AT INDIA AUTO PARTS PRIVATE LIMITED,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE- 1(1)(1), BENGALURU

PDF · subscribers
ITTPA 323/BANG/2026Status: DisposedITAT Bangalore02 July 2026AY 2022-202310 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the TPO was not justified in rejecting the transaction-by-transaction benchmarking adopted by the assessee and in applying TNMM at the entity level by aggregating various international transactions. The Tribunal found merit in the assessee's contention that the TPO had accepted the benchmarking for other international transactions, and the dispute was confined only to raw material and consumable purchases. Aggregating all transactions and subjecting the entire entity to TNMM analysis solely for examining the arm's length nature of purchase transactions was deemed unjustified. The Tribunal noted that the DRP's premise that all transactions were benchmarked under TNMM was factually incorrect, as the assessee used different methods for different transactions, which the TPO accepted for most. The Tribunal also found merit in the assessee's argument that import transactions of raw materials and consumables were independently benchmarkable using customs valuation accepted by SVB, which is a reliable external benchmark. Respectfully following the decision in the assessee's own case for AY 2018-19, the Tribunal set aside the orders of the lower authorities and restored the matter to the AO/TPO to benchmark the international transactions relating to purchase of raw materials and consumables by adopting the valuation accepted by the Customs Authorities/SVB and determine the ALP afresh.

What were the facts?

The assessee, M/s AT India Auto Parts Pvt. Ltd., filed an appeal against the order of the Dy. Commissioner of Income Tax, Circle – 1(1)(1), Bengaluru, for Assessment Year 2022-23. The assessee, engaged in manufacturing and selling automobile parts, filed its return showing NIL income. The assessee adopted the 'Other Method' for benchmarking import transactions of raw materials and consumables, relying on customs valuation. The TPO rejected this method, citing Rule 10AB of the Income Tax Rules, and instead adopted an aggregated entity-level TNMM analysis, proposing an upward adjustment of Rs. 7,80,64,806/- concerning raw material purchases. The DRP upheld the TPO's action.

What were the issues?

1. Whether the Tribunal had to decide if the TPO was justified in rejecting the 'Other Method' as the Most Appropriate Method (MAM) for benchmarking import transactions of raw materials and consumables, and instead adopting an aggregated entity-level TNMM analysis. Assessee's Contentions: - The TPO erred in rejecting the 'Other Method' without cogent reasons. - Valuation accepted by Customs Authorities under SVB proceedings is a reliable basis for determining ALP. - The TPO erred in aggregating all international transactions and benchmarking them at the entity level using TNMM; transactions should have been benchmarked on a transaction-by-transaction basis. - The issue is covered by the ITAT's decision in the assessee's own case for AY 2018-19 (IT(TP)A No. 892/Bang/2022), which directed benchmarking using customs valuation under the 'Other Method'. - There has been no change in the nature of business or transactions since AY 2018-19. Revenue's Contentions: - The TPO was justified in aggregating international transactions and applying TNMM as the MAM. - The DRP correctly held that res judicata does not apply to income-tax proceedings, making the earlier ITAT decision not binding. - The transactions were closely interlinked, making TNMM based on net profit margins a more appropriate measure.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 10AB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K

For Appellant: Ms. Tanmayee Rajkumar, Advocate
For Respondent: Smt. Nandini Das, CIT (DR)
Hearing: 08.06.2026Pronounced: 02.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER

IT(TP)A No. 323/Bang/2026 Assessment Year: 2022-23

M/s AT India Auto Parts Pvt. Ltd., The Dy. Commissioner of Vs. Bidadi Industrial Area, Income Tax, Bidadi, Ramanagara, Circle – 1(1)(1), Bengaluru Urban – 562 109. Bengaluru. PAN – AAKCA 3218 M APPELLANT RESPONDENT Assessee by : Ms. Tanmayee Rajkumar, Advocate Revenue by : Smt. Nandini Das, CIT (DR) Date of hearing : 08.06.2026 Date of Pronouncement : 02.07.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal has been instituted by the assessee against the order of the Ld. AO/TPO u/s 143(3) r.w.s. 144C(13) of the Act dt. 21.11.2025 for the AY 2022-23.

