Bellsonica Auto Component India Private Limited Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, partly allowed the assessee’s appeal for Assessment Year 2014-15 by restricting the transfer pricing adjustment relating to royalty and fees for technical services (FTS) to the rate accepted by the Central Board of Direct Taxes (CBDT) under a Unilateral Advance Pricing Agreement (UAPA). The Tribunal directed the Assessing Officer (AO) to apply a rate of 1.9% of net sales instead of sustaining the adjustment determined by the Transfer Pricing Officer (TPO).
The assessee had filed its return declaring a loss of ₹1.68 crore. During scrutiny assessment, a reference was made to the TPO under Section 92CA(1) to determine the arm’s length price (ALP) of international transactions. The TPO proposed an adjustment of ₹8.47 crore in respect of payments made towards royalty and technical fees to the associated enterprise. The draft assessment order incorporated the adjustment, and the Commissioner of Income Tax (Appeals) [CIT(A)] subsequently upheld the addition.
Before the Tribunal, the assessee contended that the TPO and the CIT(A) had wrongly rejected its transfer pricing documentation, economic analysis, and benchmarking under the Comparable Uncontrolled Price (CUP) method. It also argued that reimbursement of expenses amounting to ₹18.24 lakh, relating to items such as water charges, electricity charges, and land development charges recovered by the associated enterprise on a cost-to-cost basis, had been incorrectly included in the royalty and technical fee adjustment, although no adverse finding had been recorded regarding those reimbursements. The assessee further submitted that its associated enterprise followed a group policy of charging technical know-how fees to subsidiaries, including charging 2% from its Indonesian subsidiary, and that supporting agreements had been furnished.
