ITAT Resolves Boeing India's transfer Pricing battle: Clears INR 21,52,899 adjustment on grounds of Operational Inactivity and BCIL Merger [Read Order]

In a recent development, Boeing India Private Limited ( BIPL ) successfully resolved a tax dispute, with the Income Tax Appellate Tribunal ( ITAT ) cancelling a hefty INR 21,52,899 adjustment. The dispute revolved around BIPL's operational status and its merger with Boeing Corporation India Ltd. ( BCIL ).

The case, identified as ITA for the Assessment Year 2017-18, was heard by the Delhi Bench of the ITAT, consisting of Shamim Yahya, Accountant Member, and Challa Nagendra Prasad, Judicial Member. The ITAT issued its decision on December 8, 2023, following a hearing on November 29, 2023.

The disagreement stemmed from an order by the Assessing Officer under sections 143(3) and 144C of the Income-tax Act, 1961, dated February 28, 2022. The draft assessment order proposing the INR 21,52,899 adjustment was contested by BIPL. They argued that the adjustment related to interest on outstanding receivables concerning transfer pricing.

BIPL emphasized that the benchmarked transaction involved Boeing Corporation, a separate entity, and a similar addition had already been made for Boeing Corporation in the same assessment year. They highlighted their incorporation on March 9, 2017, and their lack of business operations during the relevant financial year.

The ITAT bench, headed by Shamim Yahya and Challa Nagendra Prasad, agreed with BIPL's arguments. They stressed that the disputed transaction was not with BIPL and that there was no involvement of the Transfer Pricing Officer ( TPO ) in BIPL's case. The TPO's order, forming the basis of the adjustment, pertained to BCIL, an entity that merged with BIPL on April 1, 2017. Consequently, the tribunal ruled that adjustments in BCIL's case should not impact BIPL's assessment.

As a result of these considerations, the ITAT overturned the transfer pricing adjustment of INR 21,52,899, providing a significant resolution to Boeing India's tax dispute. This decision highlights the importance of accurately aligning transfer pricing adjustments with specific entities and transactions to prevent instances of double taxation and ensure fair assessments based on relevant facts and circumstances.

To Read the full text of the Order CLICK HERE

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