2.

In the memo of appeal, the assessee has raised as many as 12 grounds of appeal challenging the addition made on the issue of transfer pricing adjustment, which for the sake of brevity and convenience, we are not inclined to reproduce the same here.

IT(TP)A No.323/Bang/2026 Page 2 of 10

3.

At the outset, we note that out of all the grounds raised by the assessee, the assessee pressed only Ground Nos. 6 and 7, and the remaining grounds are either general in nature, not pressed, kept open or are academic/consequential in nature. Hence, the remaining grounds are dismissed as not pressed.

4.

Vide Ground Nos. 6 and 7, the assessee challenged the rejection of the Other Method as the Most Appropriate Method for benchmarking the import transactions and the adoption of an aggregated entity-level TNMM analysis instead of transaction-wise benchmarking.

5.

The brief facts of the case on hand are that the assessee, a private limited company, is engaged in the manufacturing and sale of automobiles parts. The assessee filed its ROI for the captioned AY offering an income to taxation to the tune of Rs. NIL. The assessee adopted the Other Method as the Most Appropriate Method for purchase of raw materials and purchase of consumables, spares and maintenance relying upon the customs documents issued by the custom officer wherein the valuation of raw material and consumables was carried out by the custom officer at the time of import of raw materials. The price at which these raw materials are purchased are equal to the price determined by the customs officer and for consumables it is less than the price determined by the customs officer and therefore by application of other method, the transactions are considered to be at arm’s length price.

5.1 However, the TPO was not satisfied with the ‘Other Method’ as ‘Most appropriate method’ adopted by the assessee as according to TPO, other method is applicable only when the price which has been charged

IT(TP)A No.323/Bang/2026 Page 3 of 10

or paid or would have been charged or paid for the same or similar uncontrolled transaction with or between non-AE. The TPO relied on Rule 10AB of the Income Tax Rules in this regard.

5.2 The TPO rejected the Other Method adopted by the assessee for benchmarking its international transactions and instead aggregated all the international transactions at the entity level by applying TNMM as the Most Appropriate Method. Consequently, the TPO proposed an upward transfer pricing adjustment of Rs. 7,80,64,806/- only with respect to purchase of raw materials.

6.

Aggrieved, assessee filed objections before the DRP.

7.

Before the Ld. DRP, the assessee submitted that the Ld. TPO erred in rejecting the Other Method adopted by the assessee as the Most Appropriate Method (MAM) for benchmarking the international transactions relating to purchase of raw materials and consumables, spares and maintenance, without assigning any cogent reasons. It was contended that the valuation accepted by the Customs Authorities under the SVB proceedings constituted a reliable basis for determining the ALP of such transactions and, therefore, the Other Method ought to have been accepted as the MAM. The assessee further submitted that the Ld. TPO erred in aggregating all the international transactions and benchmarking them at the entity level by applying TNMM. According to the assessee, the impugned transactions were capable of being separately benchmarked and, therefore, ought to have been examined on a transaction-by- transaction basis instead of adopting an aggregated entity-level approach.

IT(TP)A No.323/Bang/2026 Page 4 of 10

7.1 Further, the assessee submitted that the issue relating to benchmarking of the international transactions pertaining to purchase of raw materials and purchase of consumables, spares and maintenance stands covered in its favour by the order of the Hon'ble ITAT Bangalore Bench in the assessee's own case in IT(TP)A No. 892/Bang/2022 relevant for A.Y. 2018-19. It was submitted that the Hon'ble Tribunal had directed the AO/TPO to benchmark the aforesaid international transactions by adopting the valuation determined by the Customs Authorities under the Special Valuation Branch (SVB) proceedings and accordingly determine the Arm's Length Price (ALP).

