Astemo India Private Limited Vs ACIT (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) decided two appeals filed by the assessee for Assessment Years 2016–17 and 2017–18 concerning transfer pricing adjustments in the trading segment and a separate disallowance under Section 40(a)(ia).
The assessee was engaged in the business of selling Electronic Control Units, fuel injection parts, and CNG assembly parts. It purchased goods from Associated Enterprises (AEs) and unrelated parties and sold them mainly to unrelated parties. For benchmarking its international transactions, the assessee adopted the Resale Price Method (RPM) and claimed that its transactions with AEs were at arm’s length because its gross profit margin fell within the permissible tolerance range compared to the comparable selected by it.
The Transfer Pricing Officer (TPO) accepted RPM as the most appropriate method but rejected the sole comparable chosen by the assessee and selected additional comparables. Based on the margins of these comparables, the TPO proposed transfer pricing adjustments for both assessment years.
For AY 2016–17, the Dispute Resolution Panel (DRP) excluded one comparable but retained Associated Auto Parts Limited, Salsons Impex Pvt. Ltd., and Stanes Motor (South India) Ltd. The assessee challenged the inclusion of Associated Auto Parts Limited and Salsons Impex Pvt. Ltd. on the ground that they operated in retail and after-sales markets, whereas the assessee was engaged in wholesale trading to original equipment manufacturers (OEMs). The assessee argued that wholesale and retail markets involved different customer bases, market conditions, functions, and risks, making the comparables functionally dissimilar under Rule 10B(2) of the Income Tax Rules.
