Elofic Industries Limited Vs ACIT (ITAT Delhi)
The Delhi Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal and deleted multiple transfer pricing and related adjustments made by the Assessing Officer (AO), Transfer Pricing Officer (TPO), and Dispute Resolution Panel (DRP). The assessee, engaged primarily in the manufacture of automotive filters, challenged transfer pricing adjustments relating to transactions with its associated enterprise, Elofic USA LLC, adjustments on overdue receivables, and reductions in deduction claimed under Section 80-IC.
The Tribunal noted that Elofic USA LLC was a limited liability company whose income, under U.S. law, was treated as pass-through income taxable in the hands of its owner. The assessee was the sole owner of the LLC and had included the LLC’s profits in its taxable income in India. The Tribunal observed that there was no dispute that the income earned by the LLC was offered to tax in India and that the assessee had disclosed this position in its transfer pricing documentation and tax returns. Relying on settled legal principles that a person cannot trade with oneself or earn profit from oneself, and referring to judicial precedents cited by the assessee, the Tribunal held that the transactions with the LLC could not justify a transfer pricing adjustment. It therefore directed deletion of the transfer pricing adjustment of ₹2,84,55,867 relating to international transactions with the LLC. As a result, grounds relating to rejection of CUP, comparables, and related transfer pricing issues became academic and were not adjudicated.
