India: Delhi High Court removed the penalty assessment for related-party transactions

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The Delhi High Court, in the case of: Pr.CIT v. Mitsui Prime Advanced Composites India Pvt. Ltd. (ITA 913/2016, CM APPL.46519/2016), dismissing tax department’s appeal and upheld the Tribunal’s order deleting penalty under Section 271(1)(c) of the Income-tax Act, 1961 (the Act).

In that case, the Delhi High Court agreed with the tribunal’s decision, to remove a penalty imposed on the taxpayer for an alleged concealment of income with respect to certain related-party transactions even though the taxpayer accepted the transfer pricing adjustment. The High Court also held that because the taxpayer had entered a new line of business (manufacturing), the taxpayer’s failure to disclose certain benefits and advantages from related-party services could not have triggered the automatic presumptive application of the penalty.

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