VICTAULIC INDIA P.LTD, MUMBAI V. DCIT CIR 3(3), MUMBAI

ITA 1029/MUM/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0637 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KIRIT D EDHIA
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J , MUMBAI , '# $ ,% & BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER . 1029 / /201 5 ('. . 2010-11 ) ITA NO.1029/MUM/2015(A.Y.2010-11) VICTAULIC INDIA PRIVATE LIMITED, UNIT 202/205, SAGAR TECH PLAZA, ANDHERI KURLA ROAD, SAKI NAKA, ANDHERI (EAST), MUMBAI 400 072 PAN:AACCV4716D ...... . / APPELLANT ' VS. DCIT,CIR.3(3), ROOM NO.609, 6 TH FLOOR, AAYKAR BHAVAN, M.K.ROAD, MUMBAI -400 020 ..... /0 / RESPONDENT .1/ APPELLANT BY : SHRI KIRIT DEDHIA /0 1/ RESPONDENT BY : SHRI UODAL RAJ SINGH '20 / DATE OF HEARING : 13/02/2020 3#4 20 / DATE OF PRONOUNCEMENT : 20/03/2020 / ORDER PER VIKAS AWASTHY, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-15, MUMBAI (IN SHORT THE CIT(A))DATED 05/11/2014 FOR ASSESSMENT YEAR 2010-11. 2 ITA NO.1029/MUM/2015(A.Y.2010-11) 2. SHRI KIRIT DEDHIA, APPEARING ON BEHALF OF THE AS SESSEE NARRATING FACTS OF THE CASE SUBMITTED THAT THE ASSESSEE COMPANY IS ENG AGED IN PROVIDING COMPUTER AIDED DRAFT AND DESIGN SERVICES (CAD SERVI CES) AND BUSINESS SUPPORT SERVICES TO ITS OVERSEAS ASSOCIATED ENTERP RISES I.E VICTAULIC, USA AND EURO- VICTAULIC BVBA, BELGIUM. THE ASSESSEE IS A CA PTIVE SERVICE PROVIDER. DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UN DER APPEAL, THE ASSESSEE ENTERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS. SR.NO. NAME OF THE ASSOCIATED ENTERPRISES NATURE OF SERVICES VALUE OF TRANSACTION IN INDIA RUPEES (INR) 1. VICTAULIC, USA CAD SERVICES 2,98, 76,689 2. EURO-VICTAULIC BVBA, BELGIUM CAD SERVICES 84,71,979 3. EURO-VICTAULIC BVBA, BELGIUM BUSINESS SUPPORT SERVICES 16,,92,594 TOTAL 4,00,41,262 THE ASSESSEE APPLIED TNNM AS MOST APPROPRIATE METHO D TO BENCH MARK ITS INTERNATIONAL TRANSACTIONS. THE SAME WAS ACCEPTED B Y THE ASSESSING OFFICER. THE ASSESSEE SELECTED TEN COMPANIES AS COMPARABLES WITH AVERAGE ARITHMETIC MEAN OF 13.62%. THE ASSESSING OFFICER REJECTED A LL THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE AND INTRODUCED F RESH SET OF NINE COMPARABLES WITH ARITHMETIC MEAN OF 28.582%. THE A SSESSEE OBJECTED TO THE COMPARABLES SELECTED BY THE ASSESSING OFFICER AS MA JORITY OF THE COMPARABLES WERE FUNCTIONALLY DIFFERENT. THE LD. AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE 3 ITA NO.1029/MUM/2015(A.Y.2010-11) SUBMITTED THAT NEITHER THE ASSESSING OFFICER NOR TH E CIT(A) CONSIDERED THE OBJECTIONS RAISED BY THE ASSESSEE QUA SELECTION OF FRESH COMPARABLES. THE ASSESSING OFFICER MADE ADJUSTMENT OF RS.23,91,635/- IN RESPECT OF INTERNATIONAL TRANSACTIONS RELATING TO PROVISION OF CAD SERVICES. THE CIT(A) UPHELD THE SAME. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT PAGES 98 TO 104 OF THE PAPER BOOK AGAINST SELECTION OF CO MPARABLES. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED THAT SAME SET OF OBJECTIONS WERE ALSO FILED BEFORE THE CIT(A). THE CIT(A) IN THE IMPUGNED ORDER HAS NOT DEALT WITH THE OBJECTIONS OF THE ASSESSEE A ND HAS UPHELD THE ASSESSMENT ORDER IN A MECHANICAL MANNER. 3. ON THE OTHER HAND, UODAL RAJ SINGH, REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DE PARTMENTAL REPRESENTATIVE SUBMITTED THAT THE OBJECTIONS FILED BY THE ASSESSEE AGAINST SELECTION OF COMPARABLES WERE CONSIDERED BY THE C IT(A) AND THE OBJECTIONS OF THE ASSESSEE WERE REJECTED. THE LD. DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT ORDER OF CIT(A) IS FAIR AND REASONABLE AND THU S SHOULD BE UPHELD. 4. WE HAVE HEARD THE SUBMISSIONS MADE BY RIVAL SIDE S AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. THE PRIMARY GROUSE OF THE ASSESSEE IN THE PRESENT APPEAL IS AGAINST SELECTION OF COMPARABLE S. THE ASSESSEE IN HIS TP STUDY REPORT SELECTED TEN COMPARABLES. DURING AS SESSMENT PROCEEDINGS THE ASSESSING OFFICER REJECTED ALL THE COMPARABLES SELE CTED BY THE ASSESSEE AND INTRODUCED FINAL SET OF NINE COMPARABLES AS UNDER:- 4 ITA NO.1029/MUM/2015(A.Y.2010-11) S.NO. NAME OF THE COMPANY NCP 2009-10(%) 1. ACCENTIA TECHNOLOGIES LTD. 43.62 2. ACRO PETAL TECHNOLOGIES LTD. 27.5 2 3. ADITYA BIRLA MINACS WORLDWIDE LTD. 3.85 4. CORAL HUB LTD 40.11 5. COSMIC GLOBAL LTD 16.59 6. ECLERX SERVICES LIMITED 42.14 7. INFORMED TECHNOLOGIES INDIA LTD 24.96 8. INFOSYS B P O LTD. 31.60 9. MOLD-TEK TECHNOLOGIES LTD. 26.8 5 ARITHMETIC MEAN 28.58222 5. OSTENSIBLY, THE ASSESSEE OBJECTED TO INCLUSION OF THE ABOVE COMPARABLES VIDE HIS SUBMISSIONS DATED 11/02/2013 (PAGE 98 OF THE PAPER BOOK). AN EXAMINATION OF THE SAID SUBMISSIONS BY THE ASSESSEE REVEAL THAT THE ASSESSEE HAD FILED DETAILED OBJECTIONS GIVING REASONS FOR EX CLUDING THE COMPARABLES SELECTED BY THE ASSESSING OFFICER. MAJORITY OF TH E COMPARABLES ARE BEING OBJECTED TO BY THE ASSESSEE BEING FUNCTIONALLY DIFF ERENT. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE CIT(A) HAS MERELY EXT RACTED THE TABLE FROM THE ASSESSMENT ORDER DEALING WITH SELECTION OF COMPARAB LES AND HAS NOT APPLIED HIS MIND AS AN APPELLATE AUTHORITY INDEPENDENTLY DEALING WITH OBJECTIONS OF THE ASSESSEE AGAINST INCLUSION OF COMPARABLES. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE CONSIDERED OBJECTIONS OF TH E ASSESSEE ON COMPARABLES SELECTED BY ASSESSING OFFICER AND THERE AFTER PASS SPEAKING ORDER ACCEPTING/REJECTING THE SAME, AS THE CASE MAY BE. TAKING INTO CONSIDERATION, ENTIRETY OF FACTS WE DEEM IT APPROPRIATE TO RESTORE THIS APPEAL BACK TO THE FILE OF CIT(A) FOR PASSING A SPEAKING ORDER AFTER CONSID ERING THE OBJECTIONS OF 5 ITA NO.1029/MUM/2015(A.Y.2010-11) ASSESSEE AGAINST SELECTION OF COMPARABLES AFTER AFF ORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE, IN ACCORDAN CE WITH LAW. 6. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY THE 20 TH DAY OF MARCH, 2020. SD/- SD/- (MANOJ KUMAR AGGARWAL) (VIKAS AWASTHY) % / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, 6 '/ DATED 20/03/2020 VM , SR. PS(O/S) COPY OF THE ORDER FORWARDED TO : 1. . / THE APPELLANT , 2. /0 / THE RESPONDENT. 3. 70 ( )/ THE CIT(A)- 4. 70 CIT 5. 89/0' , . . . , / DR, ITAT, MUMBAI 6. 9:;<= / GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI