In a partial relief to Hyundai Motor India Ltd, the Chennai Bench of Income Tax Appellate Tribunal (ITAT) while directing the matter to TPO for fresh consideration ruled that transfer pricing adjustment (TPA) cannot be done on the basis of entity level values.
The assessee M/s. Hyundai Motor India Ltd., is a wholly owned subsidiary of M/s. Hyundai Motor Company Ltd., South Korea. The assessee is engaged in the business of manufacturing and selling passenger cars in domestic and export markets. The assessee company has filed its return of income for assessment year 2013-14 on 28th November, 2013 admitting total income under normal provisions of the Act, and book profit under section 115JB of the Act. The assessee had entered into various international transactions with its AEs and international transactions were duly reported in Form 3CEB filed in accordance with provisions of Indian Transfer Pricing Regulations contained in section 92, 92A to 92F of the Income Tax Act, 1961. The case was taken up for scrutiny and during the course of assessment proceedings, a reference was made to JCIT (Transfer Pricing) for determination of arm’s length price of international transactions of the assessee with its AEs. The TPO suggested certain transfer pricing adjustments towards downward adjustment to the value of imports and upward adjustment for brand development services.
The assessee submitted that DRP has erred in benchmarking international transactions by segregating domestic car sales segment on standalone basis without appreciating the fact that international transactions that are closely linked are to be aggregated and benchmarked and therefore, adjustment based on segmented results is not warranted.
The coram of Judicial Member, V.Durga Rao and Accountant Member, G.Manjunatha ruled that the .DRP is erred in making TP adjustment at entity level and hence, directed the TPO to restrict TP adjustment only to international transactions pertaining to domestic car sales segment.
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