7.2 The assessee further submitted that there has been no change in the nature of business carried on by the assessee, the nature of the relevant international transactions, or its functional profile during the year under consideration as compared to A.Y. 2018-19. Therefore, following the decision of the Hon'ble ITAT in the assessee's own case the international transactions relating to purchase of raw materials and purchase of consumables, spares and maintenance ought to be benchmarked by adopting the "Other Method" as the MAM.

7.3 Accordingly, it was contended that the valuation accepted by the Customs Authorities through the SVB order represents a reliable benchmark for determining the arm's length nature of the transactions. The assessee therefore requested that the ALP of the impugned international transactions be determined by adopting the value accepted by the Customs Authorities in the SVB proceedings, in line with the directions of the Hon'ble ITAT in the assessee's own case.

IT(TP)A No.323/Bang/2026 Page 5 of 10

7.4 However, the Ld. DRP upheld the action of the TPO in aggregating all the international transactions and adopting TNMM as the Most Appropriate Method. The Ld. DRP observed that the assessee was not merely a distributor and that the international transactions relating to purchase of raw materials, purchase of fixed assets and sale of traded/finished goods were closely interlinked and therefore could not be reliably benchmarked in isolation. According to the Ld. DRP, TNMM being based on net profit margins provided a more appropriate measure of the arm's length nature of such transactions.

7.5 The Ld. DRP further held that the principle of res judicata does not apply to income-tax proceedings and, therefore, the decision of the Hon'ble ITAT in the assessee's own case for an earlier year was not binding for the year under consideration. Accordingly, the Ld. DRP confirmed the approach of the Ld. TPO in aggregating the transactions and applying TNMM as the MAM.

8.

Aggrieved by the actions of Ld. DRP/ AO, the assessee filed an appeal before us.

9.

The Ld. AR before us has filed a paper book running from page Nos. 1 to 2540 and submitted that the authorities below erred in rejecting the transaction-by-transaction approach adopted by the assessee and in applying TNMM at the entity level by aggregating all international transactions, including purchase of raw materials and consumables. It was contended that the issue is squarely covered in favour of the assessee by the decision of the Hon'ble ITAT in the assessee's own case for A.Y. 2018- 19 in IT(TP)A No. 892/Bang/2022, wherein the Tribunal held that the

IT(TP)A No.323/Bang/2026 Page 6 of 10

international transactions relating to purchase of raw materials, consumables, spares and maintenance ought to be benchmarked by adopting the valuation determined by the Customs Authorities under the Special Valuation Branch (SVB) proceedings under the Other Method.

9.1 The assessee submitted that there being no material change in the nature of transactions or business profile of the assessee during the year under consideration, the ratio laid down by the Coordinate Bench in the assessee's own case is directly applicable. Accordingly, it was argued that the Ld. TPO was not justified in rejecting the Other Method and aggregating all international transactions for benchmarking under TNMM. As such, the ALP of the impugned transactions ought to be determined by adopting the customs valuation accepted by the SVB authorities.

10.

The Ld. DR, on the contrary, vehemently supported the orders of the lower authorities and submitted that the TPO was justified in aggregating the international transactions and applying TNMM as the Most Appropriate Method. It was contended that the transactions relating to purchase of raw materials, consumables and sale of finished goods were closely interlinked and, therefore, could not be benchmarked in isolation. The Ld. DR further submitted that each assessment year is separate and the decision rendered in the assessee's own case for an earlier year does not automatically govern the year under consideration. Accordingly, the action of the Ld. TPO and the directions of the Ld. DRP were prayed to be upheld.

11.

We have considered the rival submissions of both the parties and perused the materials available on record. The key dispute before us is

IT(TP)A No.323/Bang/2026 Page 7 of 10

whether the TPO was justified in rejecting the transaction-by-transaction benchmarking adopted by the assessee and in applying TNMM at the entity level by aggregating various international transactions.

11.1 On a careful perusal of the transfer pricing order, we find merit in the contention of the assessee that the TPO had accepted the benchmarking adopted by the assessee in respect of various other international transactions and the dispute was confined only to the international transactions relating to purchase of raw materials and consumables. However, while determining the ALP of the said transactions the TPO aggregated all international transactions and applied TNMM at the entity level.

