TOYOTA KIRLOSKAR MOTOR PVT LTD., ,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 , BANGALORE

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ITA 1999/BANG/2025Status: DisposedITAT Bangalore30 July 2026AY 2020-215 pages
AI SummaryWithdrawn

What did the Tribunal hold?

The Tribunal permitted the assessee to withdraw the appeal as the issues were resolved under the APA. The appeal was accordingly dismissed as withdrawn.

What were the facts?

The assessee filed an appeal against the order of the lower authorities concerning transfer pricing adjustments and interest levies. The assessee later filed an Advance Pricing Agreement (APA) application which was concluded, covering the assessment year in question.

What were the issues?

Whether the transfer pricing adjustments made by the authorities were valid and whether interest levied under sections 234A and 234B was justified, in light of a subsequently concluded APA.

Which sections of the Income-tax Act were involved?

Section 92B,Section 234A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE

Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY

For Respondent: Smt. Divya K.J., CIT-DR
Hearing: 07.05.2026Pronounced: 30.07.2026

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld. DCIT, Central Circle- 2(1), Bengaluru dated 25.7.2025 vide DIN & Order No. ITBA/AST/S/143(3)/2025- 26/1078993625 (1) passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2020-21.

2.

The assessee has raised the following grounds of appeal: -

GENERAL GROUND

1.

The Orders passed by learned Deputy Commissioner of Income Tax, Central Circle — 2(1), Bangalore (hereinafter referred as "AO" for brevity), learned Deputy Commissioner of Income Tax (Transfer Pricing Officer) — 2(2)(2),

ITA No.1999/Bang/2025 M/s. Toyota Kirloskar Motor Pvt. Ltd., Bengaluru Page 2 of 5 Bangalore (hereinafter referred as "TPO" for brevity) and the Honourable DRP-2, Bengaluru ("AO", "TPO" and DRP collectively referred as "lower authorities" for brevity) are bad in law and liable to be quashed. GROUNDS RELATING TO TP ADJUSTMENT

2.

The lower authorities have erred in rejecting the transfer pricing analysis undertaken by the Appellant on unjustifiable grounds and conducting a fresh TP analysis despite absence of any defects in the transfer pricing analysis submitted by the Appellant. 3. The lover authorities have erred in performing entity level benchmarking by treating transactions entered with MSIL as deemed international transaction u/s 92B(2) without appreciating that:

a. Transfer Pricing provisions are not applicable to the transactions with MSIL in the Alliance segment of the Appellant as conditions of Section 92B(2) are not satisfied to treat transactions with MSIL as deemed international transactions u/s 92B(2). b. The Appellant and MSIL are both independent entities with neither of them having substantial ownership interest or control over the other. c. Toyota Motor Corporation (Parent of Appellant) and Suzuki Motor Corporation (Parent of MSIL) are also independent public listed companies not having substantial ownership interest or control over the other. d. The provisions of Section 92B(2) are applicable transaction specific, and burden of proof is on lower authorities to demonstrate how conditions of section 92B(2) are satisfied to the international transactions undertaken during the year. The lower authorities have not demonstrated how conditions of Section 92B(2) are satisfied for transactions entered into between Appellant and MSIL during the year under consideration. 4. The lower authorities have erred in: a. Incorrectly interpreting the terms of OEM Agreement; b. Referring to Contract Manufacturing agreement without appreciating that contract manufacturing was not even undertaken during the year under consideration; c. Not appreciating that the Appellant is benefitted out of the arrangement with MSIL d. Not appreciating that the transaction between the Appellant and MSIL is tax neutral as both are subject to tax in India at same rate. 5. The lower authorities have erred in inappropriately computing Operating margins of the Appellant by considering i) Interest received; ii) Miscellaneous income; and (iii) Interest Paid, as non-operating in nature. 6. The lower authorities have erred in treating provision for doubtful debts and rates & taxes as non-operating in nature, while computing the operating margins of the comparables

ITA No.1999/Bang/2025 M/s. Toyota Kirloskar Motor Pvt. Ltd., Bengaluru Page 3 of 5 7. The lower income tax authorities have erred in incorrectly computing the operating profit margin of Force Motors Ltd. 8. The TPO has erred in not following directions of DRP to treat (i) Provision for PF of International Workers, (ii) Donation and (iii) Interest on TDS as non-operating in nature while computing operating margins of the Appellant. Hence, Assessee's margins computed by the TPO is incorrect. 9. The lower authorities have erred in comparing weighted average margin of three years for comparables (from FY 2017-18 to FY 2019-20) against Operating margin of the Appellant only for FY 2019-20, which is not an equitable comparison as FY 2019-20 was not an normal year of operations for the automobile industry, when compared to earlier two years. 10. The lower authorities have erred in: a. Not making proper adjustment for enterprise level and transactional level differences between the Appellant and the comparable companies; b. Ignoring the business, commercial and industry realities and economic circumstances applicable to the Appellant vis a vis the comparables; c. Not providing Customs Duty adjustment, which was required to be made to put all comparables on a level playing field and; d. Not providing working capital adjustment l l . The lower authorities have erred in applying the modified PLI to all expense transactions including expenses incurred with non-associate enterprises and thereby making an adjustment in respect of transactions with non-associate enterprises also. GROUND RELATING TO INTEREST

12.

The lower authorities have erred in levying interest u/s 234A of Rs.3,94,61,280/- though the return is filed with1T1 the due date hence, bad in law and Assessee denies its liability to pay the same. 13. The lower authorities have erred in levying interest u/s 234B of Rs.84,18,40,640/On the facts and in the circumstances of the case, interest charged under section 234B is excessive and the Appellant denies its liability to pay the same. The Appellant submits that each of the above grounds/ sub-grounds are independent and without prejudice to one another.

2.

At the outset, the ld. A.R. of the assessee drew our attention on a letter dated 4.5.2026 filed on 5.5.2026 and submitted that the assessee filed an Advance Pricing Agreement (“APA”) application before the Central Board of Direct Taxes (“CBDT”) on 29.3.2019 and the same had been concluded vide agreement dated 31.03.2026 wherein the assessee and the CBDT have come to consensus with regard to arm’s length price in respect of international transactions entered for FY 2019-20 to FY 2023-24. It is further submitted that

ITA No.1999/Bang/2025 M/s. Toyota Kirloskar Motor Pvt. Ltd., Bengaluru Page 4 of 5 since the year under consideration is also covered in the APA, therefore, the assessee requested that leave may be granted to withdraw the appeal as the issues have been resolved under the APA. A copy of the letter submitted by the assessee for withdrawal of the appeal is reproduced below for ease of reference and convenience:

ITA No.1999/Bang/2025 M/s. Toyota Kirloskar Motor Pvt. Ltd., Bengaluru Page 5 of 5 3. The ld. DR submitted that the Revenue have no objection whatsoever if the bench permits to withdraw the appeal as prayed by the assessee.

4.

Considering the application for withdrawal dated 04.05.2026 filed by the assessee as well as the request of ld. A.R. for the assessee, we permit the assessee to withdraw the appeal in view of the fact that the year under consideration is also covered in the APA and accordingly dismissed the appeal as withdrawn.

5.

In the result, appeal filed by the assessee is dismissed as withdrawn.

Order pronounced in the open court on 30th July, 2026

Sd/- Sd/- (Prashant Maharishi) (Keshav Dubey) Vice President Judicial Member

Bangalore, Dated 30th July, 2026. VG/SPS

Copy to:

1.

The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order

Asst. Registrar, ITAT, Bangalore.

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