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No second innings should be given to appreciate the same set of facts already before the AO: ITAT grants relief to Volvo

ITAT- appreciate- same set facts - Volvo - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that no second innings should be given to appreciate the same set of facts which were already before the Assessing Officer.

The assessee, M/s Volvo Auto (India) Private Limited is a wholly owned subsidiary of Volvo Car Corporation and is engaged in the business of importing cars as completely built units for the purpose of distribution in the Indian market. This is the first financial year of the assessee’s business operations.

During the year under consideration, the assessee has made a payment of Rs.2,94,56,764/- to its parent company on account of management service fees on which taxes were deducted at source.

The assessee earned margin of 1.59% from its operations and as per TP study carried out by the assessee, average margins of comparable companies was shown at 1.86% and since the margin of the assessee with comparable companies was within +/- 5% range, international transactions were concluded to be at arm’s length.

According to the Assessing Officer, the assessee has not submitted any evidence to substantiate that the services were actually received, so the addition of Rs. 3,24,90,810/- was accordingly made.

The assessee carried the matter before the CIT(A), wherein it was held that the AO was not justified in adopting CUP method and determining the ALP of the transaction as NIL and consequently making an adjustment to the income of Rs. 3,24,90,810/-. The adjustment done by the AO on this account is deleted. These grounds of appeal are allowed.”

The Tribunal consisting of the Accountant Member, N.K. Billaiya and a Judicial Member Shuchitra Kamble observed that the Assessing Officer himself has accepted that if the management fees had not been paid by the appellant, the true-up adjustment received would have been Rs. 2.51 crores only and the profits of the appellant would have been less than the profits returned but it.

“We do not find any force in this contention of the ld. DR. In our considered opinion, no second innings should be given to appreciate the same set of facts which were already before the Assessing Officer,” the tribunal while upholding the order of the CIT(A) said.

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