Income Tax Appellate Tribunal - Pune
Yazaki India P Ltd., (Formerly Known As ... vs Assistant Commissioner Of ... on 11 July, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "C", PUNE
BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND
SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER
आयकर अपील सं. / ITA No.621/PUN/2014
िनधा रण वष / Assessment Year : 2009-10
Yazaki India Private Limited DCIT,
(Formerly known Yazaki India Vs. Circle-12, Pune
Limited),
Gat No.93, Survey No.166,
High Cliff Industrial Estate,
Kesnand, Pune - 412 207
PAN : AAACT5570F
(Appellant) (Respondent)
Appellant by Shri Dhanesh Bafna,
Ms. Chandni Shah &
Shri Pavan Dudhediya
Respondent by Shri Sanjiv Shankar
Date of hearing 08-07-2019
Date of pronouncement 11-07-2019
आदेश / ORDER
PER R.S.SYAL, VP :
This appeal by the assessee emanates from the final assessment order dated 23-01-2014 passed by the Assessing Officer (AO) u/s.143(3) r.w.s.144C(13) of the Income-tax Act, 1961 (hereinafter also called 'the Act') in relation to the assessment year 2009-10.2
ITA No.621/PUN/2014
Yazaki India Private Limited
2. The first issue is against the disallowance of Rs.2,96,50,650/- made by the AO u/s.40A(2)(a) of the Act for payment of Administrative Support service charges.
3. Succinctly, the facts of the case are that the assessee is a manufacturer of integrated harness and electrical distribution system for the automotive industries. It manufactures wiring harnesses for various segments of the automobile industry including passenger cars and commercial vehicles. It also supplies wiring harnesses for applications such as air bag assemblies. The assessee filed its return declaring Nil income. During the course of assessment proceedings, the AO observed that the assessee paid a sum of Rs.2,96,50,650/- as Administrative service charges to its holding company TACO - one of the Joint Venture partners having 50% of shares. He further noticed that approximately similar amount was paid as Royalty to the other holding company
- Yazaki Corporation, Japan having remaining 50% of shares. There is no dispute in this appeal as to the payment of Royalty. The assessee was called upon to justify the payment of Administrative service charges amounting to Rs.2,96,50,650/- to TACO. The assessee submitted that it received support services in various areas, such as Marketing, Human resources, Finance, 3 ITA No.621/PUN/2014 Yazaki India Private Limited Infrastructure etc. which helped it in carrying on its business efficiently. A further elaboration of such support services was given in detail. The AO noticed that the assessee entered into an agreement with TACO in the year of its incorporation in 1998. TACO was providing services at start-up phase and also operating phase. The assessee had reimbursed all the expenses incurred by the TACO for getting professional services from outside sources. In addition, the assessee was incurring all the administrative expenses, like, Advertisement, Sales Promotion, Audit fee, Internal Audit fee, Conveyance, Staff Welfare etc. The AO further noticed that the fees payable by the assessee to TACO was fixed at a percentage of total turnover which caused serious doubt as to its genuineness. The assessee was asked to produce details of services and documentary evidence for the services availed from TACO and their reasonable market price, who submitted certain details. In this backdrop of facts, the AO held that the assessee either did not avail any services from TACO or these were in the nature of stewardship services. He made disallowance for the full amount paid at Rs.2,96,50,650/- u/s.40A(2)(a) of the Act, against which the assessee has approached the Tribunal.
4ITA No.621/PUN/2014
Yazaki India Private Limited
4. We have heard both the sides gone through the relevant material on record. The AO has recorded in the order that the assessee entered into a similar agreement for availing such services in the year 1998. The ld. AR submitted that the assessee is continuously availing such services from TACO and no such disallowance has ever been made in the past. Be that as it may, we have gone through the contents of the Administrative Services Agreement (ASA) valid for the year under consideration which was entered into on 23-03-2007, whose copy is available at page 286 onwards of the paper book. Article 2 of the ASA narrates the services to be rendered by TACO to the assessee which are as under:-
"a. Support for Land Acquisition and Development. b. Support for Payroll and benefit Administration (Provident Fund, Superannuation, Gratuity) c. Support for Liaison with Banks and Financial Institutions.
