Case Number: ITA 475/DEL/2021
Appellant: Humboldt Wedag India Pvt. Ltd., Delhi
Respondent: DCIT, New Delhi
Assessment Year: 2016-17
Case Filed On: 2021-04-28
Order Type: Final Tribunal Order
Date of Order: 2021-08-18
Pronounced On: 2021-08-18
This case involves Humboldt Wedag India Pvt. Ltd. (HW India), a wholly-owned subsidiary of KHD Humboldt Wedag International AG Cologne (KHD AG). The company is engaged in process technology design, engineering, project management, supply of technology and equipment, and supervision of erection and commissioning of cement plants. HW India filed an appeal against the final assessment orders passed by the Deputy Commissioner of Income Tax (DCIT) for the assessment year 2016-17.
The appellant argued that the markup on services provided by the AEs was reasonable and in line with transfer pricing documentation. Additionally, the provisions for warranty and anticipated losses were made based on historical trends and contractual obligations. The primary points raised were:
The respondent (DCIT) argued that the markup on services provided by the AEs was not justified and disallowed it based on previous observations for similar cases. The DCIT also disallowed the provision for anticipated losses due to a lack of evidence supporting the crystallization of the liability during the relevant period.
The Tribunal analyzed the arguments and found that:
The Tribunal concluded that the disallowance of the markup on services and the provision for warranty were not justified and allowed the appeals filed by HW India for these issues. However, the provision for anticipated losses was disallowed due to insufficient evidence. The appeal regarding the charging of interest under Section 234A was remanded to the AO for verification.
Final Judgment: The Tribunal allowed the appeal of the assessee in ITA No. 8119/Del/2018 and partly allowed the appeal in ITA No. 475/Del/2021. The decision was pronounced in the open court on 18/08/2021.
This case highlights the procedural aspects of transfer pricing, provisions for warranty and anticipated losses, and the jurisdictional limits of the DCIT under the Income Tax Act, 1961.
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