Spectris Technologies P. Ltd. Vs ITO (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal adjudicated an appeal arising from an order passed under section 250 of the Income-tax Act, 1961, involving two recurring issues in the assessee’s case across multiple assessment years. The assessee, a domestic company engaged in supplying material analysis equipment along with installation, commissioning, and after-sales services, contested transfer pricing adjustments and disallowance of depreciation on non-compete fees.
The first issue concerned transfer pricing adjustments relating to segregation of business segments. The Assessing Officer and Transfer Pricing Officer had aggregated the assessee’s activities relating to Annual Maintenance Contract (AMC) services and Agency & Marketing Support Services, treating them as a single segment for determining the arm’s length price. The assessee contended that it had maintained proper segmental accounts based on functional, asset, and risk analysis and that benchmarking should be carried out separately for each segment. The Commissioner (Appeals) upheld the aggregation approach by following orders from earlier years.
Before the Tribunal, the assessee relied on decisions in its own cases for Assessment Years 2007–08 and 2008–09, where the Tribunal had recognized that the assessee operated in two distinct segments and had rejected aggregation of segments merely because segmental accounts were unaudited. The Tribunal noted that in earlier years it had directed separate benchmarking of the two segments and restoration of the matter to the TPO for limited verification. Following these precedents, the Tribunal held that the transfer pricing adjustment could not be sustained on an aggregated basis. It directed the Assessing Officer and TPO to treat AMC services and Agency & Marketing Support Services as separate segments, benchmark them independently, examine the comparables and segmental results, and determine whether the margins fell within the permissible tolerance range under section 92C(2). Adequate opportunity of hearing was directed to be granted to the assessee.