d. Support for Legal and Taxation services e. Support for Human Resource Development & Training facilities f. Communication Infrastructure advisory services g. Support for manpower recruitment h. Support for maintaining Industrial Relations i. Support for providing Marketing and Distribution Network j. Support for liaison with Government Authorities k. Support for Vendor development efforts"5
ITA No.621/PUN/2014
Yazaki India Private Limited
5. Consideration has been set out in para 2.2 of the same Article as an amount equal to 5% of Net Processing Fees of all products processed, assembled and manufactured. The term "Net Processing Fees" has been defined under Article 1 to mean the:
`Company's invoiced prices for the Products less material and components, less packing and warehouse charges, taxes and duties to the extent set forth on the invoice.' On going through Article 2 of the ASA, it is borne out that TACO agreed to provide support services to the assessee in various fields, such as, Administration, Financing, Legal, HRD, Marketing and Distribution, Liaison with Government authorities and Vendor development etc. Our attention has been drawn towards e-mail correspondence between TACO and assessee, copies of which have been placed at page 305 onwards of the paper book. Page 305 is an e-mail from Sh. G.K. Ramesh of TACO to Sh. Sudheendra Mudikeri of the assessee company in respect of certain corrective actions to be taken for NC's. It has further been warned that: `If the activities are not completed, we may lose the EMS certificate'. Page 306 is an e- mail of R.S. Thakur of TACO to Sh. Prashanth Nayak of the assessee company on Audit report. In this e-mail also, certain concerns have been raised about material consumption variance. 6 ITA No.621/PUN/2014
Yazaki India Private Limited Page 312 of the paper book is an e-mail under which scope of internal audit of the assessee company has been approved by the audit committee. It has been emphasized that the same needs to be started as soon as possible. In the same fashion, such e-mails of correspondence between the assessee and TACO are going on from pages 305 to page 422 of the paper book. Pages 423 to 429 are copies of extracts of the Minutes of the Board of Directors' meetings held on 08-07-2008 and 30-09-2008 substantiating receipt of Administrative Support services. On page 424 of the paper book, the Board of Directors in their meeting held on 08-07-2008 discussed about framing of Copper Hedging policy on the basis of initial trials and discussion with the TACO. Page 425 records minutes of meeting of Board of Directors held on 30-09-2008 discussing status of action points in which there is reference to the help received from TACO. Item at sr. no.15 of the Minutes of the Board meeting is that: "The Board was informed that the company management had received directives from TACO to be followed while deciding the prices of new models with the customers" so on and so forth. As against the AO's recording that the assessee did not furnish any evidence of services, we find that the assessee did furnish such details to the AO, which is fortified 7 ITA No.621/PUN/2014 Yazaki India Private Limited by the assessee's letter dated 19-02-2013 addressed to the AO, whose copy has been placed at page 299 onwards of the paper book. In this letter, it has been mentioned that the assessee submitted several documents in respect of receipt of services from TACO, such as copies of e-mail communications, copies of invoices, extracts of the minutes of meetings of Board of Directors held on 08-07-2008 and 30-09-2008. In view of the aforesaid factual panorama, it is manifest that TACO did provide administrative support services to the assessee, for which there is ample evidence. The impugned order is overturned to this extent.
6. Now the question arises as to whether or not the payment made by the assessee to TACO for such services @5% of Net Processing Fees is reasonable or at prevalent market rates? We have noticed above that Net Processing Fees has been defined in the ASA itself to mean Invoice prices for the products less Material and components, less packing and warehouse charges, taxes and duties to the extent set forth on the invoice. A copy of the assessee's Profit and loss account has been placed at page 197 of the paper book, which shows amount of Sales for the year under consideration at Rs.225.29 crore. There are Material costs of Rs.168.80 crore; Employees cost at Rs. 20.79 crore and other 8 ITA No.621/PUN/2014 Yazaki India Private Limited expenses. The assessee paid a sum of Rs. 2.96 crore towards Administrative Support services, which comes to around 1.31% of Sales.
7. The ld. AR stated that TACO rendered similar services to other related concerns as well. He submitted that the AO in some of such cases made similar disallowance u/s 40A(2)(a) of the Act, which issue has since been decided by the Tribunal. He drew our attention towards a copy of the order dated 09-12-2015 passed by the Pune Benches of the Tribunal in Tata Johnson Controls Automotive Ltd. Vs. DCIT (ITA No.1450/PN/2011). In that case, TACO rendered similar services to Tata Johnson Controls Automotive Ltd. The AO disallowed the entire amount. The ld. CIT(A) allowed 25% of such expenditure. When the matter came up before the Tribunal, it ordered to delete the entire addition. In that case, the remuneration was paid to TACO @1% of turnover in addition to reimbursement of external costs incurred by TACO, if any. Similar issue came up in the case of another group company, namely, Tata Ficosa Automotive Systems Ltd. Vs. DCIT (2017) 88 taxmann.com 899 (Pune Tribunal). In that case, TACO rendered similar services to Tata Ficosa Automotive Systems Ltd. as given to the assessee under consideration. Payment was made by that 9 ITA No.621/PUN/2014 Yazaki India Private Limited assessee to TACO @ 2% of Net sales. The AO made such disallowance, which was sustained by the ld. CIT(A). When the matter came up for consideration before the Tribunal, it directed to delete the entire disallowance made u/s.40A(2)(a) of the Act. Another group matter in DCIT Vs. Tata Toyo Radiator Pvt. Ltd. came up before the Tribunal in ITA No.1029/PN/2013 and others. In that case, payment was made to TACO @2% of total turnover. Vide its order dated 18-03-2016, the Tribunal directed to delete the entire disallowance.
8. Two things emerge from the above discussion on this issue. First is that the assessee did avail services from TACO. Second is that it made payment made as quid pro quo for such services at 1.31% of sales. Payments made by other group concerns, even at a little higher percentage than the assessee in some cases, have been found to be reasonable by the Tribunal. When we compare the rate of turnover at which the assessee paid to TACO for such services, vis-à-vis that paid by other group concerns, the same turns out to be quite reasonable and not at all excessive so as to attract the provisions of section 40A(2)(a) of the Act. Ergo, we order to delete the addition of Rs.2,96,50,650/- made on this score. This ground is allowed.
10ITA No.621/PUN/2014
Yazaki India Private Limited
9. The next issue concerns the transfer pricing addition made by the Assessing Officer. Facts apropos this issue are that the assessee furnished report in Form 3CEB indicating six international transactions. The AO made a reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of such international transactions. The TPO did not disturb the ALP determination by the assessee of any transaction except the first international transaction of "Import wires, terminals, connections, taps and tubes, spares and other raw materials" with transacted value of Rs.73,10,21,926/-. The assessee used the Comparable Uncontrolled Price (CUP) method for demonstrating that this transaction was at ALP. Rejecting the application of the CUP, the TPO adopted the Transactional Net Margin Method (TNMM) as the most appropriate method. He computed the assessee's PLI (Operating Profit/Sales) from this transaction at (-)3.78%. Considering five companies as comparables with their average PLI of OP/Sales at 3.74%, he proposed a transfer pricing adjustment of Rs.17,04,59,224/-. The AO adopted this figure of transfer pricing adjustment in the draft order and made addition for the equal sum in the final assessment 11 ITA No.621/PUN/2014 Yazaki India Private Limited order, against which the assessee has come up in appeal before the Tribunal.
10. We have heard both the sides and gone through the relevant material on record. It is noticed that the dispute in the instant appeal is only in respect of the international transaction of `Import of raw materials etc.' with transacted value of Rs.73.10 crore. As against the assessee applying the CUP method, the TPO employed TNMM as the most appropriate method. The assessee has not agitated against the application of the TNMM as the most appropriate method before the Tribunal.
