Spectris Technologies Pvt. Ltd. Vs ACIT (ITAT Delhi)
Segmental Accounts Can’t Be Ignored Merely Because They’re Unaudited: ITAT Delhi Sends TP Issue Back for Segment-Wise Benchmarking
Delhi ITAT held that transfer-pricing adjustment made by aggregating distinct business segments was unsustainable and required fresh examination in line with earlier year’s binding precedent.
The Assessee was engaged in two distinct segments—(i) Agency & Marketing Support Services and (ii) Annual Maintenance Contract (AMC) Services—and had prepared detailed segmental accounts with a clear basis for allocation of revenue and expenses. However, the TPO rejected the segmentation, treated AMC services as inextricably linked with agency services, applied TNMM at the entity level and proposed a TP adjustment of ₹1.79 crore, which was upheld by the CIT(A) by following his order for AY 2007-08.
The Tribunal noted that in the Assessee’s own case for AY 2007-08, the Coordinate Bench had categorically accepted the segmental accounts, held that AMC services and agency/marketing support services are functionally different, and deleted the TP adjustment. Merely because segmental accounts were not audited was held to be no ground to discard them, in the absence of any specific defect in allocation or accounting.
Following the earlier year’s ruling, the ITAT held that benchmarking must be done segment-wise. The matter was restored to the file of the TPO for a limited purpose of verification—to examine segmental benchmarking and comparables. The Tribunal observed that if the Assessee’s PLI of 17.95% is within the permissible tolerance range vis-à-vis comparables’ average margin of 19.63% as per proviso to section 92C(2), no TP adjustment would survive.
Accordingly, the TP issue was remanded for fresh segment-wise analysis, and the appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT DELHI
