Date: 13.01.2026
In a significant ruling for multinational corporations operating in India, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, has dismissed an appeal filed by the Revenue department against M/s Cargill India Pvt. Ltd. [2026-VIL-49-ITAT-DEL] for the Assessment Year (A.Y.) 2005-06. The decision, pronounced on December 30, 2025, provides crucial insights into the treatment of interest expenses and the application of the Comparable Uncontrolled Price (CUP) method in transfer pricing.
The case originated from an assessment order dated December 15, 2008, where the Assessing Officer (AO) made substantial additions to Cargill’s declared loss of approximately Rs. 119.86 Crore. The primary disputes centered on:
1. Interest Expenses: A proposed addition of over Rs. 9.53 Crore under Section 36(1)(iii).
2. Transfer Pricing Adjustments: Specifically relating to the import of sugar and the export of ferrous minerals.
3. Other Disallowances: Including discounting charges, deemed dividends, and depreciation on computer accessories.
The Commissioner of Income Tax (Appeals) [CIT(A)] had previously granted significant relief to Cargill, prompting the Revenue to appeal to the ITAT.
One of the primary grounds for the Revenue’s appeal was the restriction of interest expense additions. The Revenue argued that Cargill had used short-term loans for long-term investments (purchase of fixed assets) without providing adequate details on interest rates.
The Assessee’s Defense:
Cargill argued that no foreign currency loans were taken specifically for fixed assets during that year. More importantly, they invoked the principle of consistency, noting that the AO had not disallowed such interest in previous years. They also highlighted that substantial capitalization occurred because two oil refineries (Kandla and Paradeep) were finally put to use during the year.
The Tribunal’s View:
The ITAT upheld the CIT(A)’s decision to restrict the addition to only Rs. 93.54 Lakh. The Tribunal agreed that since the AO had not disputed the "Capital Work in Progress" and had allowed similar claims in the past, a sudden departure from this stance was not equitable. This reinforces the judicial trend that while res judicata (a matter already judged) doesn't strictly apply to tax proceedings, the Rule of Consistency is vital for legal certainty.
The Transfer Pricing Officer (TPO) had challenged Cargill’s benchmarking for sugar imports. Cargill used NYBOT (New York Board of Trade) quotes as an external CUP.
The Technical Nuance:
The dispute involved converting CIF (Cost, Insurance, and Freight) prices to FOB (Free on Board) values to make them comparable to NYBOT quotes. The CIT(A) directed the AO to use an average of the NYBOT price and the Kingsman Publication price (after FOB conversion) and allowed the +/- 5% range benefit.
The ITAT found this approach scientifically sound and refused to interfere, noting that using a mean of high and low prices from internationally recognized exchanges like NYBOT is a valid representation of independent third-party transactions.
For the export of ferrous minerals, the TPO had initially used an average of quotes from dates that did not align with Cargill’s actual contract dates.
The Resolution:
Cargill successfully argued that the TPO should consider specific third-party quotations (like those from Bharat Mines & Minerals and Patnaik Minerals Pvt. Ltd.) that were closer in time to Cargill’s amended contracts. Interestingly, the ITAT noted that Cargill had already settled the remaining sustained adjustment (approx. Rs. 3.82 Lakh) under the Direct Tax Vivad se Vishwas Scheme, 2020, further weakening the Revenue's stance for a higher disallowance.
The dismissal of the Revenue’s appeal ITA No. 5786/DEL/2014 serves as a reminder of three critical tax principles:
For tax professionals and corporate leaders, this ruling underscores the importance of aligning transfer pricing methodologies with actual market data and maintaining a consistent narrative across assessment years.