TaxTMI 
TaxTMI 
2026 (9) TMI 595
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....systems, temperature control systems, automated control systems primarily in the nature of refrigeration and related products. In addition to the above, the assessee is also engaged in the business of provision of software and engineering services to its Associated Enterprises ('AEs'). These operations are collectively referred to as the Invensys Process Systems ('IPS'). The Assessee has entered into transactions of purchase of components, sale of components, receipt of services, provision of services and recovery of expenses. 3. The assessee filed its return of income ('ROI') for the Assessment Years ('AY') 2021-22, which was processed u/s. 143(1) of the Act and was selected for scrutiny assessment. 4. During the scrutiny assessment proceedings, the Transfer Pricing Officer ('TPO') and the AO made certain adjustments / disallowances to the assessee's income. Against the draft assessment order of the AO, the Assessee filed objections before the Dispute Resolution Panel ('DRP'). The DRP issued its directions dated 27.09.2024 by providing partial relief in some adjustment, upheld few adjustment and also enhanced certain adjustment. 5. Below is the summary of the quantum of a....
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.... opposed request of the assessee for consideration of the additional evidence. However, he submitted that in case it is allowed the matter should be set aside to the file of the TPO/AO with this specific direction that while entertaining these additional evidence on the issue of transfer pricing adjustment. 9. We have heard the rival contentions and perused the material on record. The Assessee has filed additional evidence to substantiate the benefit derived from services received from its AE. The additional evidence filed is admitted like in the earlier AYs. This issue seem to be covered by the decision in ITA.Nos.2754 & 2757/Chny/2024, 2958 & 2959/Chny/2024 dated 11.09.2025. The relevant extract is as under: "8. The Tribunal accedes to assessee's plea for accepting these additional evidence and remanding the matter to the authorities below for fresh adjudication. We find that in the present case the assessee has also collated additional evidence to corroborate the benefit received in adherence to the principles and contentions made before the authorities below. We thus in the interest of justice set aside the matter to the file of the AO to first ascertain the benefit....
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....lectronics Ltd. and Powerica Ltd. 13. The Ld.AR contended that Penguin Electronics Ltd. should be included as that company is also into manufacture of electric and electronic components. In this regard, the Ld.AR also invited our attention to details filed at Pg.289 to 291 of the paper book. 14. The Ld.DR contended that this comparable company is catering to different industry and hence it should not be accepted. 15. We have heard the rival contentions and perused the material on record and gone through the orders of the authorities along with the paper books filed. The TPO and DRP have given a finding that Penguin Electronics Ltd. is into manufacture of electromechanical domestic appliances with self-contained electric-motor and parts. The DRP/TPO have given a finding that this comparable is into manufacturing of kitchen appliances. Whereas the Assessee is into manufacturing process control systems and temperature control systems. Though the major function i.e. manufacturing is similar to the Assessee, the industry to which Penguin is catering is different and as such we hold that Penguin Electronics Ltd cannot be considered as a comparable. Accordingly, Ground No.2.2 for....
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.... do not agree with this finding. Having admitted that there are two different segments i.e. manufacturing and trading, considering the whole entity is not appropriate. Accordingly, we hold that in the absence of segmental, this comparable company will have to be excluded from the final set of comparables. Accordingly, Ground No.2.3 for exclusion of Novateur Electrical and Digital Systems Pvt.Ltd. is allowed. 23. The Ld.AR contended that Havells India Ltd should be excluded as that company is functionally not comparable as it has Diversified activities and significant inventory; fails export revenue filter; undertakes R&D activities; significant investment in tangible assets, indicating the company is a full-fledged manufacturer; owns significant intangible assets; has significant marketing expenses, indicating ownership of marketing intangibles. In this regard, the Ld.AR also invited our attention to details filed at Pg.348 to 362 of the paper book, which also had extracted from the Annual Report. 24. The Ld.DR contended that though activities are diversified in this comparable company, the majority of the revenue i.e. 99% is from sale of products and therefore according to h....
