NIVEA INDIA P.LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 121/MUM/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0382 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 12-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS MALATHI SRIDHARAN
• Assessee Lawyers: ALIAGGER RAM PURLEDLAAR
• Keywords: Transfer pricing; International transaction; Additional evidence; Question of law
• Section: 143(3); 92B; 92F; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH K, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.121/M/2013 (ASSESSMENT YEAR- 2007-08) M/S NIVEA INDIA PRIVATE LTD. 3 RD FLOOR, HYDE PARK, SAKI VIHAR ROAD, A NDHERI (EAST), MUMBAI-400072. PAN: AACCN1990P VS. DCIT RANGE-8(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KANCHAN KAUSHAL WITH MS. HIRALI DESAI AND SHRI ALIAGGER RAM PURLEDLA(AR) REVENUE BY : MRS. MALATHI SRIDHARAN(CIT-DR) DATE OF HEARING : 24.05.2017 DATE OF PRONOUNCEMENT : 21.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S 253 OF INCOME TAX ACT ( THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-15, MUMBAI DATED 16.10.2012 FOR ASSESSMENT YEAR 2007-08 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : GROUNDS 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) ERRED IN ASSESSING THE TOTAL LOSS OF THE APP ELLANT AT RS 3,46,71,778 AS AGAINST LOSS OF RS 10,65,20.488 COMP UTED BY THE APPELLANT IN ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 2 ITS RETURN OF INCOME, TRANSFER PRICING ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN: 2. REJECTING THE TRANSFER PRICING STUDY CONDUCTED BY T HE APPELLANT WITHOUT GIVING ANY COGENT REASONS 3. VIOLATING THE PROVISIONS OF RULE 10D OF THE INCOME -TAX RULES, 1962 WHICH PROVIDE THAT THE TRANSFER PRICING DOCUMENTATI ON SHOULD BE BASED ON CONTEMPORANEOUS DATA I.E DATA AVAILABLE IN THE P UBLIC DOMAIN AT THE TIME OF UNDERTAKING THE ECONOMIC ANALYSIS FOR FILIN G THE ACCOUNTANT'S REPORT BY THE DUE DATE OF FILING THE RETURN OF INCO ME 4. STATING THAT THE CONDITIONS MENTIONED IN CLAUSES (A ) TO (D) OF SECTION 92C(3) OF THE ACT WERE SATISFIED. BEFORE DETERMINI NG AN ALP DIFFERENT FROM THE ALP DETERMINED BY THE APPELLANT 5. REJECTING THE ADJUSTED PROFIT LEVEL INDICATOR ('PLI ') APPLIED BY THE APPELLANT FOR BENCHMARKING THE INTERNATIONAL TRANSA CTIONS OF IMPORT OF RAW MATERIALS/ PACKING MATERIALS/ SEMI-FINISHED GOO DS FROM ASSOCIATED ENTERPRISES ('AES') 6. NOT COMPUTING THE PLI OF THE APPELLANT AFTER INCREA SING THE PROFIT BY RS 25,50,000, REPRESENTING ROYALTY AMOUNT SUO MOTO DIS ALLOWED BY THE APPELLANT IN ITS RETURN OF INCOME WITHOUT PREJUDICE GROUNDS 7. NOT APPRECIATING THAT THE INTERNATIONAL TRANSACTION OF IMPORT OF RAW MATERIALS, PACKING MATERIALS AND SEMI-FINISHED GOOD S FROM AES IMPACTS ONLY GROSS MARGINS OF THE APPELLANT, WHICH IS AT AR MS LENGTH. 