JUNGHEINRICH LIFT TRUCK INDIA PRIVATE LIMITED,MUMBAI vs. ASSESSMENT UNIT, NATIONAL E ASSESSMENT CENTRE- DELHI, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL
“K” BENCH MUMBAI

BEFORE MS. PADMAVATHY S, ACCOUNTANT MEMBER &
SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER
Jungheinrich Lift Truck
India Private Limited
4th floor, Delphi A Wing,
Central Avenue,
Hiranandani, Business
Park, Powai, Mumbai,
Maharashtra-400 076

Vs. Assessment
Unit/NFAC/DCIT
Circle 15(1)(2),
Mumbai
Aayakar Bhavan,
Mumbai.

PAN/GIR No. AACCJ7808G
(Applicant)

(Respondent)

Assessee by Shri Ajit Jain / Shri Siddesh Chaugule
/ Shri Rishab Parekh, Ld. ARs
Revenue by Shri Kiran Unavekar, Sr. DR

Date of Hearing
05.03.2025
Date of Pronouncement
21.05.2025

आदेश / ORDER

PER RAJ KUMAR CHAUHAN, JM:

This appeal is directed against the assessment order dated 26.06.2024 passed by Assessment Unit (hereinafter referred as Ld. AO) for AY 2020-21 in pursuance to the direction of Ld.
DRP-1,
Mumbai dated
14.06.2024

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Jungheinrich Lift Truck India Private Limited determining the total income of the assessee at Rs.
7,43,33,431/-. Ld. DRP has also proposed the addition of Rs. 4,03,95,451/- and ordered to initiate the penalty proceedings.
2. Aggrieved by the impugned order, assessee preferred the appeal before us and has raised the following grounds:-

“The Appellant objects to the order dated 26 June 2024 passed by the Assessment Unit ('AU') of Income Tax Department under section 143(3) read with section 144C(13) of the Income Tax Act,
1961 ('the Act') pursuant to the directions issued by the Hon'ble
Dispute Resolution Panel I ('learned DRP') on the following grounds:

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Jungheinrich Lift Truck India Private Limited

Excel working (submitted as per submission dated 7 March 2024) wherein all the details of the transaction is mentioned

Invoice copies co-relating to each transaction as per the above submission

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Jungheinrich Lift Truck India Private Limited

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Jungheinrich Lift Truck India Private Limited provision of services by the AE, as such reimbursements are incurred for the purpose of the administrative convenience of the Appellant. Further, Hon'ble DRP has incorrectly assumed the reimbursement as an intra-group service while determining the ALP as "NIL" and disregarding the commercial expediency of the transaction. Such costs reimbursed by the Appellant to its AE is similar to the price typically charged in the third-party scenario.

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Jungheinrich Lift Truck India Private Limited assessment, it is noticed that assessee has entered into international transaction of import of trucks and export of trucks alongwith composite payments as well as reimbursement of expenditure and a reference was made for determination of arm’s length price to the DC/ACIT(TP-
3)-1, Mumbai (Ld. TPO) for examination of arm’s length price of the international transaction. The international transaction in dispute referred to Ld. TPO is with respect to reimbursement of expenses to the tune of Rs.
75,08,633/-, which has been determined by the assessee at arm’s length price by adopting ‘no other method’. During the year under consideration, the assessee has paid Rs.
75,08,633/- to its associated enterprises and claimed the same amount to be on account of reimbursement of expenses. In transfer pricing study report, it was stated that Associated Enterprises (AE) has incurred certain expenses in relation to travelling, consultancy (SAP) charges and advertising, etc. The assessee has submitted that these reimbursement of expenses did not involve a separate provision of services by the AE and the same are incurred for the purpose of administrative convenience of the assessee. The assessee reimbursed the actual amount of expenses on cost to cost basis and no mark up was charged by the AEs on such expenses. It is further claimed that such expenses incurred are not ‘the principle element of the assessee’ or its AE’s business activity. The assessee

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Jungheinrich Lift Truck India Private Limited further submitted that these transactions were undergone for administrative convenience and having regard to the fact that such transactions were undergone on cost to cost basis, therefore, the said transactions were considered by the assessee company to be in compliance with the arm’s length principle on application of ‘other method’ as most appropriate method. It was further submitted that such reimbursement of expenses are included in the total expenses and accordingly, the assessee has applied transactional net margin method (TNMM) at whole entity and therefore the international transaction pertaining to reimbursement of expenses is also bench marked under the same.
4. The Ld. TPO while disputing the above transaction, asked the assessee to furnish back to back invoices of the expenses incurred by the AE alongwith explanation for necessity of such arrangements. However no such evidence was provided by the assessee and the assessee vide submission dated 03.11.2022, merely provided the simple copy of invoices raised by AE to the assessee and no third party invoices were provided. The Ld. AR of the assessee in the hearing dated 16.01.2023 admitted that no back to back invoices were available. Ld. TPO was of the opinion that in the absence of back to back invoices, the assessee cannot justify that the payments were made without any mark up. Further no evidence was provided by the assessee

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Jungheinrich Lift Truck India Private Limited to show that the services for which the reimbursement was done was actually received by the assessee. It is also observed that no other details were provided by the assessee company to verify the genuineness of the claim of the expenses. The Ld. TPO did not accept the contention of the assessee to bench mark the transaction using TNMM on the ground that the assessee in their own Transfer
Pricing
Study
Report
(TPSR) has not aggregated reimbursement of expenses with other transaction and has not considered the transactions under TNMM. Accordingly in the absence of any compliance with regard to the bench marking of the transaction with the cogent evidence, the ALP of the transaction was determined as NIL by using
‘other method’ under Rule 10AB of Income Tax Rule 1962
and the Ld. TPO proposed adjustment of Rs. 75,08,637/-.
Accordingly, the order u/s 92CA(3) of the Act was passed on 25.01.2023 proposing the above adjustment.
5. The Ld. AO further noted that the assessee has claimed foreign exchange loss of Rs. 3,28,86,814/- and the foreign remittance loss of Rs. 3,28,86,814/- incurred by the assessee on account of foreign exchange fluctuations was not supported with detailed calculation of the loss because the assessee has simply given the details of various gains /loss and arrived at the net loss and these details were not sufficient to explain the foreign exchange loss because it remained unexplained whether the same were the capital or revenue nature of the expenses; further there were no specific details to which these expenses pertained. The Ld. AO further noted that on the issue of foreign exchange loss, the assessee has furnished partial response and even in previous year assessment order, assessee has already been added on the ground of foreign exchange loss. Accordingly, in the absence of justification, sufficient documentary evidence and also keeping in view the past assessment trends of the assessee, the foreign exchange loss amounting to Rs.
3,28,86,814/- was disallowed and added to the total income of the assessee.
6. Accordingly, draft assessment order u/s 144C of the Act was passed on 22.09.2023 wherein during the normal computation of assessment, the Ld.
AO made an adjustment proposed by the TPO of Rs. 75,08,635/- u/s 92CA(3) of the Act and further made a disallowance on account of foreign exchange loss u/s 43AA of the Act of Rs.
3,28,86,814/- and thus determined the total income of Rs.
7,73,33,341/-. Thus Ld. AO proposed the total addition of Rs. 4,03,95,451/- because the assessee has failed to furnish any satisfactory reply.
7. The assessee preferred the objection before the Ld.
DRP and the Ld. DRP after considering the reply of the assessee alongwith Ld. TPO’s comments, rejected the and making observations as under:-
Disallowance of reimbursement of expenses.
i) The documents provided by the assessee does not prove availing of any services.
ii) The assessee has not proved that the services claimed to be rendered were actually needed by the recipients.
iii) Neither the assessee nor the AO has maintained any logbook of the time devoted by the employees of the AE to provide any service to the assessee, and therefore the TPO is handicapped in being unable to verity the costs claimed to have been incurred by the AE for providing certain claimed services in absence of these documents.
iv) On examination of the evidences and submissions of the assessee, most of the stated services can only be termed as share holder activity and there can be no charge for such services.
v) A charge of intra-group services is only allowed under the arm’s length principle, if the ´Benefit Test´ and the ‘Willingness to pay test’ is satisfied. As per the material on record, the assessee has failed to qualify ‘benefit test’
and to ‘willingness to pay test’ in respect of nature of intra-group services.
vi) The corroboration using TNMM method cannot be accepted, in the absence of other test being satisfied in respect of alleged intra-group services.
vii) It is clear that the assessee did not provide any primary evidence to show that the services were actually rendered by AE and all the documentation provided by the assessee does not prove availing any services, therefore, the claim of reimbursement of expenses deserves to be rejected.
Disallowance on account of foreign exchange loss.
The details given by the assessee for various gains /losses for arriving at net loss of Rs. 3,28,86,814/- on account of foreign exchange fluctuations are not sufficient to explain whether they are capital or revenue nature of expenses; whether last year provisions or MTM have been offered
/claimed as expenses; specific details to which these expenses pertain and whether there was adherence to section 43AA r.w.s 145(2) of the Act. In the absence of above details, the claim of the assessee to allow loss on account of foreign exchange is not acceptable. Accordingly, the disallowance of foreign exchange loss amounting to Rs.
3,28,86,814/- was also rejected.
8. Accordingly, in view of the above directions by the Ld.
DRP, the Ld. AO passed the assessment order u/s 143(3) r.w.s. 144C(13) of the Act dated 26.06.2024 wherein the Transfer Pricing adjustment of Rs. 75,08,637/- and disallowance of foreign exchange loss to the tune of Rs.
3,28,86,814/- was retained in the total income of the assessee which was determined at Rs. 7,43,33,431/-.
Thus, total addition of Rs. 4,03,95,451/- was made and penalty proceedings were also directed to be initiated.
7. The assessee being aggrieved with the above order, filed the appeal before the Tribunal. We have perused the orders of the lower authorities and also examined the paper books and other documents relied by the parties.
9. The ground no. 1 is raised with respect to foreign exchange loss on remittances u/s 43AA of the Act. The Ld.
AR has argued that no proper reason has been cited by the AO to disallow the expenses of foreign exchange loss and the Ld. AO has simply quoted and relied upon the previous assessment year (AY) 2018-19 order of the Ld. AO, wherein the foreign exchange loss was disallowed in the same manner. The Ld. AO has just followed the previous year order without taking into consideration all the details given by the assessee during the course of submission. It is further submitted that assessee has even filed the detailed working of loss in the format in which the AO has requested. It is therefore argued that the Ld. DRP has rejected the objections without examining the details supplied, documents submitted and the submissions made by the assessee. It is further submitted that the claim of the assessee for AY 2018-19 was also rejected in the same manner which was set aside by the Ld. Coordinate Bench in ITA No. 2531/Mum/2022 order dated 12.06.2023 and matter was restored to the Ld. AO for deciding afresh after considering the material and submission of the assessee.
The Ld. AR therefore relying upon para 14 of the Coordinate Bench order requested to allow the ground no.
1 by restoring the same to the file of Ld. AO for fresh adjudication.
10. Ld. DR on the other hand submitted that all the submissions made by the assessee were duly considered by the Ld. DRP while issuing directions and rejecting the claim of the assessee and therefore relied upon the orders of the ld. Lower authorities.
11. To appreciate the submissions of Ld. AR, we have extracted para 14 of the Ld. Coordinate Bench order in ITA
No. 2531/Mum/2022 (supra) as under:-
“14. Second ground of appeal is with respect to disallowance of foreign exchange losses. During the course of assessment proceedings the learned assessing officer asked the assessee about the details of the foreign exchange loss of ₹ 69,539,201/–
the assessee submitted the summary of such losses and also bifurcated that into revenue account as well as on capital account. Assessee also submitted a detailed with respect to the amount credited on the income side and amount debited on expenditure side. The learned assessing officer disallowed the same holding that assessee could not furnish the complete detail. Before the learned dispute resolution panel the assessee evidences.
Those evidences are uploaded on ITBA website and AO was asked to furnish the remand report. Before the passing of the direction by the DRP, no such remand report from the AO was received. There is no finding of learned dispute resolution panel that whether such additional evidences were admitted or not. However the learned dispute resolution panel agreed with the finding of the learned
AO. On reading of page number 27 of the direction of the learned dispute resolution panel, it is apparent that assessee was asked to provide the detail within the period of 2 days only. Therefore, it is apparent that assessee was not provided enough time to furnish the requisite details. The learned dispute resolution panel has also not given any finding on the same. The assessee has also made certain mistakes of mentioning the currency for both the rates as euro instead of U . The learned DRP upheld the disallowance holding that there is no evidence submitted by the assessee that the expenditure of foreign l exchange loss is allowable as business expenditure. The additional evidence furnished by the assessee shows that the assessee submitted description of expenditure, foreign currency in which transaction was incurred, amount of expenditure in foreign currency, date of booking, exchange rate used on date of booking, amount of expenditure booked in Indian rupee, date of actual payment, exchange rate on date of payment, resultant foreign exchange gain or loss, landed cost number, invoices number, vendor details and bank payment reference.
All these details conclusively shows that the assessee has incurred foreign exchange loss during the course of business transaction. Without examining these details, it is unfair to treat the expenditure incurred on foreign exchange loss by the assessee as non business expenditure. In view of this, we set-aside the whole assessee.
The assessee is directed to demonstrate before the assessing officer that such loss has been incurred during the course of the business and how it is accounted for. The learned AO after examination of these details, decide the issue afresh. Accordingly, ground number 2 of the appeal is allowed with above directions.”
12. It is thus evident from the above extracts that the same reason has been given by the Ld. DRP as well as by the Ld. AO vide their impugned directions and assessment order respectively with respect to disallowance on account of foreign exchange loss claimed by the assessee in the year 2018-19. 13. On examining the assessment order of case in hand, it is to be noticed that the Ld. AO has rejected the claim of assessee while relying on the assessment order dated
31.07.2022 pertaining to AY 2018-19 vide which addition has been made on account of foreign exchange loss. In addition the Ld. AO further observed that the assessee has submitted only the details and the ledger of currency purchased but failed to furnish the reasons for foreign remittance, details of sale /purchase of currency and bank account statement reflecting purchase of foreign currency.
14. On considering the reasons given by Ld. DRP as well as Ld. AO for rejecting the claim of the assessee and authorities for AY 2018-19, therefore, we respectfully follow the findings of the Ld. Coordinate bench for the relevant assessment year before us as it is to be noticed that in the present case, the assessee has made submissions, filed documents and necessary details before the lower authorities, but the same has not been considered in a fair and just manner by the lower authorities. In view of this, we set-aside the whole issue back to the file of the learned assessing officer with a direction to examine the claim of the foreign exchange loss incurred by the assessee. The assessee is directed to demonstrate before the assessing officer that such loss has been incurred during the course of the business and how it is accounted for. The learned AO after examination of these details, decide the issue afresh. Accordingly, ground number 1 of the appeal is allowed with above directions.
15. Ground no. 2 pertains to reimbursement of expenses which has been determined by the assessee to be at arm’s length price by adopting ‘any other method’. During this year, the assessee has spent INR 75,08,637/- as third party costs which were reimbursed to associate enterprises
(AE) on cost to cost basis without any mark up. On the basis of report of TPO and recommendation of Ld. DRP, the Ld.
AO has adjusted the said amount by making corresponding addition to the total income of the assessee because the Ld. TPO has determined the ALP of the transaction as NIL by using other method under rule 10AB and proposed adjustment of Rs. 75,08,637/-.
16. The Ld. AR argued that the assessee has made sufficient submissions with regard to the claim of the reimbursement of expenses but the Ld.
TPO has misunderstood the stand of the assessee and explanation given by the assessee and further the Ld. DRP has also not considered the submission and material brought on record by the assessee as the Ld. DRP has merely approved the comments of the Ld. TPO and the rejection of the objection of the assessee is done on the basis of surmises and conjectures and due consideration has not been given to the submissions made on behalf of the assessee. The Ld.
AR relied upon the judgment of the Ld. Coordinate Bench order in ITA No. 2531/Mum/2022 (supra) stating that in assessee’s own case for AY 2018-19, the claim of the assessee was rejected on the same ground by the AO but the Ld. ITAT has set aside the order and restored the matter to the file of Ld. TPO for examining the submissions and material of the assessee and decides the matter afresh.
Ld. AR stated that para 5 and 6 of the Ld. Coordinate
Bench order contains the similar facts and analysis and para no. 13 restores the matter to the Ld. TPO. It is to Ld. TPO to decide the matter afresh.
17. To appreciate the submissions of Ld. AR, we have extracted para 5, 6 and 13 of the Ld. Coordinate Bench order in ITA No. 2531/Mum/2022 (supra) as under:-
“5. The only international transaction in dispute is reimbursement of expenses, which has been determined by the assessee to be at arm's-length price by adopting any other method. During the year under consideration the assessee has paid ₹ 3,251,464/– to its associated enterprise and claimed the same amount to be on account of reimbursement of expenses. In transfer pricing study report it was stated that associated
Enterprises incurred certain expenses such as travelling, consulting and advertisement, which are initially borne by the associated enterprise and then cross-charged to the assessee company without any markup. The assessee submitted that these transactions were undertaken for administrative convenience and having regard to the fact that the transactions were undertaken on cost to cost basis the said transactions were considered by the assessee company to be in compliance with the arm's-length principle on application of other method as the most appropriate method.
6. The learned transfer pricing officer disputed the above transaction asking the assessee to furnish back to back invoices of the expenses incurred by the AE and explanation for necessity of such arrangement. Assessee could furnish only three Sample debit notes raised by the associated Enterprises on the assessee and the narration of expenses stated in the above pertain to travelling consulting and advertisement expenses.
Therefore the learned TPO was of the view that assessee has failed to furnish the documentary evidences such as back to back invoices to substantiate the reimbursement of expenses claim and further as no other details are provided by the assessee company to verify the correctness of the claim and the amount and further the nature of expenses mentioned in the debit notes and the transfer pricing study reports are also at variance, accordingly he made an adjustment of ₹ 3,251,464/–
determining the arm's-length price of the same at Rs. Nil.
Accordingly, order under section 92CA (3) of the act was passed on 27/7/2021 proposing the above adjustment.
13. Ground number 1 is with respect to the reimbursement of expenditure where the learned assessing officer has determined the arm's-length price of the international transaction at Rs. Nil for the reason that assessee has failed to furnish the requisite details with respect to the actual rendition of the services, benefit derived by the assessee and services are rendered not duplicative in nature. The assessee submitted only the simple invoices before the lower authorities. Only 3 sample debit notes raised by AE were produced before lower authorities. Those were also produced before us at page number 256 – 258 of the paper book. On perusal of these debit memos, we find that the narration of the services are in a foreign language. Except the address of the assessee and the amount in Euro, everything else is in foreign language. The three invoices/debit notes shows that two debit notes are of Euro 9225, and one debit note of Euro
11,118. In the transfer pricing study report at page number 67 of the paper book refers to the expenses with related to travelling, consulting, advertisement etc whereas before the learned dispute resolution it was claimed that these are certain expenses pertaining to travelling, SAP related charges and advertisement.
It is merely a statement by the assessee before the lower authorities that it is a cost-to-cost payment . However assessee did not furnish any back-to-back invoices of those expenses incurred. The English words in the debit notes refers to the Microsoft and SAP details for three quarters. The two quarters pertaining to 2017 and first quarter of 2018. The details are not also supported by any agreement. We fail to understand that how the lower authorities have reached at a conclusion on the 3
Sample debit notes which are in a foreign language. Assessee has also not narrated the facts properly that how the above expenditure cross-charged to the assessee company by its associated enterprises. Even the complete breakup of the expenditure showing the nature of expenditure was also not submitted. In view of this we set-aside ground number [1] of the appeal back to the file of the learned transfer pricing officer with a direction to the assessee to substantiate the nature of such expenditure, and how such expenditure have benefited to the assessee. The learned TPO may examine the same and decide the issue afresh in accordance with the law.”
