INDIA KAWASAKI MOTORS PRIVATE LIMITED,PUNE vs. COMMISSIONER OF INCOME TAX (APPEAL), PUNE - 13, PUNE

ITTPA 435/PUN/2026Status: DisposedITAT Pune23 September 2026AY 2020-2126 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided on the following issues: 1. Grounds of appeal No.1 and 3 were dismissed as 'not pressed' by the assessee, with no objection from the revenue. 2. Regarding Ground No.2 (capacity underutilization adjustment), the Tribunal noted the assessee's arguments and the rejection by the TPO and CIT(A). The assessee provided data from SIAM and a certificate of installed capacity, but discrepancies led to rejection. The assessee also submitted revised SIAM reports. The Tribunal did not provide a definitive finding on this ground in the provided excerpt, but it was listed as an issue to be decided. 3. Regarding Ground No.4 and the additional ground (group service charges/R&D fees), the Tribunal found merit in the assessee's submission. It was acknowledged that the assessee received R&D fees of Rs.23.24 crores, which it considered operating income, but the TPO and CIT(A) treated it as non-operating. The assessee argued that if the income is non-operating, the corresponding expenditure of Rs.19.37 crores should be excluded from operating expenditure. The Tribunal agreed with this contention, directing the TPO to exclude the expenditure incurred for earning the R&D fees (Rs.19.37 crores) when determining the assessee's operating margins. The TPO was also directed to provide the assessee with an opportunity of being heard. Grounds 4 and the additional ground were allowed for statistical purposes. Operative Directions: The TPO is directed to exclude Rs.19.37 crores of expenditure related to R&D fees from operating expenditure and re-determine the operating margins. The assessee is to be given an opportunity of being heard.

What were the facts?

The assessee, India Kawasaki Motors Pvt. Ltd., is a wholly owned subsidiary of Kawasaki Heavy Industries, engaged in manufacturing, assembly, and trading of motorcycles. For Assessment Year 2020-21, the assessee reported a total loss of Rs.11,38,68,569/-. International transactions with Associated Enterprises (AEs) amounted to Rs.123,42,31,249/-. The Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO) under Section 92CA(1). The TPO adopted the TNMM method but rejected certain comparables and introduced new ones, determining the comparable's Profit Level Indicator (PLI) at 6.27% against the assessee's PLI of (-) 25%. This resulted in an upward adjustment of Rs.7,08,66,335/-. The assessee did not challenge the TPO's order before the Dispute Resolution Panel (DRP). The AO passed an assessment order on 27.10.2023, incorporating the TPO's addition. The assessee appealed to the CIT(A), who granted partial relief. The assessee is now in appeal before the ITAT.

What were the issues?

1. Whether the Hon'ble CIT(A) erred in rejecting the economic adjustment in relation to additional discount granted by the Appellant to the dealers on account of BSIV phase out (Section 92C)? 2. Whether the Hon'ble CIT(A) erred in not allowing the capacity underutilization adjustment as requested by the Appellant (Section 92C)? 3. Without prejudice, whether the Hon'ble CIT(A) erred in rejecting the capacity underutilization adjustment as granted by the Ld. TPO (Section 92C)? 4. Whether the Hon'ble CIT(A) erred in considering the group service charges as non-operating in nature for the purpose of computing the operating margin of the Appellant (Section 92C)? Assessee's Contentions: - Grounds 1 and 3 were not pressed. - For Ground 2, the assessee argued that underutilization of capacity led to under-absorption of fixed costs, lowering margins. Data from SIAM and a certificate from the Ministry of Commerce were submitted, but the TPO rejected it due to discrepancies with SIAM data. The CIT(A) also rejected it based on unauthenticated and contradictory figures. The assessee submitted revised SIAM reports and e-mail correspondence to support its claim. The assessee also contended that lack of data is not a ground to reject the adjustment, citing the case of Toyota Kirloskar Motor Private Limited. - For Ground 4, the assessee argued that R&D charges received from its AE (Rs.23.24 crores) were operating income. The TPO/CIT(A) treated it as non-operating. The assessee raised an additional ground that if the income is non-operating, the corresponding expenditure (Rs.19.37 crores) should be excluded from operating costs. The assessee referred to audited accounts detailing R&D expenses. Revenue's Contentions: - The revenue strongly objected to the admission of the additional ground. - For Ground 4, the revenue relied on the orders of the TPO/AO/CIT(A).

Which sections of the Income-tax Act were involved?

Section 92CA(1),Section 92C

AI-generated summary — verify with the full judgment below

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

Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA

For Appellant: Shri Nikhil S Pathak
For Respondent: Smt. Sudha Gupta, CIT-DR

PER R. K. PANDA, VP :

This appeal filed by the assessee is directed against the order dated 26.09.2025 of the Ld. CIT(A), Pune-13 relating to assessment year 2020-21. 2. Facts of the case, in brief, are that the assessee is a wholly owned subsidiary of Kawasaki Heavy Industries and is primarily engaged in manufacturing of motorcycle and assembly of spare parts and components. The assessee also undertakes trading of motorcycles which are sold to third parties in India. It filed its return of income on 15.02.2021 disclosing total loss of Rs.11,38,68,569/-. Since the assessee during the impugned assessment year has undertaken certain international

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 92CA(1)

All 168 judgments and leading authorities on Section 92CA(1) →

Recent GST High Court judgments

Search GST case law →