EATON FLUID POWER LIMITED,PUNE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-8, PUNE

ORDER PER SATBEER SINGH GODARA, J.M. :

This assessee’s appeal for Assessment Year 2017-18 arises from the ACIT, Circle-8, Pune’s assessment dated 30.03.2022 as per DIN & Order No.ITBA/AST/S/143(3)/2021-22/1042108664 (1), in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”], framed as per CIT-(DRP-3), Mumbai-2, Mumbai’s directions dated 16.02.2022 involving DIN & Order No.ITBA/DRP/ F/144C(5)/2021-22/1039822679(1), in proceedings u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 (in short "the Act").

2 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune.

3 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune.

5. This leaves us with the assessee’s next substantive ground nos.2 to 2.5, 3 and 4 challenging correctness of the learned lower authorities action making ALP adjustment of Rs.7,77,78,194/- in respect of it’s international transactions with overseas Associated Enterprises [in short “AE's”] pertaining to manufacturing segment. Learned counsel invited our attention to this tribunal’s recent coordinate bench’s order in assessee’s recent common order in ITA.Nos.204 & 1882/PUN./2018 for assessment years 2013-14 and 2014-15 directing the TPO to adopt its internal comparables only as follows :

“4. The very factual position continues regarding the next twin issues of “ALP” adjustments of Rs.6,26,38,000/- and 3,85,97,146/- inter alia pertaining to manufacturing segment and disallowance of corporate cost allocation; respectively 4 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. wherein the department once again has lost in its arguments in all the preceding assessment years. Learned co-ordinate bench hereinabove has dealt with the instant issue(s) as follows:-

“4. The brief facts of the case as emanating from the record are that the assessee company is engaged in the manufacture and distribution of fluid power equipment such as pumps, gear pumps, valves, cylinders an related components for mobile and industrial markets. The assessee company is a joint venture of Mahindra & Mahindra Ltd. Presently, the assessee has become a wholly owned subsidiary of Eaton Corporation. During the year under consideration, the assessee reported international transactions with its AE pertaining to import of raw materials, trading goods and components. In manufacturing activity, the assessee submitted segmental profitability of accounts of AE transactions and Non-AE transactions and applied internal TNMM comparing loss incurred with Non-AE segment with profit that arrived in AE segment. The TPO noticed certain errors and after detailed discussion he rejected the internal TNMM. Before the DRP, the assessee submitted that the ITAT, Pune Benches in assessee’s own case for A.Y. 2007-08 upheld the use of internal TNMM for demonstrating arm’s length price of its international transactions pertaining to 5 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. manufacturing segment. Further, it was submitted that the DRP for A.Y. 2011-12 upheld the applicability of internal TNMM but however the DRP upheld the action of TPO in rejecting the internal TNMM selected by the assessee as most appropriate method for determining ALP of its international transactions vide para 3.2.4.

5. Before us, the ld. AR submitted that the TPO accepted the ALP demonstrated by the assessee in respect of AE and Non-AE segments relating to trading segments. Further, the ITAT, Pune Benches in assessee’s own case reported in (2015) 56 taxmann.com 135 for A.Y. 2007-08 held that the internal TNMM is the most appropriate method and referred to page 236 of the paper book and do our attention to para 17 wherein this Tribunal upheld internal TNMM is the most appropriate method to compute arm’s length price for the international transactions of purchase of raw material and components from associated enterprises. The ld. AR brought to our notice the ITAT, Pune Benches upheld the same internal TNMM for A.Ys. 2008-09, 2010-11 and 2011-12. There is no contrary order brought on record by the respondent-revenue in this regard. Therefore, we uphold the internal TNMM adopted by the assessee in determining ALP of its international transactions in purchase of raw material, components and 6 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune. finished goods. Accordingly, ground No. 2 raised by the assessee is allowed.”

6. Same order to follow in assessee’s latter appeal ITA.NO. 1882/PUN/2018 raising as many issues of TP adjustments amounting to Rs.11,20,79,272/- and Rs.4,07,27,000/- regarding corporate support services, manufacturing segments followed by corporate cost allocation disallowance of Rs.4,51,07,206/-; respectively in absence of any distinguishing features throughout.”

7 ITA.No.392/PUN./2022 Eaton Fluid Power Limited, Pune.

Order pronounced in the open Court on 30th December, 2022.