Inductotherm (India) Pvt. Ltd. Vs DCIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, partly allowed the assessee’s appeal for statistical purposes for Assessment Year (AY) 2020-21. The appeal challenged the assessment order passed under Sections 143(3), 144C(13), and 144B of the Income-tax Act involving transfer pricing adjustments, corporate tax additions relating to reversal of provisions, and short grant of TDS/TCS credit.
The assessee, a wholly owned subsidiary of Inductotherm Technologies Inc., USA, is engaged in manufacturing and sale of induction heating, welding and related industrial equipment. During scrutiny, the Central Processing Centre (CPC) made an adjustment of ₹3,75,67,050 under Section 143(1) on account of a mismatch between the tax audit report and the return of income regarding reversal of provisions. The assessee contended that the provisions had already been disallowed in the year of creation and that taxing the reversal would result in double taxation. The assessee had also entered into international transactions with its Associated Enterprises (AEs) and benchmarked them using the Transactional Net Margin Method (TNMM) at the entity level. The Transfer Pricing Officer (TPO), however, rejected the aggregated TNMM approach and adopted an internal Cost Plus Method by selecting about 240 product lines from nearly 9,000 products, resulting in a transfer pricing adjustment of ₹3,88,46,904. The Dispute Resolution Panel (DRP) upheld the adjustment and declined to adjudicate the Section 143(1) adjustment, holding that issues arising from CPC adjustments were outside its jurisdiction under Section 144C.
