The Dy. CIT, Circle-1(1), Vadodara V. M/s. Doshi Accounting Services Pvt. Ltd., Vadodara

ITA 1255/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3714 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 11-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APOORVA BHARADWAJ
• Assessee Lawyers: K P SINGH
• Keywords: Business income; Transfer pricing; International transaction; Rule of consistency; Arm length price
• Section: 154; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO S . 939 & 1255 /AHD/2015 / ASSTT. YEAR S : 2009 - 2010 & 2010 - 2011 THE D.C.I.T, CIRCLE - 1(1)(1), VADODARA VS . M/S DOSHI ACCOUNTING SERVICES PVT. LTD. 5 TH FLOOR, BBC TOWER , SAYAJIGUNJ, VADODARA - 390 005 PAN : AABCD2974J (APPLICANT) ( RESPON D ENT ) REVENUE BY : SHRI APOORVA BHARADWAJ, SR. DR ASSESSEE BY : SHRI K.P. SINGH, A.R. / DATE OF HEARING : 08 / 01 / 201 9 / DATE OF PRONOUNCEMENT: 01/02 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL S HAVE BEEN FILED AT THE INSTANCE OF THE R E VE NUE AGAINST THE TWO SEPARATE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 1 , VADODARA , DATED 18/03/2015 & 26/02/2015 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') RELEVANT TO ASSESSMENT YEAR S 2009 - 2010 & 2010 - 11 RESPECTIVELY. ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 2 2. FIRST , WE TAKE UP THE RE VENUE APPEAL IN ITA/939/2015 FOR THE ASSESSMENT YEAR 2009 - 10. THE R EVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : A. GROUNDS OF APPEAL AGAINST LD. CIT(A)'S ORDER NO. CAB - I/76/2014 - 15 DATED 23.01.2015 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(APPEAL S) ERRED BY REJECTING TURNOVER FILTER FROM 5 CRORE TO 200 CRORE AND ACCEPTING A TURNOVER FILTER FROM 1 CRORE TO 50 CRORE . L.(A) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY REJECTING ACCENTIA TECHNOLOGIES LTD. AS COMPARABLE BY NOT FOLLOWING HIS OWN ORDER FOR A.Y. 2008 - 09. L. ( B) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY REJECTING CORAL HUBS LTD. AS COMPARABLE WITHOUT APPRECIATING THE FACT THAT THIS COMPANY WAS UPHELD AS COMPARABLE BY THE LD. CIT(A) HIMSELF FOR A.Y.2008 - 09 AND THE SAME WAS ACCEPTED BY THE ASSESSEE ITSELF . L.(C) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY REJECTING ECLERX SERVICES LTD. AS COMPARABLE AFTER INCORRECTLY RELYING ON THE SPECIAL BENCH JUDGMENT IN CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. B. GROUNDS OF APPEAL AGAINST LD. CIT(A)'S ORDER U/S 154 DATED 18.03.2015 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(APPEALS) ERRED IN ALLOWING THE ASSESSEE'S CLAIM AND THEREBY DELETING THE ADDITION OF RS. 40 LACS WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAD EARLIER CLAIMED BOGUS/PERSONAL EXPENSES AMOUNTING TO 40 LACS AND THE WITHDRAWAL OF THE SAME IS ASSESSEE'S INCOME OVER AND ABOVE BUSINESS INCOME. 2(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ALLOWI NG THE DEDUCTION U/S 10A OF THE ACT TO THE ASSESSEE WITHOUT APPRECIATING THE DECISION OF THE HON'BLE ITAT - AHMEDABAD, IN THE CASE OF DCIT VS RAMESHBHAI C. PRAJAPATI 140 ITD 486 WHEREIN IT IS HELD THAT ONLY PROFIT DERIVED FROM EXPORT ACTIVITY OF THE ELIGIBL E UNDERTAKING IS ENTITLED FOR DEDUCTION U/S 10A. 2(B). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN DELETING THE ADDITION ON ACCOUNT OF WITHDRAWAL OF EXPENSES WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD NO T CLAIMED ADDITIONAL DEDUCTION U/S 10A IN THE FORM NO. 56F FILED ALONGWITH ITS RETURN OF INCOME AS PER THE CONDITION MENTIONED VIDE SEC. 10A(5) OF THE ACT ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 3 3. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR ALTER THE ABOVE GROUNDS AS MAY BE DEEMED NE CESSARY. RELIEF CLAIMED IN APPEAL IT IS PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 3. THE FIRST INTERCONNECTED ISSUE RAISED BY THE R EVENUE IS THAT THE LD.CIT (A) ERRED IN REJECTING THE TURNOVER FILTER APPLIED BY THE TPO FROM 5 CRORES TO 200 CRORES AND DIRECTED TO APPLY THE TURNOVER FILTER FROM RS. 1 CRORE TO 50 CRORES. 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PRIVATE L IMITED CO MPANY AND ENGAGED IN THE BUSINESS OF PROVIDING ACCOUNTING SERVICES. THE ASSESSEE IS 99.9% SUBSIDIARY OF A COMPANY LOCATED IN UK NAMELY DOSHI AND COMPANY. THE ASSESSEE DURING THE YEAR HAS PROVIDED SERVICES TO ITS ASSOCIATE ENTERPRISES AMOUNTING TO RS. 7 , 81 , 66 , 020 / - ONLY. THE ASSESSEE TO DETERMINE THE ARM LENGTH PRICE (FOR SHORT ALP) OF ITS INTERNATIONAL TRANSACTION WITH ITS A E HAS USED COMPARABLE UNCONTROLLED PRICE (CUP) METHOD. 4 .1 HOWEVER THE T PO WAS NOT SATISFIED WITH THE METHOD USED BY THE ASSESSEE. TH EREFORE , THE TPO ADOPTED THE TRANSACTIONAL NET MARGIN METHOD (FOR SHORT TNMM) FOR DETERMINING THE ALP OF ASSESSEE S INTERNATIONAL TRANSACTION WITH ITS AE. 4 .2 ACCORDINGLY , THE TPO AMONG OTHER THINGS SELECTED THE COMPARABLE COMPANIES APPLYING THE TURNOVER FILTER OF RS. 5 CRORES RS. 200 CRORES. AS SUCH THE TPO DETERMINED THE ALP OF RS. 8 , 64 , 13 , 415 / - ONLY. THUS THE DIFFERENCE OF ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 4 RS. 8 2 , 47 , 395 / - ( 8 , 64 , 13 , 415 - 7 , 81 , 66 , 020 ) WAS W ORKED OUT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5 . THE ASSE SSEE CARRIED THE MATTER TO THE LD. CIT (A) WHO DIRECTED THE TPO/AO TO SELECT THE TURNOVER FILTER OF RS. 1 CRORE TO RS. 5 0 CRORES. ACCORDINGLY , THE LD. CIT (A) DIRE CTED THE TPO TO DETERMINE THE AL P AFTER TAK ING THE TURNOVER FILTER OF RS. 1 CRORES TO RS. 5 0 C R ORES. 6 . BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE R EVENUE IS IN APPEAL BEFORE US. 7 . BOTH THE PARTIES BEFORE US RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVORAB LE TO THEM. 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET , WE NOTE THAT THE LD. CIT (A) IN THE OWN CASE OF THE ASSESSEE IN THE EARLIER ASSESSMENT YEAR , I.E. 2007 - 08 AND 2008 - 09 HAS DIRECTED THE TPO/AO TO TAKE THE TURNOVER FILTER OF RS. 1 CRO RES TO RS. 50 CRORES ONLY. THE REVENUE DID NOT CHALLENGE THE ORDER OF LD. CIT - A TO THE HIGHER AUTHORITY. THUS IT IS IMPLIED THAT THE ORDER OF THE LD.C IT ( A ) PERTAINING TO THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 HAS ATTAINED THE FINALITY. 8 .1 THUS IT IS CLEAR THAT THE R EVENUE HAS ACCEPTED THE ORDER OF THE LD.C IT ( A ) IN THE EARLIER YEARS BUT TH E YEAR UNDER CONSIDERATION THE R EVENUE BEING DISSATISFIED WITH THE ORDER OF THE LD.C IT ( A ) HAS PREFERRED AN APPEAL BEFORE US . THUS WE NOTE THAT THERE IS A CONTRADICTORY STAND OF THE R EVENUE IN THE CASE OF THE ASSESSEE IN DIFFERENT YEARS THOUGH THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTANCES. ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 5 8 .2 IT IS SETTLED LAW THAT PRINCIPLES OF CONSISTENCY WILL BE APPLIED IF THERE IS N O CHANGE IN THE FACTS AND CIRCUMSTANCES. THE LD. DR BEFORE US HAS NOT BROUGHT ANY IOTA OF EVIDENCE SUGGESTING ANY CHANGE IN THE FACTS AND CIRCUMSTANCES. THEREFORE , IN THE ABSENCE OF ANY INFORMATION FROM THE LD. DR ABOUT THE CHANGE IN FACTS AND CIRCUMSTANCE S, WE ARE INCLINED NOT TO DISTURB THE FINDING OF THE LD. CIT (A) KEEPING IN MIND THE RULE OF CONSISTENCY. 8 .3 IN THIS REGARD, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. REPORTED IN 358 ITR 295 , WHEREIN IT WAS HELD AS UNDER: 28. SECONDLY, AS NOTED BY THE TRIBUNAL, A CONSISTENT VIEW HAS BEEN TAKEN IN FAVOUR OF THE ASSESSEE ON THE QUESTIONS RAISED, STARTING WITH THE ASSESSMENT YEAR 1992 - 93, THAT THE BENEFITS UNDER THE ADVANCE LICENCES OR UNDER THE DUTY ENTITLEMENT PASS BOOK DO NOT REPRESENT THE REAL INCOME OF THE ASSESSEE. CONSEQUENTLY, THERE IS NO REASON FOR US TO TAKE A DIFFERENT VIEW UNLESS THERE ARE VERY CONVINCING REASONS, NONE OF WHICH HAVE BEEN POINTED OUT BY THE LEARNED COUNSEL FOR THE REVENUE. 8. 4 SIMILARLY, WE ARE ALSO OF THE VIEW THAT PRINCIPLE OF CONSISTENCY SHOULD BE APPLIED IN THE GIVEN FACTS AND CIRCUMSTANCES AS THERE WERE NO CHANGE IN COMPARISON TO THE PREVIOUS ASSESSMENT YEAR. IN THIS CONNECTION, ATTENTION MAY PLEASE B E INVITED TO THE DECISION GIVEN BY THE HON'BLE SUPREME COURT OF INDIA IN THE MATTER OF RADHASOAMI SATSANG V COMMISSIONER OF INCOME TAX REPORTED IN 193 ITR 321 (SC) WHEREIN THE HON'BLE SUPREME COURT HAS INTER ALIA HELD AS UNDER : 'WE ARE AWARE OF THE FACT TH AT, STRICTLY SPEAKING, RES JUDI CATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSM ENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. ON THESE REASONINGS, I N THE ABSENCE OF ANY MATERIAL ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 6 CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTER - AND, IF THERE WAS NO CHANGE, IT WAS IN SUPPORT OF THE ASSESSEE - WE DO NOT THINK THE QUESTION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECID ED BY THE COMMISSIONER OF INCOME - TAX IN THE EARLIER PROCEEDINGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN. 'PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIONS BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE, OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE PROPER APPREHENSION BY THE COURT OF THE LEGAL RESULT EITHER OF THE CONSTRUCTION OF THE DOCUMENTS OR THE WEIGHT OF CERTAIN CIRCUMSTANCES. IF THIS WERE PERMITTED LITIGATION WOULD HAVE NO END, EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. IT IS A PRINCIPLE OF LAW THAT THIS CANNOT BE PERMITTED ... 8 . 5 AS WE NOTE THAT THE ORDER OF THE LD. C IT ( A ) WAS ACCEPTED BY THE R EVENUE IN THE EARLIER YEARS AS DISCUSSED ABOVE , THEREFORE WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF THE LD.C IT ( A ) FOR THE YEAR UNDER CONSIDERATION. HEN CE THE GROUND OF APPEAL OF THE R EVENUE IS DISMISSED. 9 . THE O THER ISSUES RAISED BY THE R EVENUE IN GROUND NO. 1 ( A ) , 1 (B) AND 1 (C) DO NOT REQUIRE SEPARATE ADJUDICATION AS WE HAVE UPHELD THE ORDER OF THE LD.C IT ( A ) ON THE CRITERIA OF THE TURNOVER FILTER. THEREFORE , WE REFRAIN OURSELVES FROM ADJUDING THE SAME. HEN CE THE GROUND OF APPEAL OF THE R EVENUE IS DISMISSED. 10 . THE 2 ND ISSUE RAISED BY THE R EVENUE IS REGARDING THE DEDUCTION UNDER SECTION 10 A OF THE ACT. 11 . AT THE OUTSET , WE NOTE THAT THE ABOVE ISSUE RAISED BY THE R EVENUE IS ARISING FROM THE ORDER PASSED UNDER S ECTION 154 OF THE ACT. THE SCHEME OF THE INCOME TAX ACT REQUIRES THE AGGRIEVED PARTY TO FILE THE SEPARATE APPEAL AGAINST THE ORDER PASSED BY THE LD.C IT ( A ) UNDER DIFFERE NT SECTIONS OF THE ACT. AS THE REVENUE HAS CLUBBED ITS GRIEVANCE RELATED TO THE ORDER P ASSED UNDER SECTION 154 OF THE ACT ALONG WITH THE ORDER PASSED BY THE LD. C IT ( A ) UNDER SE CTION ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 7 250 OF THE ACT, THEREFORE, THE GROUND OF APPEAL RAISED AGAINST THE ORDER PASSED UNDER SE CTION 154 OF THE ACT BECOMES IN FRUCTU OUS . THEREFORE WE DISMISS THE SAME. 12 . I N THE RESULT , THE APPEAL OF THE R EVENUE IS DISMISSED. 13 . NOW C OMING TO THE ITA BEARING NO. 1255 /AHD/2015 FOR A.Y. 2010 - 11. 14 . A T THE OUTSET WE NOTE THAT THE ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL TO THE ISSUE RAISED BY THE R EVENUE IN ITA NO 939 /AHD/2015 WHICH HAS BEEN ADJUDICATED BY US V IDE PARA NUMBER 7 OF THIS ORDER. AS SUCH WE HA VE DISMISSED THE APPEAL OF THE R EVENUE. AS THE ISSUE IS IDENTICAL, THE SAME FINDING WILL BE APPLIED IN THE CASE ON HAND WITH THE FULL FORCE. HENCE , WE DO NOT FIND ANY REASON TO INTERFERE THE FINDING OF THE LD.C IT ( A ) . TH US THE GROUND OF APPEAL OF THE R EVENUE IS DISMISSED. 15 . IN THE COMBINED RESULT BOTH THE APPEALS OF THE R EVENUE ARE DISMISSED. O RDER PRONOUNCED IN THE COURT ON 01/02 / 2019 AT AHMEDABAD. - SD - - SD - (RAJPAL YADAV ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 01 / 02 /2019 M ANISH ITA NO S.939 - 1255/AHD/2015 ASSTT. YEAR 2009 - 10 & 2010 - 11 8 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT 5. , / DR, ITAT, 6. / GUARD FILE .