The Income Tax Appellate Tribunal, Chennai, remitted back the Transfer Pricing adjustment to Transfer Pricing Officer while stating that whether international transactions with Non-Korean AEs similar to MAP covered Korean AE.
The Tribunal noted from the chart that 89.78% of the total adjustment made by the TPO is covered by the MAP resolution. The balance of international transactions with non-Korean AEs worked out to Rs.43,10,66,281/- which is only 10.22% of the total adjustment made by the TPO. Therefore, the plea of the assessee is that similar methodology adopted for Korean transactions under MAP resolution may be made for the balance international transactions with non-Korean AEs, since there is a similarity in nature of functions performed, asset employed and risk assumed by the assessee, for both Korean and non-Korean transactions; and being of similar nature, the same approach may be carried out by the TPO/AO while computing the ALP.
The tribunal relied on the case of Amazon Development Centre (India) Pvt Ltd Vs ITO wherein it was observed that the CBDT letter in F. No 480/10/2011- FTD-1 dt. 28.10.2015 has been issued in respect of the resolution of MAP proceedings for Assessment Years 2007-08 to 2009-10 on behalf of the Foreign Tax & Tax Research Division-I APA-1, CBDT, New Delhi wherein it has been confirmed that for Assessment Year 2008-09, for USA transactions under the ITES Segment. The margin has been determined at 18 82% as against a margin of 24.47% determined by the TPO. It has been further clarified by way of ‘Note’ in the said letter that apportionment between US and non-US ALP and Transfer Pricing Adjustment has been carried out by the APA-1 section of FT and TR Division of CBDT on the basis of “US’ and ‘non-US revenue. It is further noted that in the annual accounts of the assessee, no distinction has been made between “US” and non-US transactions. Similarly, in the orders passed by the authorities below also no distinction has ever been made between US’ and ‘non-US” transactions. No distinction in facts or nature of transactions has been brought on record In these factual circumstances of the case, in the considered view, whatever margin has been determined for 92. 86% of the transactions, the same should be determined / applied for the remaining 7.14% transactions as well.
After considering the totality of the facts as well as judicial precedents cited, the bench was inclined to set aside the issue regarding adjustment made by the TPO in respect of international transactions of the assessee with non-Korean AEs (not covered by the MAP).
The tribunal restored back to the file of the TPO for consideration the matter as to whether the international transactions of the assessee with non-Korean AEs are similar in the nature as contented by the assessee and if it is found to be correct, the bench directed that then the TPO may consider the same treatment be given to the transaction as adopted by MAP (supra) in the case of Korean AE’s.
Case Information
Case Name: M/s.Mando Automotive- India Pvt. Ltd. v/s The ACIT
Judicial Level & Location : ITAT, Chennai
Appeal Number : IT (TP) A No.2/Chny/2019
Date of Ruling : 10/07/2024
Ruling in favor of: Appellant
Judges: ABY T. Varkey, Judicial Member And Amitabh Shukla, Accountant Member
