ITA No. 539/DEL/2021 represents a pivotal decision in the realm of transfer pricing within the Indian corporate tax landscape, involving DCM Shriram Industries Ltd, a major industrial entity in New Delhi, and the Additional CIT National E-Assessment Centre, New Delhi. The appeal concerns the 2016-17 assessment year, with the ruling pronounced by the ITAT Delhi Bench on March 15, 2023.
The case arose from the assessee’s challenge against the final assessment orders for the years 2015-16, 2016-17, and 2017-18, with a specific focus on the 2016-17 year. Key issues include transfer pricing adjustments related to the transfer of power from eligible to non-eligible units within the company, impacting the tax liabilities significantly.
The tribunal examined multiple appeals simultaneously due to the identical nature of the issues across different years. The major point of contention was the transfer pricing adjustment of Rs. 9,70,87,302 to the arm’s length price of power transferred between the company’s units. The TPO’s benchmarking of these transactions, using the rates from Uttar Pradesh Power Corporation Ltd. as a reference, was critically evaluated against the actual trading prices on the Indian Energy Exchange (IEX).
The tribunal’s decision to delete the adjustments was heavily influenced by procedural inconsistencies and misrepresentations by the assessing officer regarding the appellate history of similar cases. This scenario underlines the importance of accurate administrative handling and factual representation in tax assessment processes.
The tribunal’s ruling in favor of DCM Shriram Industries Ltd not only impacts the firm’s financial and operational strategy but also sets a precedent for how transfer pricing disputes related to power and energy transactions are to be handled in India. The decision reinforces the need for clarity and consistency in the application of tax laws and procedures.
Order pronounced in the open court on March 15, 2023.
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