11. It has been brought to our notice that the assessee resorted to Mutual Agreement Procedure (MAP) in terms of Article 25 of the Double Taxation Avoidance Agreement (DTAA) between India and Japan in respect of its international transaction of import of raw material etc. from Yazaki Corporation, Japan (YCJ), which is a part of the overall transaction under consideration. Our attention was drawn towards pages 6 and 7 of the paper book, which is a copy of the order dated 10-09-2015 passed by the Competent authority of India, reducing the amount of transfer pricing adjustment corresponding to transactions with YCJ from 12 ITA No.621/PUN/2014 Yazaki India Private Limited Rs.9,78,09,000/- to Rs.7,03,37,097/-, thereby allowing relief of Rs.2,74,71,903/-. In view of the fact that the assessee has admittedly accepted the resolution of the issue under the MAP proceedings in respect of its international transaction with YCJ, we countenance the addition to this extent at Rs.7,03,37,097/-.
12. Remaining transfer pricing adjustment of Rs.7,26,50,224/- relates to transactions of import of raw materials etc. from the Associated Enterprises (AEs) other than YCJ, which was not part of the MAP proceedings. The assessee has raised objection only on two aspects of such ALP determination by the authorities, viz., computation of its own PLI by the TPO at (-) 3.78% and exclusion of FCI Technology Services Ltd. from the list of comparables.
13. First we espouse the argument of the assessee assailing computation of its own PLI at (-) 3.78% by the TPO. The ld. AR submitted that there are certain errors in such computation, which should be suitably amended.
14. At this juncture, it is relevant to note that section 295 of the Act empowers the CBDT to make rules for the purposes of the Act. Sub-section (2) lists certain matters in respect of which the Board may provide for rules. Clause (h) of section 295(2) empowers the 13 ITA No.621/PUN/2014 Yazaki India Private Limited Board to make rules providing for: `the procedure for giving effect to the terms of any agreement for the granting of relief in respect of double taxation or for the avoidance of double taxation which may be entered into by the Central Government under this Act.' Pursuant to the prescription of section 295(2)(h), rules have been framed under part IX-C of Income-tax Rules, 1962 covering rules 44G, 44GA and 44H. Instantly, we are concerned with rule 44H. Sub-rule (4) of rule 44H states that the effect of Resolution arrived at under the mutual agreement procedure (MAP) shall be given by the AO within the stipulated period, if the assessee gives his acceptance to the resolution taken under mutual agreement procedure; and withdraws his appeal, if any, pending on the issue which was the subject matter for adjudication under mutual agreement procedure. Nitty-gritty of rule 44H(4) is that when a Resolution has been made on an issue under the MAP, which the assessee has accepted, the same attains finality. The assessee, as a pre-condition, has to necessarily withdraw its appeal to the extent of the subject matter for adjudication under the MAP.
15. Adverting to the instant Resolution under the MAP for the year under consideration, we find that the subject matter is restricted to the international transaction of Import of raw material 14 ITA No.621/PUN/2014 Yazaki India Private Limited etc. from YCJ. At the cost of repetition, we state that the assessee reported one international transaction of "Import wires, terminals, connections, taps and tubes, spares and other raw materials" with transacted value of Rs.73,10,21,926/-. This transaction covers imports from YCJ and non-YCJ AEs. The assessee and the TPO determined PLI from such import transaction in a combined manner. It means that such cumulative profit (loss) margin in the PLI encompasses profit (loss) not only from imports transactions with YCJ but also non-YCJ AEs. In fact, both separate profits (losses) subsumed into the overall profit (loss) and as such separate profits (losses) arising on account of import from YCJ and non- YCJ AEs lost their separate identities. To say the least, it is not even the case of the assessee that a separate PLI in respect of imports from non-YCJ AEs is available. The AO made transfer pricing adjustment of Rs.17.04 crore in respect of the international transaction of import of raw materials both from YCJ and non-YCJ AEs. Such a transfer pricing adjustment was made by considering the assessee's PLI from this consolidated international transaction at (-) 3.78% and that of comparables at 3.74%. The Competent Authority, in its order, has allowed relief of Rs.2.74 crore in respect of transaction with YCJ. The ld. AR has placed on record 15 ITA No.621/PUN/2014 Yazaki India Private Limited working of relief as per the MAP. There are 3 charts, which have been drawn in this regard. Chart B, which is instantly relevant for our purpose, is reproduced here as under :
