M/S GE POWER ELECTRONICS INDIA PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(1)(2), BANGALORE

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ITA 194/BANG/2019Status: DisposedITAT Bangalore29 May 2020AY 2014-153 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found merit in the assessee's submission that the DRP's order was cryptic and lacked proper consideration of legal provisions and arguments. The matter was restored to the DRP for a fresh, reasoned decision.

What were the facts?

The assessee's appeal primarily concerned a transfer pricing adjustment not being restricted to the amount of the international transaction. The DRP had issued a cryptic order on this issue, which the assessee argued was not reasoned.

What were the issues?

Whether the transfer pricing adjustment should be restricted to the amount of the international transaction, and whether the DRP's order was sufficiently reasoned.

Which sections of the Income-tax Act were involved?

Section 92C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH : BANGALORE

Before: SHRI A. K. GARODIA & SHRI PAVAN KUMAR GADALE

For Appellant: Shri Sachit Jolly, Advocate
For Respondent: Ms. Neera Malhotra, CIT (DR)
Hearing: 12.03.2020Pronounced: 29.05.2020

M/s. GE Power Electronics India Private Ltd., DCIT, Circle – 3 (1) (2), Velankani Tech Park, Bengaluru. Survey No. 43, 44/3 (P), 46 (P), vs. Electronics City, Phase II, Begur Hobli, Bengaluru – 560 100. PAN : AABCL3929K APPELLANT RESPONDENT Assessee by : Shri Sachit Jolly, Advocate Revenue by : Ms. Neera Malhotra, CIT (DR) Date of hearing : 12.03.2020 Date of Pronouncement : 29.05.2020 O R D E R

Per A. K. Garodia, Accountant Member

1.

This appeal is filed by the assessee and it is directed against the Assessment Order passed by the AO on 30.10.2018 u/s 143 (3) r.w.s. 144 C as per the directions of DRP for Asst. Year 2013 – 14.

IT(TP)A No. 194/Bang/2019 Page 2 of 3

2.

The assessee has raised as many as 18 grounds and as per Grounds No. 11, the grievance of the assessee is about upholding of the order of AO/TPO as per which the TP Adjustment was not restricted to the amount of international transaction. In course of hearing, learned AR of the assessee submitted that except this Ground No. 11, remaining grounds are not pressed. Accordingly, we proceed to decide only Ground No. 11 and all remaining grounds are rejected as not pressed.

3.

In this regard, learned AR of the assessee submitted that as per para 2.8.1 on page 7 of the order of DRP, this issue is decided by DRP by way of a cryptic order without considering the relevant aspects, relevant legal provisions and various arguments of the assessee. Learned DR of the revenue supported the order of TPO/AO and in fact, it amounts to supporting the order of DRP because the AO has to decide as per the directions of DRP.

4.

We have considered the rival submissions and we find force in the submissions of learned AR of the assessee that this issue is decided by DRP by way of a cryptic order without considering the relevant aspects, relevant legal provisions and various arguments of the assessee because as per TNMM, the reasonableness of the profit percentage of the tested party is examined by comparing it with the same of comparables. If the profit rate of comparables is more as compared to the tested party, such difference is considered as a lesser profit realized by the tested party by charging lesser price. Now, if the entire turnover is of international transaction only then entire such difference can be added as TP adjustment but if only part of the turnover is on account of international transaction, then lesser profit realized on account of such international transaction only can be added by way of TP adjustment and lesser profit realized on account of that part of the turnover which is not on account of international transaction, lesser profit realized by the tested party

IT(TP)A No. 194/Bang/2019 Page 3 of 3 cannot be added as TP adjustment because it cannot be on account of lesser prices charged to AE. But DRP has not examined these aspects in the light of the relevant legal provisions about TP adjustment. Hence, we restore the matter back to DRP for a fresh decision on this issue only by way of a speaking and reasoned order after providing adequate opportunity of being heard to both sides and while doing so, our above observations should be kept in mind. Ground No. 11 is allowed for statistical purposes.

6.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

Pronounced in the open court on the date mentioned on the caption page.

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