Asst.C.I.T., Bangalore V. M/s Indian Institute of Science, Bangalore

ITA 1262/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9502 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 06-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing

Judgement Text

ITA NO.15(B)/15 & CO NO.15(B)/16 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 NO. 15/B/2014 (ASSESSMENT YEAR 2009 10) M/S TOYOTA KIRLOSKAR MOTORS PRIVATE LIMITED, PLOT NO. 1, BIDADI INDUSTRIAL AREA, RAMANAGARA TALUK, BIDADI, BANGALORE 562109. PAN AAACT5415B VS THE DCIT, LTU, BANGALORE (RESPONDENT) (APPELLANT) AND C. O. NO. 15/B/2016 (IN ITA NO. 15/B/2014) ASSESSMENT YEAR : 2009 10 THE DCIT, LTU, BANGALORE VS M/S TOYOTA KIRLOSKAR MOTORS PRIVATE LIMITED, PLOT NO. 1, BIDADI INDUSTRIAL AREA, RAMANAGARA TALUK, BIDADI, BANGALORE 562109. PAN AAACT5415B (RESPONDENT) (APPELLANT) SHRI P. C. KHINCHA, C. A. ASSESSEE BY MS NEERA MALHOTRA, CIT DR REVENUE BY 25/07/2016 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 REVENUE AND THE C.O. IS FILED BY THE ASSESSEE AND THESE ARE DIRECTED AGAINST THE ORDER D ATED 19.11.2013 FOR A. Y. 2009 10 PASSED BY DRP U/S 144C (5) R.W.S. 144C (8 ) OF THE I T ACT 1961. ITA NO.15(B)/15 & CO NO.15(B)/16 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1.THE DIRECTIONS OF DRP IS OPPOSED TO LAW AND FAC TS OF THE CASE. 2.THE DRP ERRED IN GIVING DIRECTION TO THE AO TO G IVE RELIEF TO ASSESSEE ON THE ISSUE OF TREATING THE ROY ALTY PAID BY THE ASSESSEE AS TRANSFER PRICING ADJUSTMENT U/S 92CA. 3. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING. 3. THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. A RE AS UNDER:- 1. THE ORDER OF THE LD. DRP, BANGALORE TO THE EXTENT PREJUDICIAL TO THE RESPONDENT IS BAD IN LAW. 2. THE DRP, BANGALORE HA ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING A REFERENCE TO THE TPO F OR DETERMINING THE ARMS LENGTH PRICE WITHOUT DEMONSTR ATING AS TO HOW OR WHY IT WAS NECESSARY AND EXPEDIENT TO DO SO. 3. THE DRP, BANGALORE GAS ERRED IN CONFIRMING THE ACTION OF THE AO AND TPO IN A. PASSING THE ORDER WITHOUT DEMONSTRATING THAT HE RESPONDENT HAD MOTIVE OF TAX EVASION. B. NOT APPRECIATING THAT THE CHARGING OR COMPUTATION PROVISION RELATING TO INCOME UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION DO NOT REFER TO OR INCLUDE THE AMOUNTS COMPUTED UNDER CHAPTER X AND THEREFORE THE ADDITION MADE UNDER CHAPTER X IS BAD IN LAW; AND C NOT APPRECIATING THAT THE PROVISIONS OF SEC.40A(2) OVERRIDE THE PROVISIONS OF CHAPTER X AND THERE BEING NO ACTION UNDER SECTION 40A(2) FOR ROYALTY PA YMENT, NO ADJUSTMENT UNDER CHAPTER X CAN BE MADE. GROUNDS RELATING TO SEGMENTATION 4. THE DRP, BANGALORE HAS ERRED IN CONFIRMING TH E ACTION OF THE AO AND TPO IN ITA NO.15(B)/15 & CO NO.15(B)/16 A. CONCLUDING THAT THE TRADING AND MANUFACTURING SEGMENT OF THE RESPONDENT ARE DISTINCT WITHOUT ANY SUBSTANTIATION AND SUPPORTING MATERIAL AND WITHOUT APPRECIATING THAT BOTH THE SEGMENTS ARE INTERWINED AND INTER-RELATED WARRANTING A COMBINED TRANSACTION APPROACH IN ARRIVING AT THE ARMS LENGTH PRICE. B. NOT APPRECIATING THAT THE RESPONDENT HAD ADOPTE D THE TNMM AT THE ENTITY LEVEL, IN WHICH PROCESS, THE ROY ALTY PAYMENT WAS CONSIDERED AS CLOSELY LINKED TRANSACTIO N AND HENCE WAS SUBMITTED INTO THE EXPENDITURE AND ACCORDINGLY ALREADY CONSIDERED; C. NOT SUBSTANTIATING HOW THE ROYALTY PAYMENT WAS SINGLED OUT OF THE MANY TRANSACTIONS FOR DETERMINAT ION OF THE ARMS LENGTH PRINCIPLE; D. NOT APPRECIATING THAT ONCE THE NET PROFIT MARGI N IS TESTED ON THE TOUCHSTONE OF ARMS LENGTH PRICE, IT PRESUPPOSES THAT THE VARIOUS COMPONENTS OF INCOME A ND EXPENDITURE CONSIDERED IN THE PROCESS OF ARRIVING A T THE NET PROFIT ARE ALSO AT ARMS LENGTH. E. COMPARING PRICES AFTER COMPLETING THE ANALYSIS OF COMPARING MARGINS, WHICH PROCESS IS UNACCEPTABLE IN LAW. 4. LEARNED DR OF THE REVENUE SUBMITTED THAT SIMILAR ISSUE IN ASSESSEES OWN CASE WAS DECIDED BY THE TRIBUNAL IN A.Y. 2008 09 IN IT (TP)A NO. 1595/(BANG)/2012 DATED 14.08.2014, COPY ON PAGES 10 08 TO 1029 OF THE PAPER BOOK AND IN PARTICULAR, OUR ATTENTION WAS DRA WN TO PAGE 1026 OF THE PAPER BOOK AND IT WAS POINTED OUT THAT IN THAT YEA R, THIS ISSUE WAS RESTORED BACK TO AO/TPO FOR A FRESH DECISION. HE SUBMITTED T HAT IN THE PRESENT YEAR ALSO, THE ISSUE IN DISPUTE MAY BE RESTORED TO AO/TP O FOR A FRESH DECISION WITH SIMILAR DIRECTIONS. LEARNED AR OF THE ASSESSEE COULD NOT POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT YEAR AND THEREFO RE, WE FIND NO REASON TO TAKE A CONTRARY VIEW. HENCE, BY RESPECTFULLY FOLLOW ING THE TRIBUNAL ORDER IN ITA NO.15(B)/15 & CO NO.15(B)/16 ASSESSEES OWN CASE IN A. Y. 2008 -09, WE RESTORE T HIS MATTER BACK TO THE FILE OF AO/TPO FOR FRESH DECISION WITH SAME DIRECTIONS A S WERE GIVEN BY THE TRIBUNAL IN A. Y. 2008 09. REGARDING C.O. OF THE ASSESSEE, IT WAS FAIRLY CONCEDED BY THE LEARNED AR OF THE ASSESSEE THAT IF THE DISPUTE RAISED IN THE APPEAL OF THE REVENUE IS RESTORED TO AO/TPO WITH TH E SAME DIRECTIONS AS WERE GIVEN BY THE TRIBUNAL IN A. Y. 2008 09 THEN THE ISSUES RAISED BY THE ASSESSEE IN THE C.O. WILL BE OF ACADEMIC INTEREST ONLY AND NO SEPARATE ADJUDICATION IS CALLED FOR AT THE PRESENT STAGE. WE HOLD ACCORDINGLY. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES AND C.O. OF THE ASSESSEE IS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- (SUNIL KUMAR YADAV) (A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEM BER 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 ITA NO.15(B)/15 & CO NO.15(B)/16 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 RE GISTRAR 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