Back
2026 Supreme(Online)(ITAT) 2617
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, H: NEW DELHI
Yogesh Kumar U.S., Judicial Member, Brajesh Kumar Singh, Accountant Member
HONDA TRADING CORPORATION INDIA PRIVATE LIMITED NEW DELHI – Appellant
Versus
DC/ACIT CIRCLE 10(1) DELHI / ASSESSMENT UNIT INCOME TAX DEPARTMENT NEW DELHI – Respondent
ITA No.- 5286/Del/2024
For the Appellants/Petitioners: Nageshwar Rao, Parth
For the Respondents: Ravinder Yadav
Under Section 92F(ii) of the Income-tax Act, 1961, the Arm's Length Price (ALP) must be determined by comparing controlled transactions with uncontrolled transactions between non-associated enterprises; comparing one controlled transaction with another controlled transaction is impermissible.
Headnote:The appeal concerns the determination of Arm's Length Price (ALP) under the Income-tax Act, 1961, specifically regarding adjustments made to commission expenses. The assessee challenged an adjustment of Rs. 2,57,67,740 made by the Transfer Pricing Officer (TPO) following directions from the Dispute Resolution Panel (DRP). The TPO had calculated the adjustment by comparing the percentage of commission paid on exports with the percentage of commission received on imports, both involving associated enterprises. The primary issue was whether the TPO could determine the ALP of a controlled transaction by comparing it with another controlled transaction. The court observed that under Section 92F(ii), ALP must be a price applied in a transaction between persons other than associated enterprises in uncontrolled conditions. The court held that comparing two controlled transactions is legally untenable and that the adjustment was made on an ad hoc basis without providing the assessee an opportunity to be heard. In the result, the appeal of the assessee is partly allowed.
| Table of Content |
|---|
| 1. background of assessment and transfer pricing adjustments. (Para 1 , 2 , 3 , 5 , 7) |
| 2. challenge against comparing controlled transactions for alp. (Para 4) |
| 3. deletion of adjustment based on section 92f(ii). (Para 8) |
| 4. resolution of consequential interest and penalty grounds. (Para 9 , 10) |
ORDER
PER BRAJESH KUMAR SINGH, AM,
This appeal has been preferred by the assessee against the Final Assessment Order dated 23.10.2024 passed by the Assessing Officer (AO) under Section 143(3) read with Sections 144C(13), r.w.s. 144B of the Income-tax Act, 1961 (“the Act”), pursuant to the directions of the Hon'ble Dispute Resolution Panel (DRP) dated 25.09.2024 for the Assessment Year 2021-22.
1.1 Ground no. 1 and 2 of the appeal are reproduced as under:
“1. Impugned order is time barred, invalid and bad in law as reference made to Ld. TPO does not appear to be in accordance with law.
2. Impugned order is bad in law as it is based in invalid and unlawful directions of Ld. DRP, contrary to section 144 C(8).”
1.2 In view of the discussion made later in this order, the above grounds of appeal become academic in this appeal and are left open in this case.
2. Brief facts of the case : M/s Honda Trading Corporation India Private Limited (hereinafter referred to as "the assessee") filed its return of income for AY 2021-22 on 10/02/2022 declaring total income of Rs. 9,78,20,290/- vide Acknowledgement Number 156162270100222 The case was selected for Complete Scrutiny through CASS. Accordingly, notice u/s 143(2) of the Income-tax Act, 1961 vide DIN: ITBA/AST/S/143(2)/2022- 23/1043607153(1) was issued upon the assessee on 28/06/2022 by the National Faceless Assessment Centre. In response to the notice the assessee company made its submission on 12/07/2022. The assessee submitted copy of computation of income, copy of ITR, copy of Form 3CB & 3CD for AY 2021-22, copy of Form 3CEB, copies of Balance sheet/statement of affairs along with detailed schedules etc.
3. During the year, the assessee company was primarily engaged in the business of trading activities. The principal items traded were steel automotive parts and automotive coils, equipment and the company was also engaged in providing business auxiliary services to its parent company and other companies on which service/commission income has been earned. The trading activities and service activities were carried out both in India and in international markets.
3.1 The AO noted that some of the issues / reasons for selection of scrutiny are TP risk Parameter, and therefore, the case was referred by the AO to TPO on 02.08.2022.
3.2 The TPO proposed an adjustment of Rs. 12,49,16,249/- relating to trading segment of the assessee vide order of 92CA(3) of the Act, dated 31/10/2023, which was reduced to Rs. 11,57,97,707/- vide order dated 14/10/2024 while giving effect to the direction of the DRP u/s 144C of the Act dated 25.09.2024.
3.3 Aggrieved with the said adjustment the assessee is in appeal before us, on the following grounds of appeal:
3. Impugned order has erred in assessing total income of Appellant for relevant AY at INR 23,93,85,737/- (including an addition of INR 14,15,65,447/- on account of transfer pricing issues) as against returned income of INR 9,78,20,290/-.
Ground specific to transfer pricing adjustments
4. Impugned order erred in making the transfer pricing adjustment amounting to INR 11,57,97,707 pertaining to alleged trading segment whereas the Appellant's operating margin falls within the arm's length range computed by the Ld. TPO himself.
5. Impugned order erred in law in determining price of impugned international transactions although circumstances necessitating fresh determination of price by Ld. TPO as required in sub-section (3) of section 92C did not exist.
6. Impugned order erred in rejecting scientific analysis carried out by Appellant consistent with the Indian transfer pricing regulations prescribed un
