M/s. Honda Motorcycle and Scooter India Pvt. Ltd., Gurgaon V. DCIT, Gurgaon

ITA 1342/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90976 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 01-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JUDY JAMES
• Assessee Lawyers: VIJAY IYER
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.1342/DEL./2014 (ASSESSMENT YEAR : 2009-10) M/S. HONDA MOTORCYCLE AND SCOOTER INDIA VS. DCIT, CIRCLE 1 (1), PRIVATE LIMITED, GURGAON. PLOT NO.1, SECTOR 3, IMT MANESAR, GURGAON. (PAN : AAACH7467D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY IYER, CA REVENUE BY : SHRI JUDY JAMES, STANDING COUNSEL DR DATE OF HEARING : 01.04.2015 DATE OF PRONOUNCEMENT : .04.2015 O R D E R PER GEORGE GEORGE K., JM : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DI RECTED AGAINST THE FINAL ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (ORDER DATED 08.01.2014). THE RELEVANT ASSESSMENT YEAR IS 2009-10. 2. FIRST GROUND IS AGAINST THE ADDITION TOWARDS THE TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.17,17,15,684/- ON ACCOUN T OF TWO INTERNATIONAL TRANSACTIONS, NAMELY, PAYMENT OF EXPORT COMMISSION AMOUNTING TO ITA NO.1342/DEL./2014 2 RS.13,26,78,136/- AND PAYMENT OF ROYALTY FOR EXPORT TO THE ASSOCIATED ENTERPRISES (AES) AT RS.3,90,37,548/-. 3. BRIEFLY STATED, THE FACTS OF THIS GROUND ARE THA T LIKE EARLIER YEARS, THE ASSESSEE CONTINUED TO MANUFACTURE TWO-WHEELERS BY O BTAINING TECHNOLOGY FROM HONDA, JAPAN. THE ASSESSEE REPORTED TEN INTERN ATIONAL TRANSACTIONS. ON A REFERENCE MADE BY THE AO, THE TRANSFER PRICING OFFICER (TPO) ACCEPTED EIGHT INTERNATIONAL TRANSACTIONS AT ARMS LENGTH PRICE (ALP). AS REGARDS THE INTERNATIONAL TRANSACTION OF PAYMENT OF EXPORT COMMISSION, THE TPO HELD THAT NO SERVICE WAS RENDERED BY THE AE TO DESERVE EXPORT COMMISSION. IT IS IN THIS CONTEXT THE TPO DETERMINE D THE ALP OF THIS INTERNATIONAL TRANSACTION AT NIL. AS REGARDS THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY, THE TPO ACCEPTED THE PAYMENT OF ROYALTY AT ARMS LENGTH PRICE IN RESPECT OF DOMESTIC SALES AND EXPOR T SALES MADE TO NON- AES. HOWEVER, HE DISPUTED THE PAYMENT OF ROYALTY ON EXPORTS MADE TO AES. IN DOING SO, THE TPO HELD THE ASSESSEE TO BE A `CONTRACT MANUFACTURER. ACCORDINGLY, HE OPINED THAT SINCE TH E ASSESSEE IS MAKING A PART OF ITS SALES TO THE RELATED PARTIES AND THE BE NEFIT OF PRODUCING COMPONENTS IS REAPED BY AE, THE PAYMENT OF ROYALTY DID NOT CONFORM TO THE ARMS LENGTH PRINCIPLE. HE, THEREFORE, PROPOSED THE TP ADJUSTMENT AMOUNTING TO RS.3,90,37,548 /- IN RESPECT OF PAYME NT OF ROYALTY FOR EXPORTS TO AES. THE AO MADE THE ABOVE ADDITIONS BY ADOPTING THE FIGURES ITA NO.1342/DEL./2014 3 FROM THE TPOS ORDER AS SUCH WITHOUT ANY FURTHER EV ALUATION. THE ASSESSEE IS AGGRIEVED AGAINST THE MAKING OF SUCH ADDITIONS. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUES WER E RAISED IN APPEAL BY THE ASSESSEE FOR THE AY 2008-09, WHICH CAME TO BE HEARD SIMULTANEOUSLY WITH THE INSTANT APPEAL. WE HAVE PASSED SEPARATE ORDER F OR THE ABOVE REFERRED AY 2008-09 IN WHICH THE QUESTION OF DETERMINATION O F ALP IN RESPECT OF EXPORT COMMISSION HAS BEEN RESTORED TO THE FILE OF AO/TPO WITH CERTAIN DIRECTIONS AND THE PAYMENT OF ROYALTY FOR EXPORTS T O AE HAS BEEN ACCEPTED AT ARMS LENGTH PRICE. NO DISTINGUISHING FEATURE HA S BEEN BROUGHT TO OUR NOTICE IN THE FACTS OF THE INSTANT YEAR VIS--VIS T HOSE OF THE ABOVE REFERRED AY 2008-09. WE ADOPT THE SAME REASONS FOR THE YEAR UNDER CONSIDERATION AS WELL AND, ACCORDINGLY, REMIT THE INTERNATIONAL T RANSACTION OF PAYMENT OF EXPORT COMMISSION TO THE FILE OF AO/TPO FOR A FRE SH DETERMINATION AS PER THE GUIDELINES GIVEN IN OUR ABOVE REFERRED ORDER AN D DELETE THE ADDITION ON ACCOUNT OF PAYMENT OF ROYALTY IN RESPECT OF EXPOR TS MADE TO THE AES. 5. GROUND NO.2 IS AGAINST THE DISALLOWANCE OF RS.65 ,51,593/-, BEING SALES TOOL EXPENSES INCURRED BY THE ASSESSEE. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SIMILAR ISSUE HAS BEEN RAISED BY THE ASSESSEE IN ITS APPEALS FOR THE AYS 2006-07 AND 200 8-09, FOR WHICH SEPARATE ORDERS HAVE BEEN PASSED. IN THE ORDER PASS ED FOR THE AY 2006-07, ITA NO.1342/DEL./2014 4 WE HAVE REMITTED THE MATTER TO THE FILE OF AO FOR D ECIDING THIS ISSUE IN CONFORMITY WITH THE FINAL VIEW TAKEN IN EARLIER YEA RS. SINCE THE FACT- SITUATION REMAINS SIMILAR FOR THE INSTANT YEAR AS W ELL, INASMUCH AS NEITHER THE LD. AR NOR THE LD. DR COULD CLEARLY INFORM ABOU T THE FINAL VIEW TAKEN ON THIS ISSUE FOR THE EARLIER YEARS, WE SET ASIDE T HE IMPUGNED ORDER AND SEND THE MATTER BACK TO THE FILE OF AO FOR DECIDING IT IN CONFORMITY WITH THE VIEW TAKEN BY US IN OUR ORDER FOR THE A.Y. 2006 -07. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 24 TH DAY OF APRIL, 2015. SD/- SD/- (R.S. SYAL) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 24 TH DAY OF APRIL, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.