Vitesco Technologies India Private Ltd. (“The assessee”), had entered into international transactions with its Associated Enterprises in Relation to intra-group services, comprising technical and shared services. During the transfer pricing proceedings, The TPO determined the ALP of the services at NIL, Leading to a TP Adjustment. Although the DRP subsequently reduced the adjustment, the AO made a higher addition in the final assessment order. The assessee challenged the said adjustment before the ITAT.
Assessee’s Contentions | Revenue’s Contentions | Tribunal’s Judgment |
The assessee contended that the Final Assessment Order should be quashed, as the AO failed to follow the DRP’s directions and made an addition of ₹1,11,00,41,778 instead of the reduced TP adjustment of ₹1,01,00,41,778. | The Revenue supported the TP adjustment determined by the TPO and contended that the difference between the DRP-directed amount and the addition made in the final assessment order was a rectifiable error under Section 154. Accordingly, the assessment order could not be held invalid on this basis. | The ITAT held that the assessment order could not be sustained, as the AO had disregarded the DRP’s directions and retained the TP adjustment at ₹1,11,00,41,778 instead of restricting it to ₹1,01,00,41,778. |
The assessee submitted that the ALP of intra-group services should not be determined at NIL, as the TPO had not identified any defects in the supporting documents or cost-allocation details, nor provided any comparable or proper basis for applying the “Other Method.” | The Revenue relied upon the TPO’s determination of NIL ALP for the intra-group services and contended that the resulting TP adjustment was justified. It therefore opposed the assessee’s contention that the adjustment should be deleted. |
The ITAT further held that the NIL ALP determined for IGS was unsustainable, as the TPO had neither identified specific deficiencies in the assessee’s supporting documents nor furnished any comparable to justify the NIL valuation. Accordingly, the ITAT directed the AO/TPO to delete the TP adjustment.
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Ruling Summary -
ITAT held that the Final Assessment Order was bad in law, as the AO failed to follow the DRP’s directions and made a higher TP adjustment than the amount determined by the DRP.
ITAT further held that the NIL ALP determined by the TPO for IGS was not properly justified, as no specific defects or comparable evidence were provided. Accordingly, the TP adjustment was deleted and the assessee got relief.
