Dixon Technologies (India) Ltd. Vs ACIT (ITAT Delhi)
Specified Domestic Transactions Survive for AY 2013-14 Despite Later Omission of s.92BA(i) – But Dixon Wins Major Relief on Comparables &; Abandoned Business Expenditure
Summary: The Delhi ITAT dealt with an important question concerning the effect of the Finance Act, 2017 omission of clause (i) of s.92BA, which had brought payments to related parties covered by s.40A(2)(b) within the transfer-pricing regime as Specified Domestic Transactions (SDTs). The assessee argued that once the provision was omitted without a saving clause, it must be treated as though it had never existed. The Tribunal rejected this contention for AY 2013-14, holding that Parliament had expressly made the amendment prospective from AY 2017-18. However, on merits, the assessee secured substantial relief regarding selection of comparables and also succeeded in getting abandoned project expenditure allowed as revenue expenditure.
₹5.12 crore TP adjustment on domestic related-party transactions
The assessee was engaged in manufacture of audio-video electronic products in India. During the relevant year, it entered into specified domestic transactions involving purchase of goods, job charges, rent etc. with persons covered u/s 40A(2)(b).
The assessee adopted TNMM and declared an operating profit/sales margin of 1.65%. The TPO rejected the benchmarking and arrived at an average OP/sales margin of 4.70%, resulting in an upward TP adjustment of ₹5,12,70,379. The DRP upheld the adjustment and the AO incorporated it in the final assessment. The framework for ALP determination and comparability under Rule 10B is relevant to the Tribunal’s merits analysis.
