Acer India Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 1096/BANG/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8576 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-02-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; Principle of natural justice
• Section: 80IB; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBU NAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIT KUMAR, JUDICIAL MEMBER IT (TP) A NO.1096 (BANG) 2012 (ASSESSMENT YEAR : 2002-03) M/S ACER INDIA PVT. LTD. EMBASSY HEIGHTS, NO.13, MAGRATH ROAD, NEXT TO HOSMAT HOSPITAL, BANGALORE -560 025 PAN NO.AACCA1237A APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(1), BANGALORE RESPONDENT AND (IT(TP)A NO.1085(BANG)/2012 (ASSESSMENT YEAR : 2002-03) (BY REVENUE) ASSESSEE BY : SHRI SUMEET KHURANA, CA REVENUE BY : SHRI GNANAPRAKASH, CIT-DR DATE OF HEARING : 01-02-2017 DATE OF PRONOUNCEMENT : -02-2017 O R D E R PER SHRI A.K.GARODIA, AM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND T HE REVENUE AND THESE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT( A)-IV, BANGALORE, BOTH DATED 29-06-2016 FOR ASSESSMENT YEAR 2002-03. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER; 1.T H E OR D ER OF T H E LEARNE D COMMISSIONER OF IN COME TAX (APPEALS) IV , BA N GALORE [ ' C I T(A)' ] I S OP P OSE D TO LAW AN D FAC T S OF TH E C ASE . 1.T H E LEARNED C I T(A) H AS E R RED IN U PHOLDING THE TRANSFER PRICING ADJ U STMENT MADE IN THE ASSESSMENT OR D ER . ITA NOS.1096 & 1085(B)/2012 2 2.T H E L EARNED CIT(A) OUG H T TO HAVE APPRECIATED THE LEGAL POSITION THAT THE E X PRESSION ' HAVING REGAR D TO THE ARM ' S LENGTH PRICE ' IS NOT THE SAM E A S 'ON THE B ASIS OF THE ARM ' S L E N GTH PRICE ' OR ' HA V ING REGARD TO ARM ' S LENGTH PRICE ONL Y ' WITHOUT PREJUDICE TO T H E GENERALIT Y OF TH E F OR EG OIN G : REFERENCE TO TPO 4.T HE L EARNED ' CI T ( A ) ' ERRED IN HOLDI N G TH A T ASS ES S ING O FF ICER WAS J U S TIFIED I N MAKI N G A RE FE RENCE TO TH E LE ARNED T PO . TH E APPEL L A NT P RA Y S TH A T TH E ASSESS IN G OF FIC E R HAS ERRE D , IN LA W B M AKING A REF; R N TO TH E LEA RNED T PO WI THOUT ME E TIN G TH E CONDITIONS FOR I NV OKING THE PROVISIONS OF SECTION 92 C . 5. THE L E ARNED CIT HAS ERRED IN N O T APPRE C IA TING THE FACT THAT NO OPPORTUNIT Y W AS P R O V ID E D BY THE LEARNED ASSESSING OFFICER TO T HE APPELLANT BEFOR E REFERRING THE TRANSFER PR ICI N G I SS U ES TO THE T R A NS F ER P R I CIN G OFF I C ER . IN DE P E N DENT APPLI C ATION O F MIN D 6.T H E ORDER OF T H E LEAR N ED CIT(A)IS ERRONEOUS IN CONFIRMING THE OR D ER OF T H E LEAR N E D ASSESS I NG OFF I CER WH I CH R E LI ED ON THE ORDER OF THE T RANSFER PRICING OFFICER O NL Y H E HA S NOT INDEPEN D ENT L Y APP LI E D HIS JUDGMENT TO THE ORDER OF THE TRANSFER PRICING OFFIC E R W ITHOUT TAKING COG NI ZA N CE OF THE APPELLANTS A RGUMENTS AND REB U TTALS. 7.THE LEA RN E D C I T( A) OUG H T TO HAVE HE L D THAT MECHANICALL Y FOLLOWING THE ORDER OF THE TRANSFER PRI C IN G O FF ICER WAS IN VIO L ATION OF THE PRINCIPLE S OF NATURAL JUSTICE. REJECTION OF T RA N S A C T ION P R ICE 8.THE LEARN E D C I T ( A ) H AS ERRED , IN LAW AND IN FACT S, IN CONFIRMIN G THE ORDER OF THE TRAN S FER PRICIN G O FF IC ER AND THE ASSESSIN G OFFIC E R B Y HOLDING THAT THE INTERNATIONAL TRAN SA CTION O F TH E APPELLANT IS NOT AT ARM ' S LENGTH . ITA NOS.1096 & 1085(B)/2012 3 R E J E CTION / AD DI T I ON OF C O MP A RABL ES AND MULTIPL E YEA R DAT A THE LEARNED C I T( A) HAS ERRED , IN LAW , AND IN FACTS , IN CONFIRMING THE ASSESSMENT ORDER AND REJECTIN G THE DAT A U SE D B Y THE APPELLANT IN DETERMINING THE ARM ' S LENGTH PRICE. 10. THE LEARNED CIT(A) HAS ERRED, IN LAW IN NOT ALLOWING USING MULTIPLE YEAR DATA, WHICH IS PRESCRIBED AS PER THE PROVISO TO RULE 10B(4) OF THE INCOME TAX RULES , 1962. 11. THE LEARNED CIT(A) HAS ERRED, IN LAW AND IN FAC TS BY UPHOLDING THE ARM'S LENGTH MARGIN / PRICE DETERMINED BY TPO USING THE DATA OF COMPARABLE COMPANIES PERTAINING TO FINANCIAL YEAR 2 001 - 02, WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPL YING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS. 12. THE LEARNED CIT(A) HAS ERRED, IN LAW AND IN FAC TS , BY SUSTAINING THE ACTION OF LEARNED AO/TPO OF ASCERTAINING COMPARABLES. 13. THE COMMISSIONER ERRED IN ADOPTING COMPANIES WI TH CONTROLLED TRANSACTIONS AS COMPARABLES . COMPUTATION OF MARGIN 14. THE LEARNED CIT(A) HAS ERRED , IN LAW AND IN FACTS , IN CONFIRMING WITH THE APPROACH ADOPTED BY THE TRANSFER PRICING O FFICER AND THE ASSESSING OFFICER BY NOT FACTORING THE EFFECT OF CO MMERCIAL REASONS FOR LOWER MARGINS LIKE DISCOUNTS ON SALES, HIGHER RATE OF DEPRECIATION , FIXED CONTRACT RATES, ADVERTISEMENT EXPENSES ETC., IN COM PARING THE PROFITS OF THE APPELLANT AND THE COMPARABLE COMPANIES. 15. THE LEARNED CIT(A) HAS ERRED , IN LAW AND IN FACTS IN REFUSING TO CONSIDER WORKING CAPITAL ADJUSTMENT . BENEFIT OF + / - 5% VARIATION 16. THE LEARNED CIT(A)HAS ERRED , IN LAW AND IN FACTS , IN CONFIRMING WITH THE TRANSFER PRICING OFFICER AND THE ASSESSING OFFI CER IN NOT APPLYING THE PRO V ISIONS OF PROVISO TO SECTION 92C(2) OF THE ACT , WHICH PRO V IDES A BENEFIT O F ARM 'S LENGTH RANGE. ITA NOS.1096 & 1085(B)/2012 4 LEVY OF INTEREST 17. IN VIEW OF THE LAW AND FACTS OF THE CASE THE LE ARNED COMMISSIONER OUGHT TO HAVE HELD THAT THE PROVISIONS OF SECTION 2 34 B AND SECTION 234D WERE NOT ATTRACTED . 18. THE APPELLANT CRAVES FOR LEAVE TO ADD TO DELETE FROM OR AMEND THE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS ALSO RAISED ONE ADDITIONAL GRO UND WHICH IS AS UNDER; 1. WITHOUT PREJUDICE TO THE OTHER GROUNDS HE ASSES SING AUTHORITY SHOULD HAVE ALLOWED A PROPORTIONATE DEDUCTION UNDER SECTION 80IB OF THE IT ACT, ON THE UPWARD ADJUSTMENT MADE BY THE TR ANSFER PRICING OFFICER. 4. THE GROUNDS RAISED BY THE REVENUE IN IT(TP)A NO.108 5(B)/2012 ARE AS UNDER; 1. TH E O RD E R OF TH E L EA R NE D CIT ( APPEA L S ) , I N S O FAR A S IT IS PR E JUDICI A L TO TH E I NTEREST O F RE V EN U E , I S OPPOSED T O L AW AND TH E F A CT S AND C I RCUM S TANC ES O F THE CASE . 2. THE LEARNED CIT(APPEA L S ) W AS NO T JU S T I F I ED I N A L L O W I NG R E LI E F TO TH E ASSESSEE OU T OF T HE ADD I TI ONS M ADE I N TERMS OF T H E P R O V I S I O N S O F SECTION 92CA OF THE I . T . ACT , 1961 , BY HOLD I NG THAT THE TPO HAS ERRONEOUSLY SE L ECTED M/S MOSE R BAER IND I A LTD AS A COMPARAB L E COMPANY , WITHOUT APPREC I AT I NG THE FACTS AND C I RCUMSTANCES UNDER WHICH THE ABOVE COMPANY WAS RETAINED AS COMPARABLE BY THE TPO. 3. THE LEARNED CIT (APPEALS) HAS ERRED IN ALL OW I NG RELIEF TO THE ASSESSEE, IGNORING THE PR I MARY FACT THAT M/S MOSER BAER INDIA LTD IS ENGAGED IN THE BUSINESS OF COMPUTER PERIPHERALS AND THEREFORE , QUAL I F I ES THE PRIMARY REQUIREMENT OF BE I NG TREATING AS A COMPARABLE . 4. FOR THESE AND SUCH OTHER G R OUNDS THAT MAY BE URGED AT THE T I ME OF HEAR I NG , I T I S HUMB L Y PRAYED THA T T HE ORDER OF THE CIT (A) BE REVERSED I N SO FAR AS THE ABOVE MENT I ONED I SSUE IS CONCERNED AND THAT OF THE ASSESS I NG OFF I CER BE ITA NOS.1096 & 1085(B)/2012 5 RES T O R ED . 5. THE APPE L LANT CRAVES LEAVE TO ADD , TO A LT ER , T O A M E N D OR T O DE L ETE ANY OF THE GROUNDS THA T MAY BE URGED AT T H E T I M E OF H EAR I N G O F TH E APPEA L . 5. REGARDING THE ADDITIONAL GROUND RAISED BY THE AS SESSEE, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THIS IS A LEGAL I SSUE AND ALL THE FACTS RELEVANT FOR DECIDING THIS ISSUE ARE AVAILABLE ON R ECORD AND THEREFORE, AS PER THE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF M/S NTPC VS CIT 229 ITR 83 (SC) AND IN THE CASE OF JUTE CORPORATION OF INDIA LTD VS CIT 187 ITR 688 (SC), THE ADDITIONAL G ROUND SHOULD BE ADMITTED. 6. THE LD. DR OF THE REVENUE COULD NOT SHOW THAT TH E ISSUE INVOLVED IN THE ADDITIONAL GROUND IS NOT A LEGAL IS SUE AND THE FACTS REQUIRED FOR DECIDING THIS ISSUE ARE NOT AVAILABLE ON RECORD. THEREFORE, BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE HON BLE APEX COURT CITED BY THE LD. AR OF THE ASSESSEE, THE ADDITIONAL GROUN D IS ADMITTED. 7. AFTER ADMISSION OF THE ADDITIONAL GROUND, IT WAS PROPOSED BY THE BENCH THAT SINCE THIS ASPECT OF THE MATTER WAS NOT DECIDED BY THE LD. CIT(A) AND WAS NEVER RAISED BEFORE HIM, THE MATTER HAS TO GO BACK TO THE FILE OF THE LD. CIT(A) FOR DECIDING THIS ISSUE AND IN THE PROCESS, IT IS ALSO FELT THAT IT WILL BE PROPER THAT THE ENTIRE MATTER INVOLVED IN THESE TWO APPEALS IS RESTORED BACK TO THE FILE OF CIT (A) FOR A FRESH DECISION BECAUSE IT IS NOTED BY THE LD. CIT(A) ON PAGE-11 OF HIS ORD ER THAT HE IS NOT APPLYING RPT FILTER OR ANY OTHER FILTER SUCH AS TUR NOVER FILTER ETC. BECAUSE ITA NOS.1096 & 1085(B)/2012 6 NO SUCH FILTER WAS APPLIED BY THE ASSESSEE OR BY TH E TPO. IN REPLY, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT HE HAS NO OBJECTION IF THE ENTIRE MATTER IS RESTORED BACK TO THE FILE OF T HE LD. CIT(A) FOR FRESH DECISION ALONG WITH THE ISSUE INVOLVED IN THE ADDIT IONAL GROUND RAISED BY THE ASSESSEE. 8. THE LD. DR OF THE REVENUE ALSO AGREED TO THIS PR EPOSITION PUT FORWARD BY THE BENCH THAT THE ENTIRE MATTER IS TO B E RESTORED TO THE FILE OF THE LD. CIT(A) FOR FRESH DECISION. IN VIEW OF OU R ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE T HE ENTIRE MATTER BACK TO HIS FILE FOR FRESH DECISION INCLUDING THE ISSUE RA ISED BY THE ASSESSEE IN THE ADDITIONAL GROUND AS NOTED ABOVE. WE WANT TO MAKE IT CLEAR THAT THIS IS NOT A RATIO BEING LAID DOWN BY US THAT IN E ACH AND EVERY CASE, WHEREVER ADDITIONAL GROUNDS IS RAISED, THE MATTER S HOULD BE RESTORED BACK TO THE FILE OF THE LD. CIT(A). SINCE IN THE P RESENT CASE, WE FIND THAT THE LD. CIT(A) HAS NOT APPLIED ANY FILTER SUCH AS R PT FILTER, TURNOVER FILTER ETC., IN OUR CONSIDERED OPINION, IT WILL BE PROPER IN THE FACTS OF THE PRESENT CASE THAT THE ENTIRE MATTER IS RESTORED BAC K TO THE FILE OF THE LD.CIT(A) FOR FRESH DECISION ALONG WITH THE DECISIO N ON THE ISSUE RAISED BY THE ASSESSEE IN THE ADDITIONAL GROUND. THE LD. C IT(A) SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF THE ABOV E DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BO TH SIDES. ITA NOS.1096 & 1085(B)/2012 7 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. (LALIT KUMAR) (A.K. GARODIA) JUDICAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE: D A T E D : .02.2017 AM * COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NOS.1096 & 1085(B)/2012 8 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .