ITAT directs fresh assessments and verifications on various grounds, including transfer pricing adjustments

Weatherford Drilling & Production Services (India) Pvt. Ltd. Versus The Asstt. CIT Circle-4 Baroda

Weatherford Drilling & Production Services (India) Pvt. Ltd. Versus The Asstt. CIT Circle-4 Baroda - TMI Issues Involved:
1. Adjustment in relation to the international transaction of sale of goods to Associated Enterprises (AE).
2. Non-allowance of the benefit of +/-5% range as per Section 92C(2) of the Income-tax Act, 1961.
3. Disallowance under Section 40(a)(i)/(ia) of the Act.
4. Levy of interest under Section 234B of the Act.
5. Disallowance of an expense amounting to Rs. 13,65,460 under Section 40(a)(i) of the Act.

Issue-wise Detailed Analysis:

1. Adjustment in Relation to the International Transaction of Sale of Goods to AE:
The Assessee challenged the adjustment of Rs. 4,17,26,088/- made by the Assessing Officer (AO) under the directions of the Dispute Resolution Panel (DRP) concerning the international transaction of sale of goods to AE. The Transfer Pricing Officer (TPO) did not accept the Assessee's Transfer Pricing study and conducted its own study, which led to an initial adjustment of Rs. 3,02,66,356/-. The DRP further enhanced this adjustment to Rs. 4,27,26,088/-. The Assessee objected to the TPO's filters and comparables, particularly the inclusion of Tyco Sanmar Limited and the exclusion of United Drilling Tools Limited. The ITAT found that the TPO had compared functionally different products and directed a fresh study to ensure a fair comparison, setting aside the previous orders and restoring the issue to the TPO for a fresh transfer pricing study.

2. Non-allowance of the Benefit of +/-5% Range as per Section 92C(2) of the Income-tax Act, 1961:
The Assessee contended that the AO erred in not allowing the benefit of the +/-5% range as per Section 92C(2) in relation to the international transaction of sale of goods to AE. The ITAT directed the TPO to conduct a fresh study and consider the benefit of the +/-5% range during the reassessment.

3. Disallowance under Section 40(a)(i)/(ia) of the Act:
The Assessee objected to the disallowance of Rs. 45,99,634 under Section 40(a)(i)/(ia) of the Act, claiming that the tax had been deducted and paid during the previous year. The DRP directed the AO to verify the Assessee's claim and allow the deduction as per law. The ITAT upheld the DRP's direction, finding no reason to interfere with the order.

4. Levy of Interest under Section 234B of the Act:
The Assessee contested the levy of interest under Section 234B of the Act. The ITAT's decision on this issue was not explicitly detailed in the judgment, implying that this ground was not separately adjudicated.

5. Disallowance of an Expense Amounting to Rs. 13,65,460 under Section 40(a)(i) of the Act:
The Assessee raised an additional ground, arguing that the AO erred in not allowing an expense of Rs. 13,65,460 under Section 40(a)(i) of the Act, as it was a mere reimbursement of expenses. The ITAT admitted this additional ground and restored it to the AO for verification. The AO was directed to verify if the disallowance was indeed a reimbursement and allow the claim if proven.

Conclusion:
The ITAT partly allowed the Assessee's appeal for statistical purposes, directing fresh assessments and verifications on multiple grounds, including the adjustment related to the international transaction of sale of goods to AE, the benefit of the +/-5% range, and the disallowance under Section 40(a)(i)/(ia) of the Act. The additional ground regarding the reimbursement of expenses was also admitted and remanded for verification.