VAIBHAV GLOBAL LIMITED,JAIPUR vs. DCIT CC 4, JAIPUR

ITA 323/JPR/2026Status: DisposedITAT Jaipur23 September 2026AY 2019-2023 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Vaibhav Global Limited, filed appeals against the final assessment orders for Assessment Year (AY) 2019-20 and AY 2022-23. These orders were passed by the Assessing Officer (AO) under Section 147 read with Section 144C(13) and Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, respectively. The orders were in pursuance of directions issued by the Dispute Resolution Panel-1, New Delhi. The primary dispute pertains to transfer pricing adjustments concerning international transactions of sale and purchase with Associated Enterprises (AEs) and notional interest on outstanding receivables. For AY 2019-20, the total adjustment was Rs. 35,71,00,350, and for AY 2022-23, it was Rs. 79,42,97,751. The assessee is engaged in manufacturing and export of coloured gemstones and jewellery.

What did the Tribunal hold?

The Tribunal held that the TPO/AO erred in rejecting the Cost Plus Method (CPM) with GP/COP as the PLI, especially since it was accepted in prior years and upheld by the ITAT in the assessee's own cases. The Tribunal also found that the application of the Berry ratio with OP/VAE as the PLI under TNMM was inappropriate for a manufacturing entity and had been rejected in prior years. Regarding outstanding receivables, the Tribunal found the TPO's mark-up of 400 basis points over LIBOR to be ad hoc and not supported by comparable uncontrolled transactions. Citing the Rajasthan High Court's decision in CIT v. Vaibhav Gems Ltd., the Tribunal held that an ad hoc mark-up over LIBOR was improper. The Tribunal directed that for AY 2022-23, if any adjustment survives after verification, the interest rate should be six-month LIBOR plus 1.85% (as per a bank document for packing credit in foreign currency), and this rate should be applied only to invoices realized after 180 days. The AO/TPO was also directed to verify the credit period granted to non-AEs and compare it with the realization period from AEs. For AY 2019-20, the issue of receivables was to be re-verified. Crucially, the Tribunal directed the AO to recompute the book profit under Section 115JB for both years without adding any transfer pricing adjustment, including interest on receivables, as the DRP's direction was binding and TP adjustments are not permitted under Section 115JB. Grounds related to receivables for AY 2022-23 were allowed for statistical purposes. Ground 10 in both years concerning Section 115JB was allowed.

What were the issues?

1. Whether the Transfer Pricing Officer (TPO), Dispute Resolution Panel (DRP), and AO erred in proposing adjustments to the income on account of alleged differences in the Arm's Length Price (ALP) of international transactions with Associated Enterprises (AEs) and charging notional interest on outstanding receivables (Section 92C, 92D, 92E, 92F of the Act)? The assessee argued that their economic analysis, including the Most Appropriate Method (MAM) and filters applied under Section 92D read with Rule 10D, were rejected without cogent reasons, and the revenue failed to discharge the onus under Section 92C(3). They also contended that the Cost Plus Method (CPM) with Gross Profit Margin/Cost of Production (GP/COP) as the Profit Level Indicator (PLI) was wrongly rejected, especially as it was accepted in prior years and upheld in their own cases by the ITAT. The revenue, through the TPO and DRP, proposed adjustments based on their own analysis, including the Berry ratio with Operating Profit/Value Added Expenses (OP/VAE) as the PLI under the Transactional Net Margin Method (TNMM), which the assessee argued was inappropriate for a manufacturing entity and had been rejected in their own prior year cases. The assessee also disputed the treatment of outstanding receivables as a separate international transaction and the arbitrary computation of interest. 2. Whether the AO erred in adding transfer pricing adjustments to the book profits under Section 115JB of the Act, despite the DRP's direction to the contrary? The assessee contended that the DRP's direction was binding on the AO and that TP adjustments are not permitted to be added back for MAT calculation.

Which sections of the Income-tax Act were involved?

Section 147,Section 144C(13),Section 143(3),Section 144C(5),Section 92D,Section 10D,Section 92C(3),Section 92C,Section 92F,Section 115JB,Section 144C(10)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, JAIPUR

Before: Shri Kuldip Singh & Shri Prakash

PER : PRAKASH, ACCOUNTANT MEMBER:-

1.

These two appeals by the Assessee are directed against the final assessment orders passed by the Assessing Officer (hereinafter referred to as "the AO"), namely the order dated 22.01.2026 under section 147 read with section 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for the assessment year 2019-20 and the order dated 21.01.2026 under section 143(3) read with section 144C(13) of the Act for the assessment year 2022-23. Both orders were passed in pursuance of two separate directions dated 29.12.2025 issued by the learned Dispute Resolution Panel-1, New Delhi (hereinafter referred to as "th

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 147

All 48,773 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →