Cummins India Limited Vs ACIT (ITAT Pune)
10AA Relief Upheld, 35(2AB) Restored, 14A Partly Sustains- Export–Domestic Royalty Split Not Permissible: Entire TP Adjustment Deleted
Pune Tribunal dealt with cross-appeals against TP adjustments & corporate tax issues. AO/TPO had made an upward adjustment of Rs.12.70 Cr by rejecting Aggregation approach & applying CUP only to royalty on export sales, splitting royalty into domestic vs export segments. Tribunal noted that Jurisdictional Bombay High Court, vide judgment dated 28.07.2023 in Assessee’s own cases for AYs 2015-16 to 2017-18, has already held that once TNMM is accepted as MAM for manufacturing segment, Revenue cannot isolate one element like royalty & benchmark it separately. Tribunal applied binding HC ratio & deleted the entire TP adjustment. Grounds 2–5 allowed.
On corporate issues, Tribunal held that AO wrongly adopted total income as per 143(1) intimation instead of revised return while framing 143(3) order; exemption u/s 10AA was already allowed by CIT(A) & Revenue’s appeal on this issue survives to be adjudicated separately. Deduction u/s 35(2AB) was restored to JAO for verification of DSIR Form 3CL now received. Disallowance u/s 14A @1% of exempt income was upheld since amended Rule 8D(2) applied from 02.06.2016 & Assessee’s earlier-year decisions were not applicable. However, following Special Bench in Vireet Investments, addition of 14A expenditure to book profits u/s 115JB was deleted. On additional ground, Tribunal found LTCG of Rs.7.90 Cr had been taxed twice due to computational mismatch between assessment order & tax computation sheet; issue remitted to JAO for correction. Revenue’s appeal on 10AA & 80JJAA issues was taken up separately in connected ITA No.1256/PUN/2023.
