Honda R&D (India) Private Limited Vs DCIT (ITAT Delhi)
The ITAT Delhi considered the assessee’s appeal against the Dispute Resolution Panel’s order relating to transfer pricing adjustments for Assessment Year 2011-12. The assessee, engaged in providing market research and testing services to its associated enterprise on a cost-plus basis, challenged the rejection of certain comparable companies, denial of working capital adjustment, refusal of risk adjustment, use of single-year data, and denial of the benefit under Section 92C.
On the issue of comparables, the Tribunal held that India Tourism Development Corporation Limited could not be treated as a persistent loss-making company merely on the basis adopted by the TPO, noting that it had earned profits in the relevant segment in an earlier year. The issue was remanded to the AO/TPO for fresh consideration after providing the assessee an opportunity of hearing. The Tribunal also directed inclusion of the healthcare segment of Inhouse Production Ltd. as a comparable, observing that it had been accepted in an earlier assessment year and that its functional profile was similar to that of the assessee. However, it upheld the exclusion of Elbit Diagnostics Ltd., observing that although it was not a persistent loss-maker, it was not a suitable comparable in view of its business circumstances, including expansion, shifting of centres, accumulated losses, and limited operations.
