Action of TPO in reducing the TPA amount by Disallowance made u/s 40(a) may not be right: ITAT [Read Order]

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) ruled that the Action of Transfer Pricing Officer (TPO) in reducing the Transfer Pricing Adjustment (TPA) amount by the disallowance made under section 40(a) of the Income Tax Act may not be right.

The assessee company, 3M India Limited is engaged in the business of manufacture and sale of pressure sensitive adhesive tapes, respirators, 3D graphics for automotive industry and corrosion protection products. The A.O. passed the assessment order for the year under consideration under section 143(3) read with section 144C of the Act on May 21, 2014.

The assessee objected to the revision proceedings by contending that there is no error in the order passed by the A.O. After considering the replies given by the assessee, the CIT passed the impugned revision order holding that the assessment order dated May 21, 2014 passed for the year under consideration is erroneous and prejudicial to the interest of the revenue.

The assessee submitted that the T.P adjustment made by the TPO determining ALP of management charges at NIL in respect of remaining amount has been challenged by the assessee and the appeal is pending before the Tribunal. He submitted that,in AY 2005-06, the TPO has allowed partial relief on management cross charges, meaning thereby, ALP was not determined at NIL in that year. Accordingly, he submitted that there was no error in the assessment order on this issue and hence the Ld CIT was not justified in passing a revision order on this issue.

The coram of Judicial Member Beena Pillai and Accountant Member B.R. Baskaran ruled the CIT is taking a particular view on the assessment order passed for AY 2009-10, meaning thereby, he is finding fault with the assessment order passed for AY 2009-10. After observing so, he is revising the assessment order passed for AY 2010-11. These aspects clearly show that the CIT has not actually pointed out any error in the assessment order passed for AY 2010-11. There should not be any dispute that the claim of the assessee is as per the provisions of section 40(a) of the Act.

To Read the full text of the Order CLICK HERE

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3M India Limited vs CIT , 2021 TAXSCAN (ITAT) 253 , Shri Sharath Rao , Shri Pradeep Kumar