VITESCO TECHNOLOGIES INDIA PRIVATE LIMITED,PUNE vs. ASSESSMENT UNIT, INCOME TAX DEPARTMENT, NFAC AND JURISDICTIONAL ASSESSING OFFICER DCIT 12, PUNE, PUNE

PDF · subscribers
ITTPA 2474/PUN/2024Status: DisposedITAT Pune19 August 2026AY 2021-2237 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the assessee's primary contention was that the final assessment order was bad in law due to non-compliance with the DRP's directions. The assessee highlighted that the AO initially passed a final assessment order on 30.09.2024 without adhering to the DRP's directions dated 27.08.2024, which had granted relief and directed the total addition to be restricted to INR 101,00,41,778. The assessee provided evidence that subsequent rectification orders under Section 154 were passed by the TPO (13.03.2025) and AO (16.07.2025) to correct the final assessment order and bring it in line with the DRP's directions. The Tribunal observed that the very need for these rectification orders indicated that the original final assessment order was not in conformity with the DRP's directions. Therefore, the Tribunal held that the final assessment order dated 30.09.2024 was indeed bad in law as it failed to follow the mandatory directions of the DRP. The Tribunal quashed the assessment order dated 30.09.2024 on this ground alone, without delving into the merits of the transfer pricing adjustment. No issue was expressly left undecided.

What were the facts?

The assessee, Vitesco Technologies India Private Limited, is in appeal before the Income Tax Appellate Tribunal (ITAT) Pune Bench against the assessment order for Assessment Year 2021-22, passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, on 30.09.2024. The Transfer Pricing Officer (TPO) initially proposed an adjustment of INR 113,58,49,495. The Dispute Resolution Panel (DRP), in its directions dated 27.08.2024, granted relief, directing the addition to be restricted to INR 101,00,41,778. However, the assessee contends that the final assessment order dated 30.09.2024 did not conform to the DRP's directions, retaining the original higher addition. Subsequently, rectification orders under Section 154 were passed by the TPO and AO to align the final order with the DRP's directions.

What were the issues?

1. Whether the final assessment order passed by the Assessing Officer (AO) is bad in law for not conforming to the directions of the Dispute Resolution Panel (DRP) as per Section 144C(10) and Section 144C(13) of the Income Tax Act, 1961? Assessee's Contention: The assessee argues that the final assessment order dated 30.09.2024 is bad in law and liable to be quashed because it did not adhere to the mandatory directions of the DRP dated 27.08.2024. The AO retained the original transfer pricing adjustment of INR 111,00,41,778 instead of the reduced amount of INR 101,00,41,778 as directed by the DRP. The subsequent rectification orders under Section 154 are cited as evidence of this non-compliance. The assessee relies on various judgments of the ITAT and High Courts, including LG Electronics Inc. vs. Additional CIT, Global One India Pvt. Ltd. vs. DCIT, and July Systems and Technologies Pvt. Ltd. vs. DCIT. Revenue's Contention: The revenue, through the Departmental Representative (DR), relied on the decision of the Hon'ble Delhi Bench of the Tribunal in Honda R&D (India) Private Ltd. Vs. JCIT (ITA No. 376/Del/2015) dated 19.9.2024, to counter the assessee's ground regarding non-compliance with DRP directions. However, the assessee pointed out that this decision was stayed by the Hon'ble Delhi High Court.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 92CA(3),Section 154,Section 144C(10)

AI-generated summary — verify with the full judgment below

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

Before: SHRI Dr. DIPAK P. RIPOTE & SHRI VINAY BHAMORE

For Appellant: Shri Deepak Chopra &, Shri Nitin Narang (through virtual)
For Respondent: Shri Prakash L. Pathade, IRS CIT-DR

(1) Appeal is dismissed. ” Unquote.

27 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

5.6.6 In the case of Flextronics technologies India P. Ltd. (supra), the Assessing Officer had not passed the Final Assessment Order in conformity with the Directions of DRP, the ITAT held that the Final Assessment Order was bad in law, theHon‟ble KarnatakaHigh Court upheld the Order of the ITAT, dismissing the Revenue‟s Appeal.

5.7 The ITAT Chennai in the case of HSI Automotives (P.) Ltd. vs. DCIT,[2026] 186 taxmann.com 721 (Chennai - Trib.)[28-04- 2026],following decision of Hon‟ble Delhi High Court in the case of ESPN Star Sports Mauritius S.N.C. ET Compagnie vs. UOI [2016] 68 taxmann.com 377, and distinguishing the decision of ITAT Delhi in the case of Hitachi Astemo Haryana P Ltd vs. DCIT (supra) has held as under : Quote,“21. In the light of the discussion (supra), it is found that the AO in defiance to the binding directions of the DRP has passed the final assessment order dated 19.12.2025, which is in gross violation of Section 144C(13)of the Act, making it arbitrary, which action vitiates the passing of the impugned assessment order dated19.12.2025 and is therefore held to be passed wholly without jurisdiction and hence is null in the eyes of law.” unquote.

5.8 Similar View has been taken by ITAT Dehi in the case of Cambridge University Press and Assessment India (P.) Ltd.vs. DCIT , [2026] 185 taxmann.com 968 (Delhi - Trib.)[24-04-2026].

5.9 Thus the proposition of law discernible from the Decision of Hon‟ble Delhi High Court, Hon‟ble High Court of Karnataka (supra) , ITAT Delhi, ITAT Bangalore,ITATChennai (supra) is that the Final Assessment Order which is not in conformity with the Directions of the DRP is Bad in Law.

28 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

5.10 The Ld. DR relied on the decision of ITAT, Delhi in the case of Hitachi Astemo Haryana Private Ltd. Vs. DCIT in ITA NO. 1005/Del/2022, dated 23.11.2023, wherein on an identical facts ITAT held as under : Quote, “8. Thus, from the above reading of Hon’ble Jurisdictional High Court decisions, it is emanating that in the final assessment order passed without incorporating the DRP’s directions, the matter been remanded to the DRP by the Hon’ble High Court to give effect to the scheme of section 144C of the Act. The above case laws are binding upon us. Hence, following the same, we remit the issue of the file of AO. AO shall pass an order incorporating DRP’s directions which has been given effect by the TPO. 9. Since, we have remanded the matter to the AO to give effect to the directions of the DRP/TPO, adjudication of other grounds at this juncture is not required.”Unquote. 5.11 Distinguishing Hitachi Astemo Haryana Pvt Ltd decision: Ld. DR has relied on the decision of ITAT Delhi in the case of Hitachi Astemo Haryana Pvt Ltd vs DCIT order dated 23/11/23. However, on careful reading of the said decision it is noted that ITAT has relied on following decisions : i. Anand NVH products P Ltd : In this case, the Directions were not received by the AO from DRP. It is also noted that the Assessee has not brought to the notice of Hon‟ble High Court earlier decision in the case of ESPN Star Sports Mauritius S.N.C. ET Compagnie Vs. Union of India, (2016) 241 Taxman 0038 (Delhi).

ii. In the case of SRF Ltd vs NFAC [2021] 281 Taxman 574 (Delhi)[14-07-2021], the AO had passed Final Assessment Order before the DRP directions as in that case it was Covid Period and the Assessee filed Objections before DRP after a lapse of 30 days.

29 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

iii. In the case of Fiberhome India (P.) Ltd. vs. ACIT Delhi)/[2022] 444 ITR 237 (Delhi)[15-12-2021] the Assessee had failed to inform the AO about filling Objections before DRP, hence AO passed order before DRP Order.

iv. In the case of Ford India P Ltd vs National E- Assessment Centre, [2022] 284 Taxman 396 (Madras)[15-09-2021] ,the Assessee had not informed the AO that Assessee had filed Objections before DRP which is mandatory as per Section 144C. Therefore, facts of the case are different than present assessee.

Thus, ITAT in the case of Hitachi Astemo Haryana Pvt Ltd vs. DCIT (supra) has relied on the factually distinguishable decisions of Hon‟ble Delhi High Court which we have discussed above. Hence, the decision of ITAT in the case of Hitachi Astemo Haryana Pvt. Ltd vs DCIT is distinguishable and not applicable on the facts in the case of present assessee.

5.12 We have carefully studied the Decisions relied by the Ld.DR and Ld. AR. We have already referred to the decisions of Hon‟ble Delhi High Court, Hon‟ble High Court of Karnataka (supra) where in the Hon‟ble High Court‟s have held that Final Assessment Order which is not in conformity with the Directions of DRP is Bad in law. No decision of Hon‟ble Jurisdictional High Court has been quoted before us on this issue. During the proceedings we specifically asked for the same. Thus, in the absence of decision of Hon‟ble Jurisdictional High Court, the decision of Non Jurisdictional High Courts is binding on us. Also, when there are decisions of Hon‟ble High

30 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

Courts contrary to each other, then the decision which is favorable to the assessee has to be considered.

