The Pr. Commissioner of Income Tax- 2 vs. M/s Imerys Ceramics India Private Limited

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ITTA/137/2024HC TelanganaHBHC01057610202410 February 2025Bench: P.SAM KOSHY,NARSING RAO NANDIKONDA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT's finding was purely a finding of fact. The Court found no material available from the appellant (department) to demonstrate that the ITAT's conclusion, which led to remanding the matter to the Transfer Pricing Officer (TPO) to verify the volume of operations in the manufacturing and trading segments, was incorrect. The Court noted that the matter was still left for the TPO to verify the segmented information that the assessee was liable to produce, after which the TPO would take an appropriate decision. Consequently, the High Court found no strong case made out by the appellant warranting interference with the impugned order. The appeal was rejected.

What were the facts?

The appellant, the Principal Commissioner of Income Tax-2, Hyderabad, has filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated May 21, 2024, passed by the Income Tax Appellate Tribunal (ITAT), Hyderabad Benches 'A'. The ITAT's order was in relation to ITA.T.P. No. 494/Hyd/2022 for Assessment Year 2018-19. The appeal challenges the ITAT's decision to remand the issue of whether the assessee, M/s Imerys Ceramics India Private Limited, should be considered a manufacturing or trading segment back to the Assessing Officer/learned TPO. The dispute arose from the assessee's contention that its manufacturing segment constituted only 51% of its operations.

What were the issues?

1. Whether the assessee company should be classified as a manufacturing segment or a trading segment for the purpose of economic analysis and aggregation, as per Section 92C of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that its manufacturing segment constituted only 51% of its operations when compared to its non-manufacturing (trading) transactions. This implied that the trading segment might be more significant or at least comparable. Revenue's Contention: The revenue contended that the grounds raised in the appeal were mixed questions of fact and law, necessitating the admission of the appeal. The revenue sought to challenge the ITAT's remand order, implying a disagreement with the ITAT's finding that the matter required further factual verification by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 260A,Section 92C

AI-generated summary — verify with the full judgment below

13447 | IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD MONDAY, THE TENTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA INCOME TAX TRIBUNAL APPEAL NO: 137 OF 2024 lncome Tax Tribunal Appeal under Section 260-,4 of the lncome tax Act 1961 against the order dated 21.05.2024 on the file of the lncome Tax Appellate Tribunal, Hyderabad Benches "A", Hyderabad in l.T.A. T.P. No. 494lHydl2022 for Assessment Year 2018-'19 preferred 'against the Order dated 3'1-07-2021 passed in PAN/GIR No AAACJ7424Q on the file of the lncome Tax Department Office of the Deputy Commissioner of lncome tax, Circle 2(1), Hyderabad. Between: The Pr. Commissioner of lncome Tax- 2, 6th Floor, Signature Towers Kondapur Opposite Botanical Gardens, Hyderabad- 500084. .,.APPELLANT/RESPONDNET AND [\I/s lmerys Ceramics lndia Private Limited, 1- 11- 24614, F 1- 11- 2- 17lD 4th Floor, Surya Arcade, Secunderabad, Hyderabad, Begumpet, P. O 500016,Telangana. lndia. ( PAN No. AAACJ7424Q ) ...RESPONDENTS/APPELLANTS Counsel for the Appellant : Ms. J. Sunitha Standing Counsel representing Mr. P Murali Krishna Counsel for the Respondent : Mr. C.V. Narshimham The Court delivered the following:

THf HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA INCOM E TAX TRIBUNAL APPEAL No.737 OF 20i', 4 JUDGMENT: (pet Hon'ble Sri Justice P.Sam Koshy) Heard Ms.J.Sunitha, learned Standing Counsel apoearinll urttlc-r the instructions of M'-P.Murli Krishna, learned Seniol S',-anding jounscl lor Income Tax, lbr the appellant and Mr.C.V.Narshimhant, leitnled counsel appearing for the respondent. perused the material availablc otr reco'C. 2. The instant appcal under Section 260,4. of the Income 'lax A':t, [9(rl. has been preierrcd by th,: appellant against the order dated 21 .l)5,2025 l assccl bv tl.rr: Income '['ax App,:llatc Tribunal, l{yderabad "A" Bcncli. ){1 dei-iibed. in I.T'.A.T,P.No.4 g4tlL,, d,t2o22 lbr rhe -{ssessnrent Year 2il8-19. 3. The issue in',,rllcd in the instant cases is whether ihe asst:s: .c con)pa r has to be asscsscc cr-rr.rsidering to be a manufacturing seglilcltl (rr ir l; itdini segmcnt 4. 'i he tribuna irr thc f'acts and circuinstances more pal icularlv iire submissions that \.r e rc brought before the tribunal so fat as the es i'-:sscc bcitr:l involvcd in manuf r':turing as also in trading found that therr: u' rs a spccilie contention ol'1he e:is;essee that the manufacturing segnre)]t was orrl" 5l'l/o \hcn

Page 2 of 4 compared to thc non-All transactions and it was in this context that the tribunal in its finding in paragraph No.25 has held as under: "lt that is true, it would be unreasonable to classil\ the operations of the assessee under manutbcturing segment. Hence, this issue is rcstot'cd to the file of the learned Assessing () lllcr:r/leai.rred TPO to veriff the fact as to the volumcs of the operations of the assessee and if the maiorit.v of the transactions of the assessee with A L'.s iclate to the trading segment, it would be rcasonilble to classiry the assessee for the purpose ol economic analysis for aggregation under trading scgment. fhis ground is accordingly treated as lilluu ori lt,r statistical purpose". 5. It is thls ordci of rvhich has been put to challenge by way of'thc instant appciri- (r. Lcartrctl counsel t-rr the departrnent tried to canvas the aspect thc grounds rajsc.l l-.i lhc :tppe liarri herein are mixed question of fact as also law and Lhcrelirrc thc appcal r.rceds to be admitted. 7. I iori cr cr. pcrrrsal of the record would clearly go to show that there is no rnatcrial utarlc .r"'aillible b-v the appellanVdepartment to show that thc tinding rcachcd h1 thc Lrihunal lbr remanding the matter back to the transf'er pricing ,t'liccr t.r r',iilr ril; '..[ume of the operahn o[ the asscssee so lar as

I Page 3 of 4 manufacturing or the trading segment is concerned. We lind that the finding given by the tribuna Lo be purely finding of fact and the matter is st ll left upon for the transfer pricing officer to veriff the segmentell inlbrmatior u'hich the assessee is liable tc produce before the TPO and thereatter-l'PO to take an appropriate decision We do not find any strong case made out by thr: appellants calling for interfer:nce to the impugned order. The appeal f,rils and is accordingly rejected As a sequel, miscellaneous applications pending if an-v. shall stand closed. I Sd/- M. VIJA'(A BHASKER OIN'I'REGISTRAR //TRUE COPY// ECTION OFFICER To, DL 1. The lncome Ta < Appellate Trtbunal' Hyderabad Benches "A", H'Tderabad 2. The lncome Ta < Department office of the Deputy commissioner of lncome tax, Circle 2(1), tiyderabad. 3. One CC to tVlr F) [/lurali Krishna, Advocate [OPUC] 4. One CC to lVlr. O V Narshimham, Advocate [OPUC] 5. Two CD Copies *p I I I I

HIGH COURT DATED:1O1Q212025 JUDGMENT lTTA.No.137 ol 2O21 REJECTING THE AI'PEAL (()\-\ t4 TriE S ,c 22 APg 2W o tt)to tl cL) lt @ r)ll

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