8. UPHOLDING THE AOS ACTION OF CALCULATING THE ADJUST MENT WITH REFERENCE TO THE TOTAL PURCHASES OF THE APPELLANT (IE INCLUDING THE THIRD PARTY TRANSACTIONS) INSTEAD OF CONSIDERING THE PURCHASES FROM AES ONLY. 9. NOT RESTRICTING THE ADJUSTMENT TO THE MARGIN CHARGE D/EARNED BY THE AES FROM SUPPLY OF RAW MATERIALS/PACKING MATERIALS/SEMI -FINISHED GOODS TO THE APPELLANT. CORPORATE TAX ADJUSTMENTS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE I EARNED CIT(A) ERRED IN: 10. DISALLOWING INTEREST OF RS 491 ON DELAYED PAYMENT O F WITHHOLDING TAX. 11. GRANTING CREDIT FOR TDS ONLY TO THE EXTENT OF RS 4 30.462, THEREBY RESULTING IN SHORT GRANT OF CREDIT FOR TDS TO THE EXTENT OF RS 1 88,566/- 2. IN ADDITION TO THE ORIGINAL GROUND OF APPEAL, THE A SSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL : ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE OVERSEAS ASSOCIATED ENTERPRISES BEING THE LEAST COMPLEX OF THE ENTITIES INVOLVED IN SUPPLY OF RAW MATERIALS, PACKING MATERIALS AND SEMI FINISHED GOOD S TO THE APPELLANT, WHICH ENTERED INTO THE TRANSACTION IN THE CAPACITY OF LOW -RISK MANUFACTURERS HAD TO BE TAKEN AS TESTED PARTIES FOR THE PURPOSE OF BENCHMAR KING ANALYSIS; AND THE PRICE AT WHICH SUCH PRODUCTS WERE SUPPLIED BY THE OVERSEAS A SSOCIATED ENTERPRISES I.E. MARK-UP OF 4% ON FULL COST BEING LESS THAN ARM'S MA RK-UP AS PER THE FRESH BENCHMARKING ANALYSIS CARRIED OUT BY THE APPELLANT, THE TRANSACTION OF THE IMPORT OF SUCH PRODUCT BY THE APPELLANT (AGGREGATING TO RS . 7,51,51,003) MAY BE HELD TO BE AT ARM'S LENGTH. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIAN SUBSIDIARY OF BEIERSDORF AG (BAG). BAG WAS FOUNDED IN HAMBURG IN 1882 AND IS A GLOBAL GROUP OF BRANDED CONSUMER GOODS. THE ASSESSE E IS ENGAGED IN MARKETING AND DISTRIBUTION OF NIVEA PRODUCTS IN IND IA, FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 31.10.2007 DECLARING TOTA L INCOME AT RS. NIL. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNI SHED REPORT UNDER FORM-3CEB. THE ASSESSEE IN REPORT UNDER FORM 3CEB R EPORTED INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTER PRISES. THUS, THE AO MADE REFERENCE U/S 92CA(1) OF THE ACT TO TRANSFER P RICING OFFICER (TPO) FOR COMPUTATION OF ARMS LENGTH PRICE (ALP) IN RELA TION TO INTERNATIONAL TRANSACTION. THE FOLLOWING TRANSACTION WAS REPORTED BY THE ASSESSEE: SR.NO. NATURE OF TRANSACTION AMOUNT METHOD 1 PURCHASE OF FINISHED GOODS 9,82,54,576 RESALE PR ICE METHOD 2 PURCHASE OF RAW MATERIAL (BULK) 3,29,56,891 TNMM 3 PURCHASE OF PACKING MATERIAL 2,11,08,585 TNMM 4 PURCHASE OF SEMI-FINISHED GOODS 2,10,85,527 TNMM 5 PURCHASE OF ASSETS (MACHINERY) 1,77,69,248 COST T O COST 6 PURCHASE OF ROUTER 76,416 COST TO COST 7 ROYALTY EXPENDITURE 44,00,000 CUP 8 REIMBURSEMENT OF EXPENSES 1,10,78,970 COST TO CO ST ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 4 THE ASSESSEE SELECTED THREE COMPARABLE COMPANIES AN D SUBMITTED THAT THE ASSESSEES PROFIT MARGIN IS BETTER THAN THE (COMPAR ABLES) OTHERS : S.NO. NAME OF THE COMPANY OPERATING MARGIN ON OPERATING INCOME (%) 1 DR SABHARWALS MFG LABS LTD 7.53% 2 SINGAR LTD. 8.92% 3 WF LTD. 8.55% 4 ARITHMETIC MEAN 8.33% 5 NIVEA INDIA 8.91% THE ASSESSEE HAS APPLIED (TRANSACTION NET MARGIN ME THOD (TNMM) AS MOST APPROPRIATE METHOD TO DETERMINE THE ARMS LENG TH TRANSFER PRICE FOR CONTROLLING THE TRANSACTION. DURING THE PROCEED INGS BEFORE THE TPO, THE TPO ASKED THE ASSESSEE TO EXPLAIN WHETHER ANY P ART OF BRAND EXPENSES ARE BORNE BY ASSESSEE AS THE ASSESSEE IS ALSO PROMO TING ITS AES GLOBAL BRAND IN INDIA. IN REPLY THE ASSESSEE CONTENDED THA T THE ASSESSEE IS IN THE START OF YEAR OF ITS BUSINESS OPERATION IN INDIA AN D DID AGGRESSIVE