HERAEUS TECHNOLOGIES INDIA PRIVATE LIMITED, GAUTAM BUDDHA NAGAR,GAUTAM BUDDHA NAGAR vs. DCIT, CIRCLE 10(1), DELHI, DELHI

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ITTPA 5920/DEL/2024Status: DisposedITAT Delhi27 May 2026AY 2021-2212 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal, after considering the rival contentions and the submissions, particularly the need for additional evidence regarding Intra Group Services and the improper appreciation of the trading segment, decided to set aside the impugned order and remit the matter to the file of the AO/TPO for fresh adjudication. The Tribunal noted that Grounds of Appeal Nos. 1 and 3 (Intra Group Services) were partly allowed for statistical purposes, indicating a need for re-examination. Similarly, Grounds of Appeal Nos. 2, 6, and 7 (Sensor Assembling Segment) were also partly allowed, as the rejection of RPM and adoption of TNMM by the TPO required fresh scrutiny. Ground of Appeal No. 5 (Business Support Services) was also partly allowed, with the matter restored to the TPO for a fresh decision due to issues with filter modifications, comparable selection, and risk adjustment. Ground of Appeal No. 8, concerning the non-issuance of specific directions by the DRP, was left open. The overarching decision was to remand the entire matter to the AO/TPO for a fresh adjudication after providing a fair opportunity of hearing to the assessee. The ratio decidendi is that where there are issues of additional evidence, improper appreciation of facts, and procedural irregularities in directions, the matter should be remitted for fresh consideration.

What were the facts?

The assessee, Heraeus Technologies India Private Limited, filed an appeal against the order dated 23.10.2024 passed by the Assessing Officer/Assessment Unit under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961, for Assessment Year 2021-22. The assessee had declared a total income of Rs. (-) 5,02,70,814/-. The case was selected for scrutiny due to high-risk international transactions. The Transfer Pricing Officer (TPO) proposed a total TP adjustment of Rs. 12,34,99,427/-. The assessee filed objections before the Dispute Resolution Panel (DRP), which upheld all additions. The Assessing Officer (AO) then passed the final assessment order. The assessee is aggrieved by this order and has filed the present appeal.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the DRP erred in confirming the AO/TPO's rejection of the assessee's selected method (CUP) for Intra Group Services and calculating the arm's length price (ALP) using the CUP method, resulting in a 'nil' value and an adjustment of Rs. 7,36,05,494/-. 2. Whether the DRP erred in confirming the AO/TPO's rejection of the assessee's selected method (Resale Price Method - RPM) for the sensor assembling segment and calculating ALP using OP/OR under TNMM, leading to an adjustment of Rs. 4,85,53,815/-. 3. Whether the DRP erred in confirming the AO/TPO's adjustment of Rs. 10,74,672/- for business support services. 4. Whether the DRP erred in confirming the AO/TPO's adjustments for international transactions and related party transactions, including an adjustment of Rs. 12,32,33,981/- for international transactions and Rs. 4,85,53,815/- for transactions with related parties. 5. Whether the DRP erred in confirming the AO/TPO's benchmarking analysis with non-comparable companies and rejecting the comparables provided by the assessee. 6. Whether the DRP erred in not providing specific directions to the TPO/AO as required under Section 144C of the Act. Assessee's Contentions: The assessee argued that the DRP/AO/TPO erred in rejecting its chosen methods (CUP, RPM, TNMM) and comparables. It contended that its benchmarking working should be accepted, leading to the deletion of adjustments. Specifically, for Intra Group Services, it sought acceptance of its benchmarking and remittance for fresh adjudication with additional evidence. For the sensor assembling segment, it argued RPM was the most appropriate method. For business support services, it claimed the TPO's filter modifications were unfounded, comparables inappropriate, and risk adjustment wrongly declined. The assessee also argued that the DRP failed to issue specific directions under Section 144C. Revenue's Contentions: The judgment records no specific contentions from the Revenue's side, other than the CIT(DR) having no objection to the assessee's submissions.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92C(3),Section 144C(5)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I” BENCH, DELHI

Before: SHRI S. RIFAUR RAHMAN & SHRI VIMAL KUMAR

For Respondent: Shri Dharm Veer Singh, CIT(DR)
Hearing: 18.05.2026Pronounced: 27.05.2026

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IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER IT (TP)A No. 5920/Del/2024, Assessment Year: 2021-22 Heraeus Technologies Vs. Deputy Commissioner of India Private Limited, Income-tax, 111, ECOTECH-12, Circle 10(1), Gautam Buddha Nagar, New Delhi Greater Noida Uttar Pradesh �थायीलेखासं./जीआइआरसं./PAN/GIR No: AACCH6403R Appellant .. Respondent

Appellant by : Sh. Rohan Sogani, AR Sh. Naman Maloo, AR Respondent by : Shri Dharm Veer Singh, CIT(DR)

Date of Hearing 18.05.2026 Date of Pronouncement 27.05.2026

O R D E R PER VIMAL KUMAR, JM: The appeal filed by the assessee is against order dated 23.10.2024 passed by the ld. Assessing Officer/Assessment Unit under section 143(3)

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r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment year (‘AY’) 2021-22. 2. Brief facts of the case are that the assessee filed return of income on 12.03.2022 declaring total income of Rs. (-) 5,02,70,814/-. The case was selected for scrutiny under CASS for the reason High risk International Transactions/ (Entity reported in CbCR data) (T.P.Risk Parameter). Notice under section 143(2) of the Act dated 28.06.2022, notice u/s 142(1) of the Act dated 07.11.2023 were issued to the assessee, the assessee submitted replies. The Transfer Pricing Officer/DC/ACIT TP 2(1)(1), New Delhi vide order dated 30.10.2023 u/s 92C(3)of the Act proposed total TP adjustment of Rs. 12,34,99,427/-. After that show cause notice dated 30.11.2023 was issued. The assessee was informed that he had an option to file objection before DRP against draft assessment order if he does not agree with draft assessment order making addition. The Draft assessment order dated 12.12.2023 was issued.

2.1 On 10.01.2024, the assessee filed objection before Dispute Resolution Penal-2, New Delhi against draft assessment order. The Dispute Resolution Penal-2, New Delhi issued direction u/s 144C(5) of the Act on

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28.09.2024 wherein all additions of Rs. 12,34,99,427/- made by TPO were upheld and asessee’s plea on all grounds were rejected. As per directions of DRP, ld. AO passed final assessment order dated 23.10.2024.

3.

Being aggrieved, the appellant/assessee preferred present appeal on following grounds:

“1. In the facts and circumstances of the case and in law, Id. DRP has erred in confirming the action of the Id. AO/TPO in rejecting the method selected by assessee company and calculating arm's length price using CUP method without appreciating the nature of transaction and calculating the value as "nil". The action of the Id. DRP and Id. AO/TPO is illegal, unjustified, and arbitrary, contrary to the facts of the case. Relief may please be granted by accepting the benchmarking working as done by the assessee and thereby deleting the entire adjustment made to the income of the assessee. 2. In the facts and circumstances of the case and in law, ld. DRP has erred in confirming the action of the ld. AO/TPO in rejecting Resale price method selected by assessee company as most appropriate method and calculating arm's length price using OP/OR as PLI under TNMM method without appreciating the nature of business of assessee and recalculating the margin without any basis. The action of the Id. DRP and Id. AO/TPO is illegal, unjustified, and arbitrary, contrary to the facts of the case. Relief may please be granted by accepting the benchmarking working as done by the assessee and thereby deleting the entire adjustment made to the income of the assessee. 3. In the facts and circumstances of the case and in law, Id. DRP has erred in confirming the action of the Id. AO/TPO in making an adjustment of Rs.7,36,05,494 to the total income of assessee company on account of intra group services. The action of the Id. DRP and Id. AO/TPO is illegal, unjustified, and arbitrary, contrary to the facts of the case. Relief may please be granted by accepting the benclunarking

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working as done by the assessee and thereby deleting the entire adjustment made to the income of the assessec. 4. In the facts and circumstances of the case and in law, Id. DRP has erred in confirming the action of the Id. AO/TPO in making adjustment of Rs. 12,32,33,981 to the income of assessee on account of international transaction. The action of the Id. DRP and Id. AO/TPO is illegal, unjustified, arbitrary, contrary to the facts of the case. It is, therefore, prayed that the entire adjustment of Rs. 12,32,33,981 made to the income of the assessee be deleted. alogies India Pr 5. In the facts and circumstances of the case and in law, Id. DRP has erred in confirming the action of the Id. AO/TPO in making adjustment of Rs. 10,74,672 to the income of assessee on account of business support service transaction with related party. The action of the Id. DRP and Id. AO/TPO is illegal, unjustified, and arbitrary, contrary to the facts of the case. Relief may please be granted by accepting the benchmarking working as done by the assessee and thereby deleting the entire adjustment made to the income of the assessee. 6. In the facts and circumstances of the case and in law, Id. DRP has erred in confirming the action of the Id. AO/TPO in making an adjustment of Rs.4,85,53,815 to the total income of assessce on account of transaction with related party. The action of the Id. 6 DRP and Id. AO/TPO is illegal, unjustified, and arbitrary, contrary to the facts of the case. Relief may please be granted by accepting the benchmarking working as done by the assessee and thereby deleting the entire adjustment made to the income of the assessec 7. In the facts and circumstances of the case and in law, ld. DRP has erred in confirming the action of the Id. AO/TPO for carrying out Benchmarking analysis with companies that were not comparable with the functioning of assessee company and rejecting the comparable provided by assessee without any 7 cogent reason. The action of the Id. DRP and Id. AO/TPO is illegal, unjustified, and arbitrary, contrary to the facts of the case. Relief may please be granted by accepting the benchmarking working as done by the assessee and thereby deleting the entire adjustment made to the income of the assessee. 8. In the facts and circumstances of the case and in law, ld. DRP has erred in not providing specific directions to the Id. TPO/AO, as required under Section 144C, and leaving it to the Id. TPO to ascertain the comparable companies based on the functioning of the assessee

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company. The action of the Id. DRP is illegal, unjustified, and arbitrary, contrary to the legal position as set out in Section 144C of the Income Tax Act, 1961 9. Assessee craves to add, amend or alter any of the grounds on or before the hearing.” 4. Ld. Authorized Representative for appellant/assessee submitted the

gist of submissions consisting of 21 pages. Ground of Appeal Nos. 1

and 3 are regarding Intra Group Services adjustment of Rs.

7,36,05,494/-. The Assessee company received Intra-group Services

(‘IGS’) from two associated enterprises (‘AEs’) of the Heraeus group,

as follow:

S. Associated Country Nature of Value (Rs.) TPO’s action No. Enterprise transaction 1. Heraeus Holding Germany Payment of 4,27,82,995 Adjustment- GmbH (“HH”)- Shared Service ALP Leading Expenses (Group determined management Functions) Nil company of the Heraeus group 2. Heraeus Electro- Belgium Availing of 3,08,22,499 Adjustment- Nite Support Services ALP International (SSC services + determined NV- Global R&D / Nil business unit for production- Electro-Nite technology licensing + manufacturing support) Total adjustment 7,36,05,494 [TPO Page 1] [TPO Page 2] [TPO Page 48] [AO Page 15]

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Ld. Authorized Representative for the appellant/assessee further submitted that additional evidence in support of grounds of appeal Nos. 1 and 3 regarding Intra Group Services is necessary. The additional evidence regarding Intra Group Services under rule 29 of the ITAT Rules, 1963 may be taken on record and the matter may be remitted to the file of ld. TPO for a fresh adjudication.

4.1 Ground of Appeal Nos. 2,6 and 7 are regarding Sensor assembling segment adjustment of Rs. 4,85,53,815/-. Ld. TPO failed to appreciate that

(i) the assessee had applied RPM with GP/Sales as PLI; assessee’s GP/Sales of 31.43 falls within the 35th -65th percentile arm’s length range of 25.49%-37.33% (7 functionally comparable companies; manufacturing-sales > 75% proxy filter).

(ii) Ld. TPO rejected RPM and adopted TNMM (OP/OR); computed the margin shortfall on the entire Assembling Division-OR Rs. 62,64,49,987/OC Rs. 71,35,05,185/--- produced a Division-level

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difference of Rs. 16,74,53,181/-; then scaled it down by 29.03% (F/A

factor) to Rs. 4,85,53,815/-.

(iii) Ld. DRP confirmed action of TPO and held RPM unreliable

because of selling/ installation/ “value-addition” functions; declined

capacity- utilization adjustment.

Ld. TPO failed to appreciate that RPM is the most appropriate method

for following circumstances;

Srl. Circumstances for RPM (Rule 10B(1)(b)) Position of HTIPL Met No. 1. Tested party purchases from its AE and resells Imports semi-knockdown  to independent customers – directionality from four AEs and resells to matters final customers  2 The reseller adds no significant value Assembly from semi-knock down kits without significant value addition; assessee’s consistent position 3. The reseller owns no valuable intangible and FAR: no intangible asset;  builds no marketing intangible advertisement & business promotion for the entire company is only Rs. 2,58,508 4. The CUP method is not applicable No CUP avaible or in dispute  5. A reliable gross-margin comparison can be 7-company functionally  made- functional comparability matters more comparable set; GP/Sales than product comparability (OECD paras 31.43% within range 2.29-2.30, quoted by the TPO himself 6. The method is applied consistently to like The TPO accepted RPM/ GP-  transactions Sales for the two trading purchase transactions

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4.2 Ground of Appeal No. 5 is regarding business support services- adjustment of Rs. 10,74,672.

