DIC Fine Chemicals Pvt. Ltd. Vs DCIT (ITAT Kolkata)
The case before the Income Tax Appellate Tribunal Kolkata involved an appeal by the assessee against the final assessment order passed under Sections 143(3), 144C(13), and 144B of the Income Tax Act, 1961 for Assessment Year (AY) 2021–22.
The assessee, engaged in manufacturing and exporting sheet-fed ink as part of an international group, had entered into multiple international transactions with its associated enterprises (AEs), including purchase of raw materials, capital goods, sale of finished goods, and cross-charged expenses. These transactions were benchmarked primarily using the Transactional Net Margin Method (TNMM).
During assessment, the Assessing Officer (AO), based on adjustments proposed by the Transfer Pricing Officer (TPO) and confirmed by the Dispute Resolution Panel (DRP), made transfer pricing adjustments amounting to ₹14,97,74,696. Consequently, the total income of the assessee was assessed at ₹18,71,41,145 as against ₹3,73,66,449 declared in the return of income.
The assessee raised multiple grounds before the Tribunal, including the validity of the assessment order, limitation issues, alleged violations of natural justice, improper selection of comparables, use of inconsistent profit level indicators (PLIs), and errors in computation of book profit under Section 115JB.
During the course of hearing, the assessee submitted that it had entered into an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes (CBDT), applicable for AYs 2019–20 to 2023–24, which included the relevant AY 2021–22. Under the APA, the arm’s length nature of international transactions would be accepted if the operating profit margin was not less than 4.25% for the covered transactions.
