ITAT Remands Mitsui Prime Transfer Pricing Dispute Back to AO, Flags Double Addition and Comparable Selection Issues

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has partly allowed the appeal filed by Mitsui Prime Advanced Composites India Private Limited for Assessment Year 2016–17 and remanded several transfer pricing and computation-related issues back to the Assessing Officer (AO) for fresh adjudication. The bench of Vimal Kumar (Judicial Member) And Ramit Kochar (Accountant Member) found merit in the assessee's contention that transfer pricing adjustments appeared to have been added twice and also raised concerns regarding the selection of comparable companies for determining the arm’s length price. The dispute arose after the assessee filed a NIL income return for AY 2016–17. The case was selected for complete scrutiny on multiple issues, including international transactions, business losses, foreign remittances, share capital genuineness, and turnover disclosures. The matter was subsequently referred to the Transfer Pricing Officer (TPO), who proposed an adjustment of Rs. 1.99 crore, later modified to Rs. 1.81 crore following proceedings before the Dispute Resolution Panel (DRP). The assessee argued before the Tribunal that the AO had wrongly assessed total income at Rs. 3.81 crore despite the returned income being NIL. According to the assessee, transfer pricing adjustments had effectively been added twice — once pursuant to the TPO order and again while giving effect to DRP directions — thereby inflating the business income computation. The assessee also alleged that brought-forward losses and unabsorbed depreciation amounting to over Rs. 55.48 crore had not been properly set off. The Revenue did not oppose restoration of issues relating to alleged double additions and loss adjustments to the AO. Taking note of this position, the Tribunal set aside the assessment regarding these aspects and directed the AO to adjudicate afresh after providing an adequate opportunity of hearing to the assessee. The Tribunal also examined the transfer pricing dispute concerning the comparables selected by the TPO. The assessee argued that certain companies chosen by the Revenue authorities were functionally dissimilar and therefore unsuitable for benchmarking purposes. The Tribunal specifically noted concerns regarding three companies selected as comparables: S. No.Comparable CompanyTribunal's Observation1Zenith Fibers Ltd.Engaged in manufacturing PP Staple Fiber and yarn products with raw material-to-sales ratio of 15.24%, whereas the assessee's ratio stood at 83.07%, indicating substantial differences.2Resins & Plastics Ltd.Manufactured various resin products such as alkyd, acrylic, epoxy and formaldehyde resins, which differed significantly from polypropylene compounds produced by the assessee.3Nocil Ltd.Engaged in manufacturing rubber chemicals rather than polypropylene compounds, thereby showing functional dissimilarity. The Tribunal observed that these entities did not appear to be "just, fair and reasonable" comparables and therefore warranted reconsideration. The Tribunal also reproduced the list of comparable companies proposed by the assessee along with depreciation methodologies adopted by them: S. No.Name of Comparable CompanyDepreciation Method1Sreechem Resins Ltd.Straight Line Method as per Schedule II of Companies Act2Pankaj Polymers Ltd.Straight Line Method as per Schedule II of Companies Act3Axel Polymers Ltd.Straight Line Method as per Schedule II of Companies Act4Kingfa Science & Technology (India) Ltd.Straight Line Method as per Schedule II of Companies Act5Machino Polymers Ltd.Written Down Value Method The Tribunal observed that depreciation policies and functional comparability required proper consideration and accordingly set aside the transfer pricing adjustment of Rs. 1.81 crore for fresh examination by the AO. Case Details Case Title: Mitsui Prime Advanced Composites India Private Limited Versus ITO Citation: JURISHOUR-1384-ITA-2026(DEL) Case No.: ITA No. 741/Del/2021 Date: 22.05.2026 Counsel For Appellant: Deepender Kumar, CA Counsel For Respondent: S. K. Jadhav, CIT-DR Click Here To Read Order Read More: Supreme Court Announces Partial Court Working Days From June 1 to July 12, 2026; Summer Benches Notified

ITAT Remands Mitsui Prime Transfer Pricing Dispute Back to AO, Flags Double Addition and Comparable Selection Issues

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