Birla Furukawa Fibre Optics Private Limited Vs Dy/ACIT (ITAT Panaji)
Panaji ITAT Deletes ₹20.34 Crore Transfer Pricing Adjustment: TPO Cannot Abandon Consistently Accepted CUP for TNMM When Internal & External CUP Comparables Are Available
The Panaji ITAT in Birla Furukawa Fibre Optics Pvt. Ltd. v. Dy./ACIT dealt with a ₹20.34 crore transfer-pricing adjustment for AY 2021-22. The assessee, a 50:50 joint venture between Universal Cables Ltd. and Furukawa Electric Co. Ltd., Japan, manufactures optical fibre. Its major international transaction was purchase of Preform Silica of about ₹64.38 crore from its AE, Furukawa Electric.
The assessee had consistently benchmarked its transactions under the Comparable Uncontrolled Price (CUP) method, which had also been accepted by the TPO in earlier years. For AY 2021-22, however, the TPO rejected CUP, adopted TNMM, selected Aksh Optifibre Ltd. as the sole comparable with a weighted-average margin of 8.73%, and proposed an aggregate TP adjustment of ₹20,34,17,040.
ITAT: Internal & External CUP Established Arm’s-Length Price
The Tribunal found that reliable internal as well as external CUP data were actually available. The assessee purchased Preform Silica from an unrelated Japanese supplier, Shin-Etsu Chemical Co. Ltd., at $113/kg for Type-D and $130/kg for Type-A2, while the corresponding prices paid to its AE were $81.41/kg and $130/kg. Thus, the AE prices were either lower than or equal to uncontrolled prices.
The ITAT therefore held that the purchases from the AE were at arm’s length under both Internal and External CUP. Where the CUP method had been consistently followed and accepted in earlier years, the nature of transactions remained the same and adequate comparable data were available, the TPO was not justified in suddenly substituting TNMM without any material change in facts. The Tribunal accepted the assessee’s CUP analysis and set aside the TPO’s rejection of CUP.
The ITAT separately examined the TPO’s TNMM analysis and found a fundamental factual error. The assessee manufactured only optical fibre, whereas the TPO proceeded on the erroneous assumption that it manufactured optical-fibre cables as well.
Aksh Optifibre, on the other hand, had diversified operations involving optical fibre, optical-fibre cables, fibre-reinforced plastic rods, impregnated glass roving reinforcement, ophthalmic lenses and other services. Crucially, segmental revenue and profitability data were unavailable. The Tribunal therefore held that Aksh was not functionally comparable and rejected it as a comparable even under TNMM.
Consequently, the ITAT deleted the entire transfer-pricing adjustment of ₹20,34,17,040 and allowed the assessee’s relevant grounds.
Cases Discussed
- Benetton India (P.) Ltd. vs. Deputy Commissioner of Income-tax (Delhi – Trib.), [2025] 174 com542 (Delhi – Trib.) [23-04-2025]
- Principal Commissioner of Income-tax vs. Willis Towers Waston India (P.) Ltd. (Punjab & Haryana), [2024] 166 com455 (Punjab & Haryana) [12-08-2024]
- Assistant Commissioner of Income-tax, LTU-2, Mumbai vs. Glenmark Pharmaceuticals Ltd. (Mumbai), [2019] 102 taxmann.com438 (Mumbai)[01-02-2019]
- Assistant Commissioner of Income-tax, Circle-11 (1), Mumbai vs. Viacom 18 Media (P.) Ltd. (Mumbai), [2019] 109 com233 (Mumbai)[08-02-2019]
- Elara Securities (India) Pvt Ltd, [TS-14-ITAT-2020 (Mum)-TP] – January 06, 2020
- Lubrizol India (P.) Ltd. vs. Additional Commissioner of Income-tax, LTU, Mumbai (Mumbai), [2020] 113 com3 (Mumbai)[20-11-2019]
- Rohm and Haas India Pvt Ltd, [TS-926-ITAT-2019(Mum)-TP] – September 25, 2019 ITAT: Adopts CUP-method, accepts comparable data from Customs Department’s Database for benchmarking imports/exports
- Carlyle India Advisors (P) Ltd. Assistant Commissioner of Income-tax, (Mumbai-Trib.), [2012] 102 com500 (Mumbai-Trib.) 20-11-2018
- Omni Active Health Technologies Ltd. vs. Deputy Ld. Commissioner of Income-tax, 7(3)(1), Mumbai, [2018] 92 com88 (Mumbai)[06-03-2018
- Labvantage Solutions (P.) Ltd. vs. Assistant Commissioner of Income-tax, Circle-2(1), Kolkata (Kolkata Trib.), [2018] 93 com440 (Kolkata Trib.) [11-05-2018]
- Toll Global Forwarding India Pvt Ltd, [TS-383-ITAT-2014 (DEL)-TP] – November 18, 2014 ITAT: Adopts realistic & purposive interpretation to ‘price’ under CUP; 6th method u/r 10AB retrospective
- Assistant Commissioner of Income-tax, Circle 1(2), Hyderabad vs. Ckar Systems (P) Ltd. (Hyderabad Trib.), [2013] 29 com145 (Hyderabad Trib.)/[2012] 20 ITR(T) 817 (Hyderabad – Trib.)/[2013] 55 SOT 553 (Hyderabad – Trib.)[19-10-2012]
- Knorr-Bremse India Pvt. Ltd., (TS-700-ITAT 2012 (DEL) -TP) October 31, 2012
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- Radhasoami Satsang vs. Commissioner of Income-tax (SC), [1992] 60 Taxman 248 (SC)/[1992] 193 ITR 321 (SC)/ [1991] 100 CTR 267 (SC)[15-11-1991]
FULL TEXT OF THE ORDER OF ITAT PANAJI
