M/s Centum Rakon India Private Ltd., Bangalore V. Asst.C.I.T., Bangalore

ITA 110/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9489 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; International transaction

Judgement Text

IT(TP)A NO.110(B)/2015 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA(TP) NO. 110/B/2015 (ASSESSMENT YEAR 2010 11) THE ACIT, CIRCLE 2 (1) (1), BANGALORE VS M/S CENTUM RAKON INDIA PRIVATE LIMITED, NO. 44, KHB INDUSTRIAL AREA, YELAHANKA NEW TOWNSHIP, BANGALORE 560064. PAN AADCC2533L (RESPONDENT) (APPELLANT) SHRI S. RAMASUBRAMANIAN, C. A. ASSESSEE BY MS NEERA MALHOTRA, CIT DR REVENUE BY 26/07/2016 DATE OF HEARING 19/08/2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, AM THIS APPEAL IS FILED BY THE ASSESSEE AND THIS IS DI RECTED AGAINST THE ORDER DATED 30.12.2014 FOR A. Y. 2010 11 PASS ED BY THE A. O. AS PER THE DIRECTIONS OF DRP U/S 143 (3) R.W.S. 144C ( 13) OF THE I T ACT 1961. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1 . 0 THAT THE ORDER OF THE LEARNED LOWER AUTHORITIES I N SO FAR IT I S PREJUDICIAL TO THE INTERE S T S OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCE S OF THE CASE . 2.0 THAT THE LEARNED LO W ER AUTHORITIE S E RR E D IN LA W AND ON FACT S IN HOLDING THAT AN UNFA V OURABLE ALP ADJU S TMENT O F IT(TP)A NO.110(B)/2015 R S . 10 , 19 , 93 , 617 1 - I S R E QUIR E D. 3.0 COMPARABLE S : 3. 1 THAT THE LE A RNED LO W ER A UTH ORITIES E R RE D IN L AW AND ON FA CT S IN HOLDING THAT SPECTRUM INFOT EC H P V T LTD IS A COMPAR A BL E E NTIT Y EVE N THOU G H THE NATURE O F THE PRODUCTS MANUFACTURED B Y M I S. SPECTRUM INFOT E CH P V T LTD IS NOT KNOWN . 3 . 2 THAT TH E L EA RNED LO W ER AUTHORITIE S ERR E D IN LAW AND ON FACT S IN HOLDING THAT THE APP E LL A NT H AS NOT FURNISHED THE DETAILS OF RELATED PART Y TRANSACTIONS IN RESPECT OF ADOR PO W ERTRON LTD , CENTUM ELECTRONIC S LTD AND INCAP LTD AND S UCH A FINDING IS PERVERSE IN LAW AS BEI NG CO NTRAR Y TO THE MATERIALS AND EVIDENCES ON RECORD. O 3 . 3 THAT THE LEARNED LOWER AUTHORITIES OUGHT TO HAVE HE LD THAT ADORE POWERTR O N LTD , CENTUM ELECTRONIC S LTD , INCAP LTD , KELTRON C OMPONENT S COMPLE X LTD AND GUJR A T P O L Y - A VX E LECTR O NIC S LTD ARE COMPARABLE ENTITIES. 3 . 4 THAT THE LEARNED LOWER AUTHORITIE S ERRED IN LAW AND ON FACTS IN HOLDING THAT KELTRON COMPONENTS COMPLE X LTD AND GU J RAT POL Y - A VX E LECTRONIC S LTD A RE NOT TO BE TAKEN A S COMP A R A BLE DE S PITE HON ' BL E DRP R E JECTIN G THE CONTENTION OF THE T PO IN THI S R EG ARD. 3.5 THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HIMSELF IN HIS LETTER 18.12.2013 HAS ACCEPTED THAT THESE TWO COMPANIES FA ILED THE RPT FILTER AND SUCH A FINDING IS WITHOUT APPRECIATI NG THE CONTEXT IN WHICH THE LETTER DATED 18.12.2013 WAS WR ITTEN. 