×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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28-08-2019, New Holland Fiat (India), Section 92C(2), 144C(13), Tribunal Mumbai
This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order passed by the Deputy Commissioner of Income Tax-10(1), Mumbai (in short ‘AO’) u/s 143(3) r.w.s. 144C(13) of the Income Tax Act 1961, (the ‘Act’).
2. Briefly stated, the relevant facts are that the appellant is asubsidiary of Fiat Group Automobiles SpA, Italy and operates in India under two business divisions namely (i) Tractor and parts, and (ii) Car and parts. It filed its return of income for the assessment year (AY) 2009- 10 on 24.09.2009 declaring income of Rs. Nil. The return was taken up for scrutiny and a notice u/s 143(2) was issued on 24.08.2010. The AO made a reference to the Transfer Pricing Officer (TPO) u/s 92CA(1) of the Act in respect of international transaction. The TPO proposed and adjustment of Rs.60,57,94,177/- towards determination of arm’s length price (ALP) of the international transactions relating to tractor division and Rs.4,47,90,090/- towards car division. As per the TPO, the other transactions are to be completed without adjustment. Thus the total adjustment proposed by the TPO is Rs.65,05,84,267/-.
The AO made a draft assessment order on 26.03.2013, which was not accepted by the appellant and it filed its objection before the Dispute Resolution Panel (DRP) u/s 144C of the Act. By an order dated 23.12.2013, the DRP rejected the objections raised by the appellant in respect of transfer pricing adjustment made by the TPO and directed the AO to complete the assessment as per the draft assessment order. Accordingly, the AO passed an order by making disallowance/addition of (i) Rs.650,584 267/- towards transfer pricing adjustments, (ii) Rs.6,07,751/- for AIR transaction, (iii) Rs.99,945/- towards club expenditure and (iv) Rs.7,41,374/- in respect of miscellaneous expenditure.
The above final order of the AO is carried in appeal before the Tribunal by the assessee.
3. The 1st ground raised by the assessee in this appeal is general in nature. The 2nd ground of appeal relates to adjustment of Rs.60,57,94,177/- towards tractor division. The 3rd ground of appeal relates to an adjustment of Rs.4,47,90,090/- towards car division. We discuss below the 2nd and 3rd ground of appeal together as the TPO has computed the adjustment at the entity level considering both AE and Non-AE transactions. The 2nd ground of appeal
2.1 On the facts and circumstances of the case and in law, the TPO erred and the DRP further erred in upholding the action of the TPO of incorrectly rejecting companies comparable to the Appellant, which were selected by the Appellant in the Transfer Pricing documentation, thereby disregarding the provisions of the Rule 10B (2) of the Income Tax Rules, 1962 ('the Rules') and also violating the principles of consistency.
2.2 On the facts and circumstances of the case and in law, the TPO erred and the DRP further erred in confirming the inclusion of a new comparable in spite of having high percentage of controlled transactions.
2.2. On the facts and circumstances of the case and in law, the TPO erred and the DRP further erred in considering Foreign Exchange Gains as nonoperating income for the purpose of computing the margin.
2.3 On the facts and in circumstances of the case and in law, the DRP has erred in confirming the action of me AO/TPO by not allowing the variation/reduction of 5 percent from the arithmetic mean while determining the arm’s length price as provided under the proviso to Section 92C(2)of the Act.
2.4 On the facts and in the circumstances of the case and in law, the TPO, the AO and the DRP have violated the Proviso to Rule 10B (4) of the Rules by not allowing use of comparables’ data relating to two years prior to the financial year 2008-09, in addition to financial year 2008-09, for computing the arm's length price.