M/S MAGNA AUTOMOTIVE INDIA PVT. LTD,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 9, PUNE

This assessee’s appeal for assessment year 2017-18 arises against the National Faceless Assessment Centre, Delhi’s assessment dated 19.01.2022 framed in tune to the CIT (DRP-3), Mumbai-2’s directions dated 30.11.2021 involving Objection number & date 102200/2021-22 & 29.04.2021, in proceedings u/s 143(3) r.w.s. 144C(13) r.w.s. 144BB of the Income Tax Act, 1961; in short “the Act”. Heard both the parties. Case file perused.

The assessee raises the following substantive grounds in the instant appeal :- “Ground No. 1: General Ground On the facts and in the circumstances of the case, and in law, the National Faceless Assessment Centre, Delhi (‘NaFAC’) pursuant to the directions of the Learned Dispute Resolution Panel (‘Ld. DRP’), erred in making a Transfer Pricing (‘TP’) adjustment of INR 84,50,662 to the income of the Appellant, by holding that the Appellant’s international transaction of Sale of goods pertaining to the Manufacturing segment does not satisfy the arm’s length principle envisaged under the Income- tax Act, 1961 (‘the Act’). Ground No. 2: Erroneous rejection of TP documentation maintained by the Appellant pertaining to the Manufacturing segment On the facts and in the circumstances of the case, and in law, the Ld. DRP/Ld. TPO erred in rejecting the TP documentation maintained which was prepared by the Appellant in accordance with the manner contemplated under the relevant provisions of the Act and the Income Tax Rules, 1962 and has erroneously considered that Internal TNMM was used by the Appellant for determining the arm’s length price (‘ALP’) of Sale of goods pertaining to the Manufacturing segment. Ground No. 2.1- Erroneously conducting fresh search by adding/modifying the filters adopted by the Appellant On the facts and in the circumstances of the case and in law, the Ld. TPO erred in conducting a fresh search for comparable companies with respect to the international transaction of Sale of goods pertaining to the Manufacturing segment by adding/modifying the quantitative filters applied by the Appellant in the TP study report for FY 2016-17. Ground No. 2.2- Erroneously rejecting certain comparable companies selected by the Appellant On the facts and in the circumstances of the case and in law, the Ld. TPO erred in rejecting certain comparable companies selected by the Appellant in its TP study report for FY 2016-17 while benchmarking its international transaction of Sale of goods pertaining to the Manufacturing segment. Ground No. 3- Erroneously comparing the Appellant’s margin at entity level with that of the comparable companies On the facts and in the circumstances of the case and in law, the Ld. DRP/Ld. TPO erred in comparing the Appellant’s margin at entity level with that of the comparable companies’ margin. Ground No. 4- Erroneously rejecting the segmental profitability statement as submitted by the Appellant On the facts and in the circumstances of the case and in law, the Ld. DRP/Ld. TPO erred in rejecting the segmental profitability statement Appellant for determining the ALP of Sale of goods transaction pertaining to the Manufacturing segment. Ground No. 4- Erroneously considering certain items as non-operating in nature while computing the margin of the Appellant On the facts and in the circumstances of the case and in law, the Ld. DRP/Ld. TPO erred in considering foreign exchange earning/loss and provision for doubtful, debt/provisions written back as non-operating in nature. Ground No. 5- Erroneously considering income from provision of management support services in AE sales for computing the TP adjustment On the facts and in the circumstances of the case and in law, the Ld. DRP/Ld. TPO erred in including an income of INR 1,60,69,733 from provision of management support services while calculating the TP adjustment with respect to Sale of goods transaction pertaining to the Manufacturing segment. Ground No. 6- Erroneously rejecting Cost-Plus Method considered as the most appropriate method on a without prejudice basis On the facts and in the circumstances of the case and in law, the Ld. DRP/Ld. TPO erred in rejecting the corroborative analysis conducted by the Appellant on a without prejudice basis by considering Cost Plus Method (‘CPM’) as the most appropriate method. Ground No. 7- Erroneous initiation of penalty proceedings On the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating the penalty proceedings under Section 274 r.w.s. 270 of the Act. In view of foregoing grounds of appeal