Case Number: ITA 843/DEL/2021
Appellant: Shahi Exports Pvt. Ltd., New Delhi
Respondent: ACIT, New Delhi
Assessment Year: 2016-17
Result: 2016-17
Case Filed on: 2021-07-12
Order Type: Final Tribunal Order
Date of Order: 2022-01-17
Pronounced on: 2022-01-17
This appeal was filed by Shahi Exports Pvt. Ltd. for the Assessment Year 2016-17 against the order dated 30.06.2021 framed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961. The primary issues pertained to the jurisdiction of the Assessing Officer (AO) in referring the case to the Transfer Pricing Officer (TPO) for determination of transfer pricing adjustments, and other associated tax matters.
The grievances of the appellant included the following:
The case was heard by the Delhi ‘I-2’ Bench of the Income Tax Appellate Tribunal (ITAT) via video conferencing, with Shri Saktijit Dey, Judicial Member, and Shri N.K. Billaiya, Accountant Member, presiding over the matter. The hearing was held on 11.01.2022, and the order was pronounced on 17.01.2022.
The Tribunal analyzed the appellant’s challenge to the jurisdiction of the AO in referring the case to the TPO for determination of transfer pricing adjustments. The appellant argued that after the omission of clause (i) of section 92BA by the Finance Act 2017, the AO had no jurisdiction to refer to the TPO for specified domestic transactions under section 40A(2).
The Tribunal referred to various judicial decisions, including those of the Hon’ble Supreme Court and High Courts, which supported the appellant’s contention that once a provision is omitted from the statute, it is deemed never to have existed. Consequently, the reference made by the AO to the TPO was considered invalid.
The appellant contested the transfer pricing adjustment of Rs. 14,92,534/- related to purchases from AE M/s Delhi Brass and Metal Works Pvt Ltd. The Tribunal found that the adjustment was made without any comparable analysis and was contrary to the facts on record. Therefore, the adjustment was deemed arbitrary and unjust.
The disallowance of Rs. 161,38,20,073/- out of the super productivity incentive paid to the promoter directors was another point of contention. The Tribunal noted that the incentive was based on a commercial expediency and was essentially revenue neutral. Thus, the disallowance was considered arbitrary and not based on comparable data.
The appellant claimed a deduction under section 80IA for steam generating units based on the rates prescribed by various State Electricity Regulations Authorities. The Tribunal found that the rates applied by the assessee were correct and directed the AO to verify the rates charged by the electricity board to its consumers and allow the deduction accordingly.
The Tribunal also addressed the issue of whether education cess paid by the assessee should be allowed as a deductible expense under section 37. Referring to various judicial decisions, including those of the Hon’ble High Court of Bombay, the Tribunal concluded that education cess should be allowed as a deduction.
The Tribunal concluded that the reference to the TPO and the consequent orders were invalid. It directed the AO to delete the impugned additions and allowed the appeal of the assessee for statistical purposes.
The order pronounced in the open court on 17th January 2022 was as follows:
Order pronounced in the open court on 17th January 2022
Sd/- Sd/-
(SAKTIJIT DEY) (N.K. BILLAIYA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date: 17th January 2022
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
Shahi Exports Pvt. Ltd. vs ACIT: Transfer Pricing Dispute – Final Tribunal Order
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