Case Name: Finolex Cables Ltd [TS-319-ITAT-2023(PUN)-TP]
Facts:
The assessee was engaged in manufacturing and sales of electrical cables, optical fiber cables, lamps and switches etc. For AY 2013-14, the assessee allocated expenses to its FCL-Roorkee Unit (eligible 80-IC unit) and explained that these expenses were allocated on turnover basis except the derivative losses and interest, which were allocated on actual basis.
The TPO proposed TP adjustment qua specified domestic transaction of allocation of common expenses to eligible unit by charging mark up @7.48% on the basis that assessee failed to show that the cost allocated to the Roorkee unit included the mark up.
The CIT(A) held in favour of the assessee. The CIT(A) held that allocation was done on actual basis and it was not a case of transfer of service that required additional markup.
Conclusion:
The Pune ITAT observed that CIT(A) has also verified that no such adjustment had been done for subsequent AYs 2016-17 & 2017-18. The ITAT held that “It is not a case of cost allocation for rendering any services by one unit to the other, which otherwise would have required the ALP determination by applying an arm’s length mark-up. Here is a case where common administrative expenses, such as, directors’ salary and audit fee etc., have been shared between both the units on the basis of revenue earned by them de hors such expenses culminating into rendition or receipt of any services or property by/from one unit to another”. The additions were thus deleted.