ITAT Remands TP Adjustment Issue as RPT Filter Was Not Properly Verified

Hyundai Motor India Engineering Private Limited Vs DCIT (ITAT Hyderabad)

In this case, the assessee challenged the final assessment order dated 19 September 2024 passed under Sections 143(3), 144C(13), and 144B of the Income Tax Act for Assessment Year 2021-22. The assessee had originally filed its return declaring total income of ₹62.29 crore. After scrutiny and transfer pricing proceedings, the Transfer Pricing Officer (TPO) proposed a transfer pricing adjustment of ₹20.45 crore. Based on the TPO’s order, the Assessing Officer (AO) issued a draft assessment order, following which the Dispute Resolution Panel (DRP) issued directions. The AO subsequently passed the final assessment order assessing total income at ₹82.75 crore.

Before the Tribunal, the assessee did not press its additional grounds relating to limitation and validity of the assessment order, and those grounds were dismissed. The assessee primarily contested the exclusion of two comparable companies—I Services India Private Limited and Cheers Interactive India Private Limited—from the final set of comparables used for transfer pricing analysis.

Regarding I Services India Private Limited, the assessee argued that the TPO wrongly excluded the company on the ground that sufficient details were unavailable for computing the Related Party Transaction (RPT) filter. The Tribunal examined the TPO’s order and found that details relating to profit and loss items and balance sheet items had already been extracted in the order itself. It observed a contradiction in the TPO’s reasoning, since relevant details relating to related party transactions appeared to be available. As factual verification of the exact RPT percentage was still required, the Tribunal remanded the issue to the AO/TPO for verification, proper computation of the RPT filter, and reconsideration of the company’s inclusion in the comparable set after giving the assessee an opportunity of being heard.