TaxTMI 
TaxTMI 
2026 (2) TMI 363
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....tion 144 C(8). 1.2 In view of the discussion made later in this order, the above grounds of appeal become academic in this appeal and are left open in this case. 2. Brief facts of the case : M/s Honda Trading Corporation India Private Limited (hereinafter referred to as "the assessee") filed its return of income for AY 2021-22 on 10/02/2022 declaring total income of Rs. 9,78,20,290/- vide Acknowledgement Number 156162270100222 The case was selected for Complete Scrutiny through CASS. Accordingly, notice u/s 143(2) of the Income-tax Act, 1961 vide DIN: ITBA/AST/S/143(2)/2022- 23/1043607153(1) was issued upon the assessee on 28/06/2022 by the National Faceless Assessment Centre. In response to the notice the assessee company made its submission on 12/07/2022. The assessee submitted copy of computation of income, copy of ITR, copy of Form 3CB & 3CD for AY 2021-22, copy of Form 3CEB, copies of Balance sheet/statement of affairs along with detailed schedules etc. 3. During the year, the assessee company was primarily engaged in the business of trading activities. The principal items traded were steel automotive parts and automotive coils, equipment and the company was also enga....
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....pellant and failed to undertake appropriate functional analysis of comparables vis-à-vis Appellant: 9. The Ld. TPO / AO grossly erred by considering following inappropriate filters, for the purpose of arm's length evaluation and making the impugned adjustment: Reject companies having turnover less than one crore; and Reject companies with different accounting year end. 10. Impugned order erred in not considering use of contemporaneous data and thereby accepting companies as comparable for which the financial data was not available with the Assessee at the time of preparation of transfer pricing documentation. 11. Impugned order erred in not making appropriate adjustments to account for differences in working capital employed by the Assessee vis-à-vis the comparables and in the process also ignored the provisions of the Indian transfer pricing regulations and judicial pronouncements on this subject. 12. Impugned order erred in calculating the median of comparable data set and thereby calculating the amount of adjustment by considering such incorrect median. 13. Impugned order erred grossly in using incorrect net margins ....
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....n 2,95,83,014 4 Payment of commission 3,62,00,991 5. It is observed that the commission received is about Rs. 2.95 Cr on sales on 504 Cr whereas commission paid is about Rs. 3.62Cr on export of about Rs. 176 Cr. the commission paid is at a much higher percentage than is received. TPO is directed to verify this aspect or the transaction also Without making further enquires with assessee in view of section 144C(13) quoted below - "(3) Upon receipt of the directions issued under sub-section (5)_the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153. the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received." 3.7 The same was discussed by the TPO in his order giving effect dated 14/10/2024 to the direction u/s 144C of the Act of the DRP and the TPO made an adjustment Rs 2,57,67,740/-. The relevant discussion by the TPO is reproduced as under: "5.5- reference to the TPO The Hon'ble DRP has stated in page 9 of its order on the difference in commi....
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.... as the Hon'ble DRP's directions for verifying commission transactions are unclear and lack necessary context, leading to Ld. TPO passing the order with irrational conclusions, thereby making the impugned adjustment. 16.3 The impugned order is legally untenable as the Ld. TPO made an adjustment disregarding the fundamental principles of transfer pricing, by inappropriately comparing the transactions of commission paid and received by the Appellant with the AE(s). 16.4 The impugned order is bad in law, resulting in economic double taxation, as the transactions pertaining to commission received and paid are already included in the total international transaction value used to calculate the impugned adjustment for the alleged trading segment. " 5. Subsequent to the filing of the present appeal by the assessee on 19.11.2024, an order u/s 154 dated 26.12.2024 was passed by the AO, wherein the submissions made by the assessee in its rectification application dated 19.11.2024 inter-alia on the issue of adjustment of Rs. 2,57,67,740/- was dealt as under: "6.2 Adjustment of INR 2,57,67,740/- on account of commission expenses (trading segment) T....
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....F TWO CONTROLLED TRANSACTIONS IS VIOLATIVE OF CHAPTER X OF THE ACT 10. As stated above, the Appellant had entered into two international transactions for payment and receipt of commission with its AEs a. Controlled transaction A-Receipt of commission of Rs. 2.95.83,014/- from AEs ie, 0.50% of imports of Rs. 5,04,08,43,910/- b. Controlled transaction B-Payment of commission of Rs. 3,62.00,991/- to AEs le., 2.05% of exports of Rs. 1,76.83,47,562/- 11. Under Chapter X of the Act, section 92 requires that an income arising from an international transaction shall be computed having regard to the arm's length price. Section 92F(ii) defines "arm's length price to mean "a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions" (emphasis supplied by us). Thus, for a price to treated as ALP, the same must be derived from transaction: a. Entered between persons other than AEs, and b. Conducted in uncontrolled conditions. 12. As stated in the preceding paragraphs, TPO has considered the commission received as ALP for benchmarking the co....
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....upheld by Hon'ble jurisdictional High Court in Principal Commissioner of Income-tax vs. Coim India (P.) Ltd. [2024] 160 taxmann.com 756 (Delhi) in its order dated 19.02.2024: 6. ...........It has also been found on facts that the TPO has compared controlled transactions with other controlled transactions, losing sight of the imperative of the comparison being made with "uncontrolled transactions". It has thus found that the direction as framed would clearly be contrary to Section 92F(ii) of the Act and which mandates that ALP would be the price identified for a "transaction between persons other than associated enterprises in uncontrolled conditions" 7. It is on a cumulative consideration of the aforesaid aspects that the additions have come to be annulled. The view as taken by the ITAT cannot possibly be faulted. 8. The appeals fail to raise any substantial question of law They shall consequently stand dismissed." A copy of the above judgments is attached herewith this submission for ease of reference. 15. At this juncture Appellant would also like to state that it is a settled law that the Revenue cannot be permitted a second innin....