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....ical Ltd should be excluded as that company is engaged in dissimilar activities and has significant inventories; fails export revenue filter, owns significant intangible assets and significant marketing expenditure. In this regard, the Ld.AR also invited our attention to details filed at Pg.377 to 378 of the paper book filed, which had extracted from Annual Report of the Company. The Ld.AR also submitted that this comparable was excluded in the Assessee's own case for AY 2015-16 by the ld.CIT(A) and the revenue has not preferred an appeal against the same and prayed for application of principle of consistency. 30. The Ld.DR contended that res judicata will not apply to income tax proceedings. 31. We have heard the rival contentions and perused the material on record and gone through the orders of the authorities along with the paper books filed. The TPO and DRP (page 816 of the paper book) has accepted the contention of the Assessee and held that since the said comparable is engaged in manufacture of power distribution solutions which is a different sector, the same was excluded. Admittedly, the Revenue has not filed appeal against the said comparable. In view of the above an....
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....n the interest of justice and fair play, the TPO is hereby directed to re-run the search once again and see whether these comparables are appearing in the search matrix and if they appear include them in the final list. Accordingly, with these directions this ground of appeal no.3.3 is disposed of. Ground of appeal no.3.3 is allowed for statistical purposes. 36. Ground 3.2 exclusion of 3 comparable companies: Sundaram Business Services Ltd.; Microland Ltd.; and Concept Public Relations India Ltd. The Ld.AR indicated that he is not pressing exclusion of Microland Ltd. and as such exclusion of Microland Ltd. is dismissed. 37. The Ld.AR contended that Sundaram Business Services Ltd. is functionally not comparable as it is engaged in dissimilar activities and owns significant intangible assets; has significant marketing expenses, indicating ownership of marketing intangibles; and significant onsite activities. In this regard, the Ld.AR also invited our attention to details filed at Pg.389 to 399 of the paper book, which also had extracted from Annual Reports of the company. The Ld.DR contended that only PSS segment is considered and therefore this comparable should not be rejecte....
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.... to highlight that the expenditure (provision for contract losses) has been considered as operating expenditure in the above years. The details of the computation of margins as per the Transfer Pricing Study and the TP orders (wherever applicable) was provided as Annexure 1 to SCN response. The Ld.AR also additionally submitted that the reversals have been offered to tax, in the computation of taxable income for AY 2021-22. Similarly, Provisions written back were also offered to tax as taxable income during the year. The Ld.AR also highlighted that this Tribunal in the Assessee's own case for AY 2014-15 had directed that the provision no longer required written back ought to be considered as operating in nature. Similarly, Miscellaneous income comprising of true-up adjustment, scrap sales, reversal of vendor payments, advance recovered and others. These are operating as they are closely connected to operation of the Assessee. Further, the Ld.AR also contended that export incentives should be considered as operating income as the same is also considered as income for the purpose of corporate tax. Forex gain has to be considered as operating when the same was treated in the earlier A....
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....the companies faced severe decline in business, however, the impact of such decline varied from company to company. Therefore, we do not agree with the contention of the DRP that since all companies faced covid lockdown pressure, there is no necessity for any adjustment. Having concluded this aspect, in the instant case the Assessee has sought two kinds of relief viz., first one is 'adjustment of fixed cost' or 'notionally increasing the sales' and second relief is considering only current year margin of comparable companies. The Ld.AR during the course of hearing vehemently pressed on the second relief relying on the basis of jurisdictional Tribunal decision in the case of Brakes India Ltd. in IT(TP)A No.47/Chny/2024 dated 03.07.2025. The relevant extract is as under: "8.3. Considering the above facts of extraordinary recessionary year - FY 20019-20 (AY 2020-21), the TPO comparing 3 years weighted average PLI of comparable companies (where two normal years are there) with that of PLI of Brake Division of only impugned assessment years data, will not be an equitable comparison. Therefore, the TPO has to consider either weighted average of 3 years of both the comparable com....