CUMMINS INDIA LIMITED,PUNE vs. THE ASSESSMENT UNIT, INCOME TAX DEPARTMENT, NFAC AND THE ACIT, CIRCLE 1(1), PUNE, PUNE

ITA 1786/PUN/2024Status: DisposedITAT Pune28 September 2026AY 2020-2140 pages
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What were the facts?

The assessee, Cummins India Limited, is engaged in manufacturing, trading, and selling engines. For assessment years 2020-21 and 2021-22, the assessee filed returns declaring total incomes of Rs.559,57,00,030/-. The cases were selected for scrutiny, and due to international transactions, the matter was referred to the Transfer Pricing Officer (TPO). The TPO proposed upward adjustments of Rs.12,96,00,000/- for royalty on export sales and Rs.92,20,072/- for design engineering services. The Dispute Resolution Panel (DRP) proposed an enhancement of Rs.1.22 crores on royalty and upheld the TPO's adjustment for design engineering services. The Assessing Officer (AO) made additions based on the TPO and DRP reports, including disallowance under Section 14A read with Rule 8D and addition on account of health and education cess variation. The assessee appealed these orders.

What did the Tribunal hold?

The Tribunal allowed Ground No.2 concerning the transfer pricing adjustment on account of royalty payment, following its decision in a related appeal (ITA No.1786/PUN/2024) where the issue was decided in favor of the assessee. Similarly, Ground No.3, relating to the transfer pricing adjustment for Engineering Design Services, was also allowed, again following the reasoning from the related appeal. Grounds No.4, 5, 6, and 7 were dismissed as 'not pressed' by the assessee. Regarding Ground No.8 (short credit of TDS), the Tribunal restored the issue to the file of the Assessing Officer with a direction to verify the records and grant the correct TDS credit. For Ground No.9 (levy of interest u/s 234A), the issue was also restored to the Assessing Officer for computation of correct interest. Ground No.10, concerning the initiation of penalty proceedings, was dismissed as premature. The appeals were partly allowed for statistical purposes.

What were the issues?

1. Whether the AO, pursuant to the DRP's directions, erred in making an upward adjustment of INR 14,18,00,000/- concerning the international transaction of royalty payment and INR 92,20,072/- concerning the international transaction of rendering engineering and design services. The assessee argued that the royalty payment was for a license to use engine technology and technical support, as per inter-company agreements, and this treatment was accepted in prior years. The revenue contended that the transaction should be re-classified as a Cost Contribution Arrangement (CCA). 2. Whether the AO erred in initiating penalty proceedings under Section 270A of the Act. 3. Whether the AO erred in granting short credit for Tax Deducted at Source (TDS) amounting to Rs.23,15,671/-. 4. Whether the AO erred in levying interest under Section 234A of the Act.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 142(1),Section 143(2),Section 14A,Section 41,Section 234A,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE

Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE

For Appellant: Shri Ketan Ved
For Respondent: Smt. Sudha Gupta, CIT-DR

PER R. K. PANDA, VP :

The above two appeals filed by the assessee are directed against the separate orders dated 26.07.2024 and 22.10.2024 of the Assessing Officer passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to assessment years 2020-21 and 2021-22 respectively. Since identical grounds have been raised in both the appeals, therefore, for the sake of convenience both the appeals were heard together and are being disposed of by this common order.

2.

Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing, trading and selling of engines and allied acti

The order continues below.

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