ROCHE DIAGNOSTICS INDIA P.LTD,MUMBAI vs. ASST CIT 11(1)(1), MUMBAI

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ITA 1537/MUM/2016Status: DisposedITAT Mumbai09 January 2023AY 2011-125 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 TTK Healthcare Limited is not a comparable company due to its manufacturing activities and significant related party transactions. Consequently, the assessee's margins were found to be higher than the comparables, rendering the international transactions at arm's length.

What were the facts?

The assessee's appeal was recalled to decide on the inclusion/exclusion of TTK Healthcare Limited as a comparable company for transfer pricing analysis. The original order had restored the matter to the AO/TPO despite arguments that the issue was already decided for a subsequent assessment year.

What were the issues?

Whether TTK Healthcare Limited is a functionally comparable company to the assessee for transfer pricing purposes, considering its business activities and related party transactions.

Which sections of the Income-tax Act were involved?

Section 92CA,Section 254,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “J” BENCH, MUMBAI

For Appellant: Shri Nitesh Joshi, AR
For Respondent: Shri Shaym Prasad, CIT DR
Hearing: 12.10.2022Pronounced: 09.01.2023
1.

This is recalled matter by miscellaneous application number 204/M/2021 for assessment year 2011 – 12 vide order dated 2/3/2022 where in the order passed by coordinate bench in ITA number 1537/M/2016 dated 10/1/2020 was recalled to decide Ground no 1 & 2 of The Appeal.

2. The reason for allowing miscellaneous application of the assessee was that, coordinate bench was to decide regarding the issue of exclusion/inclusion of TTK

3.

Accordingly the coordinate bench accepted the arguments of the assessee and held that there is a mistake apparent on record while adjudicating this issue and therefore it was recalled to decide ground number one and two of the appeal.

4.

Those Grounds are as under :-

“GROUND NO. 1:

The Ld. DRP has erred in law and on facts in upholding the action of the Ld. AO/TPO of cherry- picking TTK Healthcare Limited (TTK Healthcare') as a comparable company without providing search process to the appellant, which is not permissible as per the Transfer Pricing Regulations.

2.

GROUND NO. 2:

The Ld. AO/TPO/DRP have erred in law and on facts in selecting TTK Healthcare as a comparable company without appreciating the following: a) TTK Healthcare is engaged in manufacturing activity as opposed to the appellant, which is engaged in trading activity.

6.

Meanwhile, pursuant to the order of the coordinate bench dated 10/1/2020, the learned transfer pricing officer passed an order under section 92CA (3) read with section 254 of the income tax act on 28/1/2022 wherein the inclusion or exclusion of the comparable M/s TTK healthcare Ltd [ Segmental] was examined. The learned TPO after considering the explanation of the assessee issued a notice under section 133 (6) of the act to TTK healthcare limited which was replied to stating that medical devices segment of TTK healthcare limited is engaged in manufacturing activity having its own manufacturing units. Further that company has also submitted the margin in trading and manufacturing segments. The margin in trading segment is 1.36% which is very less. The learned TPO therefore held that TTK healthcare limited is not comparable to the

7.

From the above order of the learned transfer pricing officer, it is apparent that TTK healthcare limited is not a good comparable and therefore is required to be excluded. Further on exclusion of this comparable the margins of the assessee is higher than the margin shown by the comparables. Therefore, no transfer pricing adjustment can be made.

8.

This is the only dispute even in recalled order.

9.

We have heard the rival contentions and perused the orders of the learned transfer pricing officer passed under section 92CA (3) read with section 254 of the income tax act. The learned departmental representative could not show any reason that the order passed by the learned transfer-pricing officer pursuant to the direction of the coordinate bench, is not correct.

10.

In view of this, ground number 1 and 2 of the appeal of the assessee is allowed.

11.

As decision on ground number one and ground number two of the appeal of the assessee was the only mandate

Order pronounced in the open court on 09.01.2023.

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