TPO to collate data from comparable companies exercising powers u/s 133(6): ITAT

Case Details: Toyota Tsusho India (P.) Ltd. v. ACIT - [2022] 139 taxmann.com 433 (Bangalore-Trib.)

Judiciary and Counsel Details

• • N. V. Vasudevan, Vice President & B.R. Baskaran, Accountant Member
  • Darpan Kirpalani, Adv. for the Appellant.
  • Mudavathu Harish Chandra Naik, CIT (DR) (ITAT) for the Respondent.

Facts of the Case

The assessee was engaged in the business of trading in automobile components, manufacturing/processing steel products, and providing logistic services primarily catering to the automotive industry. It procured raw materials for its manufacturing activities from AE and, therefore, the transaction of manufacture of steel was regarded as an international transaction.

In the manufacturing segment, in arriving at operating profit/sales or operating profit/cost, the assessee had reduced sum described as ‘other expenses’ stating same to be pre-operative expenses. Since the assessee was a tested party, TPO was of the view that adjustments to the tested party profit margin could not be done. As the assessee could not give details of similar expenses incurred by comparable companies chosen by TPO, AO did not accept the exclusion of pre-operating expenses from operating costs.

ITAT Held

The Tribunal held that in case appropriate adjustments cannot be made to uncontrolled transactions due to lack of data, then to read provisions of transfer pricing regulations in harmony, adjustments should be made on the tested party.

Further, where it was practically not possible to obtain data on pre-operative expenses of comparable companies, TPO should collate same from comparable companies by exercising his powers under section 133(6) and provide the assessee an opportunity by sharing details so obtained, and accordingly, grant adjustment.

List of Cases Reviewed

• • Ika India (P.) Ltd. v. Dy. CIT [2018] 98 taxmann.com 312 (Bang – Tri.) (paras 12 and 14) followed.

List of Cases Referred to

• • Vishay Components India (P.) Ltd. v. Dy. CIT [IT Appeal No. 133 (Pune) of 2011, dated 25-5-2012] (para 8)
  • Ika India (P.) Ltd. v. Dy. CIT [2018] 98 taxmann.com 312 (Bang – Tri.) (para 12).