Shree Ulka LLP Vs The ACIT (ITAT Mumbai)
Section 10AA & Transfer Pricing Are Two Sides of Same SEZ Profit: Mumbai ITAT Orders Fresh, Coordinated Examination
Summary: The assessee, Shree Ulka LLP, was engaged in production, processing & preservation of fish & fish products from its unit situated in the Mangalore Special Economic Zone. AY 2020-21 was the first year in which it claimed deduction u/s 10AA.
For AY 2021-22, the assessee filed its return declaring nil income after claiming deduction of ₹4,46,69,638 u/s 10AA. It also entered into specified domestic transactions with its associated enterprise, Ulka Sea Foods Private Limited, including purchase of goods of ₹115,17,16,462.
The assessee benchmarked the purchase transactions by applying the “other method” prescribed in Rule 10AB & also furnished a corroborative TNMM analysis. The TPO noted that USFPL identified vendors, negotiated procurement terms & coordinated logistics, though raw material moved directly from third-party vendors to the assessee.
Rejecting the assessee’s benchmarking in an ex parte order, the TPO applied an average EBIT margin of 9.17% & proposed a TP adjustment of ₹7,47,46,398.
The AO also denied deduction u/s 10AA, principally relying upon findings recorded for AY 2020-21. He held that the SEZ undertaking was formed by splitting up or reconstruction of the existing business of USFPL. After the DRP rejected the objections, total income was determined at ₹11,94,16,036.
