Partial Relief to Hyundai Construction: ITAT restores issue of transfer pricing addition made under Manufacturing activity segment to AO

In a partial relief to Hyundai Construction Equipment India, the Income Tax Appellate Tribunal (ITAT), Pune Bench restored the issue of transfer pricing addition made under the Manufacturing activity segment to AO.

The assessee, M/s. Hyundai Construction Equipment India Private Limited has been engaged in the manufacture and distribution of heavy earthmoving equipment and parts. Return was filed declaring total income at Nil. The assessee reported 13 international transactions in Form No.3 CEB and grouped some of them and then applied different methods for showing them at the ALP.

The assessee has filed the appeal against making transfer pricing adjustment on entity level rather than restricting it to the AE transactions. The TPO computed the transfer pricing addition by considering revenues from ̳Manufacturing segment‘ in totality at the entity level. The DRP did not concur with the assessee‘s submission that such issue was decided in favour of the assessee by the Bombay High Court on the ground that the SLP filed by the Department was pending.

The coram headed by the Vice President, R.S.Syal and Judicial Member S.S.Viswanethra Ravi relied on the judgment jurisdictional High court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd., holding that the transfer pricing adjustment made at entity level should be restricted to the international transactions only. It is pertinent to mention that the Department‘s SLP against this judgment has since been dismissed by the Supreme Court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. Similar view has been taken by the Hon‘ble Bombay High Court in CIT Vs. Thyssen Krupp Industries Pvt. Ltd. and CIT Vs. Tara Jewels Exports (P). Ltd..

The ITAT directed the AO/TPO to restrict the transfer pricing addition to the extent of international transactions under the segment of Manufacturing activity‘.

“The transfer pricing addition made in the impugned order under the Manufacturing activity segment is set aside and the matter is restored to the file of the AO/TPO for re- computing the same in accordance with the directions and observations given hereinabove. Needless to say, the assessee will be allowed an opportunity of hearing,” the ITAT added.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.

M/s. Hyundai Construction Equipment India Private Limited vs ACIT , 2021 TAXSCAN (ITAT) 332 , Shri M.P. Lohia , Shri Navin Gupta