2021 (2) TMI 1326 - AT - Income Tax

TP Adjustment - ALP of the international transaction undertaken by the assessee with its AE - HELD THAT - The Tribunal in assessee s own case for assessment year 2013-2014 2020 (4) TMI 909 - ITAT BANGALORE had restored the entire transfer pricing issue to the AO/TPO to arrive at fresh ALP of the international transaction undertaken by the assessee with its AE. In view of the above order of the Tribunal the entire issue raised in this appeal are restored to the files of the AO/TPO to arrive at fresh ALP of the international transaction undertaken by the assessee with its AE.Appeals filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Transfer Pricing Adjustment under Section 92CA of the Income Tax Act
2. Threshold Limit for Related Party Transactions
3. Capacity Utilization Adjustment
4. Inclusion/Exclusion of Comparable Companies

Transfer Pricing Adjustment:
The appeal pertains to an order under Section 143(3) read with Section 144C of the Income Tax Act for the assessment year 2014-2015. The Transfer Pricing Officer (TPO) determined an adjustment under Section 92CA at Rs.6,13,87,076, which was then recalculated to Rs.4,99,37,624. The assessee contested the TPO and Dispute Resolution Panel's decisions, seeking a fresh consideration of the Arms Length Price (ALP) for international transactions with its Associate Enterprise (AE). The Tribunal, based on a similar case for the assessment year 2013-2014, remanded the issue back to the AO/TPO for a fresh determination of the ALP.

Threshold Limit for Related Party Transactions:
The assessee challenged the adoption of a 25% threshold limit for "related party transactions" by the TPO and DRP, advocating for a 10% limit. The Tribunal, referencing the earlier case, directed a fresh assessment of the ALP, indicating a need for a specific discussion on the threshold limit issue.

Capacity Utilization Adjustment:
The assessee contested the rejection of the claim for "capacity utilization adjustment" by the DRP without detailed discussion. The Tribunal observed that the DRP's decision lacked specific adjudication on this ground and ordered a reconsideration of this claim along with other transfer pricing issues.

Inclusion/Exclusion of Comparable Companies:
The assessee sought the exclusion of specific comparables in the transfer pricing analysis. The Tribunal noted that the DRP's rejection of the assessee's claims lacked detailed reasoning and directed a comprehensive review of all objections raised by the assessee, emphasizing the need for a speaking order. The Tribunal set aside the transfer pricing adjustment and restored all related issues to the AO/DRP for a thorough reconsideration.

In conclusion, the Tribunal allowed the appeal for statistical purposes, remanding the entire transfer pricing issue back to the AO/TPO for a fresh determination of the ALP for the international transactions, emphasizing the importance of detailed adjudication and specific reasoning in addressing the assessee's objections.