Honda R And D (India) Private Limited Vs DCIT (ITAT Delhi)
When TPO Accepts The Same TP Study Next Year, He Cannot Speak A Different Language For The Earlier Year—₹50.20-Lakh Adjustment Remanded For Consistent Relief U/s 92CA
Background
Honda R&D (India) Private Limited challenged the final assessment order dated 26 July 2024 passed by the AO-NFAC u/s 143(3) r.w.s. 144C(13) & 144B.
Following the directions issued by the DRP on 26 June 2024, the AO made a transfer-pricing adjustment of ₹50,19,930. The assessee approached the Tribunal with twelve grounds challenging the adjustment both on merits & on legal grounds.
The Tribunal heard the appeal in detail & concluded the hearing on 10 August 2026. However, a significant development occurred immediately thereafter.
Post-Hearing Development
By a letter dated 17 August 2026, the assessee brought to the Tribunal’s notice an order dated 14 August 2026 passed by the TPO for the immediately succeeding AY 2021-22.
The assessee submitted that the transfer-pricing issue examined for AY 2021-22 was identical to the controversy pending before the Tribunal for AY 2020-21. In the subsequent year’s proceedings, the TPO had examined the additional evidence, transfer-pricing documentation & economic analysis furnished by the assessee and had granted complete relief.
Since the order for AY 2021-22 had been received only after the hearing of the appeal for AY 2020-21 concluded, it could not have been produced during the hearing. The assessee therefore requested that the subsequent order be taken on record & considered while deciding the pending appeal. A copy of the communication was also furnished to the Departmental Representative.
What Happened in AY 2021-22
The order for AY 2021-22 had been passed by the TPO u/s 92CA(3) r.w.s. 254 pursuant to remand directions issued by the High Court & the Tribunal.
In the set-aside proceedings, the TPO issued a fresh notice dated 31 July 2026, permitting the assessee to furnish its explanation & supporting documents. The assessee responded on 7 August 2026.
The TPO thereafter examined the transfer-pricing documentation & the economic analysis placed on record. Upon verification, the TPO categorically recorded that no adverse inference was required in respect of the arm’s length price of the international transactions for AY 2021-22.
Thus, for the succeeding year, the Department itself accepted the assessee’s contentions on the same transfer-pricing issue that had resulted in the ₹50.20-lakh adjustment for AY 2020-21.
Principle of Consistency
The Tribunal observed that the assessee’s grievance for AY 2020-21 stood substantially addressed by the TPO’s later order for AY 2021-22. The facts & grounds involved in both years were stated to be similar, while the TPO had accepted the assessee’s position in the succeeding year after examining the relevant documentation.
Transfer-pricing analysis is undoubtedly assessment-year-specific because the functions performed, assets employed, risks assumed, economic circumstances & comparable data may vary from one year to another. Therefore, acceptance in one year does not automatically or mechanically determine the result for every other year.
However, where the material facts, international transactions & grounds are identical, the Department cannot maintain contradictory positions without identifying a relevant factual or legal distinction. Consistency requires that substantially similar cases receive substantially similar treatment.
The subsequent order was especially relevant because it was not a routine assessment order passed without examination. It was an order passed in fresh proceedings pursuant to judicial remand, after the TPO considered additional evidence, transfer-pricing records & the assessee’s economic analysis.
The TPO’s express conclusion that no adverse inference was warranted provided a material basis for reconsidering the adjustment made for the immediately preceding year.
Why the Tribunal Chose Remand
The Tribunal did not itself delete the ₹50,19,930 adjustment outright. Instead, it considered it appropriate to restore the matter to the AO/TPO.
This course allowed the AO/TPO to verify whether the material facts & transfer-pricing considerations for AY 2020-21 were indeed similar to those examined & accepted for AY 2021-22. It also ensured that the assessee received relief consistent with the subsequent-year order after the requisite factual verification.
The remand was not an unrestricted direction to reopen the entire transfer-pricing inquiry from scratch. The Tribunal specifically directed the AO/TPO to grant appropriate relief in line with the order dated 14 August 2026 for AY 2021-22.