Particulars Data Flag Amount in INR
Applying MAP resolution
As per Final AO
OP/OR (%) -378%
Order
As agreed in MAP
Comparables margin % 1.57%
(refer Note 1 below)
Reduced TP Adjustment post
G 12,12,70,858
MAP
Break-up of the TP
adjustment into Japan AE &
Other AE
Adjustment pertaining to Japan
AE transactions - accepted in H = (G*A)/C 7,03,37,097
MAP
TP Adjustment corresponding
I=G-H 5,09,33,761
to transactions with other AEs
12,12,70,858
16. It can be seen from the above chart of working of relief and the remaining transfer pricing adjustment as per MAP that the assessee's own PLI of OP/Sales as computed by the TPO at (-) 3.78% has been accepted as such. Relief has been given in the margin of comparables, which the TPO took at 3.74% and the Competent authorities mutually agreed to reduce it to 1.57%.
17. The question which looms large before us is -- can the assessee assail its PLI qua international transaction of Import of 16 ITA No.621/PUN/2014 Yazaki India Private Limited raw materials etc. from non-YCJ AEs, when the same PLI has been accepted in MAP proceedings? Exercise of an ALP determination under the TNMM involves two broader components, viz., PLI of the assessee and average PLI of the comparables. In the instant case, the TPO determined PLI of the assessee at (-) 3.78% and that of the comparables at 3.74%. In the MAP Resolution, whereas the PLI of the assessee has been accepted at the same level, the PLI of the comparables has been altered. It deciphers that the assessee accepted its own PLI determination at (-)3.78%, which is undisputedly from the common international transaction of Import of raw material etc. both from YCJ and non-YCJ AEs. At no stage did the assessee ever challenge by urging to split this single transaction of import of raw materials and its consequential PLI into two separate transactions, one with YCJ and other with non- YCJ AEs. Once the PLI determined by the TPO, which bears the combined profit (loss) from transactions both with YCJ and non- YCJ AEs has been accepted by the assessee under the MAP Resolution even though in respect of transactions with YCJ, there can be no question of now making any alternations to such a combined PLI in so far as the transactions with non-YCJ AEs are concerned. If we proceed to make any alternation to the PLI in 17 ITA No.621/PUN/2014 Yazaki India Private Limited respect of transaction of import from non-YCJ AEs as suggested by the ld. AR, it would frustrate the assessee's PLI in respect of transaction with YCJ also, which is not permissible at this stage as the same has been accepted by the assessee in the MAP resolution. Since there is a common computation and determination of PLI under TNMM for all the transactions of import of raw materials, now no challenge can be made to the correctness of such PLI for the international transaction of import of raw materials etc. from non-YCJ AEs. The position would have been different if the ALP determination of the transaction of import of raw materials etc. from YCJ had been done separately from the transaction of import of raw materials etc. from non-YCJ AEs, in which case both the profits would have been independent of each other and none bearing the effect of the other. In view of the foregoing discussion, we jettison the contention raised on behalf of the assessee.
18. Now we take up the second argument of the assessee against the exclusion of FCI Technology Service Ltd. from the list of comparables by the TPO. Before taking up this issue, we want to reiterate that the TPO computed PLI of the assessee and comparables at particular percentages. In MAP proceedings, the PLI of the assessee has been accepted by the Competent authorities 18 ITA No.621/PUN/2014 Yazaki India Private Limited and the assessee as well. However, the PLI of the comparables determined by the TPO has been reduced from 3.74% to 1.57%. It means that, whereas the PLI determination of the assessee by the TPO attained finality by virtue of MAP proceedings, the PLI determination of the comparables by the TPO has been jeopardized. We have held supra that the PLI determination of the assessee by the TPO is not open to challenge, which is so for having not been altered in the MAP proceedings and accepted by the assessee as such. However, this view does not hold good in respect of the PLI determination of the comparables by the TPO qua the international transaction of import from non-YCJ AEs. In that view of the matter, it is held that the assessee can validly assail any part of the determination of the ALP of the comparables in respect of transaction of import of raw materials etc. from non-YCJ AEs.
