CONCEPT MEDICAL RESEARCH PRIVATE LIMITED,SURAT vs. DCIT, CIRCLE 1(1)(1), SURAT

ITTPA 1/SRT/2024Status: DisposedITAT Surat25 September 2026AY 2020-2121 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Concept Medical Research Private Limited, is in appeal before the Income Tax Appellate Tribunal (ITAT) against the final assessment order for Assessment Year 2020-21. The order was passed by the Assessing Officer (AO) in accordance with directions from the Dispute Resolution Panel (DRP). The assessee is engaged in trading medical devices and R&D. For AY 2020-21, the assessee declared a total income of Rs. 3,52,53,460/-. The case was selected for scrutiny, and the AO referred the matter to the Transfer Pricing Officer (TPO). The TPO proposed upward adjustments of Rs. 2,71,27,935/- on account of sale of goods (Rs. 2,71,15,469/-) and interest on ECB loan (Rs. 12,466/-). The AO issued a draft assessment order, to which the assessee filed objections before the DRP. The DRP rejected the objections, and the AO passed the final assessment order, assessing total income at Rs. 6,63,93,020/-.

What did the Tribunal hold?

The Tribunal decided the issues as follows: 1. **Ground No. 1 (Sale of Goods Adjustment):** The Tribunal allowed this ground for statistical purposes. While the assessee argued that Relisys Medical Devices Ltd. was a manufacturing company and thus not a comparable for its trading business, the lower authorities had rejected this on the basis that the assessee itself included Relisys in its Transfer Pricing Study Report (TPSR). However, the Tribunal noted that it was not in dispute that Relisys was a manufacturing company and the assessee was a trader. The judgment indicates that the Tribunal found merit in the assessee's argument regarding the mismatch in business activities, leading to this ground being allowed for statistical purposes, implying a potential re-evaluation of comparables or the adjustment itself. The specific reasoning for allowing it for statistical purposes suggests a procedural or substantive flaw in the lower authorities' approach to the comparability analysis. 2. **Ground No. 2 (Interest on Loan):** The Tribunal allowed this ground and directed the deletion of the addition of Rs. 12,466/-. The Tribunal found the assessee's explanation of commercial expediency for advancing the loan to its Associated Enterprise to be reasonable, especially considering the small amount involved. It respectfully followed the decision in Rubamim Ltd. Vs. Deputy Commissioner of Income-tax and clarified that its decision was based on the peculiar facts and circumstances and not to be treated as a precedent. 3. **Ground No. 3 (Penalty Proceedings):** The Tribunal dismissed this ground as premature, agreeing with both parties that penalty imposition is a separate proceeding and does not require adjudication at this stage. 4. **Ground No. 4 (143(1) Addition):** The Tribunal allowed this ground for statistical purposes and directed the AO to verify the documents submitted by the assessee. The assessee successfully demonstrated that necessary adjustments were made before filing the return, and the addition in the 143(1) intimation resulted in a double disallowance. The AO was instructed to delete the addition if satisfied after verification. No issue was expressly left undecided.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the addition of Rs. 2,71,15,469/- as upward adjustment on account of sale of goods to an associated enterprise was erroneous, considering Relisys Medical Devices Ltd. (used as a comparable) is engaged in manufacturing while the assessee is in trading (Section 92CA r.w.s. 92C). 2. Whether the addition of Rs. 12,466/- as interest income on a loan provided to an associated enterprise was justified (Section 92CA r.w.s. 92C). 3. Whether the proposed initiation of penalty proceedings under Section 271AA for non-maintenance of documents under Section 92D was premature. 4. Whether the AO erred in considering income computed under Section 143(1)(a) as income declared by the assessee, leading to an addition of Rs. 40,11,626/-. Assessee's arguments: 1. Relisys Medical Devices Ltd. is a manufacturing company, whereas the assessee is a trader, making it an inappropriate comparable. The assessee's business is trading and R&D, not manufacturing. 2. The loan was given out of commercial expediency, and the amount of interest is negligible. The assessee relied on the decision in Rubamim Ltd. Vs. Deputy Commissioner of Income-tax. 3. The penalty proceedings are premature as they are separate proceedings. 4. The assessee had already made necessary adjustments before filing the return, and the addition in the 143(1) intimation resulted in a double disallowance. Revenue's arguments: 1. The revenue relied on the orders of the lower authorities for Ground No. 2. 2. For Ground No. 4, the revenue left the issue for the wisdom of the bench.

Which sections of the Income-tax Act were involved?

Section 92CA,Section 92C,Section 92D,Section 271AA,Section 143(1)(a),Section 143(3),Section 144C(1),Section 144C(2),Section 144C(5),Section 144C(13),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

For Appellant: Ms. Aarti Shah, AR
For Respondent: Shri Aashish Pophare, CIT-DR
Hearing: 29.06.2026Pronounced: 25.09.2026

Per B.M. Biyani, A.M.:

Feeling aggrieved by the final order of assessment bearing DIN: ITBA/AST/S/143(3)/2024-25/1066102828(1) dated 26.06.2024 passed by learned Assessment Unit of Income-tax Department Ld. 3(3) r.w.s. 144C(13) & 144B of the Income- the directions dated 06.06.2024 issued by learned Dispute Resolution Panel, CIT(DRP-2), Mumbai-3 Ld. for Assessment- 20-21, the assessee has filed this appeal. Concept Medical Research Private Limited IT(TP)A No. 1/SRT/2024 AY 2020-21

2.

The background facts leading to present appeal are as under:

(i) The assessee is a company claiming to be engaged in

The order continues below.

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