3.6 THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN NOT TAKING EXICOM TELE-SYSTEMS LTD AS A CO MPARABLE EVEN THOUGH THERE IS NO DISPUTE ON THIS COMPARABLE AND THERE ARE NO DIRECTIONS FROM THE HON'BLE DRP TO THE CONTRARY. 3.7 THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT A SINGLE MOST FAVOURABLE COMP ARABLE ALONE IS SUFFICIENT AND IT IS NOT NECESSARY TO DETE RMINE THE ALP WITH REFERENCE TO A NUMBER OF TRANSACTIONS. IT(TP)A NO.110(B)/2015 4.0 DETERMINATION OF ALP 4.1 THAT THE LEARNED LOWER AUTHORITIES ERRED IN L AW AND ON FACTS IN NOT ADOPTING THE CASH PROFITS AS PLI EVEN THOUGH THE METHOD OF PROVIDING DEPRECIATION BY THE APPELLANT A ND THE COMPARABLE ENTITIES ARE DIFFERENT AND IT IS NOT POS SIBLE TO MAKE ADJUSTMENT FOR SUCH DIFFERENCES. 4.2 THAT THE LEARNED LOWER AUTHORITIES ERRED IN LA W AND ON FACTS IN DETERMINING THE OPERATING COST AT RS. 50,14,49,6821- WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAD ENTERED INTO TRANSACTIONS WITH NON-AS SOCIATED ENTERPRISES ALSO . 4.3 THE LEARNED LOWER AUTHORITIES OUGHT TO HAVE HE LD THAT ANY ALP ADJUSTMENT SHOULD BE MADE ONLY WITH REFEREN CE TO INTERNATIONAL TRANSACTIONS AND NOT WITH REFERENCE T O ALL THE TRANSACTIONS. 4.4 THAT THE LEARNED LOWER AUTHORITIES ERRED IN LA W AND ON FACTS IN NOT MAKING ANY WORKING CAPITAL ADJUSTME NT . 4.5 WITHOUT PREJUDICE TO GROUND NO. 4 . 4 THE LEARNED LOWER AUTHORITIES OUGHT TO HAVE TAKEN THE INTEREST ON WOR KING CAPITAL AS A PART OF THE OPERATING COST IN CASE OF WORKING CAPITAL ADJUSTMENT IS NOT MADE. 4.6 THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN NOT INCLUDING THE FOREIGN EXCHANGE GAIN , INTEREST ON MARGIN MONEY AND MISCELLANEOUS INCOME AS A PART OF OPERATING REVENUE WHILE DETERMINING THE ALP. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON'B LE INCOME TAX APPELLATE TRIBUNAL , BANGALORE TO ADD , DELETE , AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL . IT(TP)A NO.110(B)/2015 4 3. LEARNED AR OF THE ASSESSEE SUBMITTED THAT ADMIT TEDLY AS PER PAGE 6 OF THE ORDER OF TPO, ALL THREE COMPARABLES A S NOTED IN GROUND NO. 3.2 I.E. 1) ADOR POWERTRON LTD., 2) CENTUM ELEC TRONICS LTD. AND 3) INCAP LTD. WERE REJECTED ON ACCOUNT OF RPT FILTER A ND BEFORE DRP, IT WAS CONTENDED BY THE ASSESSEE AS NOTED BY DRP ON PAGE 5 OF ITS ORDER THAT THE RPT PERCENTAGE OF THESE COMPANIES IS BELOW 25% BUT THE OBJECTION OF THE ASSESSEE WAS REJECTED BY SAYING THAT NO FACT UAL INFORMATION IN THIS REGARD WAS FURNISHED. HE SUBMITTED THAT THIS I S NOT CORRECT BECAUSE THESE DETAILS WERE SUBMITTED BEFORE THE TPO VIDE LETTER DATED 18.12.2013, COPY AVAILABLE ON PAGES 530 TO 538 OF T HE PAPER BOOK CONTAINING DETAILS OF RPT TRANSACTIONS OF THESE COM PANIES IN THE RANGE OF 0 3.61% TO 6.36% AND HENCE TO BE ACCEPTED AS GOO D COMPARABLE BECAUSE RPT % IS BELOW 15%. 4. REGARDING GROUND NO. 3.6, HE SUBMITTED THAT THE RE WAS NO DISPUTE BEFORE DRP ABOUT EXICOM TELE SYSTEMS LTD. AND THERE IS NO DIRECTION OF DRP TO THE EFFECT THAT THIS COMPANY IS NOT TO BE TREATED AS A COMPARABLE BUT STILL, THE A.O. HAS NOT CONSIDERED T HIS COMPANY AS A COMPARABLE. 5. REGARDING SPECTOM INFOTECH PVT. LTD. I.E. GROUN D NO. 3.1, HE SUBMITTED THAT ANNUAL REPORT OF THIS COMPANY IS AVA ILABLE ON PAGES 474 TO 501 OF THE PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PAGE 500 AND IT WAS POINTED OUT THAT THIS COMPANYS PRODUCTS IT(TP)A NO.110(B)/2015 5 ARE SAID TO BE ELECTRONIC UNITS WITHOUT ANY OTHE R DESCRIPTION BUT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURE AND SUPP LY OF ELECTRONIC PRODUCTS INCLUDING FREQUENCY CONTROL PRODUCTS AND R ESISTOR NETWORKS AND THEREFORE, THIS IS NOT A GOOD COMPARABLE. FINAL LY, HE SUBMITTED THAT SINCE, THREE COMPANIES ARE TO BE INCLUDED FOR THE R EASON THAT THESE COMPANIES ARE SATISFYING RPT FILTER OF 15%, THE SAM E HAVE TO BE EXAMINED ON OTHER ASPECTS SUCH AS FUNCTIONAL COMPAR ABILITY, THE ENTIRE MATTER MAY BE RESTORED TO AO/TPO FOR A FRESH DECISI ON. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT THREE COMPANIES WERE REJECTED BY THE TPO ON THE BASIS RPT FILTER BUT IT IS SEEN THAT AS PER PAGE 538 OF THE PAPER BOOK, THESE COMPANIES ARE SATISFYING RPT FILTER OF 15% BUT THERE IS NO FINDIN G OF TPO OR DRP ABOUT ACTUAL RPT 5 OF THESE COMPANIES. HENCE, ON THIS ASP ECT, THE MATTER HAS TO BE RESTORED BACK TO FIND OUT ACTUAL RPT % OF THE SE COMPANIES AND IF THIS ASSERTION OF THE ASSESSEE IS FOUND CORRECT THA T THESE COMPANIES ARE SATISFYING 15% RPT FILTER, THEN ACCEPTABILITY OF TH ESE COMPANIES AS GOOD COMPARABLES IS TO BE EXAMINED ON OTHER ASPECTS SUCH FUNCTIONAL SIMILARITY ETC. SIMILARLY, REGARDING FUNCTIONAL SIM ILARITY OR DISSIMILARITY OF SPECTOM INFOTECH PVT. LTD. I.E. GROUND NO. 3.1 ALSO, WE FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO/TPO TO EXAMINE AFRESH THE FUNCTIONAL SIMILARITY OF THIS COMPANY AND TO PASS A SPEAKING AND REASONED ORDER ON THIS ASPECT. WE ALSO FEEL IT PRO PER THAT WHEN THE IT(TP)A NO.110(B)/2015 6 MATTER IS GOING BACK TO AO/TPO ON THESE TWO ASPECTS , THEN IT WILL BE NOT IMPROPER TO RESTORE THE ENTIRE MATTER TO THE AO /TPO FOR FRESH DECISION BY WAY OF A REASONED AND SPEAKING ORDER AF TER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . WE ORDER ACCORDINGLY. THEREFORE, NO ADJUDICATION IS CALLED F OR IN RESPECT OF OTHER ISSUES RAISED BEFORE US. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GARODI A) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE DATED: 19/08/2016 AM* COPY TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., BANGALORE AR, ITAT, BANGALORE IT(TP)A NO.110(B)/2015 7 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P. S. .. 4 DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER DOES FOR XEROX & ENDORSEMENT . 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. 12 THE DATE ON WHICH THE FILE GOES TO THE DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER 13 DATE OF DISPATCH OF ORDER