M/S. WITTMANN BATTERFELD INDIA P. LTD.,CHENNAI vs. DCIT, TPO-3(2), CHENNAI

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ITTPA 86/CHNY/2024Status: DisposedITAT Chennai20 May 2026AY 2021-214 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the TPO rejected the assessee's chosen CUP method and applied TNMM as the MAM, recomputing the margin and selecting fresh comparables, resulting in the TP adjustment. The Tribunal noted that the TPO did not consider the assessee's contentions regarding economic adjustments (customs duty, warranty provision, forex losses) and the submissions on interest on receivables. Consequently, the Tribunal decided that the entire issue of TP adjustment for margins and interest on receivables needed re-examination. The Tribunal remitted the issues back to the AO/TPO to be examined afresh, providing the assessee a reasonable opportunity of being heard. The ratio decidendi is that when an AO/TPO fails to consider material submissions and claims of the assessee regarding economic adjustments and interest on receivables, the matter should be remanded for fresh adjudication.

What were the facts?

The assessee, M/s. Wittmann Battenfeld India Pvt. Ltd., is appealing against the final assessment order for Assessment Year 2021-22, passed by the National Faceless Assessment Unit (AO) under Section 143(3) r.w.s 144C(13) of the Income Tax Act, 1961. The assessee, engaged in manufacturing special purpose machinery, industrial process control equipment, software development, and consultancy, declared Nil income for AY 2021-22. Due to international transactions, the case was referred to the Transfer Pricing Officer (TPO). The TPO proposed an upward margin adjustment of Rs. 2,93,24,486/- and an upward adjustment for interest on receivables. The assessee's objections to the Disputes Resolution Panel (DRP) were unsuccessful, leading to this appeal before the ITAT.

What were the issues?

1. Whether the Tribunal has the power to re-examine the Transfer Pricing (TP) adjustment made by the TPO, including the method adopted and the economic adjustments claimed by the assessee? Assessee's Contentions: - The assessee is not challenging the Most Appropriate Method (MAM) adopted by the TPO but seeks certain economic adjustments for computing margins for Arm's Length Price (ALP). - The assessee's margins are affected by customs duty, provision for warranty, and forex losses. Treating these as operating items in benchmarking is improper. - The comparables chosen by the TPO do not have these elements, necessitating adjustments under Rule 10B for correct ALP. - Submissions regarding interest on receivables were not properly considered. Revenue's Contentions: - The judgment records no specific contentions from the revenue regarding the issues raised by the assessee.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY.S

आदेश / O R D E R

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the final order of the assessment passed by National Faceless Assessment Unit (in short "AO") passed u/s. 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (in short "the Act") dated 07.10.2024 for Assessment Year (AY) 2021-22.

2.

The assessee is a company and engaged in the business of manufacturing of special purpose machinery, industrial process control

IT(TP)A No.86/Chny/2024 M/s. Wittmann Battenfeld India Pvt. Ltd. :- 2 -:

equipment, software development and providing engineering and technical consultancy. The assessee filed a return of income for AY 2021-22 on 11.03.2022 declaring Nil income. The case was selected for scrutiny and the statutory notices were duly served on the assessee. Since the assessee had international transactions, the A.O made a reference to the Transfer Pricing Officer (TPO) to complete the Arm's Length Price (ALP) of the international transactions. The TPO proposed upward margin adjustment to the tune of Rs.2,93,24,486/- and upward adjustment towards interest on receivables. The A.O passed the draft assessment order incorporating the TP adjustment. Aggrieved, the assessee filed objections before the Disputes Resolution Panel (DRP), who confirmed the TP adjustment. The assessee is in appeal before the Tribunal against the final order of assessment passed by the A.O pursuant to the direction of the DRP.

3.

We have heard the parties, and perused the material available on record. The assessee in the TP study has adopted CUP method as the Most Appropriate Method (MAM). The TPO rejected the TP study and applied Transaction Net Margin Method (TNMM) as MAM. The TPO recomputed the margin of the assessee accordingly and selected the comparables afresh to make a TP adjustment of Rs.2,93,24,486/-.The Ld. Authorized Representative (AR) of the assessee during the course of hearing submitted that the assessee is not contending the MAM adopted by the TPO but is only seeking certain economic adjustments while the computing the margins of the assessee for the purpose ALP. The Ld. AR further submitted that the assessee's margins are affected by the customs duty, provision for warranty and forex loses and treating these items as operating while computing the margins of the assessee will not be proper benchmarking exercise. The Ld. AR also submitted that

IT(TP)A No.86/Chny/2024 M/s. Wittmann Battenfeld India Pvt. Ltd. :- 3 -:

the comparables chosen by the TPO do not have these elements in their margins and therefore the above economic adjustments need to be allowed as per Rule 10B to arrive at the correct ALP. We notice from the TP study of the assessee that the assessee has adopted CUP method whereas the TPO has held TNMM as MAM. We further notice that the contentions with regard to the economic adjustments have not been considered by the TPO while arriving at the TP adjustment. We further notice that the submissions of the assessee with regard to interest on receivables have also not considered properly. Therefore, we are of the considered view that the entire issue of TP adjustment made towards margins and interest on receivables have to be re- examined after providing reasonable opportunity to the assessee to make submissions on the impugned adjustment. Accordingly, we remit the issues back to the AO/TPO to be examined afresh after giving a reasonable opportunity of being heard to the assessee. It is ordered accordingly.

4.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced on 20th day of May, 2026 at Chennai.

Sd/- Sd/- (एबी टी. वक�) (पदमावती यस) (ABY. T. Varkey) (Padmavathy.S) लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य �याियक �याियक सद�य �याियक �याियक सद�य सद�य / Judicial Member सद�य चे�नई/Chennai, �दनांक/Dated: 20th May, 2026. EDN, Sr. P.S आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant

IT(TP)A No.86/Chny/2024 M/s. Wittmann Battenfeld India Pvt. Ltd. :- 4 -:

2.

��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

Digitally signed by EJTADA DURGA EJTADA DURGA NARESH NARESH Date: 2026.06.01 14:36:18 +05'30'

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