DOW CHEMICAL INTERNATIONAL,MUMBAI vs. ADDL /JOINT/DY. /ASSTT COMM OF INCOME TAX /ITO, MUMBAI
आयकर अपीलीय न्यायाधिकरण न्यायपीठ, म ुंबई|
IN THE INCOME-TAX APPELLATE TRIBUNAL “K” BENCH,
MUMBAI
BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER
&
SMT. RENU JAUHRI, ACCOU
NTANT MEMBER
आयकर अपील सुं./ITA No. 1940/MUM/2021
(नििाारण वर्ा / Assessment Year: 2016-17)
Dow
Chemical
International
Private
Limited
Godrej IT Park, P2, 1st
Floor, Block B, 02 LBS
Road,
Godrej
Business
District
Phirojshanagar,
Vikhroli
(W),
Mumbai
400079
v/s.
बिाम
The DCIT/ACIT, Ward
14(1)(2), Mumbai
The Additional/Joint/Deputy
/Assistant Commissioner of Income Tax/Income
Tax Officer, National e-Assessment Centre, Delhi
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACD4467B
Appellant/अपीलार्थी
..
Respondent/प्रनिवादी
निर्ााररती की ओर से /Assessee by:
Shri Hitesh Thakkar
राजस्व की ओर से /Revenue by:
Shri Bhagirath Ramawat SR DR
स िवाई की िारीख / Date of Hearing
09.07.2025
घोर्णा की िारीख/Date of Pronouncement
31.07.2025
आदेश / O R D E R
PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the DCIT, Mumbai National e-Assessment Centre, Delhi passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, [hereinafter referred to as “Act”] on 26.03.2021 for Assessment Year 2016-17. 2. The assessee has raised the following grounds in these appeals.
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Dow chemical International Pvt LTd.
“Based on the facts and circumstances of the case, Dow Chemical International
Private Limited (as successor of Dow Corning India Private Limited) (hereinafter referred to as 'the Appellant' or 'DCIPL') respectfully craves to prefer an appeal against the assessment order issued by the National e-Assessment Centre, Delhi
(hereinafter referred to as the 'AO") under section 143(3) read with section 144C(13) in pursuance of directions of the Dispute Resolution Panel-1 (hereinafter referred to as the 'Hon'ble DRP') and order of Assistant Commissioner of Income-tax, Transfer
Pricing-1(2) (2), Mumbai (hereinafter referred to as the "learned TPO') on the following grounds, each of which are without prejudice to one another:
On the facts and in the circumstances of the case and in law, the learned AO/ learned
TPO/the Hon'ble DRP have:
GENERAL
Erred in determining the Appellant's total income at Rs. 29,67,65,620/- as against the income of Rs. 25,39,34,970/- disclosed in the return filed.
Erred in passing the transfer pricing assessment order under section 92CA(3) of the Act on 1 November 2019, which was barred by limitation, thereby rendering the transfer pricing order as null and void as per the provisions of section 92CA(3A) read with section 153 of the Act.
Erred in continuing assessment proceedings and passing the final assessment order in the name of a non-existent/ amalgamating entity i.e. Dow Corning India Private Limited instead of Dow Chemical International Private Limited (as successor of Dow Corning India Private Limited), thus rendering the entire proceedings null and void, liable to be quashed.
TRANSFER PRICING GROUNDS
International Transaction - Export of finished goods to associated enterprises ('AEs')
General
4. Erred in making an adjustment of INR 1,01,60,644 to the total income of the Appellant under section 92CA(3) of the Act on account of adjustment in the arm's length price of the international transaction of export of finished goods to AEs.
Rejection of the economic analysis undertaken by the Appellant
5. Erred in rejecting the economic analysis undertaken by the Appellant using
Transactional Net Margin Method (TNMM), which was in accordance with the provisions of the Act read with the Indian Income-tax Rules, 1962 (the Rules'), for the determination of arm's length price of the international transaction of export of finished goods, without providing any cogent reasons for the same.
Inappropriate application of Comparable Uncontrolled Price ('CUP") method to benchmark the international transaction
6. Erred in considering CUP method as the most appropriate method for determination of arm's length price without appreciating that there are differences that exist on account of function, assets and risk ('FAR') between finished products sold to AEs vis-à-vis finished products sold locally to third parties.
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Dow chemical International Pvt LTd.
7 Erred in not appreciating the fact that the price at which finished goods were sold to AEs are affected by various factors such as market conditions, functions performed, risks assumed, geographical considerations, business reasons for sale of products etc. which in the present case cannot be reasonably quantified and hence CUP method cannot be applied.
Erred in not considering 15% volume discount for computation of adjustment, though the same was granted by the Ld. TPO in the TPO Order.
International Transaction: Availing of information technology services from AEs
General
9. Erred in making an adjustment of INR 3,26,70,003 to the total income of the Appellant under Section 92CA(3) of the Act on account of adjustment in the arm's length price of the international transaction of payment for information technology services to AE
Rejection of economic analysis undertaken by the Appellant
10. Erred in not accepting the economic analysis undertaken by the Appellant including the analysis using cost allocation methodology, which was in accordance with the provisions of the Act read with the Rules, for determination of arm's length price.
Erred in not appreciating the fact that since the operating margin earned by the assessee from its business operations is at arm's length (based on net level margin analysis using TNMM) payment made for availing of IT services utilized in respect of business activities also meets the arm's length test.
Inappropriate application of CUP method to benchmark international transaction
12. Erred in not using any of the six methods prescribed under section 92C to benchmark the international transaction of payment for availing of services.
Erred in first stating that cost of goods/services in the hands of the seller / service provider cannot be the basis for determining the arm's length price and thereafter himself computing a hypothetical man hour rate based on the estimated salary of the employee rendering the services for computation of arm's length price.
Without prejudice to the above, erred in computing the arm's length price by applying some ad-hoc man hour rate to some ad-hoc number of man hours (so called CUP) which is not in accordance with the transfer pricing regulations prescribed in India. 15. Erred in not appreciating that one of the basic conditions for applying CUP is availability of the price of the same service in uncontrolled condition and it cannot be hypothetical or imaginary value but real value on which similar transactions have taken place.
Benefit test/ commercial expediency for availing services
16 Failed to appreciate the business model and business realities of the Appellant and the role of its AE and concluding that very little services have been received or no benefits have been availed by the Appellant.
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Dow chemical International Pvt LTd.
Erred in not appreciating the evidences submitted to substantiate services received benefits derived/ basis of allocation of costs and disregarded the same without giving any cogent reasons.
Ignored evidences submitted for service availed and benefits derived
18. Erred in not considering the external accountant certificate alongwith detailed cost allocation sheet submitted by the Appellant which demonstrates that cost has been allocated using appropriate allocation keys and that the transaction is at arm's length.
CORPORATE TAX GROUNDS
Credit for Dividend Distribution Tax (DDT)
19. erred in not granting credit for DDT of Rs 7,10,84,832 paid by the assessee.
Interest under section 115P
20. erred in charging interest of Rs 3,76,74,961 under section 115P of the Act.
Claim for Education cess
21. The assessee prays that the Assessing Officer be directed to allow deduction under section 37(1) of the Act in respect of education cess paid during the year on income- tax and DDT
Taxation of DDT
22. erred in not appreciating that dividend paid/ distributed to non-resident shareholder namely Dow Corning Enterprise LLC (a tax resident of USA), is liable to be taxed under Article 10 of India - USA DTAA (i.e. at the rate of 15%) and not as per section 115-0 of the Act at 20.56%.
LEVY OF PENALTY
23. Erred in initiating penalty proceedings under section 271(1)(c) of the Act.
The above grounds of appeal are independent and without prejudice to each other.
The Appellant craves leave to add, alter, vary, omit, substitute of amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable the Honorable Members to decide this appeal according to law.”
The assessee has subsequently taken the following additional ground:
“Each of the grounds given below are independent and without prejudice to the other grounds of appeal preferred by the Appellant.
Without prejudice to the Appellant's grounds of appeal, the assessment order dated 25 March 2021 is time-barred as assessment order under section 143(3) of the Act was required to be passed by 31 December 2019. The Appellant craves for leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.”
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Dow chemical International Pvt LTd.
At the outset, Ld. AR submitted that the assessee has opted to settle the dispute under the Direct Tax Vivad Se Vishwas Scheme, 2024 (DTVSVS). Vide letter dated 19.03.2025, the assessee has placed on record, a copy of the Form 2 dated 07.03.2025 received from the Designated Authority determining the tax liability. The assessee, therefore, seeks to withdraw the present appeal.
In view of the above facts, the appeal is dismissed as withdrawn.
Order pronounced in the open court on 31.07.2025. ANIKESH BANERJEE
RENU JAUHRI
(न्यानयक सदस्य/JUDICIAL MEMBER)
(लेखाकार सदस्य/ACCOUNTANT MEMBER)
Place: म ुंबई/Mumbai
दिन ुंक /Date 31.07.2025
दिव्य रमेश न ुंिग वकर/ स्टेनो
आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to :
अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.
सत्यानित प्रनत ////
आदेशािुसार/ BY ORDER,
सहायक िंजीकार (Asstt.