Assessee's Appeal Partly Allowed: Transfer Pricing Adjustments Limited, Interest Charged

The Tribunal partly allowed the assessee's appeal, directing adjustments only on international transactions related to the Infrastructure Group Segment, remanding various issues to the Transfer Pricing Officer for re-examination. The Tribunal upheld the rejection of certain transfer pricing documents and the decision to charge interest under Section 234C. The order was issued on 24th April 2015.

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Issues Involved:
1. Adjustment to Transfer Price
2. Rejection of Transfer Pricing Documents
3. Error in Arriving at International Transactions of Infrastructure Segment
4. Disproportionate Adjustment to Arm's Length Price (ALP)
5. Use of Contemporaneous Data
6. Rejection of Comparable (Escorts Ltd.)
7. Error in Value of Other Income
8. Adjustment Only for International Transactions
9. Safe Harbour Provisions
10. Imputed Cost of Interest
11. Levying Interest under Section 234C

Detailed Analysis:

1. Adjustment to Transfer Price:
The assessee contended that the TPO erroneously considered the international transactions of the Air Solutions Segment as part of the infrastructure segment, leading to an incorrect adjustment. The Tribunal directed that adjustments should be made only on transactions related to the Infrastructure Group Segment and remanded the issue to the TPO for re-examination.

2. Rejection of Transfer Pricing Documents:
The Tribunal dismissed the grounds related to the general rejection of the Transfer Pricing documents as they were not urged before the Tribunal.

3. Error in Arriving at International Transactions of Infrastructure Segment:
The Tribunal noted that the TPO made an adjustment only to the Infrastructure Group Segment and not the Air Solutions Segment. The Tribunal directed the TPO to make adjustments only on international transactions related to the Infrastructure Group Segment.

4. Disproportionate Adjustment to Arm's Length Price (ALP):
The assessee argued that the adjustments should be restricted to AE transactions amounting to Rs. 8,81,80,275. The Tribunal remanded the issue to the TPO to examine and determine the quantum of AE transactions on which the T.P. Adjustment has to be made.

5. Use of Contemporaneous Data:
The assessee used multiple-year data, while the TPO considered current year data. The Tribunal dismissed this ground as the use of current financial year data is mandatory under Rule 10B(4) of the IT Rules, 1962.

6. Rejection of Comparable (Escorts Ltd.):
The TPO rejected Escorts Ltd. as a comparable due to a different year ending. The Tribunal upheld the TPO's decision, finding no infirmity in rejecting this company as a comparable.

7. Error in Value of Other Income:
The assessee contended that the TPO adopted the wrong figure for other operating income. The Tribunal directed the TPO to verify and adopt the correct figure.

8. Adjustment Only for International Transactions:
The Tribunal directed that adjustments should be made only on AE transactions related to the Infrastructure Group Segment and remanded the issue to the TPO for re-examination.

9. Safe Harbour Provisions:
The Tribunal did not specifically address this ground in detail, as it was not pressed by the assessee.

10. Imputed Cost of Interest:
The TPO made an adjustment for notional interest on receivables from AEs. The Tribunal, following the decision of the ITAT Mumbai Bench in Evonik Degussa P. Ltd., held that notional interest on delayed payment is not called for if there is no agreement for charging interest on late payments. The issue was remanded to the AO/TPO for examination.

11. Levying Interest under Section 234C:
The Tribunal upheld the charging of interest under Section 234C as consequential and mandatory, directing the AO to recompute the interest while giving effect to the order.

Conclusion:
The Tribunal partly allowed the assessee's appeal for statistical purposes, remanding several issues to the TPO for re-examination and verification, and upheld certain decisions made by the TPO. The order was pronounced on 24th April 2015.

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