Leoch Batteries India Private Limited, Bengaluru V. Deputy Commissioner Of Income Tax, Circle-4(1)(1), Bangalore

ITTPA 790/BANG/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0727 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 16-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-10-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 07-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NARENDRA KUMAR
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND MS PADMAVATHY S, ACCOUNTANT MEMBER IT(TP)A No. 790/Bang/2022 Assessment Year : 2018-19 M/s. Leoch Batteries India Pvt. Ltd., BBMP No. 117/26, ‘Nile Towers’, 1 st Floor, 4 th Main Road, Ganganagar, Bengaluru – 560 032. PAN: AACCL3714F Vs. The Deputy Commissioner of Income Tax, Circle – 4(1)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Narendra Kumar Jain, CA Revenue by : Shri Sanjay Kumar, CIT- DR Date of Hearing : 12-10-2022 Date of Pronouncement : 17-10-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against the assessment order dated 25/07/2022 passed by the Assessment Unit, Income Tax Department for A.Y. 2018-19 on following grounds of appeal: “1. The Orders passed by Assessment Unit, Income Tax Department (hereinafter referred as "AO" for brevity), learned Joint Commissioner of Income Tax (OSD) TP— 2(1)(1), Bangalore (hereinafter referred as "TPO" for brevity) and the Honourable DRP-2, Bengaluru ("AO", '`TPO" and Page 2 of 4 IT(TP)A No. 790/Bang/2022 DRP collectively referred as "lower authorities" for brevity) are bad in law and liable to be quashed. 2. The learned DRP/TPO have erred in not granting working capital adjustment while computing the arm's length price of international transactions. The Appellant submits that each of the above grounds/ sub-grounds are independent and without prejudice to one another. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Income-tax Appellate Tribunal to decide the appeal according to law. The Appellant prays accordingly.” 2. At the outset, the Ld.AR submitted that the only issue alleged by assessee in the present appeal is in respect of non-granting of working capital adjustment while computing the arms length price of the international transactions. 3. The Ld.AR submitted that working capital adjustment was denied to the assessee for the reason that assessee did not demonstrate the impact on the profits and whether the margins of the comparable companies need to be computed after reducing or eliminating such items that may have an impact. The Ld.AR submitted that the Ld.TPO has denied the working capital adjustment for the reason that the segmental working capital details were not disclosed in the respective annual reports of the comparable companies. The Ld.AR submitted that voluminous details in respect of the same were filed before the Ld.TPO as well as the DRP which forms part of the paper book filed before this Tribunal at pages 148-166. It is thus submitted that denial of working capital adjustment to assessee is contrary to the propositions laid down by various decisions of this Tribunal. Page 3 of 4 IT(TP)A No. 790/Bang/2022 4. The Ld.AR placed reliance on following decisions in support of his contentions.  Decision of Coordinate Bench of this Tribunal in case of Huawei Technologies India (P.) Ltd. vs. JCIT reported in [2019] 101 taxmann.com 313  Decision of Coordinate Bench of this Tribunal in case of M/s. Yahoo Software Development India Pvt. Ltd. vs. JCIT in IT(TP)A No. 178/Bang/2022 by order dated 11/07/2022. The Ld.DR on the contrary relied on the orders passed by authorities below. We have perused the submissions advanced by both sides in the light of records placed before us. 5. We note that admittedly working capital adjustment has been denied to assessee. The Ld.AR has placed reliance on the decision of Hon’ble Chennai Tribunal in case of Mobis India Ltd. vs. DCIT reported in [2013] 38 taxmann.com 231 before the authorities below however the same was not considered. It is a settled principle that it is necessary to eliminate the differences between the comparables and the assessee which is possible only by computing working capital adjustment in the hands of the comparable companies. The OECD guidelines are also very clear in respect of the granting of working capital adjustment to the commercial enterprises operating in similar market as that of the tested party. In our considered opinion, respectfully following the view taken by the Tribunals specifically that has been relied by the Ld.AR hereinabove, working capital adjustment deserves to be granted to assessee in order to bring the comparable companies on par with that of the assessee for the purpose of broad comparison thereby eliminating any differences. The Page 4 of 4 IT(TP)A No. 790/Bang/2022 Ld.TPO is directed to allow the working capital adjustment on actuals based on the materials already available on record. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, the grounds raised by assessee stands allowed for statistical purposes. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 17 th October, 2022. Sd/- Sd/- (PADMAVATHY S) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 17 th October, 2022. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore