ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 9, PUNE vs. GESTAMP PUNE AUTOMOTIVE INDIA PRIVATE LIMITED, PUNE

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.

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.

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.

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. *