M/s Kennametal India Ltd., Bangalore V. ACIT, Bangalore

ITA 1333/BANG/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8656 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREETHI GARG
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER IT(TP)A NO.1333/BANG/2011 ASSESSMENT YEAR : 2007-08 M/S. KENNAMETAL INDIA LTD., 8/9 TH MILE, TUMKUR ROAD, BENGALURU 560073. PAN:AACCK4472B VS. ASSISTANT COMMISSIONER OF INCOME TAX(LTU), JSS TOWERS, 100 FEET RING ROAD, BANASHANKARI III STAGE, BANGALORE-560085. APPELLANT RESPONDENT ASSESSEE BY : SHRI. K. R. VASUDEVAN, ADVOCATE REVENUE BY : SMT. PREETHI GARG, CIT-DR DATE OF HEARING : 3.1.2017 DATE OF PRONOUNCEMENT : 6 .1.2017 IT(TP)A NO.1333/BANG/2011 PAGE 2 OF 8 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST TH E ORDER OF THE ASSESSING OFFICER PASSED PURSUANT TO THE DIRECTION OF THE DRP ON THE FOLLOWING GROUNDS: 1. 2. IT(TP)A NO.1333/BANG/2011 PAGE 3 OF 8 3. 4. 5. IT(TP)A NO.1333/BANG/2011 PAGE 4 OF 8 6. 7. IT(TP)A NO.1333/BANG/2011 PAGE 5 OF 8 2. DURING THE COURSE OF HEARING, THE LEARNED COUNSE L HAS INVITED ATTENTION THAT DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD ENTERED INTO SEVERAL INTERNATIONAL TRANSACTIONS WIT H ITS AE. THE TRANSACTIONS RELATED TO PURCHASE OF RAW MATERIALS A ND COMPONENTS, PURCHASE AND SALE OF FINISHED GOODS, IMPORT OF CAPI TAL GOODS AND REIMBURSEMENT OF COSTS PAID AND RECEIVED. IN ITS T RANSFER PRICING ANALYSIS, THE ASSESSEE HAD APPLIED TRANSACTIONAL NE T MARGIN METHOD (TNMM). HOWEVER, IN THE ABSENCE OF THE REQUIRED INF ORMATION AND DATABASE TO ASCERTAIN THE CORRECT ALP, THE AO HAS M ADE REFERENCE TO TPO UNDER SECTION 92CA OF THE ACT. AFTER MAKING AN EXHAUSTIVE STUDY 8. 9. IT(TP)A NO.1333/BANG/2011 PAGE 6 OF 8 OF THE DATA AVAILABLE ON THE MATTER, THE TPO HAS HE LD THAT THE PAYMENT MADE FOR SAP IMPLEMENTATION WAS TREATED AS NIL FOR VARIOUS REASONS. BASED ON THESE CONCLUSIONS, THE TPO HELD THAT ALP O F THE TRANSACTIONS INVOLVING SAP IMPLEMENTATION CHARGES IS NIL. ACCO RDINGLY, THE AMOUNT OF RS.13,26,31,510/- PAID BY THE ASSESSEE AS SAP IMPLEMENTATION/IT/SAP SERVICE CHARGES WAS TREATED A S TP ADJUSTMENT U/S 92CA OF THE ACT. AGAINST THE TP ADJUSTMENT, TH E ASSESSEE IS BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CON TENDED THAT IN THE SUCCEEDING ASSESSMENT YEAR, SIMILAR TP ADJUSTME NT WAS MADE BY THE TPO AND IN APPEAL, THE CIT(A) CALLED A REMAND R EPORT DURING THE PERIOD OF APPELLATE PROCEEDINGS AND IN REMAND REPOR T THE TPO HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE. THE RELE VANT PORTION OF THE TPOS REMAND REPORT ORDER ACCEPTING THE CONTENTION OF THE ASSESSEE IS REPRODUCED BELOW: AFTER GOING THROUGH THE SUBMISSIONS OF THE TAXPAYE R AND THE DEMONSTRATION OF THE SERVICES RECEIVED, THE TPO IS OF THE OPINION THAT THE PAYMENTS MADE FOR THESE GROUP SERVICES ARE FOR DAY TO DAY SAP RUNNING COSTS, PAYMENT FOR SAP LICENCES AND MAINTEN ANCE AND UPGRADATION. THE TRANSACTION WAS AGGREGATED WITH M ANUFACTURING AND TRADING SINCE IT WAS CLOSELY LINKED AND HENCE WAS A GGREGATED WITHOUT ANY SEPARATE BENCHMARKING. THIS STAND OF THE TAXPA YER IS ACCEPTABLE TO THE TPO. 4. IN THE LIGHT OF THESE FINDINGS OF THE TPO IN REM AND PROCEEDINGS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT SINCE THE TPO IT(TP)A NO.1333/BANG/2011 PAGE 7 OF 8 HAS ACCEPTED THE VERSION OF THE ASSESSEE, THE TP AN ALYSIS IN THE INSTANT CASE BE REDONE BY THE TPO AFRESH. 5. THE LD. DR DID NOT DISPUTE THE REMAND REPORT OF THE TPO. HE HOWEVER PLACED RELIANCE UPON THE ASSESSMENT ORDER A ND ORDER OF THE TPO IN THE INSTANT CASE. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES AND IN THE LIGHT OF THE REMAND RE PORT OF THE TPO, WE FIND THAT THE TPO HAS TAKEN A CONTRADICTING STAND I N THE SUCCEEDING YEAR IN THE REMAND PROCEEDINGS. 6. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT IN THE INSTANT CASE, TPO SHOULD DO FRESH EXERCISE IN THE LIGHT OF ITS REMAND REPORT IN ORDER TO DETERMINE THE ALP FOR INTERNATIONAL TRANSA CTIONS. 7. ACCORDINGLY, WE SET ASIDE THE ASSESSMENT ORDER A ND RESTORE THE MATTER TO THE FILE OF THE AO/TPO TO MAKE FRESH EXER CISE FOR DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO N IN THE LIGHT OF THE ASSESSEES CONTENTIONS, TPO REPORT AND THE REMAND P ROCEEDINGS SUBMITTED TO THE CIT(A) IN SUCCEEDING YEAR. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 6 TH JANUARY, 2017. SD/- SD/- (S. JAYARAMAN) (SUNIL KUMAR YA DAV) ACCOUNTANT MEMBER JUDICIA L MEMBER BANGALORE. DATED: 6 TH JANUARY, 2017. /NS/ IT(TP)A NO.1333/BANG/2011 PAGE 8 OF 8 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.