K G DENIN LIMITED,METTUPALAYAM vs. DCIT, CORPORATE CIRCLE 1, COIMBATORE, COIMBATORE

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru erred in confirming / making the downward adjustment of Rs.18,98,652/- with respect to the sale of steam to the A.E.s without assigning proper reasons and justification.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru erred in rejecting the cost-plus Method adopted by the appellant company while computing the taxable total income for the assessment year under consideration without assigning proper reasons and justification.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that rejection of the cost-plus method in the absence of any cogent reasoning / basis was wrong, erroneous, invalid, incorrect and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the lack of reasons for rejecting the method adopted by the appellant company duly supported by the documentary evidences would vitiate the decision to assess the ALP 'at cost' in its entirety.

The NaFAC, Delhi / Dispute Resolution Panel - 2, Bengaluru failed to appreciate that the adoption of 'at cost' method as the most appropriate method to the factual matrix of the case for making the downward adjustment of AE Sales despite having accepted there being no appropriate methodology for ascertaining the same was wrong, erroneous, invalid, incorrect and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the quantification of downward adjustment of AE Sales by the TPO on various facets is wrong, erroneous, invalid, incorrect and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate having not examined the nature of the commodity dealt with, the erroneous re-computation of the ALP in terms of 'at cost' should be considered as bad in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that at the cost-plus method adopted by the appellant company at Rs.940 per ton as against the direct cost at Rs.926 per ton would vitiate the requirement for making the disputed downward adjustment in the computation of taxable total income.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that findings in relation thereto forming part of the impugned order under consideration were wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the draft scrutiny assessment order under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the directions issued by the Dispute Resolution Panel - 2, Bangalore were issued out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the final scrutiny assessment order under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the quantification of the sum(s) under dispute under various facets was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that there was no meaningful opportunity given at the stage of conducting and concluding draft assessment proceedings and further at the stage of preparing the final scrutiny assessment order and hence ought to have appreciated that the gross violation of the principles of natural justice would vitiate both the orders.

The NaFAC, Delhi / Dispute Resolution Panel 2, Bengaluru failed to appreciate that the entire computation of taxable total income was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. 18. The NaFAC, Delhi / Dispute Resolution Panel - 2, Bengaluru Delhi failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.

The assessee is a company promoted in 1992 for setting up the Denim Plant with the state of art equipments imported from Europe. The assessee filed a return of income for AY 2017-18 on 28.11.2017 declaring total income of Rs.41,37,89,030/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had specified domestic transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to complete the Arm's Length Price (ALP) of the specified domestic transactions. The assessee in the TP study has reported the following specified domestic transactions:

With regard to the specified domestic transactions pertaining to transfer of steam, the TPO sent a show cause notice as to how the assessee has arrived at the sale price of Rs. 940/-/unit when there exists no market for steam and that why the ALP of the steam cannot be determined at cost of Rs. 926/-/unit. The assessee submitted that since it is followed the cost plus

There is a delay of 1336 days in filing the appeal before us and the assessee filed a petition for condoning the delay along with an affidavit. It is stated that the assessee instead of filing the direct appeal before the Tribunal against the final assessment order dated 22.02.2022 has filed the appeal before the CIT(A) – 16, chennai on 23.03.2022. It is further stated that after the disposal of the wrong appeal by the CIT(A) vide order dated 30.07.2025, the appellant filed the captioned appeal before the Tribunal belatedly on 26.12.2025.The ld AR during the course of hearing drew our attention to the relevant documents in this regard. Accordingly the ld AR submitted that the delay is due to the bonafide mistake committed by the assessee in approaching the wrong forum and there is no intentional delay on the part of the assessee. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the

The Ld. Authorized Representative (AR) of the assessee submitted that the variation namely the downward adjustment of Rs. 14/unit is not permissible in as much as the variation incorporated in the orders of the lower authorities would defy the Rule 10CA(7) read with proviso to Section 92C(2) read with Section 92BA of the Act. The ld AR submitted the computation showing that the variance in the ALP is at 1.51% i.e. [(Rs.940- Rs.926)/Rs.926]. The Ld AR therefore submitted that the variation proposed/adopted by the lower authorities is less than the tolerable limit there shall not be any variation/disputed downward adjustment.

We have considered the rival submissions and perused the material available on record. The sole dispute relates to the downward transfer pricing adjustment made in respect of transfer of steam by the assessee's energy division to its fabric division. The assessee adopted a price of Rs.940 per unit as against Rs.926 per unit determined by the TPO resulting in a difference in ALP to the tune of Rs.14 per unit. It is the contention of the assessee that the variation between the transfer price adopted by it and the arm's length price determined by the TPO works out to 1.51%, which falls within the tolerance range prescribed under Rule 10CA read with the proviso to section 92C(2) of the Act. On consideration of the facts, we find merit in the contention of the assessee considering that as per NOTIFICATION NO. SO 1866(E) [NO.50/2017 (F.NO.500/1/2014-APA-II)], DATED 09-06-2017 the tolerance limit for other than wholesale business is fixed at 3%. In the present case the variation between the price adopted by the assessee and the price determined

In the result, the appeal of the assessee is allowed.