MUSASHI AUTO PARTS INDIA PRIVATE LIMITED,DELHI vs. AU ITD, JAO DCIT CIRCLE 16(1), DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”, NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER IT(TP)A No. 195/Del/2026, A.Y. 2022-23 Musashi Auto Parts India Vs. AU ITD, Private Limited DCIT, UG-17C, Som Datt Circle 16(1), Chamber-1, New Delhi 5 Bhikaji Place, New Delhi �थायीलेखासं./जीआइआरसं./PAN/GIR No: AADCM1239R Appellant .. Respondent Appellant by : Shri Deepak Chopra, Advocate Ms. Ashmita Sharma, Advocate Shri Nitin Narang, CA Respondent by : Shri Mahesh Kumar, CIT(DR) Date of Hearing 13.07.2026 Date of Pronouncement 07.08.2026

O R D E R PER VIMAL KUMAR, JM:

The appeal filed by the assessee is against final assessment order dated 19.02.2026 of the Ld. Assessing Officer/ Assessment Unit [hereinafter referred

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to as “the AO”] under section 143(3)/144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2022-23.

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conclusion that MSI Japan influences the terms and conditions of sales made by the Appellant to third party OEM's/customers In India. 5.5. That the TPO/DRP failed to appreciate that the OEM's/third-party customers in India were unrelated parties, whose transactions with the Appellant were completely uninfluenced by MSI Japan and such third- parties were free to select their suppliers at their own discretion. 5.6. That the TPO/DRP also failed to appreciate that these third-party customers were OEMs who were purchasing similar parts/products from other manufacturers in India and were under no obligation to procure goods only from the Appellant. 5.7. That the TPO/DRP failed to appreciate that the Appellant was providing similar products to several third-party customers at comparable prices, which would completely negate the allegation/factor of any influence by MSI Japan. Errors in the computation of the operating margins of the "manufacturing segment": 6. That the TPO/DRP erred in rejecting the economic analysis in the TP documentation filed by the Appellant in terms of the Section 92D of the Act read with Rule 100 of the Rules and proceeded to make the TP adjustment to manufacturing segment. 6.1 That the TPO / DRP have erred, on facts and in law, in incorrectly computing the operating margin of the Appellant for manufacturing segment by considering certain items of incomes/expenses as operating/non-operating in nature.

6.2 That the TPO / DRP have erred, on facts and in law, in computing the operating margin of manufacturing segment of Appellant company by unjustifiably excluding certain items namely provisions written back, export incentives and miscellaneous income which form part of the operating income. 6.3 That the TPO / DRP have erred, on facts and in law, in computing the operating margin of manufacturing segment of Appellant company by unjustifiably including the depreciation expense as part of the operating cost, despite the same being in the nature of a non-operating expense. 6.4 That the TPO / DRP have erred in failing to make appropriate adjustments to account for differences in the level of depreciation between the Appellant and the comparable companies while redetermining the ALP of the international transaction carried on by the Appellant, thereby rendering the comparability analysis defective.

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Errors committed by the TPO/DRP while computing the adjustment in the manufacturing segment: 7. That the TPO / DRP have grossly erred in law and on the facts and circumstances of the Appellant's case in proposing the TP adjustment of INR 119,22,81,774 to the operating profit of the manufacturing segment of Appellant company and in doing so:

7.1. That the TPO/DRP have erred in undertaking a fresh comparable analysis, when seven comparables were already accepted as valid comparables. In such a situation, a fresh analysis or additional comparables were not warranted for the analysis, 7.2. That the TPO/DRP have erred by rejecting, without cogent reasons, the quantitative and qualitative screens/ filters applied and set of comparable companies arrived at by the Appellant in the TP Documentation following a detailed and robust search methodology and proceeding to apply certain arbitrarily selected filters to arrive at his own comparable set based on frivolous grounds. 7.3. That the TPO / DRP have erred in law as well as on the facts and circumstances of the Appellant's case in computing the aforesaid transfer pricing adjustment by adopting inconsistent Profit Level Indicators ("PLI"), i.e., "OP/OR" has been considered as the PLI of the Appellant, whereas "OP/OC" has been applied as the PLI for the comparables which is contrary to the settled principles of TP law that mandate application of a consistent PLI for both the tested party and the comparables, and is therefore unsustainable.

7.4. That the TPO / DRP erred in arbitrarily rejecting the comparable companies as selected in the TP Documentation maintained by the Appellant. 7.5. That the TPO/DRP erred in arbitrarily accepting certain functionally dissimilar companies in the final set of comparables. 7.6. That the TPO / DRP have erred in law and on the facts and circumstances of the Appellant's case in accepting Nifco South India Manufacturing Pvt. Ltd. and Gestamp Automotive India Pvt. Ltd. as comparable companies, despite the fact that they are failing the related party filter applied by the Ld. TPO, and in not passing a reasoned and speaking order in this regard. 7.7. That the TPO / DRP have erred in law and on the facts and circumstances of the Appellant's case in accepting Guru Nanak Auto Enterprises Ltd. and Sundaram Fasteners Limited as comparable companies, without

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appreciating the fact that the said had peculiar economic circumstances, including their involvement in schemes of amalgamation and arrangement (demerger) during the relevant year, which materially impacts their financial results, and in not passing a reasoned and speaking order in this regard. 7.8. That the TPO/DRP have erred in law as well as on the facts and circumstances of the Appellant's case in accepting Guru Nanak Auto Enterprises Ltd. and Autotech Industries (India) Pvt. Ltd. as comparable companies, despite the fact that the said companies do not satisfy the export filter, and in not passing a reasoned and speaking order in this regard. TP adjustment on Payment of Royalty 8. That the TPO/DRP erred in making/sustaining an adjustment of INR 22,18,33,637 in respect of royalty paid to MSI Japan for receiving license to manufacture and technical assistance. 9. That the TPO/DRP erred in separately benchmarking the payment of royalty, which already formed part of the cost base of the manufacturing segment, which stood benchmarked by applying TNMM and hence it was not open for being benchmarked separately. 10. That, without prejudice, the TPO/DRP have erred in rejecting the economic analysis contained in the TP Documentation maintained by the Appellant in accordance with Section 920 of the Act read with Rule 10D of the Rules, and in proceeding to re-determine the ALP of the international transaction pertaining to payment of royalty, without assigning any cogent reasons and in doing 50: 10.1 That the TPO / DRP have grossly erred in law and on the facts and circumstances of the Appellant's case in proposing a TP adjustment of INR 22,18,33,637 in respect of royalty paid to the AE, by arbitrarily restricting the royalty rate from 3.5 percent to 0.78 percent based on an alleged benchmarking using a range derived from four comparable royalty agreements, without proper appreciation of the facts of the Appellant's case and without adopting a reliable and consistent benchmarking approach. 10.2 That the TPO / DRP have erred in law and on the facts of the Appellant's case in disregarding the detailed benchmarking analysis undertaken by the Appellant, including the search methodology, selection criteria and Functions, Assets and Risk ("FAR") analysis, as documented in the TP Documentation, without providing any cogent basis for such rejection. 10.3 That the TPO / DRP have further erred in conducting an arbitrary, non- transparent and ad hoc search process for identifying comparable

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royalty agreements, resulting in the selection of an inadequate and non- representative sample of only four agreements, which is insufficient to determine a reliable arm's length range. 10.4 That the TPO / DRP have erred in law in selecting and relying upon comparable royalty agreements without undertaking a proper FAR analysis and without establishing functional comparability with the Appellant's licensing arrangement. 10.5 That the TPO/ DRP have violated the principles of natural justice by not providing the Appellant with complete details of the search process, including the comparable agreements relied upon from the RoyaltyStat database and the corresponding FAR analysis, thereby denying the Appellant a reasonable opportunity to examine and rebut the same. Corporate Tax additions/disallowances: 11. That the AO/ DRP have grossly erred in making the addition of INR 12,49,455 on account of interest income under the head of business and profession by failing to appreciate that the interest income is: a. credited to Income statement on account of adjustment made in accordance with the provisions of IndAS and; b. reduced in accordance with the provisions of income computation and disclosure standards ("ICDS") as notified by the Central Government under Section 145(2) of the Act as it is notional in nature and not actually received by the Appellant. 12. That the AO / DRP erred in disallowing the entire claim of additional made under section 32(1)(ila) of the Act to the extent of INR 8,58,34,261 on an ad hoc and arbitrary basis. 13. That the AO/DRP erred in not appreciating that such claim of additional depreciation emanated out of the preceding year, when such plant and machinery was purchased and which claim was duly allowed in the immediately preceding year.

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dated 29.12.2025 mentions DIN No. ITBA/DRP/M/144C(5)/2025- 26/1084182580(1). Ld. DRP directions were uploaded and screenshot of ITB Portal mentions date as 30.12.2025. 5.1 Section 144C(13) of the Act provides that: “(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.”

5.2 A co-ordinate Bench in paragraphs 10 to 17 of its order dated 22.05.2024 in ITA No. 1733/Del/2022, titled as Honda R & D (India) P. ltd. Vs. ACIT, held as under: “10. Intimation letter for order under section 144C(5) dated 27.4.2022 in order dated 19.3.2024 in Nikon India Private Ltd. vs ACIT ITAT Delhi Bench observed as under:- "the System's Report clearly say that information regarding when the DRP order was received by DC/ACIT (NeA)-2(2)(2), Delhi is not known". 11. In Microsoft Corporation (India) Pvt. Ltd. vs DCIT order dated 28.2.2024 ITAT Delhi Bench observed that - "We find that section 13 of the Information Technology Act, 2000 has been subject matter of consideration by the Hon'ble Supreme Court in the case of Union of India Vs. G. S. Chatha Rice Mills reported (2021) 2 Supreme court Cases 209 dated 23.09.2020 as under:- "The dispatch of a record occurs when it enters a computer resource outside g the control of the originator. The time of receipt of the electronic record is fixed by the provisions of sub-section (2) of Section 13. When the addressee has designated a computer resource, receipt occurs when the record enters the computer resource so designated. Otherwise, where no computer resource is designated, the receipt of the record is when it is retrieved by the addressee. These provisions have been incorporated in the law to enable the dispatch and receipt of a record in the electronic form to be defined with precision with reference to both time and place."

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On a cohesive reading of provision of section 130 and 144B of the Act read together with section 13 of the Information Technology Act, 2000, we hold that the moment document is uploaded by the originator (which in the present case Id DRP) on 07.04.2022 in ITBA portal that dispatch from the side of the Id DRP is complete and since the entire documents are uploaded through electronic mode, the same happens seamlessly and accordingly, the receipt of the said document also becomes instantaneously. Hence, the date of receipt of DRP direction also happened on 07.04.2022 itself and the due date in terms of section 144C(13) would start reckoning from that date. Merely, because the NeAC had retained the document receipt from Id DRP in the form of DRP directions for few months in its kitty and the later transfer the same to the assessment unit on 02.05.2022, the due date in terms of section 144C(13) of the Act for framing the final assessment order by the Id AO does not get automatically extended. Hence, we have no hesitation to hold that the final assessment order ought to have been passed by the Id AO on or before 31.05.2022 in the instant case. Since, the same was done on 30.06.2022 which is barred by limitation." 12. Hon'ble Supreme Court in Civil Appeal No. 3427 of 2020 in the case of Sugandhi (dead) by Lrs. & ANR. Vs P. Rajkumar order dated 13.10.2020 held as under:- "It is often said that procedure is the handmaid of justice. Procedural and technical hurdles shall not be allowed to come in the way of the court while doing substantial justice. If the procedural violation does not seriously cause prejudice to the adversary party. courts must lean towards doing substantial justice rather than relying upon procedural and technical violation. We should not forget the fact that litigation is nothing but a journey towards truth which is the foundation of justice and the court is required to take appropriate steps to thrash out the underlying truth in every dispute. Therefore, the court should take a lenient view when an application is made for production of the documents under sub-rule (3)." 13. Hon'ble Supreme Court of India in Civil Appeal No. 1829 of 2023 in the case of the National Faceless Assessment Centre & Ors. Vs Automotive Manufacturers Private Limited order dated 21.03.2023 held as under:- "4. Having heard Shri Balbir Singh, learned ASG, appearing of the Revenue and Shri Dharan Gandhi, learned counsel appearing for the respondent- assessee and having gone through the impugned judgment and order passed by the High Court and considering the fact that the Assessment Order was passed without issuing a show cause notice with a draft Assessment Order, as was mandatorily required, under Section 1448 of the Act, as such, it cannot be said that the High Court has committed any error. However, at the same time, considering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take corrective measures and therefore the High Court ought to have remanded the matter to the Assessment Officer to pass a fresh order in accordance with law, after following the due procedure, as required under the law, namely, more particularly, under Section 144B of the Act."

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prescribed u/s 144C(13) of the Act. Therefore, final assessment order being barred by limitation is null and void. Ground of appeal No. 3 is accepted. Other grounds of appeal are left open. 6. In the result, the appeal filed by the appellant/assessee is allowed. Order pronounced in the open court on 07.08.2026

Sd/- Sd/- (M. BALAGANESH) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 07.08.2026 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI