ITAT Delhi Deletes ALP Adjustment on Imported Capital Goods, Removes Mark-Up on Cost-to-Cost Reimbursements

DHR Holding India Pvt. Ltd. Vs ACIT (ITAT Delhi)

The Income Tax Appellate Tribunal (ITAT) considered the assessee’s appeal against the final assessment order passed under Section 143(3) read with Section 144C of the Income-tax Act, 1961 for Assessment Year 2014-15. The dispute primarily related to transfer pricing adjustments concerning imported medical equipment, interest on outstanding receivables, reimbursement of expenses, and consequential relief relating to unabsorbed depreciation.

The assessee, engaged in trading medical equipment and consumables, imported blood gas analysers and related products from its Associated Enterprise (AE). Under its business model, some analysers were sold outright to customers, while others were installed at customer premises on a lease basis, with the assessee supplying consumables. The imported leased analysers were capitalised in the books, and depreciation was claimed in the trading segment. The Transfer Pricing Officer (TPO) questioned the distinction between equipment imported for resale and equipment capitalised as fixed assets, alleging that the assessee had failed to furnish the documentation required under Rule 10D. The TPO determined the arm’s length price (ALP) of the imported capital goods at nil and proposed a transfer pricing adjustment equal to the depreciation claimed on those assets, amounting to ₹77,04,297. The Assessing Officer incorporated the adjustment in the draft assessment order, and the Dispute Resolution Panel (DRP) upheld it.