19. Now we take up the argument of the assessee for inclusion of FCI Technology Services Ltd. in the list of comparables, which was a comparable chosen by the assessee. The TPO directed to exclude it on the ground of a persistent loss making company. He noticed on page 14 of his order that for the A.Y.2006-07, this company incurred loss of (-) 0.28%; for the A.Y. 2007-08 though 19 ITA No.621/PUN/2014 Yazaki India Private Limited the assessee had claimed that this company had earned profit of 5.09%, but the PLI margin of this company was (-) 7.76%; for the A.Y. 2008-09 this company incurred loss of (-) 22.59% in connectors segment; and for the A.Y. 2009-10, this company again incurred loss of (-) 40.97% in connectors segment. In the light of such factual position, this company was held to be a persistent loss making company and hence not comparable. The assessee is aggrieved by exclusion of this company from the list of comparables.
20. Having heard both the sides and gone through the relevant material on record, it is seen that the TPO did not dispute the functional similarity of this company with the assessee company. He however, directed to remove it from the list of comparables only on the ground of persistent losses. The ld. AR stated that the TPO went wrong in noting some figures of losses. We have gone through the margins computation of FCI Technology Services Ltd., a copy of which has been placed at page 442 of the paper book for the year under consideration and part of which is available at page 484 of the paper book for the immediately preceding assessment year, i.e. 2008-09. It is apparent that for the A.Y. 2006-07, this company incurred loss at (-) 0.28% which has been correctly 20 ITA No.621/PUN/2014 Yazaki India Private Limited recorded by the TPO. The dispute is about recording loss for the A.Y. 2007-08. The TPO has noticed that the PLI margin of this company stood at (-) 7.76%. We have gone through page 484 of the paper book for the A.Y. 2008-09, which shows that as against the PLI (-) 7.76% noted by the TPO, the correct PLI is 5.08%. Inadvertently, the TPO considered the figure which falls under the next column relevant for the A.Y. 2008-09. Thus, it is overt that for A.Y. 2007-08 this company had PLI of 5.08%. For the A.Y. 2008-09, there was loss of (-) 22.60% in the connectors segment which was followed by loss of (-) 40.97% for the year under consideration.
21. The Hon'ble jurisdictional High Court in CIT Vs. Goldman Sachs (India) Securities (P) Ltd. (2016) 290 CTR 236 (Bom.) considered a similar issue of persistent loss making companies. In that case, the TPO excluded Capital Trust Ltd. on the ground of persistent loss making company. The Tribunal included this company by noticing that it was not a persistent loss making company as for the A.Y. 2005-06 it made profit although it was loss for subsequent two years, namely, A.Y. 2006-07 and 2007-08. Considering the factual position obtaining in the instant case, it is seen that though FCI Technology Services Ltd. suffered loss for 21 ITA No.621/PUN/2014 Yazaki India Private Limited the A.Y. 2008-09 and the year under consideration but, in fact, there was profit for the A.Y. 2007-08 at 5.08%. As this company earned profit of 5.08% for the A.Y. 2007-08, it ceases to be a persistent loss making company in so far as the A.Y. 2009-10 is concerned, since one of the three years is in profit though the other two years are in loss.
22. The ld. DR invited our attention towards the direction given by the DRP on page 12 in which it has returned a categorical finding that FCI Technology Services Ltd. started manufacturing connectors during the A.Y. 2008-09 and there was no manufacturing of connectors during the A.Y. 2007-08, for which the assessee is claiming that this company has positive PLI.
