TBEA GREEN ENERGY (INDIA) PRIVATE LIMITED,RAMNAGAR, KARNATAKA vs. ACIT, CENTRAL CIRCLE 1, VADODARA, GUJARAT

ITA 592/AHD/2026Status: DisposedITAT Ahmedabad01 October 2026AY 2022-202313 pages
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What were the facts?

The assessee, TBEA Green Energy (India) Private Limited, is appealing against the Final Assessment Order dated 26/12/2025, passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, for Assessment Year 2022-23. This order was passed pursuant to directions from the Dispute Resolution Panel (DRP) dated 08/12/2025. The assessee, engaged in solar energy products, reported a loss of Rs. 5,34,17,471/- for the year. The assessment proceedings involved a reference to the Transfer Pricing Officer (TPO) concerning international transactions with Associated Enterprises (AEs). Key disputes involve transfer pricing adjustments related to raw material purchase and finished goods sale, and interest on External Commercial Borrowings (ECB). The amount in dispute for the manufacturing segment adjustment is Rs. 4,59,64,702/-, and for ECB interest is Rs. 14,37,784/-.

What did the Tribunal hold?

The Tribunal decided the appeal as follows: Regarding Ground Nos. 3, 3.1 to 3.3 and Ground Nos. 4 & 4.1 (transfer pricing adjustment for manufacturing segment), the Tribunal allowed the grounds for statistical purposes. It set aside the order of the lower authorities and restored the matter to the Assessing Officer/TPO for re-determination of the Arm's Length Price (ALP). The Tribunal noted that while regulatory ceilings do not negate the need for benchmarking, the TPO's rejection of the assessee's claims at the threshold without examining comparability adjustments was not tenable. Rule 10B(3) requires adjustments to eliminate material effects of differences. The TPO is directed to consider the assessee's submissions, determine if differences materially affect profit margins, grant quantified comparability adjustments, and re-evaluate the final set of comparables through functional comparability analysis. The assessee will be granted a reasonable opportunity of being heard. Regarding Ground No. 5, 5.1 to 5.4 (ECB interest adjustment), the Tribunal allowed the grounds for statistical purposes and restored the issue to the Learned TPO for fresh determination. The Tribunal found that while RBI guidelines do not override transfer pricing provisions, the TPO's approach of selecting a single comparable with a fundamentally different credit profile, scale, and risk attributes was also not tenable. The TPO is directed to re-determine the ALP after considering the assessee's submissions and granting a reasonable opportunity of being heard. Regarding Ground No. 6 (disallowance on lease rent equalization reserve), the ground was dismissed as not pressed. Regarding Ground Nos. 7, 8 & 9 (initiation of penalty proceedings), these grounds were dismissed as premature, as penalty proceedings are separate from assessment proceedings. Regarding Ground No.1&10 (general grounds), these were dismissed as general in nature.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the DRP erred in sustaining the transfer pricing adjustment of Rs. 4,59,64,702/- regarding the purchase of raw material and sale of finished goods, specifically concerning the re-computation of the Profit Level Indicator (PLI) and the Arm's Length Margin (ALM). - Assessee's contention: The DRP erred in sustaining the TPO's re-computation of PLI (OP/OR) as -10.17% and ALM as 5.31%, rejecting the assessee's PLI of 7.78%. The assessee argued that excluding depreciation and customs duty from operating costs was appropriate under Rule 10B(3) due to extraordinary circumstances like capacity underutilization and dissimilar import duties. The assessee also contended that the TPO erred in rejecting its chosen comparable companies (Waaree Energies Limited, Elite Power System India Private Limited, etc.) and selecting a new set. - Revenue's contention: The DRP correctly upheld the TPO's re-computation of OP/OR as -10.17% and ALM as 5.31%, stating that the assessee's use of cash PLI was inappropriate and an artificial attempt to exclude key operating expenses. The revenue argued that depreciation and customs duty are operating expenses. 2. Whether the DRP erred in sustaining the downward adjustment of Rs. 14,37,784/- in respect of interest paid on External Commercial Borrowings (ECB) to its AE, Innovation Sustainable Energy, Hong Kong. - Assessee's contention: The DRP erred in sustaining the TPO's ALM of 3.08% instead of the assessee's applied rate of 5.79%. The assessee argued that the ECB loan was transferred post-BTA and the interest rate complied with RBI Master Circular guidelines. The TPO's selection of Reliance Industries Ltd. as a sole comparable via Loan Connector database was flawed due to vastly different business and risk profiles. - Revenue's contention: The DRP correctly upheld the TPO's determination of an arm's length rate of interest of 3.08%. The revenue argued that RBI regulatory ceilings do not automatically determine arm's length price under Section 92C, and the TPO's approach was correct. 3. Whether the DRP erred in sustaining the disallowance on account of excessive claim of interest on lease rent equalization reserve. 4. Whether the Assessing Officer erred in initiating penalty proceedings under Sections 270A(2), 270A(9)(a), and 271AAD of the Act.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144C(5),Section 92CA(1),Section 92C,Section 10B(3),Section 270A(2),Section 270A(9)(a),Section 271AAD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, D” BENCH, AHMEDABAD

Per Rahul Chaudhary, Judicial Member:

1.

The present appeal preferred by the Assessee is directed against the Final Assessment Order, dated 26/12/2025, passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2022-23, passed by the Assessing Officer pursuant to the directions issued by the Hon’ble Dispute Resolution Panel-2, Mumbai -3 [hereinafter referred to as the ‘DRP’] dated 08

The order continues below.

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