ITAT Hyderabad Rules in Favor of Assessee, Deletes Arms Length Price Adjustment

The Appellate Tribunal ITAT Hyderabad allowed the appeal for Assessment Year 2013-14, challenging a arms length price adjustment in the assessment order. The Tribunal ruled in favor of the assessee, deleting the arms length price adjustment on receivables. It emphasized that an associate enterprise cannot be considered as a comparable, leading to the adjustment deletion. The decision was based on precedents and deemed other arguments on merits irrelevant. The order was issued on 26th November 2021, concluding the matter.

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Issues:
1. Challenge to arms length price adjustment in assessment order.
2. Adoption of segmental comparable in business support services.
3. Reliance on inter-company agreements for determining credit period.
4. Consideration of associate enterprise as comparable.
5. Deletion of arms length price adjustment on receivables.
6. Overall decision on merits.

Analysis:
The appeal for Assessment Year 2013-14 was brought before the Appellate Tribunal ITAT Hyderabad challenging the correctness of the arms length price adjustment of Rs. 59,45,094 made in the assessment order. The primary grievance of the assessee was the lack of adoption of any segmental comparable in the business support services segment by the lower authorities. The Transfer Pricing Officer's order had relied on the inter-company agreements to determine the credit period, which was noted without the use of any segmental comparable in the adjustment.

In the judgment, reference was made to cases such as Tecnimont Icb Pvt Ltd., Mumbai Vs. ACIT and Sabic Innovative Plastic India Pvt Ltd Vs. DCIT, emphasizing that an associate enterprise cannot be considered as a comparable due to its lack of independence in transactions. Therefore, the impugned arms length price adjustment on receivables was deleted solely based on this reason.

The Tribunal found all other arguments on merits to be irrelevant in light of the above decision. Consequently, the appeal of the assessee was allowed based on the deletion of the arms length price adjustment on receivables. The order was pronounced in the Open Court on 26th November 2021, bringing the matter to a close.

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