Accordingly, the subsequent year’s favourable decision became the governing reference point for fresh adjudication of the earlier year.
Decision
The transfer-pricing dispute for AY 2020-21 was remitted to the AO/TPO with a direction to grant appropriate relief consistent with the order passed for AY 2021-22, where no adverse inference had been drawn regarding the ALP of the international transactions.
The assessee’s appeal was partly allowed for statistical purposes.
Key Takeaway
A favourable order for another assessment year is not automatically binding, but it becomes highly persuasive when it concerns identical transactions, contentions & factual circumstances, particularly when passed after detailed verification pursuant to judicial remand.
The Department remains free to identify genuine year-specific differences. What it cannot do is accept the transfer-pricing analysis in one year & retain an adverse adjustment in the immediately preceding year without explaining any material distinction.
Transfer pricing may change with the facts—but when the facts remain the same, the tax answer should not change merely because the calendar did.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal arises from order passed by AO-NFAC, dated 26.07.2024, u/s 143(3) read with section 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereafter as “the Act”).
1.1 In this case, following the DRP’s directions dated 26.06.2024, the Ld. AO made an addition of Rs.50,19,930/- on account of variation in respect of TP Adjustment.
1.2 The aggrieved assessee has approached the ITAT with as many as 12 grounds challenging the said adjustment on merits as also on legal grounds.
1.3 It deserves to be mentioned that the hearing in this matter was concluded on 10.08.2026 after a detailed hearing. However, vide letter dated 17.08.2026 the Ld. AR for the assessee filed a letter as under: –
“Sub: Honda R&D India Private Limited
Appeal No. ITA 4410/DEL/2024
Relating to Assessment Year: AY 2020-21
Bench: ‘I’ – Heard on 10.08.2026
…………………………………………………………………………………………………………
Please find attached order giving effect passed by Ld. Transfer Pricing Officer pursuant to remand direction of Hon’ble ITAT in relating to AY 2021-22 [Annexure A] granting complete relief involving identical issue.
As said Order giving effect was received post hearing of Appeal No. ITA 4410/DEL/2024, on 10.08.2026 this may kindly be taken on record and placed before Hon’ble Members on that day (Hon’ble Judicial Member Mrs. Kavitha Rajagopal & Hon’ble Accountant Member Mr. Sanjay Awasthi) for appropriate consideration.
We are filing a copy of same with Ld. Departmental Representative’s office for their reference and record. We would be most obliged.”
2. A perusal of the order dated 14.08.2026 passed by DC/ACIT TP 2(1)(1), Delhi for AY 2021-22 reveals that indeed the assessee’s contentions on identical grounds, as seen for the year under consideration (AY 2020-21), have been accepted and no adverse inference has been drawn. For the sake of reference, the relevant portions from the TP’s order are extracted as under: –
“4. Following the aforesaid directions issued by the Hon’ble High Court and Hon’ble ITAT, since the matter was remitted back to the file of the TPO with direction to verify the additional evidences placed on record by the assessee and redo the TP study, a fresh reference was received in this case from the JAO. Consequently, in pursuance to fresh set aside proceedings in this case, notice dated 31.07.2026 was issued giving an opportunity to the assessee to file its submission. In response to said notice, the assessee submitted its reply on 07.08.2026.
5. The submission made by the assessee has been considered and perused. After examination of transfer pricing documentation placed on record and considering economic analysis contained therein, no adverse inference is drawn in respect of Arm’s Length Price of the international transactions for the year under consideration i.e. AY 2021-22.
This order is passed u/s 92CA(3) r.w.s. 254 of the I.T. Act, 1961 with the necessary approval of the Addl. CIT(TP)-2(1), New Delhi.”
2.1 Since the grievance of the assessee is seen to be settled for AY 2021-22 on similar facts as compared to AY 2020-21, being the year under adjudication at present, we deem it fit to remand this matter back to the file of Ld. AO/TPO for granting appropriate relief in line with the order dated 14.08.2026 for AY 2021-22. We direct accordingly.
3. In the result, the appeal is partly allowed for statistical purposes.
