Sepco 1 Engineering (India) Private Limited vs. Deputy Commissioner of Income Tax

Parties Involved

Facts Summary

The assessee, Sepco 1 Engineering (India) Private Limited, filed an appeal against the order dated January 29, 2020, passed by the Deputy Commissioner of Income Tax, Circle 23(2), New Delhi, for the assessment year 2016-17. The assessee declared income of Rs. 74,69,200/- and was engaged in the business of Consultancy Services and Civil contractors. The case was selected for scrutiny, and a notice under section 143(2) of the Income Tax Act, 1961, was issued on July 27, 2017. The assessee had entered into international transactions with its associated enterprises, and a reference was made to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price. The TPO passed an order on October 25, 2019, and the Assessing Officer (AO) passed an assessment order on January 29, 2020, making an addition of Rs. 17,96,524/- under section 92CA of the Act. The assessee filed an appeal before the Commissioner of Income Tax (Appeals), which was dismissed on March 14, 2022.…

Legal Issues

• 1. Whether the Transfer Pricing Officer (TPO) erred in making and the AO/Commissioner of Income Tax, Appeals (CIT(A)) have erred in upholding the Transfer Pricing (TP) adjustment of INR 17,96,524 in respect of the international transactions with its associated enterprises (AE's).
• 2. Whether the CIT(A)/TPO have erred in rejecting the benchmarking analysis adopted by the Appellant, wherein aggregated Transactional Net Margin Method (TNMM) has been adopted as the appropriate method for benchmarking the international transaction relating to payment of royalty.
• 3. Whether the CIT(A)/TPO have erred in ignoring the benchmarking analysis using Transactional Net Margin Method (TNMM), submitted by the Appellant for benchmarking the international transactions.
• 4. Whether the CIT(A)/TPO have erred arbitrarily in inclusion and exclusion of comparable companies as per TP Study ignoring the functional profile and quantitative filter qualifications.
• 5. Whether the CIT(A)/TPO have rejected the claim of working capital adjustment.
• 6. Whether the AO has erred in levying interest under sections 234B and 234C of the Act.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

Similar Judgements

• JCB India Ltd. vs ACIT

  Other

• McCann Erickson India Pvt. Ltd. vs. DCIT, Circle 16 (1)

• Cvent India Pvt Ltd Vs. The I.T.O

• ITA No.2121/Chny/2024 & Cross-Objection No.1/Chny/2025

• ERM India Private Limited vs. Assessment Unit, Income Tax Department

  Delhi Bench benchAY 2021-22Partly Allowed

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

  Delhi ‘I’ Bench benchAY 2011-12, 2012-13Partly Allowed