ASSTT.CIT, CIR.-1, AURANGABAD, AURANGABAD V. M/S. SKODA AUTO INDIA PVT.LTD., AURANGABAD

MA 131/PUN/2022

AI Insights

The case involves the Revenue's miscellaneous application against Skoda Auto India Pvt. Ltd., concerning transfer pricing adjustments and economic adjustments related to import duty and capacity underutilization for the assessment year 2004-2005. The Revenue sought to recall the Tribunal's earlier order which had dismissed its main appeal. The Tribunal, after reviewing the submissions and the absence of new evidence or apparent mistakes in the original order, decided to dismiss the application, citing precedents that support rectification only for apparent mistakes and not for re-evaluating substantive issues.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471132 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-10-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Next Hearing Date: 16-08-2024
• Assessment Year: 2004-2005
• Appeal Filed On: 26-12-2019
• Other Referred Cases: ACIT vs. Saurashtra Kutch Stock Exchange Ltd., CIT vs. Reliance Telecom Ltd., CIT vs. Ramesh Electric and Trading Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARVIND DESAI
• Assessee Lawyers: NIKHIL PATHAK
• Keywords: Transfer pricing; Capital expenditure
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “A” BENCH : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER M.A.No.131/PUN./2022 Arising out of I.T.A.No.154/PUN./2011 - Assessment Year 2004-2005 The ACIT, Circle-1, AURANGABAD. Maharashtra. vs. M/s. Skoda Auto India Pvt. Ltd., A-1/1, Five Star Industrial Area, MIDC, Shendra, AURANGABAD. PAN AAECS3749M (Appellant) (Respondent) For Revenue : Shri Arvind Desai, Addl. CIT-DR For Assessee : Shri Nikhil Pathak Date of Hearing : 06.09.2024 Date of Pronouncement : 14.10.2024 ORDER PER SATBEER SINGH GODARA, J.M. This Revenue’s miscellaneous application M.A.No.131/PUN./2022 filed u/s.254(2) of the of the Income Tax Act, 1961 (in short \"the Act\"), seeks to recall/rectify our order dated 10.06.2019 in dismissing it’s main appeal I.T.A.No.154/ PUN./2011 for assessment year 2004-2005. Heard both the parties at length. Case file perused. 2. The Revenue pleads the following substantive grounds in the instant miscellaneous application M.A.No.131/PUN./2022: 2 M.A.No.131/PUN./2022 • “Assessee Skoda Auto India Pvt. Ltd. (SAIPL) is a subsidiary of Skoda Auto a.s., which is again a subsidiary of Volkswagen AG. The assessee company is engaged in the business of manufacturing and selling of cars and trading in accessories thereof. The assessee filed its return of income for AY 2004-05 on 29/10/2004, declaring total income of Rs.1,70,07,180/-. The assessee has entered into several international transactions with its Associate Enterprises, hence reference made to the Addl. CIT-TP who has made transfer pricing adjustments of Rs.52,01,32,552/-, which were also incorporated by the A.O. in the assessment order. Assessment order u/s 143(3) of the Act was passed for AY 2004-05 on 29/12/2006 assessing total income at Rs.53,27,14,710/-. Being aggrieved, the assessee has preferred appeal before the CIT(A), Aurangabad. The CIT(A) vide order dated 16/11/2010 has held that Hindustan Motors should be considered as comparable since the same is functionally comparable and it cannot be excluded merely because of the reason that it has incurred losses. Further directed to include Hindustan Motors in the set of comparable companies for the purpose of computing the arm's length price. Further, the Id. CIT(A) held that factory shifting expenses amounting to Rs.2,02,43,739/- is treated as capital expenditure and the total income is enhanced. Aggrieved by the order of Ld.CIT(A)-2, Aurangabad, Revenue filed appeal before the Hon'ble ITAT, Pune. Also, assessee field a cross-objection 3 M.A.No.131/PUN./2022 against the order of CIT(A), Aurangabad dated 16/11/2010. • Hon’ble ITAT vide its order no.154/PUN/2011 Dt. 10.06.2019, has adjudicated the ground appeal related to capacity under utilization only and did not adjudicate the ground of appeal related economic adjustment on account of import duty. In fact the Hon'ble ITAT Pune in its recent decision in the case of Fresinious Kabi (ITA Nos. 2572 & 2573/PUN/2016 A.Y. 2011-12) has denied the claim of import duty adjustment. • It is noticed from the assessee's submission dated 12/10/2006 filed before the TPO that the assessee had made economic adjustments on account of lower level of indigenisation, under utilization capacity and extraordinary expenses and accordingly the adjusted PLI of the assessee was worked out to 19.91% (OP/OR) as against unadjusted PL1 of (-) 6.67% (OP/OR). Thus it was seen that the adjustment for import duty and capacity underutilization were done by the assessee in its own PLI instead of that of the comparables as per the provisions of Rule 10B(3)(e). Therefore, the TPO had rejected the claim of the assessee relating the economic adjustment and the extraordinary expenses were treated as operating expenses. Accordingly the TPO had reworked out the PLI of the assessee at (-) 7.25%. 4 M.A.No.131/PUN./2022 • The Ld. CIT(A) had allowed the import duty adjustment and capacity underutilization adjustment in the hand of the assessee. However, while deciding the appeal of the department, the Hon'ble ITAT has adjudicated the ground appeal related to capacity under utilization only and did not adjudicate the ground of appeal related economic adjustment on account of import duty. In fact the Hon'ble ITAT Pune in its recent decision in the case of Fresinious Kabi (ITA Nos. 2572 & 2573/PUN/2016 A.Y. 2011- 12) has denied the claim of import duty adjustment. • Due to incorrect computation of capacity utilization computation, the adjustment of Rs.26.24 crore still remains. Since the Hon'ble ITAT, has not adjudicate the ground of appeal related economic adjustment on account of import duty, hence the miscellaneous application u/s.254(2) of the Income Tax Act, 1961 is required to be filed requesting to re-institute the appeal in the above case. HENCE, THIS PRAYER.” 3. Suffice to say, the Revenue’s sole substantive grievance canvassed in it’s instant miscellaneous application M.A.No.131/ PUN./2022 is that our impugned order dated 10.06.2019 has treated it’s corresponding 3rd and 4th substantive grounds pleaded in the main appeal ITA.No.154/PUN./2011 as rendered academic in light of the 5 M.A.No.131/PUN./2022 consequential computation to be framed after rejecting the 5th and 6th substantive grounds herein. 4. It is in this factual backdrop that we had called for the TPO’s comments regarding his consequential computation way back on 17.02.2023. No such report has come from the departmental side despite the fact that it’s instant M.A. is listed today i.e. on 12th occasion. That being the case, we quote [2008] 305 ITR 277 (SC) ACIT vs. Saurashtra Kutch Stock Exchange Ltd.; [2021] 133 taxmann.com 41 (SC) CIT vs. Reliance Telecom Ltd.; and [1993] 203 ITR 497 (Bom.) CIT vs. Ramesh Electric and Trading Co. that the purpose of sec.254(2) rectification is only to correct apparent mistakes than undertaking long drawn process of roving enquiries and hold that our impugned order dated 10.06.2019 does not suffer from any apparent mistake and therefore, the instant Revenue’s miscellaneous application stands rejected in very terms. Ordered accordingly. 5. This Revenue’s miscellaneous application M.A.No.131/ PUN./2022 is dismissed in above terms. Order pronounced in the open Court on 14.10.2024. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 14th October, 2024 VBP/- 6 M.A.No.131/PUN./2022 Copy to 1. The appellant 2. The respondent 3. The Pr. CIT, Pune concerned 4. D.R. ITAT, “A” Bench, Pune. 5. Guard File. //By Order// //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune. "