India vs Inductotherm (India) Pvt. Ltd., May 2026, Income Tax Appellate Tribunal, Case No ITA No. 1609/Ahd/2024
Table of Contents
Case Information
Court: Income Tax Appellate Tribunal, 'D' Bench, Ahmedabad
Case number: ITA No. 1609/Ahd/2024
Citation: ITA No. 1609/Ahd/2024 (Assessment Year: 2020-21)
Applicant: Inductotherm (India) Pvt. Ltd., Plot No. SM-06, Sanand II Industrial Estate, Village Bol, Sanand, Ahmedabad-382170 [PAN: AAACI3672B]
Respondent: Deputy Commissioner of Income-tax, Circle 2(1)(1), Ahmedabad
Jurisdiction: Ahmedabad, India
Judgment date: 27 May 2026
Judgment Summary
The appeal was filed by Inductotherm (India) Pvt. Ltd. against the order dated 12 July 2024 passed by the Assessing Officer under section 143(3) read with sections 144C(13) and 144B of the Income Tax Act, 1961, for Assessment Year 2020-21.
Three substantive issues were before the Tribunal: a transfer pricing adjustment of Rs.3,88,46,904 arising from the TPO's rejection of the assessee's aggregated TNMM approach and application of an internal Cost Plus Method; an adjustment of Rs.3,75,67,050 made by the CPC under section 143(1) on account of a mismatch relating to reversal of provisions; and a failure by the Assessing Officer to grant credit for TDS of Rs.71,86,233 and TCS of Rs.91,050.
The Tribunal deleted the transfer pricing adjustment, holding that TNMM at entity level was the most appropriate method in the absence of any change in facts or functional profile and in view of consistent coordinate bench decisions in the assessee's own case. The other two issues were remanded to the Assessing Officer for verification and fresh adjudication. The appeal was allowed for statistical purposes.
Background
Inductotherm (India) Pvt. Ltd. is a wholly owned subsidiary of Inductotherm Technologies Inc., USA. It is engaged in the manufacture and sale of induction heating, welding and related industrial equipment and components.
For Assessment Year 2020-21, the assessee filed its return of income on 13 February 2021, declaring total income of Rs.175.94 crores. The case was selected for scrutiny and a notice under section 143(2) was issued.
During the scrutiny proceedings, the CPC issued an intimation under section 143(1) making an adjustment of Rs.3,75,67,050 on account of a mismatch between the tax audit report and the return of income in respect of reversal of provisions. The assessee contended that the provisions in question had already been disallowed in the year of their creation in earlier assessment years, and that taxing the reversal would result in double taxation.
The assessee also entered into international transactions with its Associated Enterprises (AEs) during the relevant previous year. For benchmarking purposes, it adopted the Transactional Net Margin Method (TNMM) at the entity level and demonstrated an operating margin of 23.68%, which was higher than the margins of the comparables it selected.
Core Dispute
The central transfer pricing dispute was whether the TPO was justified in rejecting the assessee's aggregated TNMM approach and instead applying an internal Comparable Profit Margin/Cost Plus Method by selecting approximately 240 product lines from the assessee's product basket of approximately 9,000 products as between-AE and non-AE comparable transactions, resulting in a transfer pricing adjustment of Rs.3,88,46,904.
The assessee argued that the internal Cost Plus Method was inappropriate because of significant functional, economic, geographical and risk differences between AE and non-AE transactions, and that reliable comparability adjustments were not feasible as required under Rule 10B of the Income-tax Rules, 1962. It also argued that the aggregated TNMM approach had been consistently accepted in the assessee's own case in earlier assessment years from AY 2006-07 onwards and that there was no change in its functional, asset and risk profile.
A second dispute concerned the adjustment of Rs.3,75,67,050 made by the CPC under section 143(1), which the assessee contended involved double taxation of previously disallowed provisions and was procedurally defective for failure to grant the mandatory 30-day notice period under the second proviso to section 143(1).
A third dispute concerned the denial of credit for TDS of Rs.71,86,233 and TCS of Rs.91,050 claimed in the return of income.
Court Findings
On the transfer pricing issue, the Tribunal found that the coordinate bench had consistently upheld the application of TNMM and rejected the internal CPM approach in the assessee's own case for earlier assessment years involving identical facts [paragraph 7]. The Revenue produced no material showing any change in facts or the functional profile of the assessee. The Tribunal observed that the DRP itself recorded that there was no change in the factual matrix yet declined to follow binding judicial precedent on the ground that the issue was pending before higher forums, which the Tribunal held was not sustainable in law. The Tribunal held that judicial discipline requires orders of coordinate benches on identical facts to be followed unless stayed, reversed or distinguished on facts [paragraph 7].
On the section 143(1) adjustment, the Tribunal accepted as an undisputed fact that the provisions in question had been disallowed in earlier years at the time of their creation, and that taxing the reversal would amount to double taxation [paragraph 10]. The assessee produced a revised tax audit report and an auditor's certificate dated 06 June 2025 and filed on 07 August 2025 clarifying that the mismatch arose from an inadvertent classification error. However, the Tribunal noted that the claim of earlier disallowance and the reconciliation through the revised report required verification by the Assessing Officer and therefore remanded the issue [paragraph 10].
The Tribunal also noted at paragraph 4.3 that the DRP declined to adjudicate the section 143(1) adjustment and the denial of concessional tax rate under section 115BAA on the ground that those matters fell outside its jurisdiction under section 144C, describing this as an abdication of responsibility by senior revenue officers.
On the TDS and TCS credit issue, both parties accepted that the matter required verification. The Tribunal directed the Assessing Officer to verify the claim from Form 26AS, the Annual Information Statement and other supporting evidence and grant due credit in accordance with law [paragraph 13].
Outcome
The Tribunal directed that the transfer pricing adjustment of Rs.3,88,46,904 be deleted [paragraph 7].
The issue of the section 143(1) adjustment of Rs.3,75,67,050 relating to reversal of provisions was set aside and remanded to the Assessing Officer for verification of the assessee's claim and fresh adjudication in accordance with law after providing adequate opportunity of being heard. This ground was allowed for statistical purposes [paragraph 10].
The issue of short grant of TDS credit of Rs.71,86,233 and TCS credit of Rs.91,050 was restored to the Assessing Officer with a direction to verify the claim from Form 26AS, AIS and other supporting evidence and grant due credit in accordance with law. This ground was also allowed for statistical purposes [paragraph 13].
The appeal of the assessee was allowed for statistical purposes [paragraph 14].
TP Method Highlighted
The assessee adopted the Transactional Net Margin Method (TNMM) at the entity level as the most appropriate method, reporting an operating margin of 23.68%, which was higher than the margins of its selected comparables [paragraph 3.1].
The TPO rejected the aggregated TNMM approach and instead applied an internal Comparable Profit Margin/Cost Plus Method, selecting approximately 240 product lines from the assessee's basket of approximately 9,000 products that were considered comparable between AE and non-AE segments, resulting in an adjustment of Rs.3,88,46,904 [paragraph 3.1].
The Tribunal upheld TNMM at entity level as the most appropriate method, consistent with coordinate bench decisions in the assessee's own case from AY 2006-07 onwards, and directed deletion of the transfer pricing adjustment [paragraph 7].
Major Issues / Areas of Contention
- Whether the TPO was justified in rejecting the assessee's aggregated TNMM approach and applying an internal Cost Plus Method by selecting approximately 240 product lines from a basket of approximately 9,000 products, resulting in a transfer pricing adjustment of Rs.3,88,46,904.
- Whether the DRP was bound to follow coordinate bench decisions in the assessee's own case upholding TNMM for earlier assessment years, in the absence of any change in facts or functional profile.
- Whether the adjustment of Rs.3,75,67,050 made by the CPC under section 143(1) on account of reversal of provisions amounted to double taxation of expenditure already disallowed in earlier assessment years.
- Whether the intimation under section 143(1) was procedurally invalid for failure to grant the mandatory 30-day notice period under the second proviso to section 143(1).
- Whether the DRP had jurisdiction under section 144C to adjudicate adjustments made by the CPC under section 143(1), including the reversal of provisions and denial of concessional tax rate under section 115BAA.
- Whether the assessee was entitled to credit for TDS of Rs.71,86,233 and TCS of Rs.91,050 as claimed in its return of income.
- Whether the assessment order passed under section 143(3) read with sections 144C(13) and 144B was invalid for failure to issue a proper show-cause notice as required under section 144B.
- Whether the intimation under section 143(1) issued by the CPC merges with the assessment order passed under section 143(3) read with sections 144C(13) and 144B.