18. Ld. DR on the other hand supported the orders of the lower authorities and submitted that the claim of the assessee has been rightly rejected in the absence of any cogent material or evidence by the assessee.
19. To appreciate the stand of the assessee and comments of the TPO, we find expedient to extract para 7 to 9 of the TPO order as under:-
“7. Reply of the assessee:
The assessee provided the following reply dated 19/01/2023
against the show cause notice dated 16/01/2023. "...During the year, the Assessee made reimbursement of expenses to its Associated Enterprises ("AES") in relation to travelling, consultancy (SAP charges) and advertising, etc.
Assessee submits that these reimbursements of expenses do not involve a separate provision of services by the AE and the same are incurred for the purpose of the administrative convenience of the Assessee.
In the Transfer Pricing documentation maintained by the Assessee, the Assessee has determined the arm's length price of the above-mentioned transaction using "Other
Method as prescribed under Rule 10AB of the Income-tax
Rules, 1962 ("Rules"). The Assessee had reimbursed the actual amount of expenses on cost to cost basis and no mark-up was charged by the AFs on such expenses.
The Assessee submits that the reimbursement of expenses is without any mark-up and is actual amounts paid to third parties by AE on behalf of the Assessee and therefore, no income/expenses arise. Expenses incurred by the AEs relating to the Assessee are charged back at cost without any mark-up. Such expenses incurred are not a principal element of the Assessee's or its AE's business activities.
transaction is therefore in compliance with the arm's length principle.
In connection to the above, sample inter-company invoices raised by the AEs on the Assessee were submitted vide
Annexure 4 of submission dated 3 November 2022. Without prejudice to the above, Assessee submits that such reimbursement of expenses are included in the total expenses..
Accordingly, the Assessee has applied
Transactional Net Margin Method at whole entity level and therefore the intemational, transaction pertaining to reimbursement of expenses is also benchmarked under the same..."
8. TPO's comments:
8.1 The reply of the assessee against the show cause notice is not found acceptable.
The assessee claimed that the reimbursement were for the purpose of travelling, consultancy
(SAP charges) and advertising, etc. further, the assessee claimed that these expenses were back to back and without any mark-up and is actual amounts paid to third parties by AE. Moreover, the assessee claimed that reimbursement was included in the total expenses while benchmarking using TNMM method, the Assessee has applied Transactional Net Margin Method at whole entity level and therefore the international transaction pertaining to reimbursement of expenses is also benchmarked under the same.
8.2 If assessee is claiming that these expenses were the same that were paid to the AE's then back to back invoices should have been available with the assessee. However, no such evidence were provided by the assessee. The assessee vide submission dated 3/11/2022, merely provided the sample copy of invoices raised by AE to the assessee. No 3rd party invoices were provided. Further, the AR of the assessee in the hearing dated 16/01/2023 admitted that no back to back invoices were available. Thus, in absence of back to back invoices the assessee cannot justify that the payment were made without any mark-up.
8.3 Further, no evidence was provided by the assessee to show that the services for which reimbursement was done were actually received by the assessee. Thus, the assessee has failed to furnish the documentary evidences such as back-to-back invoices to substantiate the reimbursement of expenses claim.
Moreover, no other details are provided by the assessee company to verify the genuineness of the claim of expenditure.
8.4 With regards to the second objection of the assessee that reimbursement was included in the total expenses while benchmarking using TNMM method, the Assessee has applied
Transactional Net Margin Method at whole entity level and therefore the international transaction pertaining to reimbursement of expenses is also benchmarked under the same.
The same is not found acceptable as assessee in their TPSR while aggregating the transactions have indentified the following transactions as closely linked.
Nature of transaction

Amount

Import of spares

9,10,24,274
Import of trucks (including free of costs)

76,21,24,146

Import of fixed assets for operating lease

15,02,17,498

Import of warehouse navigation system
Logistic Interface - Installed in truck

1,96,020

Export of damaged truck

3,07,827

Export of used trucks

35,92,372

Receipt of compensatory payment

10,03,14,825

Warranty and commission

6,52,591

Mumbai, Dated 21/05/2025
Dhananjay, SPS

आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to :