Vestas Wind Technology India Private Limited Vs JCIT (ITAT Chennai)
Notional Addition on Alleged Understatement of Sales — Held Without Authority of Law
The assessee sold 15 WTGs to its subsidiary companies for ₹134.72 crores, whereas the AO compared third-party prices (average about ₹10.68 crores per WTG) and adopted a notional sales value of ₹160.34 crores, treating the difference of ₹25.60 crores as understatement of sales and adding it to income. The Tribunal held that the AO did not cite any provision of the Act empowering him to disregard actual sale consideration and substitute a notional market price. It was specifically noted that section 40A(2) applies only to expenditure and has no application to sales, and that domestic transfer pricing provisions were not applicable for AY 2008–09 (section 92BA came only from AY 2013–14 and, in any case, was not attracted on these facts). The Tribunal reiterated that only real income can be taxed and notional income cannot be brought to tax, unless the Revenue brings cogent evidence that extra consideration over and above invoice value was received. Mere comparison with third-party prices, without statutory backing, was held to be insufficient. Reliance was placed on CIT v. Calcutta Discount Co. Ltd. (91 ITR 8, SC) and K.P. Varghese v. ITO (131 ITR 597, SC), emphasizing the Revenue’s burden to prove understatement/extra consideration.
