2023 (5) TMI 32 - AT - Income Tax

TP adjustment on account of payment of Regional Service Charges - requisite test for intra-group services - HELD THAT - As coordinate bench of the Tribunal in assessee s own case in Ingredion India Pvt. Ltd. 2022 (10) TMI 1168 - ITAT MUMBAI for the assessment year 2012-13 remanded the issue to the file of the learned TPO with a direction to the assessee to demonstrate the requisite test for intra-group services as well as the need and benefit of the services from the associated enterprises. Since in the present case also, the determination of arm s length price of a similar international transaction is involved and both the parties have made similar submissions, therefore, we deem it appropriate to remand this issue to the file of the learned TPO with similar directions as rendered by the coordinate bench in the preceding assessment year. Accordingly, the impugned order on this issue is set aside. As a result, grounds no.1 and 2 raised in assessee s appeal are allowed for statistical purposes. Erroneous computation of total income for the year under consideration - difference is on account of the additional customs duty paid/deposited before filing the return of income - As per the assessee, while computing the assessed income in the final assessment order, the AO considered the income processed under section 143(1) of the Act, as the starting point, instead of the returned income, which was considered in the draft assessment order - HELD THAT - As the difference is on account of the additional customs duty paid/deposited before filing the return of income, which is allowable u/s 43B of the Act, and in this regard the assessee has also filed a rectification applications dated 19/08/2022 before the AO, which is pending disposal. Therefore, in view of the above, we deem it appropriate to restore this issue to the file of the AO for computation of the total income, as per law, after necessary verification. As a result, grounds no.3 and 4 raised in assessee s appeal are allowed for statistical purposes.

Summary

Issues Involved:
1. Transfer Pricing Adjustment on account of Payment of Regional Service Charges.
2. Erroneous Computation of Total Income.
3. Disallowance of Additional Customs Duty Paid.
4. Levy of Interest under Sections 234B, 234C, and 234D.
5. Initiation of Penalty Proceedings.

Summary:

1. Transfer Pricing Adjustment on account of Payment of Regional Service Charges:
The assessee challenged the upward adjustment of INR 9,55,98,734 made by the Transfer Pricing Officer (TPO) regarding the payment of regional service fees to its Associated Enterprises (AEs). The TPO determined the Arm's Length Price (ALP) of the transaction at NIL value, citing lack of evidence and benefit from the services. The Dispute Resolution Panel (DRP) upheld the TPO's decision, stating that the services appeared to be shareholder services without demonstrable benefits. The Tribunal remanded the issue back to the TPO for fresh consideration, instructing the assessee to demonstrate the need, benefit, and rendition of the services, in line with the decision in the preceding assessment year.

2. Erroneous Computation of Total Income:
The assessee contended that the Assessing Officer (AO) incorrectly started the computation of total assessed income from the income processed under section 143(1) instead of the returned income. The Tribunal restored the issue to the AO for proper computation of total income after necessary verification, particularly concerning the additional customs duty paid, which is allowable under section 43B.

3. Disallowance of Additional Customs Duty Paid:
The assessee argued against the disallowance of INR 64,83,632 on account of alleged mismatch in amounts reported in Form No. 3CD and Form No. ITR-6. The Tribunal directed the AO to re-compute the total income and tax after verifying the facts and circumstances of the case.

4. Levy of Interest under Sections 234B, 234C, and 234D:
The assessee contested the excessive levy of interest under sections 234B, 234C, and 234D. The Tribunal noted that this issue is consequential in nature and allowed it for statistical purposes.

5. Initiation of Penalty Proceedings:
The assessee objected to the initiation of penalty proceedings under section 270A. The Tribunal dismissed this ground as premature.

Conclusion:
The appeal by the assessee was partly allowed for statistical purposes, with directions for fresh consideration and verification on specific grounds. The order was pronounced on 28/04/2023.