MRF LTD.,CHENNAI vs. DCIT LTU-2, CHENNAI

ITTPA 68/CHNY/2018Status: DisposedITAT Chennai28 February 2025AY 2014-1533 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, M/s. MRF Limited, filed its return of income for AY 2014-15 on 28.11.2014, declaring a total income of Rs.1054,17,99,530/-. The case was selected for scrutiny, and the Assessing Officer (AO) referred certain Specified Domestic Transactions (SDT) to the Transfer Pricing Officer (TPO). The TPO ordered a downward adjustment of Rs.66,94,650/-. The AO passed a draft assessment order, and the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP issued directions on 27.09.2018, pursuant to which the AO passed the final assessment order on 09.10.2018, determining the assessed income at Rs.1135,96,10,750/-. The assessee is in appeal against this order.

What did the Tribunal hold?

On the issue of transfer pricing adjustment for electricity, the Tribunal noted that the consuming unit paid Rs.5.50 per unit plus wheeling charges. It observed that the assessee's eligible power unit had benchmarked the rate at Rs.5.50 per unit, which was the rate charged by TNEB to industrial consumers, excluding wheeling charges. The Tribunal found that the consuming unit was paying wheeling charges to TNEB over and above the industrial rate. The Tribunal held that the assessee had rightly applied CUP parameters by making a like-for-like comparison, as the benchmark rate of Rs.5.50 per unit was exclusive of wheeling charges, and the eligible unit had adopted the same transfer rate without adjustment for wheeling charges. Therefore, the downward adjustment of Rs.66,94,650/- was deleted. Regarding the disallowance of weighted deduction under Section 35(2AB), the Tribunal held that the AO was not justified in curtailing the deduction in the pre-amended period and directed the deletion of the disallowance of Rs.95,500/-, following a previous ITAT decision in the assessee's own case. On the disallowance of provision for warranty, the Tribunal, respectfully following its own previous decisions in the assessee's case, allowed the claim and directed the AO to delete the addition. It also held that the adjustment made under Section 115JB was unsustainable as the provision was in the nature of an ascertained liability. Concerning the re-computation of MAT credit, the Tribunal directed the AO to verify and allow the consequential MAT credit eligible to the assessee for the AY in accordance with law.

What were the issues?

1. Whether the Tribunal had to decide if the downward adjustment of Rs.66,94,650/- made by the TPO and confirmed by the DRP regarding transfer pricing of electricity was justified. The assessee argued that wheeling charges are borne by the consumer and not by the power generating unit, citing Sections 42 of the Electricity Act, 2003, and that the benchmark rate of Rs.5.50 per unit was a like-for-like comparison. The revenue supported the lower authorities' order. 2. Whether the Tribunal had to decide on the disallowance of weighted deduction of Rs.95,500/- under Section 35(2AB) of the Income Tax Act, 1961. The assessee contended that once an R&D facility is approved by DSIR, expenditure qualifies for deduction, citing a previous ITAT decision. The revenue's contentions are not recorded. 3. Whether the Tribunal had to decide on the disallowance of provision for warranty of Rs.20,54,23,000/- under normal provisions and Section 115JB of the Act. The assessee argued that the provision was for an ascertained liability on a scientific basis, citing previous decisions in its own case and the Supreme Court in Rotork Controls India (P) Ltd. vs. CIT. The revenue's contentions are not recorded. 4. Whether the Tribunal had to decide on the re-computation of MAT credit to be carried forward under Section 115JAA of the Act. The assessee sought re-computation. The revenue's contentions are not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 115JB,Section 80-IA,Section 92BA,Section 42,Section 35(2AB),Section 115JAA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI AMITABH SHUKLA

Hearing: 13.12.2024Pronounced: 28.02.2025

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Assessing Officer passed u/s.143(3) / 144C(13) of the Income Tax Act,

1961 [herein after “Act”] dated 09.10.2018 for assessment year 2014-15

(hereinafter in short “AY") pursuant to the DRP directions dated

27.09.

2018. 2. Brief facts of the case are that, the assessee company is engaged in the business of manufacturing and selling of automobile ty

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 144C(13)

All 3,299 judgments and leading authorities on Section 144C(13) →

Recent GST High Court judgments

Search GST case law →