23. We have gone through the Annual report of this company relevant for the A.Yrs. 2009-10 and 2008-09. Page 467 of the paper book for the assessment year under consideration gives details of stock, production and sales for the year ending 31-12-2007 which has opening stock of connectors as well. Similar is the position for the preceding year as well, which depicts that there was opening stock of connectors. In that view of the matter, it becomes evident that this company was already into 22 ITA No.621/PUN/2014 Yazaki India Private Limited manufacturing of connectors, which product has been considered as similar by the DRP. Ex consequenti, the relevant contrary finding recorded by the DRP about that company not engaged in manufacturing of connectors during the A.Y. 2007-08 is, therefore, not correct. As FCI Technology Services Ltd. is not a persistent loss making company and further the functional similarity has not been disputed by the TPO, we order to include this company in the list of comparables.
24. Last ground taken by the assessee is against making the transfer pricing adjustment in respect of all the transactions including non-international transactions.
25. After considering the rival submissions and going through the relevant material on record, we find that no exception can be taken to the argument of the ld. AR that the transfer pricing addition should be restricted only to the international transactions and not the non-international transactions of the assessee. First sub-section of section 92 of the Act, which is the first section of the Chapter X, provides in unambiguous terms that : `Any income arising from an international transaction shall be computed having regard to the arm's length price'. The Chapter extends its 23 ITA No.621/PUN/2014 Yazaki India Private Limited application only to the international transactions, which term has been defined in section 92B to mean : `a transaction between two or more associated enterprises...'. Thus it is patent that the transfer pricing provisions apply only to the transactions between the associated enterprises and not to unrelated or non-associated enterprises. The Hon'ble jurisdictional High Court in CIT Vs. Tara Jewels Exports Pvt. Ltd. (2015) 94 CCH 032-MumHC (Bom):
(2016) 381 ITR 404 (Bom) has held that sections 92A and 92B require transfer pricing adjustment to be done only in respect of the transactions entered into between the assessee with its AEs and not with the non-AEs. Similar view has been reiterated again by the Hon'ble jurisdictional High Court in CIT Vs. Thyssen Krupp Industries India Pvt. Ltd. (2016) 381 ITR 413 (Bom.). As the view adopted by the AO does not accord with that of the Hon'ble jurisdictional High Court, we are disinclined to accept the same.
26. We, therefore, set aside the impugned order to this extent and direct that the transfer pricing addition should be restricted to the international transactions and not the non-international transactions. This ground is thus allowed.
24ITA No.621/PUN/2014
Yazaki India Private Limited
27. To sum up, we set aside the impugned order and remit the matter to the AO/TPO for reworking out the ALP of the international transaction of "Import wires, terminals, connections, taps and tubes, spares and other raw materials" afresh in accordance with our above observations and directions.
28. In the result, the appeal is partly allowed.
Order pronounced in the Open Court on 11th July, 2019.
Sd/- Sd/-
(PARTHA SARATHI CHAUDHURY) (R.S.SYAL)
JUDICIAL MEMBER VICE PRESIDENT
पुणे Pune; दनांक Dated : 11th July, 2019
सतीश
आदेश क ितिलिप अ िे षत/Copy
षत of the Order is forwarded to:
1. अपीलाथ / The Appellant;
2. यथ / The Respondent;
3. The CIT(A)-13, Pune
4. The CIT/IT/TP, Pune
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, पुणे "सी" / DR 'C', ITAT, Pune;
6. गाड फाईल / Guard file.
आदेशानुसार/ ार BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune 25 ITA No.621/PUN/2014 Yazaki India Private Limited Date
1. Draft dictated on 08-07-2019 Sr.PS
2. Draft placed before author 10-07-2019 Sr.PS
3. Draft proposed & placed JM before the second member
4. Draft discussed/approved JM by Second Member.
5. Approved Draft comes to Sr.PS the Sr.PS/PS
6. Kept for pronouncement on Sr.PS
7. Date of uploading order Sr.PS
8. File sent to the Bench Clerk Sr.PS
9. Date on which file goes to the Head Clerk
10. Date on which file goes to the A.R.
11. Date of dispatch of Order.
*