ITAT deletes Addition for Intra-Group Services, Citing Consistency with Earlier Rulings [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) ruled in favor of the assessee deleting the addition for intra-group services. It cited the consistency with earlier rulings, particularly from the Assessment Year(AY) 2014-15 and 2015-16, where similar adjustments had been deleted by the Co-ordinate Bench.

TDK India Pvt. Ltd.,appellant-assessee, filed its return of income on November 31, 2016, declaring nil income after adjusting Rs. 10,75,04,394 with brought-forward losses. The case was selected for scrutiny, and statutory notices were issued. The Assessing Officer(AO) referred the case to the Transfer Pricing Officer(TPO) for transfer pricing adjustments on intra-group services.

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On October 30, 2019, the TPO made adjustments of Rs. 20,05,67,685 for intra-group services, Rs. 24,81,50,256 for sales margin, and Rs. 63,11,28,244 for the sale of ferrite for consumption. The assessee contested this before the Dispute Resolution Panel(DRP), which directed the AO/TPO to consider Rs. 12,54,93,154 as the arm’s length price for intra-group services.

The AO then passed the final order, making the addition. The assessee has now appealed against the DRP’s decision.

The two member bench comprising Pradip Kumar Choubey(Judicial Member) and Rajesh Kumar(Accountant Member) examined the records and noted that the assessee, part of the TDK EPCOS Group, was engaged in manufacturing and selling electronic components, including capacitors and soft ferrite components. It had manufacturing units in Nasik and Kalyani.

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Following the DRP’s directions, the TPO added Rs. 12,92,40,932 as the arm’s length price for intra-group services, covering IT services, export services, and management support services. The appellate tribunal found that a similar adjustment in the assessee’s case for AY 2014-15 and 2015-16 had been deleted by the Co-ordinate Bench under identical facts. The revenue had accepted that decision, as no further appeal was filed.

The ITAT, following the Co-ordinate Bench’s decision in the appellant-assessee’s own case, directed the AO/TPO to delete the addition and accept the charges for intra-group services as at arm’s length. This was in line with the Supreme Court's ruling in Radhasoami Satsang vs. CIT, which stated that a consistent position from earlier years should not be changed.

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The bench also referenced similar rulings from the Calcutta High Court and the Supreme Court, confirming that the department could not take a different view in later years.

In short the appeal was allowed.

To Read the full text of the Order CLICK HERE

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