M/s. Givaudan (India) Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 1267/BANG/2010

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9313 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A.K.GARODIA, ACCOUNANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER IT(TP)A NOS. A.Y. APPELLANT V S RESPONDENT 1 ITA NO.1267(B)/2010 2006-07 M/S GIVAUDAN (IND.) PVT. LTD. PLOT NO.26, 2 ND CROSS, JIGANI IND. AREA, JIGANI, BANGALORE-560 085 DCIT, LTU, BANGALORE 2 IT(TP) NO. 1729(BANG)/2013 2007-08 -DO- -DO- 3 IT(TP)A NO.1730(B)/2013 2008-09 -DO- ACIT, LTU, BANGALORE ASSESSEE : SHRI P.K.PRASAD, ADVOCATE REVENUE BY : MS. NEERA MALHOTRA, CIT-II DATE OF HEARING : 10-10-2016 DATE OF PRONOUNCEMENT : -10-2016 O R D E R PER A. K. GARODIA, A. M.:- THESE THREE APPEALS ARE FILED BY THE ASSESSEE WH ICH ARE DIRECTED AGAINST THREE SEPARATE ASSESSMENT ORDERS PASSED BY THE AO U/S 143(3) R.W.S.144C OF THE IT ACT, 1961 AS PER THE DIRECTION S OF THE DRP FOR THE ASSESSMENT YEARS : 2006-07, 2007-08 & 2008-09. ALL THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE , THESE ARE DISPOSED OF BY WAY OF THIS COMMON ORDER. ITA NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 2 2. GROUNDS RAISED BY THE ASSESSEE FOR THE ASSESSME NT YEAR 2006- 07 READ AS UNDER; THE GROUNDS MEN TI ONED HE R E I N A R E W I THOU T PRE J UDICE TO ONE ANOTHE R . TRANSFER PRICING RELATED 1. THAT THE ORDER OF THE LEARNED DEPUTY COMMISSIONER O F INCOME-TA X , LARGE TA X PAYER UNIT , BANGALORE ( ' AO ') AND L EARNED DEPUTY DIRECTO R O F INCOME-TA X ( TRANSFER P RI C I NG ) - V ( ' TPO ') , T O THE EXTENT P R E J UD I CIAL TO THE APPELLANT , IS BAD I N L AW AND LIAB L E TO BE QUASHED . 2. THA T T H E L EA R NED AO AND THE L EA RN ED D I SPUTE RESOL U T I O N PANEL ( ' PANE L ' ) ERRED I N UP H O L D I NG T HE R E J EC TI ON O F THE ANA L YSIS UNDERTAKE N BY T HE APPE L LANT I N I T ' S TRANSFER PR I C I NG ( TP ) DOCUMEN T AT I ON , BY THE L EARNED TPO AND THEREBY E R RED I N NOT APPRECIATING THA T THE APPELLANT HAD PREPARED THE TP DOCUMENTAT I ON BONA FIDE AND I N GOOD FAITH . 3. THA T TH E L EARNED AO AND THE L EARNED PANEL ER R ED BOTH I N FACTS AN D L AW I N CON FIR M I NG THE ACT I ON O F T H E LEA RN E D TPO O F CONSIDER I NG T HE PA Y MEN T O F RS . 1 , 36 , 60 , 049 BY THE APPELLANT FOR THE I NTE R NAT I ONA L TRANSAC T ION PE RT A I N I NG TO P R OV I S I ON O F INFORMAT I ON TECHNO L OGY ( IT ) SERVICES BY THE ASSOCIATED ENTERPRISES ( AES ) , AS ' N I L ', AND IN DO I NG SO GROSSLY ERRED I N : 3.1 UPHO L D I NG THE ACT OF THE LEARNED TPO OF ERRONEOUSLY APPLYING THE COMPARABLE UNCONTROLLABLE P RI CE ( ' CUP ' ) METHOD . 3 . 2 . I G N O RIN G T HE DETA I LS OF T H E I T CH A R GES PA I D BY T HE ITA NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 3 APPE LL ANT TO THE AES , DUR I NG THE COURSE O F THE OF T H E PROCEED I NGS BEFORE T H E L EA R NED PANEL , I N TERMS OF T H I RD PA R TY INVO I CES AND E X TRACTS OF OTHE R TH IR D PA R TY COMPANIES I NCURR I NG SUCH SIMILAR E X PENDITURE ON ACCOUNT OF IT SERVICES , ETCETERA . 3 . 3 . ER R ED IN CONS I DERING THE QUANT I F I CAT I ON OF TRANSACTION VALUE AS ' NI L' FOR IT SERVICES BEING RENDERED B Y TH E AE . 