5.12.1 In these facts and circumstances of the case, respectfully following Hon‟ble Delhi High Court (supra), Hon‟ble High Court of Karnataka, ITAT Delhi, ITAT Banglore, ITAT Chennai, we hold that the Final Assessment Order is bad in law. as it is not in conformity with the Directions of the DRP. In the result the Legal Ground Number 4 raised by the Assessee is allowed.

5.12.2 In this case, the Ld. DR submitted that the AO realized the mistake and passed an order u/s 154 of the Act. Therefore, Ld. DR submitted that the Final Assessment Order was rectified and hence it is inconformity with the DRP‟s directions. In this case, we have reproduced above the order of the TPO giving effect to the DRP‟s directions and relevant paragraphs of the Final Assessment Order. On careful reading of these orders, it is clear that the TPO has consciously considered the ALP of the transactions at Rs.1,11,00,41,778/-. Thus, though the DRP had reduced the adjustment to Rs.1,01,00,41,778/-. The TPO while giving effect to the directions of the DRP considered the adjustment at Rs.1,11,00,41,778/-. Similarly, in the Final Assessment Order, the AO made addition of Rs.1,11,00,41,778/-. Therefore, these are not mistake as envisaged u/s 154 of the Act. Therefore, we do not agree with the submission of the Ld. DR. We have already discussed the case laws in earlier paragraphs.

6.

In this case, the TPO has determined the Arm‟s Length Price of Intra Group Services at Nil. The main contention of the TPO was that assessee has not demonstrated that services were

31 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

rendered, assessee has failed toprove that services were required by the assessee and has failed benefit test.

7.

We have analyzed the documents filed by the assessee before the TPO and DRP. The assessee had filed elaborate documentation before the AO and TPO which is in the form of two paper books filed before us. The assessee also filed third party assurance report explaining the cost allocation.

7.1 Regarding Material Management Services the assessee had submitted that all e-components are sourced by the Central Purchasing Team which gives advantage of bulk purchases reducing the cost by 5% to 10%. During the year assessee had only 10 personnel looking after procurements, which could do the procurements only because support from the AEs in the form of central purchasing team. Assessee also filed Shared Services Agreement which is at page Nos. 2082 to 2187 of the paper book.

7.2 Assessee had submitted, that all production lines are connected to central server, which is accessible to global production team. The online trouble shooting can be done with the help of line review tool. Similarly, assessee had been allowed access to advanced sophisticated manufacturing system. Global team is responsible for all kinds of productions issues like warranty, defect analysis etc. The global team personnel visit and monitors production.

7.3 IT Support Services, Finance and General Administration: Assessee filed documentary evidences at page Nos. 2368 to 2497 of the paper book. Assessee submitted that centralized facilitation resulting in efficiency in terms of synergies, access to

32 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

data base, engineering systems. Assessee submitted that assessee had got only six personnel for IT support, they could deliver only because of the support from the AEs. Similarly, for HR and General Administration. Assessee submitted that percentage of Finance and General Administration Cost allocated to assessee is only .05% of total group cost.

7.4 Selling and Distribution : The assessee filed global organization chart for selling and distribution at page Nos. 3336 to 3338 of the paper book. Assessee submitted that the global PSM are responsible for new business, first level technical issues, rendering of customer enquiry etc. Assessee utilizes expertise of AEs in analyzing marketing data and strategy sells. Percentage of sells and distribution cost allocated to assessee is only 0.18% of the total group cost.

7.5 Thus, the assessee had filed elaborate documents before the TPO and DRP, however, TPO has not pointed out any specific mistakes in the above-mentioned documents. The TPO has not commented on the third-party assurance report filed by the assessee explaining the allocation.

7.6 Thus, assessee has elaborately explained the receipt of services. As far as, benefit is concerned, it is not the domain of the TPO to analyze whether any benefit was received or not? The TPO as per section 92CA of the Act was only required to analyze the Arm‟s Length price of the intra group services. In this case, the TPO has arrived at Arm‟s Length Price of Intra Group Services at Nil following other method. However, the TPO has not specified anything about the other method. TPO has not specified how he has arrived at Nil.

33 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

8.

