us, the ld. AR submitted that the TPO accepted the ALP demonstrated by the assessee in respect of AE and Non-AE segments relating to trading segments. Further, the ITAT, Pune Benches in assessee’s own case reported in (2015) 56 taxmann.com 135 for A.Y. 2007-08 held that the internal TNMM is the most appropriate method and referred to page 236 of the paper book and do our attention to para 17 wherein this Tribunal upheld internal TNMM is the most appropriate method to compute arm’s length price for the international transactions of purchase of raw material and components from associated enterprises. The ld. AR brought to our notice the ITAT, Pune Benches upheld the same internal TNMM for A.Ys. 2008-09, 2010-11 and 2011-12. There is no contrary order brought on record by the respondent-revenue in this regard. Therefore, we uphold the internal TNMM adopted by the assessee in determining ALP of its international transactions in purchase of raw material, components and 6 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. finished goods. Accordingly, ground No. 2 raised by the assessee is allowed.” 5. The Revenue is fair enough during the course of hearing that this tribunals yet another coordinate bench’s common order in its cross appeals with the assessee involving assessment years 2010-11 and 2011-12 dated 15.10.2018 (pages 6 to 36 in paper book) has also declined the very arguments regarding all these three issues. We thus adopt judicial consistency in absence of any distinction in all these assessment years and decide the instant three issues in assessee’s favour and against the department. The former’s instant substantive grounds 4 to 7.5 stand accepted in very terms. Necessary computation shall follow as per law. The assessee’s former appeal ITA No. 204/Pun/2018 is allowed in above terms. 6. Same order to follow in assessee’s latter appeal ITA.NO. 1882/PUN/2018 raising as many issues of TP adjustments amounting to Rs.11,20,79,272/- and Rs.4,07,27,000/- regarding corporate support services, manufacturing segments followed by corporate cost allocation disallowance of Rs.4,51,07,206/-; respectively in absence of any distinguishing features throughout.” 7 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. 6. Ld. CIT-DR at this stage took us to the DRP’s directions in para-4.2 that the assessee had not filed or demonstrated ALP of it’s transactions pertaining to import of raw materials etc. He fails to dispute that the learned “DRP” in paras 4.2.11 at page no.39 has followed it’s earlier directions only regarding the very issue of internal rejection of assessee’s comparables in the same segment. We make it clear that we are dealing with the assessee’s Transactional Net Margin Method [in short “TNMM”] having profit level indicator than exact product similarly as held in Gemstone Glass (P.) Ltd. vs. JCIT [2015] 63 taxmann.com (Ahd. Tribunal). Faced with the situation, we adopt judicial consistency qua the instant sole surviving issue and leave it open for the learned Transfer Pricing Officer [in short “TPO”] to compute the assessee’s ALP in light of its internal comparables as per law in very terms. Ordered accordingly. 7. This assessee’s appeal is partly allowed for statistical purposes in above terms. Order pronounced in the open Court on 30 th December, 2022. Sd/- Sd/- (GD PADMASHALI) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 30 th December, 2022 VBP/- 8 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5 . DR, ITAT, “C” Bench, Pune. 6. Guard File. BY ORDER, // TRUE COPY // Senior Private Secretary ITAT, Pune.