IKA India Pvt. Ltd. Vs ACIT (ITAT Bangalore)
IKA India Pvt. Ltd., engaged in manufacturing and trading laboratory and processing equipment, appealed against the CIT(A)-3, Bengaluru order dated 12.09.2017 for AY 2013-14. The assessee imported products from IKA Group, exported manufactured products to IKA Group, and provided R&D, marketing and technical support services to group companies.
The assessee reported international transactions including imports, exports, traded-goods purchases, services, royalty, interest, personnel support fees, fixed-asset purchases and expense reimbursements. The TPO accepted the transactions as being at arm’s length except the export/manufacturing transaction with the Associated Enterprise (AE). The assessee had used the Transactional Net Margin Method (TNMM), while the TPO conducted a fresh analysis, rejected two of the assessee’s three comparables and selected 13 comparables, arriving at an average margin of 8.61% on operating cost. A transfer pricing adjustment of Rs.2,49,54,363 was consequently made.
The Tribunal dismissed the assessee’s challenge to the TPO’s rejection of its transfer pricing study, holding that the TPO’s order set out reasons for rejecting it. The challenge concerning FY 2012-13 data was also dismissed as no specific arguments were advanced.
On comparables, the Tribunal followed its decision in the assessee’s own case for AY 2012-13. It upheld inclusion of Shree Pacetronix Limited, Continental Controls Limited, Hindustan Syringes and Medical Devices Limited, Centenial Surgical Suture Limited, Allengers Medical Systems Limited, Iscon Surgicals Ltd. and Hemant Surgical Industries Ltd. It directed inclusion of Gansons Ltd. and Systronics India Ltd. It rejected the objection that Artificial Limb Manufacturing Corporation of India could not be comparable merely because it was government-owned. For Elico Limited, the AO/TPO was directed to obtain segmental revenue information under Section 133(6), provide the material to the assessee and determine comparability after hearing it. Similar directions were issued regarding Blue Neem Medical Devices Private Limited concerning segmental information and the 75% manufacturing-revenue filter.