In this context, reference is made to the decision of ITAT Pune in the case of Bosch Chassis Systems India (P.) Ltd. v. Deputy Commissioner of Income-tax, [2026] 185 taxmann.com 190 (Pune - Trib.), whereinITAT has held as under: Quote, “14. After hearing both the sides and perused the submissions of the Ld. AR as well as judicial precedents relied upon the Ld. AR, we find some force in the arguments advanced by the Ld. AR. The facts on record that reveals that the assessee submitted the details regarding the intra group services supported by the relevant documentary evidences such as sample copies of invoices, intra company agreement, various email communications demonstrating the need and benefits derived by the assessee from such services. The Ld.TPO, however, in disregard to the submissions of the assessee held that the assessee failed to demonstrate the benefits derived from the receipt of such services by the assessee and therefore determined the ALP of intra-group service fees at Nil applying „Other Method' under Rule 10AB of the Rules. The Ld. DR demonstrated the receipt of services by the assessee before us too. It is further observed that while applying Rule 10AB, no comparable was brought on record in respect of the intra-group services and therefore, in our view, adoption of Other Method is not in accordance with the Rule 10AB and hence not sustainable in law. The assessee considered TNMM as the most appropriate method for benchmarking its international transaction including the service charges mentioned in para 12 above and applied the aggregation approach to establish that payments made towards intra group services charges are also allocated at cost in the trading segment and accordingly benchmarked while applying TNMM under the trading segment. It is the submission of the Ld. Counsel for the assessee that the adjustment made separately for intra-group service charges would tantamount to a double adjustment by testing the transaction both under other method on standalone basis as well as aggregating it with the trading segment. In our view, rejection of assessee's aggregation approach and adoption of the aforementioned approach by the Ld. TPO is not correct and would result in double adjustment as contended by the Ld. AR. We also find that the Ld. DRP has itself at one place categorically observed that the cost which are clearly linked to manufacturing in production should be allocated as per method adopted by the assessee, but still upheld the action of the Ld. TPO/AO. 15. The Hon'ble Bombay High Court in the case of Lever India Exports Ltd. (supra) held that the ad-hoc determination of ALP by the Ld. TPO dehors section 92C of the Act cannot be sustained. The Tribunal observed that the role of the Ld. TPO is specific and limited to determine the ALP of international transaction and not to dwell into the allowability/ genuineness of the expenditure incurred by the

34 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

assessee. If at all, this exercise can be done by the Ld. AO. However, we find that in the present case of the assessee, the Ld. AO has only given effect to the TPO's determination of the ALP for intra-group service charges. The relevant observation and findings of the Hon'ble Bombay High Court is reproduced below :

"We note that the Tribunal has recorded the fact that the respondent assessee has launched new products which involved huge advertisement expenditure. The sharing of such expenditure by the respondent assessee is a strates to develop its business. This results in improving the brand image of the products, resulting in higher profit to the respondent assessee due to higher sales Further, it must be emphasized that the TPO's jurisdiction was to only determine the ALP of an International Transaction. In the above view, the TPO has to examine whether or not the method adopted to determine the ALP is the most appropriate and also whether the comparables selected are appropriate or not. It is not part of the TPO's jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of Section 37 of the Act and/or genuineness of the expenditure.-This exercise has to be done, if at all, by the Assessing Officer in exercise of his jurisdiction to determine the income of the assessee in accordance with the Act. In the present case, the Assessing Officer has not disallowed the expenditure but only adopted the TPO's determination of ALP of the advertisement expenses. Therefore, the issue for examination in this appeal is only the issue of ALP as determined by the TPO in respect of advertisement expenses. The jurisdiction of the TPO is specific, and limited i.e. to determine the ALP of an International Transaction in terms of Chapter X of the Act read with Rule 10A to 10E of the Income Tax Rules. The determination of the ALP by the respondent assessee of its advertisement expenses has not been disputed on the parameters set out in Chapter X of the Act and the relevant Rules. In fact, as found both by the CIT (A) as well as the Tribunal that neither the method selected as the most appropriate method to determine the ALP is challenged nor the comparables taken by the respondent assessee is challenged by the TPO. Therefore, the ad-hoc determination of ALP by the TPO dehors Section 92C of the Act cannot be sustained."

16.

Now, coming to the adoption of „Other Method' by the Ld. TPO/AO, we find that the lower authorities have applied the „Other Method' without searching for similar and uncontrolled transaction between non-associated enterprises and straightway treating the value of the international transaction to be at „Nil' which is in violation of the condition laid down under Rule 10AB of the Rules.

17.

The Co-ordinate Bench of the Tribunal in the case of Lear Automotive India Private Limited (supra) under the similar set of facts as that of the present assessee has held as under :

35 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

"10. In light of the above background, we have carefully considered the arguments advanced by the Ld.AR in respect of the impugned issue in hand. One of the contentions of the Ld. AR is that an ad-hoc approach adopted by the Ld. TPO to benchmark the international transaction of allocation of RHQ charges cannot be sustained in the guise of 'Other Method'. We find some force in the contention of the Ld. AR that the adoption of the „Other Method' as per Rule 10AB of the Rules require the Ld. TPO to bring on record a suitable CUP to justify the applicability of the method employed.

11.

The relevant extract of the Rule 10AB of the Rules reads as under: "10AB. For the purposes of clause(f) of sub-section (1) of section 92C, the other method for determination of the arm's length price in relation to an international transaction or a specified domestic transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non- associated enterprises, under similar circumstances, considering all the relevant facts."

On analyzing the instant case in line with the above Rule, we find that the Ld. TPO has failed to bring on record a suitable comparable uncontrolled transaction and the price charged therein, while adopting the 'Other Method' as the most appropriate method for benchmarking the impugned transaction. Further, without bringing any such comparable on record, the Ld. TPO arbitrarily made an ad hoc adjustment of the 50% of the RHQ charges paid by the assessee to its AE, Lear Shanghai. Thus, in our considered view, the aforesaid benchmarking exercise conducted by the Ld. TPO is not in accordance with Rule 10AB of the Rules and hence, unsustainable in the law. The Ld. TPO has not complied with the provisions of the Act read with the relevant Rule to determine the ALP of the international transaction by applying one of the methods prescribed under section 92C of the Act.

12.

From perusal of the various judicial precedents (supra) cited by the Ld. AR, we find that this issue is no more res-integra. It is now a settled position in law that the determination of the ALP of the international transaction on an ad-hoc basis de hors section 92C of the Act by merely asserting that the 'Other Method' is applied cannot be sustained as held by various Courts and Tribunals. In the case of CIT v. M/s. Johnson & Johnson Ltd. (supra), the Hon'ble Jurisdictional Bombay High Court held as under :

"4(d). We find that the impugned order of the Tribunal upholding the order of the CIT(A) in the present facts cannot be found fault with. The TPO is mandated by law to determine the ALP by following one of the methods prescribed in Section 92C of the Act read with Rule 108 of

36 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

the Income Tax Rules. However, the aforesaid exercise of determining the ALP in respect of the royalty payable for technical know how has not been carried out as required under the Act. Further, as held by the CIT(A) and upheld by the impugned order of the Tribunal, the TPO has given no reasons justifying the technical know-how royalty paid by the Assessing Officer to its Associated Enterprise being restricted to 1% instead of 2%, as claimed by the respondent assessee. This determination of ALP of technical know-how royalty by the TPO was ad hoc and arbitrary as held by the CIT(A) and the Tribunal. (e) In the above view, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. ". ............................ ........................... 19. Based on the factual matrix and the legal position set out above, in our view, the adjustment made by the Ld. TPO and affirmed by the Ld. DRP in respect of intra-group service charges is not sustainable in law and therefore the impugned adjustment is hereby deleted and the TNMM applied by the assessee is upheld. The ground Nos. 18 to 22 raised by the assessee are accordingly allowed.”Unquote.

9.

Similarly, ITAT, Bangalore in the case of Bostik India (P.) Ltd. v. DC/ACIT, [2025] 175 taxmann.com 583 (Bangalore - Trib.) has allowed appeal of the assessee wherein Arm‟s length price of Intra group services was treated as Nil.

10.

Therefore, respectfully following the decision of Hon‟ble Bombay High Court in the case of CIT Vs. Lever India Exports (supra), ITAT, Pune, Delhi and Bangalore we hold that the ALP determined by the TPO at Nil without bringing on record any comparable is unsustainable in law. Accordingly, we direct the AO/TPO to delete the addition. Thus, ground Nos. 8 raised by the assessee is allowed.

11.

Since we have allowed Ground number 8 and 4, raised by the assessee, all other grounds become academic in nature and dismissed unadjudicated.

37 Income Tax Appellate Tribunal, Pune IT(TP)A No. 2474/PUN/2024, Vitesco Technologies India Private limited

12.

In the result, Appeal of the assessee is partly allowed in above terms.

Order pronounced in the open Court on 19th August, 2026

Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/Pune; दिन ांक/Dated : 19-08-2026 Ravi Kumar Digitally signed by Ravi Kumar Date: 2026.08.24 09:47:23 Ravi Kumar +05'30' आदेशकीप्रतितितिअग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent 3. The concerned Pr.CIT, Pune 4. DR, ITAT, „C‟ Bench, Pune 5. ग र्डफ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकरअपीलीयअदिकरण, पुणे / ITAT, Pune

More judgments on Section 144C(13)

All 3,426 judgments and leading authorities on Section 144C(13) →

Recent GST High Court judgments

Search GST case law →