The case ITA 590/DEL/2021 involves an appeal by Relaxo Footwear Ltd., Delhi, against the order passed by the Assessing Officer, National e-Assessment Centre, New Delhi, for the assessment year 2016-17. The appeal addresses the transfer pricing adjustments made under section 92BA(i) of the Income Tax Act, 1961.
The details of the case are as follows:
The case was heard on 26.06.2023 before the Delhi Bench “I” of the Income Tax Appellate Tribunal (ITAT), comprising Accountant Member Shri M. Balaganesh and Judicial Member Shri Anubhav Sharma. The appellant was represented by Shri Ved Jain, CA, and the respondent was represented by Shri R.D. Burman, CIT-DR.
The appellant raised several grounds in the appeal, primarily challenging the transfer pricing adjustment of Rs.91,04,673/- made by the Assessing Officer based on the directions of the Dispute Resolution Panel (DRP) in respect of specified domestic transactions. The key issue was whether the Assessing Officer was justified in making this adjustment.
The appellant’s counsel argued that the specified domestic transactions were determined using the Cost Plus Methodology by adding a margin of 15% on the cost of goods transferred. This method was more than the overall profit margin of the company and the profit margin of the eligible unit for deduction under section 80IC of the Act. The appellant contended that the Transfer Pricing Officer (TPO) wrongly substituted this method with the Transactional Net Margin Method (TNMM) and applied an inappropriate margin of 12.99%.
The Tribunal found that the TPO’s adjustment was incorrect, and the issue of whether any transfer pricing adjustment could be made under section 92BA(i) was critical. This section had been omitted by the Finance Act, 2017, with effect from 01.04.2017. The Tribunal referred to the decision of the Karnataka High Court in PCIT vs. Texport Overseas Pvt. Ltd., which held that the omission of a provision without a saving clause meant it was as if the provision had never existed.
Based on the precedent and the omission of section 92BA(i), the Tribunal ruled that the transfer pricing adjustment of Rs.91,04,673/- and the subsequent addition of Rs.27,31,402/- could not be made. Therefore, the additions made by the Assessing Officer were directed to be deleted.
Order pronounced in the open court on 20th July, 2023.
M. BALAGANESH
ACCOUNTANT MEMBER
ANUBHAV SHARMA
JUDICIAL MEMBER
Dated: 20th July, 2023
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR
Assistant Registrar, ITAT, New Delhi
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform