CORTEVA AGRISCIENCE SERVICES INDIA PRIVATE LIMITED(FORMERLY KNOWN AS E.I .DUPONT SERVICES CENTER INDIA PRIVATE LIMITED),HYDERABAD vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-१७(1), HYDERABAD

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ITA 2185/HYD/2017Status: DisposedITAT Hyderabad29 November 2021AY 2013-143 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that an associated enterprise cannot be taken as a comparable for determining arm's length price as it lacks the independent nature of an uncontrolled transaction. Therefore, the impugned adjustment was deleted.

What were the facts?

The assessee challenged an arm's length price adjustment made by the lower authorities on receivables. The adjustment was based on SBI's interest rate without considering segmental comparables in the business support services segment.

What were the issues?

Whether an associated enterprise can be used as a comparable for transfer pricing adjustments, and if an adjustment can be made without considering segmental comparables.

Which sections of the Income-tax Act were involved?

Section 92CA

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad

Before: Shri S.S. Godara & Shri Laxmi Prasad Sahu

For Appellant: Shri K.R. Vasudevan
Hearing: 24/11/2021Pronounced: 26/11/2021

O R D E R Per S. S. Godara, J.M. This assessee’s appeal for A.Y 2013-14 arises from the Commissioner of Income Tax (Appeals) – 5, Hyderabad’s order dated 31.10.2017 in case No.0520/2016-17/CIT(A)-5 involving proceedings under section 143(3) r.w.s. 92CA(3) of Income Tax Act, 1961 (in short, “the Act”). 1 Heard both sides. Case file perused.

2.

We straight away come to the assessee’s sole substantive grievance canvassed in the instant appeal challenging correctness of both the lower authorities’ action making arms length price adjustment of Rs.59,45,094/- in the assessment order going by S.B.I’s 14.45% interest rate; and that too, without adopting any segmental comparable in the assessee’s segment of business support services.

3.

We next note with able assistance of both the parties that the Transfer Pricing Officer’s order dated 31.10.2016 in para 6.5 to 6.5.3 has relied on assessee’s alleged inter-company agreements executed with its associated enterprise only for determining the corresponding credit period in the business transactions as 30 days only. We thus make it clear that the learned lower authorities have not adopted any segmental comparable whilst arriving at the impugned adjustment. 4. Faced with this situation, we quote Tecnimont Icb Pvt Ltd., Mumbai Vs. ACIT (2012) 138 ITD 23 (Mumbai) and Sabic Innovative Plastic India Pvt Ltd Vs. DCIT (2013) 59 SOT 138 (Ahmedabad) holding that an associate enterprise itself would not to be taken as a comparable since lacking the independent nature of an uncontrolled transaction in forming hallmark of Chapter X of the Act. We thus delete the impugned arms length price adjustment on receivables for this precise reason alone.

5.

All the other pleadings on merits are rendered infructuous.

6.

This assessee’s appeal is allowed in above terms.

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