(i) the Assessee had applied TNMM with OP/OC as PLI; HTIPL’s OP/OC of 7% is within the 35th -65th percentile arm’s length range of 1.33% - 15.18% (12 comparables, median 4.89%)

(ii) Ld. TPO failed to appreciate that TPO modified the assessee’s filters (rejected the employee-cost > 50% filter; raised the export filter to ≥ 75%; required service income ≥ 75%); built a fresh set of 12 comparables with median OP/OC of 21.17% (range 6.41% -38.81%); computed ALP using OR Rs. 96,37,380 / OC Rs. 90,59,584 → ALP price Rs. 1,09,77,498; adjustment Rs. 13,40,118/-. The adjustment was recomputed to Rs. 10,74,672 [AO Page 15] (difference Rs. 2,65,446 - reconciliation to be confirmed against the final assessment order)

(iii) Ld. DRP confirmed the filter / comparable selection; declined the risk adjustment (Ground 7) for want of quantitative basis.

Ld. Assessee submitted that (i) the TPO’s filter modifications are unfounded (section 3.2). (ii) The comparable set is inappropriate

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(Section 3.3). (iii) The risk adjustment was wrongly declined (section

3.4).

4.3 Ground of Appeal No. 8 is regarding non-issuance of specific

directions by DRP u/s 144C of the Act for the following instances:

S. No. Issue before the DRP Direction given by the Hon’ble DrP (Verbatim) 1. Search methodology and database used to "the Panel directs the identify Business Support Services AO/TPO to clearly spell out comparables the search methodology including the database over which the filters have been applied to select the comparables, and make the same a part of the final order." 2. Maa Business Solutions Pvt Ltd ----whether "The TPO is however directed the comparable passes the RPT filter to verify if this comparable passes RPT filter." 3. Sutherland Global Services Pvt " Ltd whether The TPO is however directed the comparable filter." passes the RPT filter to verify if this comparable passes RPT 4. Margin-computation errors comparables The Panel directs the AO/TPO (Ground 5 before the DRP) to verify the same and rectify the computational errors, if any. 5. Search methodology and database used to "the Panel directs the identify Sensor Assembling Segment AO/TPO to clearly spell out comparables the search methodology including the database over which the filters have been applied to select the comparables, and make the same a part of the final order." 6. JNS Instruments Ltd - whether the The Panel directs the TPO to comparable passes persistent loss filter and reverify if this comparable other filters of the TPO passes all the filters applied

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by him including persistent loss filter. If yes, this comparable should be included in the comparable set.

5.

The Ld. Departmental Representative had no objection to the submissions made by Ld. Authorized Representative for assessee.

6.

From examination of record in light of aforesaid rival contention, especially submission of additional evidences regarding Intra Group Services and improper appreciation of trading segment of the assessee, which requires fresh adjudication by the Departmental Authorities.

7.

Accordingly, Grounds of appeal No. 1 and 3 are partly allowed for statistical purposes.

7.1 Ground of Appeal Nos. 2,6 & 7 regarding Sensor Assembling Segment Adjustment of Rs. 4,85,53,815/-. Ld. TPO rejected RPM application by the assessee and adopted TNMM method. The assessee claims that RPM is the most appropriate method for circumstances involved in the case. The matter requires to be looked into afresh.

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Accordingly, Ground of Appeal Nos. 2, 6 & 7 are partly allowed for statistical purposes.

7.2 Ground of Appeal No. 5 regarding Business Support Services- Adjustment of Rs. 10,74,672/-. The assessee has claimed that TPO’s filtered modification are unfounded, the comparable selected are inappropriate and the risk adjustment was wrongly declined. Therefore, it is considered expedient to restore the matter to the file of Ld. TPO for a fresh decision. Accordingly, Ground of Appeal No. 5 is partly allowed for statistical purposes.

7.3 Ground of Appeal No. 8 pertains to the non-issuance of specific directions u/s 144C of the Act despite specific issues before the Ld. DRP, which is left open.

8.

Therefore, in the interest of justice, it is considered expedient to set aside the impugned order dated 23.10.2024 and remit the matter to the file of Ld. AO/ TPO for a fresh adjudication of the matter in accordance with law, after affording fair opportunity of hearing to the appellant/assessee.

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9.

In the result, the appeal filed by the appellant/assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 27.05.2026

Sd/- Sd/- (S. RIFAUR RAHMAN) (VIMAL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27.05.2026 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

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