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Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
PER R.S.SYAL, VP : This appeal by the Revenue is directed against the order dated 08-08-2017 passed by the Commissioner of Income-tax (Appeals) in relation to the assessment year 2011-12.
The only effective ground in the appeal reads as under : “Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in restricting the adjustment only on the value of international transactions of import of CDK materials?”
2 ITA No.2717/PUN/2017 Gestamp Pune Automotive India Pvt. Ltd.,
Briefly stated, the facts of the case are that the assessee filed 3.
its return declaring total loss of odd Rs.18.14 crore. Such return
was accompanied by the Audit Report in Form No. 3CEB indicating
international transactions. The Assessing Officer (AO) made a
reference to the Transfer Pricing Officer (TPO) for determining the
arm’s length price (ALP) of the international transactions. One of
the international transactions of purchase of items of assembly CKD
materials from Associated Enterprises (AEs) amounted to odd
Rs.26.50 crore. The assessee applied the Resale Price Method
(RPM) for benchmarking the international transaction of purchase
of items of assembly CKD materials. The TPO rejected this method
and applied the Transactional Net Margin Method (TNMM) as the
most appropriate method. The TPO chose certain comparables with
their average Profit Level Indicator (PLI) of 10.23%. He computed
transfer pricing adjustment of Rs.13,00,63,586/- from this
transaction, which amount was added by the AO in his order. The
assessee challenged such addition before the ld. first appellate
authority, inter alia, alleging that the transfer pricing adjustment
should be confined to the international transactions alone and not
the entity level transactions, as was done by the TPO. The ld.
CIT(A) vide para no.2.1.43 on page 37 of the impugned order
3 ITA No.2717/PUN/2017 Gestamp Pune Automotive India Pvt. Ltd.,
directed that the adjustment should be made only to the value of
international transactions, which is the subject matter of ground
raised by the Revenue before the Tribunal, as reproduced above.
We have heard both the sides and gone through the relevant
material on record. It is seen from the TPO’s order that the
international transaction of purchase of items of assembly CKD
materials amounted to odd Rs.26.50 crore. While computing the
transfer pricing adjustment, the TPO started with `Price charged
(operating revenue of the assessee)’ at Rs.59,67,27,834/-. Then he
took up the figure of `Operating cost’ at Rs.69,09,87,750/-. By
considering the arm’s length margin at 10.23%, he computed the
amount of transfer pricing adjustment under consideration. The ld.
AR submitted that the figures of `Price charged’ and `Operating
cost’ taken by the TPO are entity level figures of the purchase of
items of assembly CKD materials, which also include the value of
transactions with non-AEs. The ld. CIT(A) has directed that the
transfer pricing adjustment should be restricted to the amount of
international transactions alone. This issue is no more res integra in
view of several judgments passed by various higher forums
including the Hon’ble jurisdictional High Court holding that the
transfer pricing adjustment should be restricted only to the
4 ITA No.2717/PUN/2017 Gestamp Pune Automotive India Pvt. Ltd.,
international transactions and not the entity level transactions. The
Hon’ble jurisdictional High Court in CIT Vs. Phoenix Mecano
(India) Pvt. Ltd. (2019) 414 ITR 704 (Bom.) has held that the
transfer pricing adjustment made at entity level should be restricted
to the international transactions only. Here, it is pertinent to
mention that the Department’s SLP against the judgment in the case
of Phoenix Mecano (India) Pvt. Ltd. has since been dismissed by
the Hon’ble Supreme Court in CIT Vs. Phoenix Mecano (India) Pvt.
Ltd. (2018) 402 ITR 32 (st.). Similar view has been taken by the
Hon’ble Bombay High Court in CIT Vs. Thyssen Krupp Industries
Pvt. Ltd. (2016) 381 ITR 413 (Bom.) and CIT Vs. Tara Jewels
Exports (P). Ltd. (2010) 381 ITR 404 (Bom.). Since the view
canvassed by the ld. CIT(A) accords with that of the Hon’ble
jurisdictional High Court in the aforenoted cases, we, therefore,
uphold the same.
In the result, the appeal is dismissed. Order pronounced in the Open Court on 17th October, 2019.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 17th October, 2019 सतीश
5 ITA No.2717/PUN/2017 Gestamp Pune Automotive India Pvt. Ltd.,
आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-13, Pune 4. The Pr. CIT-V, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “C” / DR ‘C’, ITAT, Pune; 6. गाड� फाईल / Guard file. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
Date 1. Draft dictated on 16-10-2019 Sr.PS 2. Draft placed before author 16-10-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *