Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 19139 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Miscellaneous Application
Pronouncement Date
21-03-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
K
Assessment Year
2006-2007
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL \"K\" BENCH, MUMBAI SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER MA No.89/MUM/2024 (Arising out of ITA No.1842/Mum/2016) (Assessment Year: 2006-2007) Cabot India Pvt. Limited 12th Floor, Kesar Solitaire, Plot No.5, Sector 19, Palm Beach Road, Sanpada. [PAN:AAACU1414F] …………. Appellant Vs Deputy Commissioner of Income Tax 1(3)(2), Mumbai Mumbai. …………. Respondent MA No.88/MUM/2024 (Arising out of ITA No.6318/Mum/2014) (Assessment Year: 2009-2010) MA No.96/MUM/2024 (Arising out of ITA No.2108/Mum/2016) (Assessment Year: 2010-2011) Cabot India Pvt. Limited 12th Floor, Kesar Solitaire, Plot No.5, Sector 19, Palm Beach Road, Sanpada. [PAN:AAACU1414F] …………. Appellant Vs Deputy Commissioner of Income Tax 1(1), Mumbai Mumbai. ……………. Respondent & MA No.87/MUM/2024 (Arising out of ITA No.2586/Mum/2016) (Assessment Year: 2011-2012) Cabot India Pvt. Limited 12th Floor, Kesar Solitaire, Plot No.5, Sector 19, Palm Beach Road, Sanpada. [PAN:AAACU1414F] …………. Appellant Vs Assistant Commissioner of Income Tax – 15(1)(2), Mumbai Mumbai. ……………. Respondent MA No. 89/Mum/2024, M.A.No.88/Mum/2024 M.A.No.96/Mum/2024 & M.A.No.87/Mum/2024 Assessment Year 2006-2007, 2009-2010, 2010-2011 and 2011-2012 2 Appearance For the Appellant/ Assessee For the Respondent/Department : : Shri Jeet Kamdar & Shri Amey Wagle Shri Kiran Unavekar Date Conclusion of hearing Pronouncement of order : : 03.01.2025 21.03.2025 O R D E R Per Rahul Chaudhary, Judicial Member: 1. These are four Miscellaneous Applications moved by the Assessee in following appeals (i) ITA No.1842/Mum/2016, (ii) ITA No.6318/Mum/2024, (iii) ITA No.2108/Mum/2016 and (iv) ITA No. 2586/Mum/2016 for the Assessment Year 2006-2007, 2009-2010, 2010-2011 and 2011-2012 which were disposed off by way of Common Order, dated 21/08/2023. 2. We have heard both the sides and perused the material on record. The primary grievance of the Assessee is some of facts have been incorrectly recorded in Paragraph 11 and 13 of the orders sought to be rectified by way of present applications. The learned Authorised Representative for the Assessee submitted that the aforesaid grievance shall stands redress in case necessary rectification is carried out in the said order keeping in view of the submission made in Paragraph 5, 7, 9, 10 and 11 of the present application(s). 3. On perusal of record we find some merit in the aforesaid submission advanced on behalf of the Assessee. Accordingly, last two sentences of paragraph 11 of the order of the Tribunal shall stand deleted. “011.We have carefully considered …………………………………. This is unfair and not justified. Each transaction of royalty is unique, if it is not so, who will pay royalty for a common technology. Therefore the MA No. 89/Mum/2024, M.A.No.88/Mum/2024 M.A.No.96/Mum/2024 & M.A.No.87/Mum/2024 Assessment Year 2006-2007, 2009-2010, 2010-2011 and 2011-2012 3 assessee widen the search to include all companies petrochemical industry which gave a list of 11 companies as stated by the assessee. However L stated in the letter has not been submitted before us. Assessee also did not show that what is the ballpark rates of royalty in those 11 comparables and why the same should not be used.” 4. Accordingly, Paragraph 11 of the Common Order, dated 21/08/2023, shall be read as and be replaced by the following: “011. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also considered the decision of the coordinate bench in assessee‟s own case wherein it remanded the issue back to the file of the learned assessing officer to redetermine the arm‟s-length price of the international transaction by first determining the most appropriate method. When we look at the order of the coordinate bench for assessment year 2005 –06 of coordinate bench wherein at Para number 10 it has categorically held that the royalty rates paid by the assessee to its associated enterprise itself cannot be taken for benchmarking of the other transaction with its associated enterprises for the reason that both the transactions are controlled transactions. The learned TPO has taken the benchmarking rate of royalty paid by the assessee to its associated enterprise of trade grade carbon black (3%) with royalty payment for carcass grade at the rate of 5%. Probably the learned TPO has considered it as internal CUP available. However, both the transactions are controlled transactions as those are with its associated enterprises. Therefore the comparison made by the learned TPO and the learned CIT – A are completely incorrect. However, we hasten to add that though internal CUP does not apply, however we do not agree that for benchmarking this royalty transaction of carcass grade royalty payment at the rate of 5% CUP cannot be adopted as the most appropriate method for determining the ALP. Assessee argued before the coordinate bench for earlier years that the product manufactured by the assessee being unique and the technology or technical input provided by Cabot Corporation USA also being unique, it is very difficult to find out a case involving supply of similar technology or technical input so as to ascertain a comparable uncontrolled price paid for the royalty. The assessee also argued that no data available for that year in respect of uncontrolled comparable transactions which have a similarity or MA No. 89/Mum/2024, M.A.No.88/Mum/2024 M.A.No.96/Mum/2024 & M.A.No.87/Mum/2024 Assessment Year 2006-2007, 2009-2010, 2010-2011 and 2011-2012 4 at least a close similarity with the transaction of the assessee with its associated enterprise involving payment of royalty. For these reasons, the coordinate bench held for that year that the CUP method adopted by the assessee cannot be considered as the most appropriate method to determine arm‟s-length price. Therefore on the facts of the case and arguments by the parties the coordinate bench for that year. It held that CUP method cannot be regarded as the most appropriate method for determining the arm‟s-length price of the royalty paid by the assessee as there is no data available in respect of uncontrolled transactions which are similar or at least closely similar to the transaction of the assessee company with its associated enterprise. In the circumstances the coordinate bench setaside the issue back to the file of the learned assessing officer to determine the most appropriate method first for benchmarking of this transaction. However for the current year, the assessee as per letter dated 15 January 2015 before the Additional Commissioner Of Income Tax [ THE TPO] in the proceedings set- aside by the coordinate bench back to the file of the learned assessing officer for determining the most appropriate method, assessee once again claimed that CUP is the most appropriate method for benchmarking. The assessee also cited the instances of the rates at which royalty was paid by other group companies of Cabot Corporation to it. It was stated that the rates are ranging between 6% to 10%. However we failed to understand that how the transaction of cabot Corporation with other group companies of the Cabot could be considered as a comparable transaction because both the transactions are in controlled environment. The RBI rate stated by the assessee cannot also be considered because these are not the transactions but the rates thought appropriate by the reserve bank of india on the basis of roles and responsibilities of that Institute. It has nothing to do with the transfer pricing mechanism as per The Income Tax Act. Same is the fate of the rates shown by SIA by Ministry of commerce and industry. Further the SIA rates shown by the assessee in paragraph number 10 of its letter dated 15 January 2015 before the learned TPO clearly shows that this was the foreign collaboration proposals. The collaboration proposals are also coupled with several other conditions and commercial aspects which may or may not be present in the present agreement of assessee with AE as neither the assessee nor the AO is privy to that information. Therefore, reliance on the rates adopted by the RBI and SIA both are rejected and cannot be taken for benchmarking the transaction by adopting cup method. MA No. 89/Mum/2024, M.A.No.88/Mum/2024 M.A.No.96/Mum/2024 & M.A.No.87/Mum/2024 Assessment Year 2006-2007, 2009-2010, 2010-2011 and 2011-2012 5 The assessee has benchmarked the royalty rates on intellectual property database royalty source.com. Wherein the assessee has narrowed down search to only „carbon black‟ segment of industry. This is unfair and not justified. Each transaction of royalty is unique, if it is not so, who will pay royalty for a common technology. Therefore the assessee widen the search to include all companies petrochemical industry which gave a list of 11 companies as stated by the assessee.” 5. As far as Paragraph 13 of the above Common Order, dated 21/08/2023, is concerned, we are of the view that there is no mistake apparent on record as the Tribunal has expressed its view after taking into consideration argument and submissions of both sides as well as orders of the Co-ordinate Benches of the Tribunal. 6. In terms of above, the Common Order, dated 21/08/2023 stand rectified to the extent provided in paragraph 4 above, and accordingly the present Miscellaneous Applications are partly allowed. Order pronounced on 21.03.2025. Sd/- Sd/- (Amarjit Singh) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 21.03.2025 Milan, LDC MA No. 89/Mum/2024, M.A.No.88/Mum/2024 M.A.No.96/Mum/2024 & M.A.No.87/Mum/2024 Assessment Year 2006-2007, 2009-2010, 2010-2011 and 2011-2012 6 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध, आयकर अपीलीय अदधकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai "
AI Insights
The case involves multiple Miscellaneous Applications (MAs) filed by Cabot India Pvt. Limited against the Deputy Commissioner of Income Tax concerning the assessment years 2006-2007 to 2011-2012. The applications sought rectification of certain facts recorded in the Tribunal's Common Order dated 21/08/2023, which dealt with the arm's-length pricing of royalty transactions. The Tribunal acknowledged some merit in the assessee's submissions, leading to the rectification of specific parts of the order. However, the Tribunal found no mistake in another part of the order and thus did not alter it.
