Assessment Appeal Analysis: Teejay India Private Limited vs. Income Tax Department

• In a recent development, Teejay India Private Limited, formerly known as Ocean India Private Limited, found itself embroiled in a legal tussle with the Income Tax Department regarding the final assessment order passed under sections 143(3) and 144C(13) of the Income Tax Act, 1961 for the Assessment Year (AY) 2012-13.

Background and Facts:

• Teejay India Private Limited, operating in the manufacturing and exporting sector of knitted fabrics and apparels, filed its return of income for AY 2012-13, declaring a loss of Rs. 38,59,95,609/-. The assessment was selected for scrutiny, leading to a Transfer Pricing Officer (TPO) adjustment of Rs. 12,88,76,471/- for international transactions with associated enterprises (AEs). Additionally, the Assessing Officer (AO) proposed further adjustments for inadmissible depreciation and income from other sources.

Grounds of Appeal:

The appellant, aggrieved by the final assessment order, raised multiple grounds of appeal, contesting the fairness and legality of the adjustments made. These grounds primarily focused on:

1. Disputing the method used by the TPO for determining arm's length price.
2. Contesting the failure to provide appropriate adjustments for abnormal business loss and under-utilization of capacity.
3. Challenging the treatment of certain expenses as non-operating and extraordinary.
4. Asserting non-compliance with the directions of the Dispute Resolution Panel (DRP) regarding working capital adjustment.

Judicial Analysis:

• The appellate authority conducted a thorough examination of each ground of appeal. Regarding the method used for determining the arm's length price, the appellant sought to change from Transactional Net Margin Method (TNMM) to Comparable Uncontrolled Price (CUP). However, the appellate authority ruled against this change, emphasizing the importance of maintaining consistency unless there are substantial changes in circumstances.
• Furthermore, the authority upheld the decision of the DRP regarding adjustments, citing the failure of the appellant to substantiate unique factors warranting deviation from standard practices.

Conclusion:

• Ultimately, the appeal of Teejay India Private Limited was partly allowed for statistical purposes, indicating a recognition of procedural lapses while affirming the substance of the adjustments made by the tax authorities.
• This case underscores the complexity and importance of transfer pricing regulations in international transactions, emphasizing the need for meticulous documentation and adherence to prescribed methodologies.

Topic- Teejay India Pvt. Ltd. Versus Deputy  Assistant Commissioner of Income Tax

Court-ITAT-Visakhapatnam

Date-13/02/2024

Team Taxonation

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