Owens-Corning (India) Private Limited Vs ACIT (ITAT Mumbai)
The assessee appealed against the assessment order dated 23.08.2017 passed under Sections 143(3) read with 144C(13) of the Income-tax Act for the relevant assessment year. The appeal involved issues relating to transfer pricing adjustment, amortisation of leasehold land premium, depreciation, and disallowance of provisions for expenses.
Transfer Pricing Adjustment
The principal dispute concerned a transfer pricing adjustment of ₹19,21,38,016 relating to the manufacturing segment. The Transfer Pricing Officer (TPO) determined the assessee’s operating margin at 2.62% after treating ₹9,06,80,292 representing fixed assets written off as part of operating costs. The assessee contended that the amount was a non-operating item, had already been added back while computing taxable income, and therefore should not form part of operating costs for transfer pricing purposes.
The Tribunal accepted the assessee’s contention. It noted that earlier Tribunal decisions had held that fixed assets written off do not constitute operating costs. It also found that the assessee had already added back the written-off amount while computing its taxable income and that the assessment order itself reflected this position. Further, excluding the written-off amount did not alter the margins of the comparable companies. The Tribunal held that the Dispute Resolution Panel (DRP) had erred in refusing to entertain the assessee’s additional objection, as no fresh evidence was required and the issue could be decided on the existing record.