MARKETING FOR DIVERSE PRODUCT PORTFOLIO. A HEAVY AD VERTISING OF PORTFOLIO WAS REQUIRED TO CREATE REQUIRED AWARENESS AMONG THE CONSUMERS. IT WAS FURTHER CONTENDED THAT TO BECOME ONE OF THE LEADING PLAYER IN INDIAN COSMETICS WITH DIFFERENCE GROWTH AND MAKING ITS PRE SENCE IN CONSUMER GOODS AGAINST ESTABLISHED PLAYER, THE ASSESSEE NEED S TO INVEST A LOT IN THE MARKETING INTANGIBLES AGAINST ESTABLISHED PLAYER LI KE HUL, L,OREL AND P&G. 4. AFTER CONSIDERING THE CONTENTION OF ASSESSEE, THE T PO OBSERVED THAT THE PRODUCT OR BRAND OF THE ASSESSEE-COMPANY WAS NOT IN TRODUCED FOR THE FIRST ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 5 TIME IN INDIA, THE COMPARABLE COMPANIES ARE COMPUTI NG IN THE MARKET WITHOUT THE LEVERAGE OF GLOBAL BRAND. UNLIKE THE AS SESSEE-COMPANY, THE COMPARABLE COMPANIES HAVE TO BEAR PRODUCT RISK, TEC HNICAL RISK, FOREIGN EXCHANGE RISK ETC. THESE ADJUSTMENTS WERE NOT CONSI DERED IN THE HANDS OF COMPARABLE COMPANIES. HENCE, THERE IS RISK DIFFEREN TIATE BETWEEN THE ASSESSEE AND THE COMPARABLES, THE ASSESSEE HAS NOT GIVEN ANY ECONOMIC JUSTIFICATION FOR INCURRING SUCH A HUGE EXPENDITURE IN THE PROMOTION OF BRAND WHICH IS NOT OWNED BY ASSESSEE WITHOUT GETTIN G ANY CORRESPONDING COMPENSATION (REIMBURSEMENT). THE TPO DOUBTED, IF A NY INDEPENDENT ENTITY WOULD EXPAND THE AMOUNT OF 30% IN THE PROMOT ION OF BRAND OWNED BY IT WITHOUT ANY ADEQUATE COMPENSATION. THE TPO CO NCLUDED THAT ASSESSEE HAS NOT PROVIDED ANY ADJUSTMENT IN THE HAN DS OF COMPARABLES ON ACCOUNT OF RISK DIFFERENTIATION AND IN ABSENCE OF C OMPENSATION FROM THE ASSESSEE FOR PROMOTION OF ITS BRAND; TPO FELT THAT TNMM SHOULD BE CONSIDERED WITHOUT ANY ADJUSTMENT TO THE COMPANIES SELECTED BECAME UNIFORMLY COMPARABLE. THE TPO FOUND THAT ASSESSEES OPERATING PROFIT/OPERATING INCOME WITHOUT ADJUSTMENT ON ACCOU NT OF SALE AND PROMOTION OF EXPENSES IN THE MANUFACTURING SEGMENT IS FOUND TO BE (-) 22.10%. THE TPO FURTHER HELD THAT THE PROFIT MARGIN OF COMPARABLE WITHOUT ADJUSTMENT IS AS UNDER: NAME OF THE COMPANY OPERATING PROFIT /OPERATING INCOME DR SABHARWALS MFG LABS LTD 1.94 ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 6 SINGAR LTD. 8.54 VVF LTD. 1.60 AVERAGE MEAN 4.02 ON THE BASIS OF PROFIT MARGIN, THE TPO WORKED OUT T HE ADJUSTMENT OF RS.6,70,54,631/- IN THE FOLLOWING MANNER : PARTICULARS AMOUNT (RS.) AMOUNT (RS.) OPERATING INCOME INCOME OTHER INCOME OPERATING EXPENSES AE COST NON-AE COST OPERATING PROFIT 25,67,03,000 54,000______ 7,51,51,003 23,83,38,997 25,67,57,000 31,34,90,000 (5,67,33,000) OPERATING PROFIT/ OPERATING INCOME -22.10 % ARMS LENGTH MARGIN 4.02% DETERMINATION OF ARMS LENGTH PRICE OPERATING INCOME OPERATING PROFIT @ 4.02% OPERATING COST NON-AE COST ARMS LENGTH VALUE OF AE COST ACTUAL AE COST A B C= A-B D E=C-D F 25,67,57,000 1,03,21,631 24,64,35369 23,83,38,997 80,96,372 7,51,51,003 ADJUSTMENT (EXCESS OF ACTUAL AE COST OVER ARMS LENGTH VALUE) G=F-E 6,70,54,631 5. ON RECEIPT OF ORDER OF TPO U/S 92CA(3) SUGGESTING T HE ADJUSTMENT OF RS. 6,70,54,631/-. THE AO ISSUED SHOW-CAUSE NOTICE DATE D 16.11.2010 AS TO WHY THE ADDITION SHOULD NOT BE MADE. THE ASSESSEE F URTHER VIDE ITS APPLICATION DATED 23.02.2011 CONTENDED THAT ASSESSE E DID NOT WISHES TO EXERCISE THE OPTION FOR FILING OBJECTION BEFORE THE DISPUTE RESOLUTION PANEL (DRP) AGAINST THE DRAFT ASSESSMENT AND WOULD LIKE TO PREFER THE OPTION FOR FILING APPEAL BEFORE THE LD. CIT(A). HEN CE, THE AO PASSED THE ORDER U/S 144C(3) R.W.S. 143(3) OF THE ACT ON 25.02 .2011. AGGRIEVED BY THE ORDER OF VARIOUS ADDITION AND ADJUSTMENT ON ACC OUNT OF ALP WITH REGARD TO INTERNATIONAL TRANSACTION, THE ASSESSEE F ILED APPEAL BEFORE THE LD. ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 7 CIT(A), BUT WITHOUT ANY SUCCESS. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL B EFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE RE VENUE. THE LD. AR OF THE ASSESSEE ARGUED THAT HE HAS RAISED THE ADDIT IONAL GROUND OF APPEAL. IT WAS FURTHER ARGUED THAT THE ADDITIONAL GROUND OF APPEAL MAY BE TAKEN UP FIRST. THE LEARNED AR FOR THE ASSESSEE ARGUED T HAT THE OVERSEAS AES ARE LEAST COMPLEX ENTITY AND SHOULD BE ALLOWED AS A TESTED PARTY. THE FAR ANALYSIS FOR DETERMINING THE COMPLEXITY OF EACH OF THE ENTITY IS ALREADY AVAILABLE ON RECORD BEFORE THE LOWER AUTHOR ITIES IN THE FORM OF TP STUDY REPORT. IN SUPPORT OF HIS SUBMISSION THE LD A R FOR ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN NATIONAL T HERMAL POWER CORPORATION LTD (229ITR 383), JUTE CORPORATION OF I NDIA ( 187ITR 688), THE DECISION OF DELHI HIGH COURT IN GE MONEY FINANC IAL SERVICES PVT LTD VS PCIT IN ITA NO. 662/2016 DATED 31.08.2016, M UMBAI TRIBUNAL IN PFIZER LIMITED VS ACIT IN ITA NO. 3729 & 3424/M/ 2008 DATED 06.11.2015 AND JCIT VS GRASIM INDUSTRIES MA NO. 247 /M2010 IN ITA NO.6253/M/1999, CIT V/S S. NELLIPPAN [66 ITR 722(SC )], AHMADABAD ELECTRICITY COMPANY AND GODAVARI SUGAR MILLS LTD. V /S CIT [199 ITR 351(BOM)] AND INAROO LTD. V/S CIT [204 ITR 312(BOM) ]. THE LD AR ARGUED THE ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROUND OF APPEAL BEFORE THE TRIBUNAL, EVEN THOUGH THE CLAIM HAS NOT BEEN MA DE EITHER BEFORE ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 8 INCOME-TAX OFFICER/ASSESSING OFFICER OR THE FIRST A PPELLATE AUTHORITY. IT WAS FURTHER ARGUED THAT THE ADDITIONAL GROUND OF AP PEAL RAISED BY ASSESSEE IS PURELY LEGAL IN NATURE. ALL THE FACTS RELATED WI TH THE ADDITIONAL GROUND OF APPEAL, ARE AVAILABLE ON RECORD. ON THE OTHER HA ND, LD. DR FOR THE REVENUE STRONGLY OPPOSED THE ADMISSION OF ADDITION GROUND OF APPEAL AT THE SECOND APPELLATE STAGE. THE LD. DR FOR THE REVE NUE ARGUED THAT IN THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE, T HE ASSESSEE HAS RELIED UPON THE ADDITIONAL EVIDENCE FILED BY ASSESSEE BEFO RE THE TRIBUNAL. IN THE APPLICATION FOR RAISING ADDITIONAL GROUNDS OF APPEA L, THE ASSESSEE HAS PLEADED THAT THE ADDITIONAL GROUND OF APPEAL IS BAS ED ON EVIDENCE FILED BEFORE THIS TRIBUNAL. THE LD. DR FOR THE REVENUE FU RTHER ARGUED THAT AS PER THE MANDATE OF SECTION 92D, 92E, THE PERSON WHO HAVE ENTERED INTO INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRA NSACTION HAS TO KEEP AND MAINTAIN SUCH INFORMATION AND DOCUMENT IN RESPE CT THEREOF AND TO FURNISH THE REPORT OF THE ACCOUNTANT IN THE FORM 3C EBON OR BEFORE THE SPECIFIED DATE. THE SPECIFIED DATE IS DEFINED UNDER CLASUE-(IV) OF SECTION 92F, AS PER SECTION 92F THE MEANING OF SPECIFIED DA TE IS THE DUE DATE OF FILING OF RETURN OF INCOME AS PER SUB-SECTION (1) O F SECTION 139 OF THE ACT. IT WAS FURTHER ARGUED THAT ADMITTEDLY NO SUCH DOCUM ENT OR INFORMATION WAS AVAILABLE OR FILED BY THE ASSESSEE EITHER BEFOR E AO/TPO. THERE IS NO REFERENCE ABOUT THE AES OF ASSESSEE AS A TESTED PA RTY IN THE REPORT FURNISHED UNDER FORM 3CEB. THE LD. DR FOR THE REVEN UE FURTHER ARGUED ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 9 THAT BY WAY OF ADDITIONAL GROUND OF APPEAL, THE ASS ESSEE IS SEEKING SUBSTITUTION OF TESTED PARTY FOR THE PURPOSE OF BEN CH MARKING OF TRANSFER PRICING ADJUSTMENT. THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE IS PURELY FACTUAL IN NATURE AND CANNOT BE ALLOWED TO R AISE AT THIS STAGE. THE LD. DR FOR THE REVENUE ARGUED THAT THOUGH THE RATIO DESCEDENDI IN CASE OF NTPC, JUTE CORPORATION OF INDIA LTD. IS NOT IN DISP UTE OF THE REAL DISPUTE IN RAISING THE ADDITIONAL GROUND OF APPEAL IS THAT IF THE FACT FOR DETERMINING THE ADDITIONAL GROUND OF APPEAL IS EMAN ATED FROM THE RECORD AVAILABLE BEFORE THE LOWER AUTHORITY OR NOT. THE LD . DR FOR THE REVENUE ARGUED THAT THE QUESTION RELATED TO THE ADDITIONAL GROUND OF APPEAL IS DIRECTLY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF ULTRATECH CEMENT V/S ACIT (2017) 81 TAXMANN.COM 72 (BOM) WHEREIN ALL EARLIER DECISION ON THE ISSUE RELATED T O RAISING OF ADDITIONAL GROUND HAS BEEN CONSIDERED BY THE HONBLE COURT. IT WAS FURTHER ARGUED THAT CHAPTER X OF THE ACT DOES NOT ENVISAGE TAKING THE AE AS A TESTED PARTY. EVEN OTHERWISE, IF IT IS HELD THAT CHAPTER D OES NOT PROHIBIT CONSIDERING THE TESTED PARTY THE SAME IS PERMITTED ONLY WHEN THE AE IS LEAST COMPLEX ENTITY AND RELIABLE DATA OF COMPARABL E ARE AVAILABLE. THE AES WITH WHOM, THE ASSESSEE HAS ENTERED INTO INTER NATIONAL TRANSACTION ARE NOT LEAST COMPLEX ENTITY AS THEY HAVE THEIR OWN TRADEMARK AS WELL AS TECHNICAL KNOWHOW. THE ASSESSEE USED BOTH THESE INT ANGIBLE FOR ITS BUSINESS ACTIVITY AND FOR WHICH THE ASSESSEE COMPEN SATE THEM. RELIABLE ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 10 DATE RELATING TO COMPARABLE IS NOT AVAILABLE IN THI S CASE. THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE IS ABSOLUTELY F ACTUAL IN NATURE AND ALLOWABLE UNDER LAW. THE DECISIONS RELIED BY LD AR FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS OF THE PRESENT CASE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES ON THE ADMISSION OF ADDITIONAL GROUND OF APPEAL. THE ASSESSEE IN THE APPLICATION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL HAS CATEGO RICALLY CONTENDED THAT THE ADDITIONAL GROUND OF APPEAL IS RAISED IN VIEW O F THE ADDITIONAL EVIDENCE SUBMITTED BEFORE THE TRIBUNAL. THE ASSESSE E HAS REFERRED VARIOUS DECISIONS OF SUPERIOR COURTS. IN THE ADDITIONAL GRO UND, THE ASSESSEE HAS CATEGORICALLY MENTIONED THAT AES IS LEAST COMPLEX ENTITY INVOLVED IN SUPPLY OF RAW-MATERIAL, PACKING MATERIAL AND SEMI-F INISHED GOODS TO THE ASSESSEE, WHICH ENTERED INTO TRANSACTION IN CAPACIT Y OF LOW RISK MANUFACTURE HAD TO BE TAKEN AS A TESTED PARTY FOR T HE PURPOSE OF BENCH MARKING ANALYSIS. 8. AS PER OUR CONSIDERED VIEW, THE TRANSFER PRICING RE GULATIONS PRACTICE IN INDIA IS BASED ON ARMS LENGTH PRINCIPLE. THE CONCE PT REVOLVES AROUND THAT PRICE OR MARGIN DETERMINED IN CONTROL TRANSACT ION INVOLVING TWO AES SHOULD BE COMPARED TO AN UNCONTROLLED TRANSACT ION BETWEEN TWO INDIA ENTERPRISES OPERATING UNDER SAME CIRCUMSTANCE S. THE INCOME-TAX ACT HAS NOT DEFINED TESTED PARTY. HOWEVER, THE OR GANIZATION FOR ECONOMIC CO-OPERATIVE AND DEVELOPMENT (OECD) IN TRA NSFER PRICING ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 11 GUIDELINES FOR MULTINATIONAL ENTERPRISES OF TAX ADM INISTRATION (OEDC GUIDELINES) DEFINES TESTED PARTY, ACCORDING TO WH ICH, TESTED PARTY THE ONE TO WHICH THE TRANSFER PRICING MATTER SHOULD BE APPLIED IN THE MOST RELIABLE MANNER AND FOR WHICH MOST RELIABLE COMPARA BLE CAN BE FOUND I.E. IT WILL MOST OFTEN BE THAT HAS TO BE LESS THAN FUNCTIONAL ANALYSIS. THUS, ON THE BASIS OF THE DEFINITION PROVIDED BY OECD UND ER OECD GUIDELINES, IN OUR VIEW THE TESTED PARTY MUST C ONTAIN (A) LEST COMPLEX (B) AVAILABILITY OF RELIABLE AND ACCURATE DATA OR C OMPARABLE (C) THE DATA AVAILABLE CAN BE USED WITH MINIMAL ADJUSTMENT. 9. TO ASCERTAIN THE FACT, IF THE FACTS RELATED TO ADDI TIONAL GROUND OF APPEAL IS AVAILABLE ON RECORD OR NOT. WE HAVE GONE THROUGH TH E REPORT IN FORM NO. 3CEB PAGE 16 TO 28 OF THE PAPER BOOK. THE EXHIBIT-1 , ATTACHED WITH THE REPORT DESCRIBED THE NAME OF THE AES, NATURE OF RE LATIONSHIP WITH AE, AND THE BRIEF DESCRIPTION OF BUSINESS CARRIED BY TH E AE. EXHIBIT 2 DESCRIBED THE DETAILS OF PARTICULARS OF INTERNATION AL TRANSACTION OF ASSESSEE FOR PURCHASES/ SALE OF RAW MATERIALS, CONSUMABLES O R OTHER SUPPLIES. EXHIBITS 3&5 DESCRIBED THE DETAILS OF INTERNATIONAL TRANSACTION IN RESPECT OF PURCHASED AND SALE OF FINISHED GOODS WITH ITS AE S. AN EXHIBITS 4 CONTAINS THE DETAILS OF SALE AND PURCHASES OF TANGI BLE MOVEABLE AND IMMOVABLE PROPERTY OR LEASE OF SUCH PROPERTY. EXHIB IT 6 REFERS ABOUT THE DETAILS OF TRANSACTION OF INTANGIBLE PROPERTY (NOT AVAILABLE IN TP STUDY). FURTHER PAGE NO.29 TO 92 CONTAINED DETAILS OF COMPR EHENSIVE TRANSFER ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 12 PRICING STUDY. THUS, IN OUR VIEW THE ONLY AVAILABLE DETAILS WITH REGARDS TO ASSESSEES AES ON RECORD OF TP STUDY IS THE NAME OF THE AES, NATURE OF RELATIONSHIP WITH AE, AND THE BRIEF DESCRIPTION OF BUSINESS CARRIED BY THE AE. 10. T HE HONBLE JURISDICTIONAL HIGH COURT IN ULTRATECH C EMENT LTD. VS. ACIT (SUPRA) WHILE DEALING WITH THE ADDITIONAL GROU ND OF APPEAL RELATED TO THE CLAIM OF DEDUCTION U/S 80IA WHICH WAS NOT CL AIMED BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME. THE HONBLE COUR T HELD THAT IT IS SINE QUA NON PROVIDED IN SUB-SECTION (7) OF SECTION 80IA OF THE ACT IS THE FURNISHING ALONG WITH RETURN OF INCOME, A REPORT OF AUDITED ACCOUNT IN FORM NO. 10CB AS REQUIRED UNDER RULE 18BBB(3) OF TH E ACT. THE FORM 10CCB WHICH IS REQUIRED TO BE FILED ALONG WITH RETU RN OF INCOME AS VARIOUS DETAILS TO BE FILED INCLUDING THE INITIAL A Y FROM WHICH THE DEDUCTION IS BEING CLAIMED, THE NATURE OF ACTIVITIE S CARRIED OUT WITH REGARD TO THE INFRASTRUCTURE FACILITY, NAMELY, WHETHER IT IS FOR DEVELOPING OR DEVELOPING AND OPERATING OR FOR DEVELOPING, OPERATI NG AND MAINTAINING THE NEW INFRASTRUCTURE FACILITY. IT IS ONLY ON THE EXAMINATION OF THESE DETAILS AS SUBMITTED BY THE AUDITOR IN FORM NO. 10C CB THAT THE CLAIM OF DEDUCTION CAN BE CONSIDERED. THE COURT FURTHER HELD THAT IN CASE NO FORM NO. 10CCB IS FILED BY THE APPELLANT/ASSESSEE, THERE FORE, THERE IS NO EVIDENCE ON RECORD FOR SUBJECT AY TO ALLOW THE CLAI M. ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 13 11. WE HAVE SEEN THAT, UNDISPUTEDLY THE NAME OF THE AE S, NATURE OF RELATIONSHIP WITH AE, AND THE BRIEF DESCRIPTION OF BUSINESS CARRIED BY THE AE WITH ASSESSEE FOR FUNCTIONAL ANALYSIS AND BENC HMARKING RELATED WITH ITS AES ARE ON RECORD IN THE REPORT UNDER FORM 3CE B. THOUGH THE COMPLETE DETAILS ARE NOT ASCERTAINABLE FROM THE REC ORD RELIED BY THE ASSESSEE. THOUGH, THE DETAILS RELATED WITH THE FORE IGN AES ARE AVAILABLE IN THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE, W HICH HAVE NOT BEEN RELIED BY LD AR FOR THE ASSESSEE WHILE MAKING SUBMI SSION ON ADDITIONAL GROUND OF APPEAL. WE HAVE ALSO CONSIDERED THE OBJEC TIONS OF THE REVENUE THAT ADDITIONAL GROUND RAISED BY THE ASSESSEE SHOUL D NOT BE ADMITTED AT THIS STAGE. AFTER CONSIDERING, THE SUBMISSION OF RE VENUE, WE ARE OF THE VIEW THAT APPROACH IN SUCH MATTERS SHOULD BE DIFFER ENT, WHEN THE REVENUE SEEKS TO FASTEN LIABILITY BEFORE THE TRIBUNAL. THE REASONS ARE THAT THE TRIBUNAL IS THE LAST FACT-FINDING AUTHORITY AND THE ASSESSEE HAS NO OTHER AVENUE TO RAISE ITS GRIEVANCES SO FAR AS FACTS ARE CONCERNED. IN CASE, ON THE FACTS AND IN THE LAW, ULTIMATELY IF IT IS DISCOVERE D THAT ASSESSEE IS NOT LIABLE TO TAX, THE REVENUE CANNOT HAVE GRIEVANCES. THE ARTICLE 265 OF THE CONSTITUTION OF INDIA PROVIDES THAT NO TAX SHOULD B E LEVIED AND COLLECTED EXCEPT BY AUTHORITY OF LAW. IN CASE, IF ULTIMATELY THE ASSESSEE IS FOUND TO BE LIABLE TO TAX, THE ASSESSEE WILL COMPENSATE THE REVENUE IN TERM OF INTEREST ON THE TAX LIABILITY. WE ARE OF THE VIEW T HAT FUNDAMENTAL PRINCIPLE LAID DOWN BY HONBLE APEX COURT IN CASE OF NTPC (SU PRA) IS THAT THERE ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 14 CAN BE NO TAX LIABILITY WITHOUT THE AUTHORITY OF LA W AND THE PRINCIPAL WILL HOLD GOOD ALL POINTS OF TIME. THE HONBLE DELHI HIG H COURT IN CASE OF GE MONEY FINANCIAL SERVICES PRIVATE LTD VS PCIT(SUPRA) WHILE EXAMINING THE CORRECTNESS OF THE ORDER RELATED WITH THE TREAT ING OF FOREIGN ASSOCIATED ENTERPRISES (AES) HELD AS UNDER: THE QUESTION OF LAW WHICH THE ASSESSEE/APPELLANT A RGUES IN THIS APPEAL FOR AY 2009-10 IS REGARDING THE APPROPRIATENESS AND COR RECTNESS OF TREATING THE FOREIGN ASSOCIATED ENTERPRISES (AES) AS A TESTED P ARTY. THE ASSESSEES TRANSFER PRICING ANALYSES AND DETERMINATION OF ALP LED IT TO APPROACH TO ITAT WHICH BY IMPUGNED ORDER HAS REMITTED THE MATTER FOR CONSIDERATION OF THE MOST APPROPRIATE METHOD AS WELL AS QUESTION OF APPR OPRIATE COMPARABLE IS APPLICABLE IN THE CIRCUMSTANCES OF THE CASE. THE AS SESSEE HAS APPROACHED THIS COURT AGAINST THE OBSERVATION AND FINDINGS OF THE I TAT IN PARA 10 TO 18 TO THE EFFECT THAT THE FOREIGN AE CANNOT BE CONSIDERED AS TESTED PARTY. RELIANCE IS PLACED UPON SECTION 92B TO CONTEND THAT THERE IS NO THING IN THE PROVISION INHIBITING SUCH CONSIDERATION. THIS COURT NOTICES THAT FOR RE-CONSIDE RATION AND DETERMINATION OF THE APPROPRIATE METHOD AS WELL AS APPROPRIATE COMPARABL E IS AND THE TESTED PARTY, IT WOULD BE CONVENIENT AND APPROPRIATE FOR T HE TPO TO CONSIDER THE QUESTION WHICH THE ASSESSEE AS IN THE PRESENT CASE. THE TPO IS THEREFORE DIRECTED TO OVERLOOK AND NOT FEEL BOUND BY THE OBSE RVATION OF THE TRIBUNAL AND RENDER FINDING ON MERIT OF THE ISSUE . 12. IN VIEW OF THE ABOVE FACTUAL AND LEGAL DISCUSSION, WE ARE OF THE VIEW THAT WHOLE INTENT AND PURPOSE OF THE TRANSFER PRICING PR OVISION IS FIRST SELECT THE MOST APPROPRIATE COMPARABLE/ TESTED PARTY AND THER EAFTER, BY APPLYING THE MOST APPROPRIATE METHOD TO DETERMINE ARMS LENGTH P RICE(ALP). CONSIDERING, THE FACT THAT ASSESSEE HAS NOT RAISED THE ISSUE REL ATED WITH THE SELECTION OF COMPARABLE AS AES EITHER BEFORE THE TRANSFER PRIC ING OFFICER OR BEFORE FIRST APPELLATE AUTHORITY, AND HAS RAISED THE ISSUE FOR T HE FIRST TIME BEFORE THE TRIBUNAL BY WAY OF ADDITIONAL GROUND OF APPEAL. THU S, CONSIDERING THE ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 15 MATERIAL AVAILABLE ON RECORD AND THE FACTUAL AND LE GAL DISCUSSION AS REFERRED ABOVE, WE ADMIT THE ADDITIONAL GROUND OF APPEAL RAI SED BY ASSESSEE, AND ARE INCLINED TO RESTORE THIS ISSUE RAISED IN THE ADDITI ONAL GROUND TO THE FILE OF ASSESSING OFFICER/TRANSFER PRICING OFFICER FOR EXAM INING ISSUE AFRESH. THE AO/TPO SHALL DECIDE THE ISSUE AFTER CONSIDERING ALL THE MATERIAL AVAILABLE ON RECORD IN ACCORDANCE WITH THE LAW. THE ASSESSING OF FICER/TRANSFER PRICING OFFICER SHALL DECIDE THE ISSUE BY CALLING THE INFOR MATION AND DOCUMENTS FROM THE ASSESSEE AS WELL AS BY MAKING HIS OWN INQUIRY I N THE DATA BASE OR OTHERWISE. NEEDLESS TO SAY THAT ASSESSING OFFICER/T RANSFER PRICING OFFICER SHALL AFFORD REASONABLE OPPORTUNITY TO THE ASSESSEE BEFOR E DECIDING THE ISSUE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE ASS ESSING OFFICER/TRANSFER PRICING OFFICER IN PROVIDING ALL NECESSARY INFORMAT ION AND DOCUMENTS AND NOT TO SEEK ADJOURNMENT WITHOUT ANY PROPER AND VALID RE ASONS. WITH THESE OBSERVATIONS THE ADDITIONAL GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED. 13. IN THE RESULT THE GROUNDS OF APPEAL NO. 1 TO 6 ARE ALLOWED FOR STATISTICAL PURPOSE. HOWEVER, IT IS MADE CLEAR THAT TILL THE PA SSING OF ORDER BY ASSESSING OFFICER/ TRANSFER PRICING OFFICER ON THIS ISSUE, TH E ASSESSEE WOULD NOT BE ENTITLED TO CLAIM THE REFUND OF TAX IF ALREADY PAID / DEPOSITED. 14. GROUND NO. 7 TO 9 IS RAISED AS ALTERNATIVE GROUNDS. AS WE HAVE RESTORE THE TRANSFER PRICING ISSUES TO THE FILE OF ASSESSING OF FICER/TRANSFER PRICING OFFICER BY ALLOWING ADDITIONAL GROUND OF APPEAL, THUS THESE GROUNDS OF APPEAL NEEDS NO ADJUDICATION. ITA NO.121/M/2013- M/S NIVEA INDIA PRIVATE LTD. 16 15. GROUND NO.10 RELATES TO DISALLOWING OF INTEREST OF RS. 491/-ON ACCOUNT OF DELAYED PAYMENT OF TAX AND GROUND NO. 11 RELATES TO SHORT GRANT OF CREDIT FOR TDS. CONSIDERING THE FACT THAT MAIN GROUNDS OF APPE AL RELATED TO TRANSFER PRICING ADJUSTMENT HAS BEEN RESTORED TO THE FILE OF ASSESSING OFFICER. HENCE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE FAC TS AND GRANT APPROPRIATE RELIEF IN ACCORDANCE WITH LAW. IN THE RESULT GROUND NO. 10 & 11 ARE ALSO ALLOWED FOR STATISTICAL PURPOSE. 16. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF AUGUST 2017. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 21/08/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. /TRUE COPY/