11.2 In our considered view, once the benchmarking methodology adopted by the assessee in respect of other international transactions has been accepted and no adjustment has been proposed thereto, there was no justification for aggregating all the transactions and subjecting the entire entity to TNMM analysis merely for examining the arm's length nature of the purchase transactions under dispute.

11.3 We further find that the Ld. DRP proceeded on the premise that all international transactions were benchmarked under TNMM and were required to be aggregated on account of their interlinked nature. However, the record clearly demonstrates that the international transactions were benchmarked by the assessee using different methods depending upon the nature of the transaction and the TPO had accepted the same in respect of all transactions except purchase of raw materials and

IT(TP)A No.323/Bang/2026 Page 8 of 10

consumables. Therefore, the very foundation on which the Ld. DRP upheld the aggregation approach is factually incorrect.

11.4 We also find merit in the contention of the assessee that the import transactions relating to raw materials and consumables were independently capable of being benchmarked on the basis of customs valuation accepted by the Special Valuation Branch (SVB). The valuation determined by the Customs Authorities is arrived at after examining whether the relationship between the parties has influenced the import price and therefore constitutes a reliable external benchmark. In the absence of any material brought on record by the Revenue to demonstrate that such customs valuation is unreliable or unsuitable, the same cannot be disregarded without cogent reasons.

11.5 At this stage, it is pertinent to note that an identical issue arose in the assessee's own case for A.Y. 2018-19 in IT(TP)A No. 892/Bang/2022. The Coordinate Bench after noticing that the Ld. TPO had accepted the benchmarking of other international transactions and that only the purchase transactions were disputed held that the Ld. DRP was not correct in proceeding on the footing that all transactions were benchmarked under TNMM. The Tribunal further held that the international transactions relating to purchase of raw materials, consumables and spares ought to be benchmarked by adopting the valuation accepted by the Customs Authorities and accordingly restored the matter to the file of the AO/TPO with such direction. The relevant para is reproduced below: 6.3 In the case of GP Global Energy (P.) Ltd. (supra) the Delhi Bench of Tribunal held as under: "7. Insofar as bench marking the international transactions using customs data is concerned we sustain the order of the Ld: CIT(Appeals) as the Ld. CIT(A) observed that the Chennai Bench of the Tribunal in the case of Coastal Energy Pvt. Ltd. v. ACIT (supra) held that the valuation was made by custom authorities

IT(TP)A No.323/Bang/2026 Page 9 of 10

by assigning values to import goods on the basis of scientifically formulated methods as they were responsible for making fair assessment value of the imported goods according to internationally accepted protocols. Therefore, we see no infirmity in the order of the Ld. CIT(A) on this issue. Ground no. 1 of the Revenue is rejected." 6.4 In view of the above precedents, we direct the AO to benchmark the international transactions of purchase of raw materials, consumables and spares by adopting the valuation made by custom authorities in respect of these goods and to determine the ALP. Accordingly, the issue in dispute is remitted to the file of AO for de novo consideration.

11.6 The Revenue has not brought to our notice any material changes in facts or law vis-à-vis the year considered by the Coordinate Bench. Therefore, respectfully following the decision rendered in assessee's own case for A.Y. 2018-19, we hold that the Ld. TPO was not justified in rejecting the Other Method and in aggregating the international transactions by applying TNMM at the entity level. Accordingly, we set aside the orders of the lower authorities on this issue and restore the matter to the file of the AO/TPO with a direction to benchmark the international transactions relating to purchase of raw materials and consumables by adopting the valuation accepted by the Customs Authorities/SVB and determine the ALP afresh in accordance with law after providing adequate opportunity of hearing to the assessee. Thus, the grounds raised by the assessee are allowed for statistical purposes. 12. In the result, the appeal of assessee is allowed for statistical purposes.

Order pronounced in court on 2nd day of July, 2026 Sd/- Sd/- (SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 2nd July, 2026 / vms /

IT(TP)A No.323/Bang/2026 Page 10 of 10

Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore

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 →