HANYANG AUTOMOTIVE INDIA PVT LTD.,KANCHEEPURAM vs. DCIT, CHENNAI

The brief facts of the case are that, the assessee company is engaged in the business of manufacturers of auto components, filed its return of income for the assessment year 2011-12 on 30.11.2011 declaring a loss of Rs. 5,01,61,459/-. The case has been selected for scrutiny under CASS, and during the course of assessment proceedings, a reference u/s. 92CA(1) of the Act was made to the Transfer Pricing Officer (TPO) to determine Arm’s Length Price (ALP) with reference to international transactions reported in Form No. 3CEB. The TPO vide order dated 25.01.2016 suggested downward adjustment of Rs. 2,73,10,221/- in respect of international transactions. In pursuant to directions of the TPO, the AO passed draft assessment order u/s. 144C(1) of the Act and proposed the TP adjustment as suggested by the TPO. The assessee has filed objections against draft assessment order before the DRP, and the DRP, Bangalore vide their order dated 28.12.2015 upheld TP adjustments proposed by the Assessing Officer. In pursuant to DRP directions, the AO has passed final assessment order u/s. 143(3) r.w.s. 144C(13) of the Act on

The Ld. AR for the assessee submitted that the appeal filed by the assessee on the issue of transfer pricing adjustment towards international transactions with its Associate Enterprise (AE) should go back to the file of the AO for fresh consideration, in view of subsequent developments as per which for assessment year 2012-13, the assessee has followed internal CUP method to determine ALP of transactions with its AE. Although, for impugned assessment year, the assessee has followed TNMM method as most appropriate method, but subsequently it has been noted that internal CUP is the best method to determine ALP of international transactions and thus, the assessee has adopted internal CUP method for assessment year 2012-13 and the TPO has accepted the method followed by the assessee. Therefore, to give one more opportunity to the assessee, the matter may be remitted back to the file of the AO.

We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee has followed TNMM as most appropriate method to determine ALP of international transactions with its AE. The TPO has accepted method followed by the assessee, but made certain adjustments towards international transactions. The assessee now claims that TNMM is not most appropriate method for international transactions of the assessee with its AE and further, internal CUP method is suitable method to determine ALP of international transactions. We find that the assessee is in initial year of operations and has adopted TNMM as most appropriate method. However, in subsequent assessment years and from assessment year

In the result, the appeal filed by the assessee is allowed for statistical purposes.