The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that Transfer pricing adjustment is to be restricted to international transaction.
The assessee raised an appeal against the order of Commissioner of Income Tax (Appeals) [CIT(A)] on the grounds of Addition on account of Transfer Pricing and Restricting transfer pricing adjustment to international transaction.
The assessee submitted that the DRP erred in upholding the transfer pricing adjustment to the extent of Rs. 38,41,90,287 in determination of Arm’s Length Price by failing to consider the facts of the case, including the submissions made by the Appellant and the evidences produced with reference to the transactions reported filed by the Appellant.
It was also submitted that the DRP erred in not restricting the transfer pricing adjustment to the value of international transactions with associated enterprises.
The issue for consideration with respect to transfer pricing was that whether the transfer pricing adjustment should be restricted to international transactions by the assessee with its associated enterprise or whether the adjustment is required to be computed at entity level.
The tribunal relied upon the case of Tara Jewels Exports (P.) Ltd. [2017] (Bombay) where the Bombay High Court held that adjustment to be done to arrive at arm’s length price is only in respect of transaction with its associated enterprises.
In the case of Kemrock Industries & Exports Ltd [2022], the Ahmedabad ITAT held that transfer pricing adjustment should be restricted only in respect of turnover of assessee-company relating to international transactions, sale of resins to its associated enterprises, and same should not be done in relation to all transactions.
In the case of KHS Machinery (P.) Ltd. [2023], the Ahmedabad ITAT held that adjustment of PLI of comparables ought to be made at transaction level and not entity level.
In the case of Bekaert Industries (P.) Ltd. [2022] the Pune ITAT held that Transfer pricing addition should be restricted only qua international transaction and not entity level transactions.
In view of the judicial precedents, the two-member bench consisting of Waseem Ahmed (Accountant member) and Siddhartha Nautiyal (Judicial member) allowed the appeal.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