4. TH E INT E R ES T LI ABIL I TY U N DE R SECT I O N 2 34C AND 234D HAS AR I SEN AS A RESU L T OF THE ORDER OF THE LEARNED AO MA K I N G A N ADDITION AS D I SCUSSED ABOVE , LEAD I NG TO AN ENHANCED TA X L IAB I LITY . THE I NTEREST L IAB I LITY WOULD CONSEQUENTIALLY ABATE I N CONS I DERATION OF OUR REQUEST TO SET ASIDE THE O R DER OF THE LEARNED AO . 3. GROUNDS RAISED BY THE ASSESSEE FOR THE ASSESSMEN T YEAR 2007- 08 ARE AS UNDER; THE GROUNDS MENTIONED HEREIN TAKEN BY THE APPELLAN T ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) - LARGE TAXPAYERS UNIT, BANGAL ORE ['CIT (A)-LTU'] IS CONTRARY TO THE FACTS AND CIRCUM STANCES OF THE CASE , CONTRARY TO LAW AND LIABLE TO BE QUASHED. SPECI F IC GROUNDS 2. THAT THE LEARNED CIT(A)-LTU ERRED IN UPHOLDING THE REJECTION OF TRANSFER PRICING CTP ' ) DOCUMENTATION BY THE LEARNED TRANSFER PRICING OFFICER CTPO')/ ASSESSING OFFICER CAO') AND THEREBY ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD PREPARED THE TP DOCUMENTATION BON A FIDE AND IN GOOD FAITH. 3 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A)-LTU ERRED IN: (A) UPHOLDING THE ACT OF THE LEARNED TPO OF ERRONEO USLY SELECTING THE COMPARABLE UNCONTROLLABLE PRICE CCUP' ) ITA NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 4 METHOD TO BE THE MOST APPROPRIATE METHOD, AS AGAINS T THE TRANSACTIONAL NET MARGIN METHOD CTNMM'), ADOPTE D BY THE APPELLANT AT THE ENTITY LEVEL BASED ON AGGRE GATION OF TRANSACTIONS (B) ERRED IN CONSIDERING THE QUANTIFICATION OF TRANSACTION VALUE AS 'NIL' FOR IT SERVICES BEING RE NDERED BY THE ASSOCIATED ENTERPRISES ('AES') AND THAT FOR THE BENEFIT ACCRUED TO THE APPELLANT ON RECEIPT OF SUCH SERVICES . (C) IGNORING THE DETAILS/ DOCUMENTS PROVIDED IN SUPPORT OF THE IT CHARGES PAID BY THE APPELLANT TO THE AES, DURING THE COURSE OF THE PROCEEDINGS BEFORE TH E LEARNED CIT(A)- LTU. THEREBY, CONCLUDING THAT THE APPELLANT HAS NOT RECE IVED ANY SERVICES. 4. THE INTEREST LIABILITY UNDER SECTION 234B AND 234D HAS ARISEN AS A RESULT OF THE ORDER OF THE LEARNED AO M AKING AN ADDITION AS DISCUSSED ABOVE , LEADING TO AN ENHANCED TAX LIABILITY . THE INTEREST LIABILITY WOULD CONSEQUENTIALLY ABATE IN CONSIDERATION OF OUR REQUEST TO SET ASIDE THE ORDER OF THE LEARNED AO. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN AB OVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL . 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FOR T HE ASSESSMENT YEAR 2008-09: THE GROUNDS MENTIONED HEREIN TAKEN BY THE APPELLANT ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) -LARGE TAXPAYERS UNIT, BANGALORE [ ' CIT (A)-LTU'] IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE , CONTRARY TO LAW AND LIABLE TO BE QUASHED. 2. THAT THE LEARNED CIT(A)-LTU ERRED IN UPHOLDING THE REJECTION OF TRANSFER PRICING CTP ' ) DOCUMENTATION BY THE LEARNED TRANSFER ITA NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 5 PRICING OFFICER CTPO')/ ASSESSING OFFICER CAO') AND THEREB Y ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD PR EPARED THE TP DOCUMENTATION BONA FIDE AND IN GOOD FAITH. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT (A)- LTU ERRED IN: (A) UPHOLDING THE ACT OF THE LEARNED TPO OF ERRONE OUSLY SELECTING THE COMPARABLE UNCONTROLLABLE PRICE CCUP' ) METHOD TO BE THE MOST APPROPRIATE METHOD, AS AGAINST THE TRAN SACTIONAL NET MARGIN METHOD CTNMM'), ADOPTED BY THE APPELLANT AT THE ENTITY LEVEL BASED ON AGGREGATION OF TRANSACTIONS (B) ERRED IN CONSIDERING THE QUANTIFICATION OF TRA NSACTION VALUE AS ' NIL' FOR IT SERVICES BEING RENDERED BY THE ASSOCIAT ED ENTERPRISES AND THAT FOR THE BENEFIT ACCRUED TO THE APPELLANT ON RECEIPT OF SUCH SERVICES. (C) IGNORING THE DETAILS/ DOCUMENTS PROVIDED IN SU PPORT OF THE IT CHARGES PAID BY THE APPELLANT TO THE AES, DURING THE COURSE OF THE PROCEEDINGS BEFORE THE LEARNED CIT(A)-LTU. THEREBY, CONCLUDING THAT THE APPELLANT HAS NOT RECE IVED ANY SERVICES. 4. THE INTEREST LIABILITY UNDER SECTION 234D HAS ARISE N AS A RESULT OF THE ORDER OF THE LEARNED AO MAKING AN ADDITION A S DISCUSSED ABOVE, LEADING TO AN ENHANCED TAX LIABILITY. THE IN TEREST LIABILITY WOULD CONSEQUENTIALLY ABATE IN CONSIDERATION OF OUR REQUEST TO SET ASIDE THE ORDER OF THE LEARNED AO. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND/OR TO ALTER , AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL 5. AT THE VERY OUTSET, IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT THE DIRECTIONS OF THE DRP IS VERY CRY PTIC IN ALL THE THREE YEARS AND IN THIS REGARD, HE HAS DRAWN OUR ATTENTIO N TO PARA-11 OF THE DIRECTIONS OF DRP FOR THE ASSESSMENT YEAR 2006-07. HE SUBMITTED THAT UNDER THESE FACTS, THE MATTER SHOULD BE RESTORED BA CK TO THE FILE OF THE AO FOR FRESH DECISION. ITA NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 6 6. IT WAS SUBMITTED BY THE LD. DR OF THE REVENUE T HAT THE ASSESSEE IS NOT BEEN ABLE TO ESTABLISH BEFORE THE TPO OR BEF ORE THE DRP OR BEFORE THE TRIBUNAL THAT ANY SERVICES WERE RENDERED BY THE AE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE PARA-11 OF THE DIRECTIONS OF DRP FOR ASST . YEAR 2006-07. 11. AFTER GOING THROUGH THE TP REPORT OF THE TPO, THE SUBMISSIONS MADE BY THE ASSESSEE, THE REMAND REPORT OF THE TPO DATED 28-06-2010 AND THE REJOINDE R OF THE ASSESSEE DATED 10-08-2010, THAT THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS REGARDING QUANTIFICATION OF SERVICES IN TERMS OF ACTUAL COST INCURRED BY THE AE IN CONNECTION WITH RENDERING OF SERVICES TO THE ASSESSEE ON THE BASIS OF THIRD PART Y INVOICES. HENCE, THE TPO IS JUSTIFIED IN TAKING THE ARMS LENGTH PRICE FOR SUCH SERVICES T BE NIL. 8. IN THE REMAINING TWO YEARS I.E. 2007-08 & 2008- 09, THE MATTER WAS DECIDED BY THE LD. CIT(A) AND NOT BY DRP BUT SI NCE THE MATTER IN DISPUTE IN ASSESSMENT YEARS : 2006-07, 2007-08 & 20 088-09 ARE SIMILAR AND IN ASSESSMENT YEAR : 2006-07, THE ORDER OF DRP IS VERY CRYPTIC AND THEREFORE, IT IS REQUIRED TO BE RESTORE D BACK TO THE FILE OF THE AO/TPO FOR FRESH DECISION, WE FEEL IT PROPER THAT T HE MATTER IN DISPUTE FOR ALL THE THREE YEARS SHOULD BE RESTORED BACK TO THE FILE OF THE AO/TPO FOR FRESH DECISION BECAUSE THE ISSUE IN LATER YEARS SHOULD BE DECIDED AFTER THE DECISION IN THE EARLIER YEARS I.E. 2006-0 7. HENCE, IN ALL THE ITA NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 7 THREE YEARS, WE RESTORE THE ENTIRE MATTER BACK TO T HE FILE OF THE AO/TPO FOR FRESH DECISION AFTER PROVIDING ADEQUATE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. (ASHA VIJAYARAGHAVAN) (A.K. GA RODIA) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : .10.2016 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 NO.1267(B)2010, IT(TP)A NOS.1729 & 1730(B)/2013 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 .