Sanden Vikas India Pvt. Ltd Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) considered the appeal filed by Sanden Vikas India Pvt. Ltd. against the assessment order passed under Sections 143(3), 144C(13), and 144B of the Income Tax Act, 1961, pursuant to the directions of the Dispute Resolution Panel (DRP). The assessee had also raised an additional ground challenging the validity of the assessment as being barred by limitation in light of a Madras High Court decision. However, this additional ground was subsequently withdrawn and was therefore not admitted.
The assessee challenged a transfer pricing adjustment of ₹2,48,65,842 relating to the international transaction of purchase of raw materials and components from its associated enterprises (AEs). It also disputed the rejection of its search process, the selection of comparable companies by the Transfer Pricing Officer (TPO), the denial of set-off of brought forward business losses in the demand computation, and the initiation of penalty proceedings under Section 270A.
The Tribunal noted that the assessee was engaged in manufacturing car air conditioner systems and components, including compressors, HVAC units, cooling units, evaporators, condensers, hoses, pipes, and receiver driers. The assessee benchmarked its purchase of raw materials from AEs using the Transactional Net Margin Method (TNMM) with Operating Profit/Operating Revenue (OP/OR) as the Profit Level Indicator (PLI). Based on two comparable companies, the assessee determined that its transaction was at arm’s length. The TPO rejected one of those comparables, namely Calsonic Kansei Motherson Auto Products Private Limited, conducted a fresh search, and introduced nine new comparables. The TPO consequently proposed an upward transfer pricing adjustment, which was subsequently reduced by the DRP after directing grant of working capital adjustment and examination of the assessee’s operating margin.
