Denso Haryana Pvt Ltd Vs. The Dy.CI.T.

Parties Involved

Facts Summary

The assessee, Denso Haryana Pvt Ltd, is a resident corporate entity engaged in manufacturing automobile components. It is a wholly-owned subsidiary of DENSO, Japan. The assessee filed its return of income (ROI) on 29.11.2011 declaring an income of Rs 1,07,55,93,206/-. The Transfer Pricing Officer (TPO) made an adjustment of Rs 18,40,35,200/- and accordingly, the Assessing Officer (AO) assessed the total income at Rs 1,25,96,28,400/-. The assessee considered 13 transactions for AY 2011-12 and 8 transactions for AY 2012-13 as international transactions. Except for cost recharges and reimbursement of expenses, the assessee adopted an aggregate approach and clubbed all other transactions together to benchmark for determination of arm's length price (ALP) by selecting the Transactional Net Margin Method (TNMM) as the most appropriate method. The TPO accepted the assessee's approach in respect of all transactions except three, which are payments made towards intra-group services, payment made towards import of capital goods, and payment for royalty. Aggrieved, the assessee went in appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] who gave relief by deleting the adjustment made in respect of the transaction of ‘Intra Group services’, reducing the ALP disallowance of mark-up charged by AEs on ‘purchase of fixed assets’ and deleting the ALP on account of 'payment of royalty'. The CIT(A) also held that material facts are the same in the AY 2011-12 and 2012-13.…

Legal Issues

• 1. Validity of the assessment order on the ground that the AO had not recorded any reasons to refer the matter to the TPO.
• 2. Validity of the reference made by the AO to the TPO for computation of the arm's length price.
• 3. Erroneous addition of INR 7,006,041 on provision of Intra Group services to the returned income of the Appellant by re-computing the arm's length price.
• 4. Disallowance of mark-up charged by AEs on ‘purchase of fixed assets’.
• 5. Penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income.
• 6. Charging of interest under sections 234A, 234B and 234D of the Act.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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