ACIT, CHENNAI V. Transworld Garnet India Pvt. Ltd., CHENNAI

ITA 1353/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4703 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: R SIVARAMAN
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 92D; 6; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1353/MDS/2013 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2), WANAPARTHY BLOCK, 4 TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI 600 034. (APPELLANT) VS M/S. TRANSWORLD GARNET INDIA PVT. LTD., 34/46, M.G.R. ROAD, KALASHETRA COLONY, BESANT NAGAR, CHENNAI 600 090. [PAN: AAACT 3408 N] (RESPONDENT) REVENUE BY : SHRI T.N. BETGERI, JCIT ASSESSEE BY : SHRI R. SIVARAMAN, ADVOCATE DATE OF HEARING : 26-09-2013 DATE OF PRONOUNCEMENT : 24 -10-2013 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), TRICHY DATED 06-03-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 6-07. THE I.T.A. NO. 1353/MDS/2013 2 REVENUE HAS FILED APPEAL AGAINST THE ORDER OF THE C IT(APPEALS) DELETING THE PENALTY LEVIED U/S. 271G OF THE INCOM E TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF WGI HEAVY MINERALS INC, U.S.A. THE ASSESSEE IS MANUFACTURING GARNET FROM THE SAND AT TUTICORIN. THE ENTIRE PRODUCE OF THE A SSESSEE IS EXPORTED TO ITS PARENT COMPANY AND ITS SUBSIDIARY U NITS. SINCE THE ENTIRE SALE IS DONE WITH ASSOCIATED ENTERPRISE AS D EFINED U/S. 92 OF THE ACT, THEREFORE, IT ATTRACTS THE PROVISIONS OF T RANSFER PRICING. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY. 2006-07 ON 28-11-2006 DECLARING ITS TOTAL INCOME AS NIL. DU RING THE AY. 2006-07, THE ASSESSEE ALLEGEDLY FILED AUDIT REPORT AS PRESCRIBED U/S. 92 OF THE ACT BEFORE THE TAX AUTHORITIES. THE AUDITORS CERTIFIED THAT THE ASSESSEE HAS MAINTAINED ALL THE RECORDS AS CONTEMPLATED IN SECTION 92D R.W. RULE 10D OF THE INCOME TAX RULE S, 1962. THE DETAILS OF TRANSFER PRICING CALCULATIONS WERE ALSO SUBMITTED. THE ASSESSEE HAD FOLLOWED COMPARABLE UN-CONTROLLED PRIC E [CUP] METHOD TO DETERMINE THE ARMS LENGTH PRICE [ALP]. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 16-12 -2008 PASSED U/S. 143(3) R.W.S. 115 WE(3), HELD THAT THE ASSESSEE HAS NOT GIVEN THE DETAILS OF THE COMPARABLE QUALITY OF THE MINERALS I.T.A. NO. 1353/MDS/2013 3 EXPORTED BY IT TO ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE HAS NOT FURNISHED THE DETAILS TO DETERMINE THE CORRECTNESS OF THE CUP PRICE CLAIMED BY THE ASSESSEE THEREFORE, NO ADJUSTMENT IS IN THE ALP CAN BE MADE. HOWEVER, PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE. THE DCIT, COMPANY CIRCLE-III(2), CHENNAI VIDE ORDER DATED 26-06-2009 PASSED U/S. 271G, IMPOSED PENALTY ON THE ASSESSEE FOR NON-FURNISHING/FILING OF THE DOCUMENTS/INFORMAT ION AS DETAILED U/S.92D(3) OF THE ACT. A PENALTY OF ` 23,00,880/- BEING 2% OF THE VALUE OF INTERNATIONAL TRANSACTION WAS LEVIED. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESS EE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) VIDE IMPUGNED ORDER, ALLOWED THE APPEAL OF THE ASSE SSEE AND DELETED THE PENALTY LEVIED U/S. 271G ON THE GROUND THAT THE ASSESSING OFFICER HAD CALLED FOR THE DETAILS REGARD ING THE QUALITY OF MEASUREMENT OF THE PRODUCT WHICH WERE DEALT ONLY BY THE COMPETITOR AND NOT BY THE ASSESSEE AND HENCE THERE WAS NO LAPSE ON THE PART OF THE ASSESSEE. THE ASSESSEE HAD GIVE N THE DETAILS REGARDING THE QUALITY OF MEASUREMENT DEALT BY HIM. I.T.A. NO. 1353/MDS/2013 4 AGGRIEVED AGAINST THE ORDER OF THE CIT(APPEALS), TH E REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI T.N. BETGERI, APPEARING ON BEHALF OF THE RE VENUE SUBMITTED THAT THE ASSESSEE HAD TO SUBSTANTIATE THE BASIS OF DETERMINING ALP UNDER CUP METHOD. THE LD. DR STRON GLY SUPPORTING THE PENALTY ORDER PASSED BY DY. COMMISSI ONER OF INCOME TAX PRAYED FOR SETTING ASIDE THE IMPUGNED OR DER. 4. ON THE OTHER HAND, SHRI R. SIVARAMAN, ADVOCATE A PPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ALL THE DE TAILS WERE FURNISHED BY THE ASSESSEE. THE ASSESSEE HAD MAINTA INED COMPLETE SET OF BOOKS OF ACCOUNT. THE ASSESSEE HAD ALSO FURNISHED AUDIT REPORT IN FORM NO. 3 CEB, THE AUDIT ORS OF THE ASSESSEE HAVE CERTIFIED THAT THE ASSESSEE HAS MAINT AINED ALL THE RECORDS AS REQUIRED UNDER THE PROVISIONS OF SECTION 92D R.W.R. 10D OF THE INCOME TAX RULES. THE LD. COUNSEL CONTENDED THAT THE SHOW CAUSE NOTICE DATED 16-12-2008 ISSUED U/S. 271G IS VAGUE AND DEFECTIVE. THE PENALTY WAS LEVIED U/S. 271G IN AN ARBITRARY AND UN-JUSTIFIED MANNER FOR NON-FURNISHING OF DOCUMENTS/INFORMATION. THE LD. COUNSEL STRONGLY SU PPORTED THE I.T.A. NO. 1353/MDS/2013 5 ORDER OF THE CIT(APPEALS) AND PRAYED FOR DISMISSAL OF THE APPEAL OF THE REVENUE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES. THE PENALTY HAS BEEN IMPOSED FOR NON- PRODUCTION/FURNISHING OF DOCUMENTS/INFORMATION SOUG HT BY THE ASSESSING OFFICER U/S. 92D. AS PER THE PROVISIONS OF SECTION 92D, EVERY PERSON WHO ENTERS INTO AN INTERNATIONAL TRANS ACTION IS REQUIRED TO MAINTAIN INFORMATION AND DOCUMENTS IN R ESPECT THERE OF AS PRESCRIBED UNDER RULE 10D OF THE INCOME TAX RULE S. RULE 10D GIVES THE DETAILS OF THE INFORMATION AND DOCUMENTS REQUIRED TO BE MAINTAINED BY THE PERSONS ENTERING INTO AN INTERNAT IONAL TRANSACTION. A PERUSAL OF THE IMPUGNED ORDER AND O THER DOCUMENTS ON RECORD WOULD SHOW THAT THE ASSESSEE HA S FILED STATUTORY BOOKS OF ACCOUNT AND THE AUDIT REPORT IN THE PRESCRIBED FORM NO. 3 CEB. IT IS NOT IN DISPUTE THAT THE AUDI TORS HAVE CERTIFIED THAT THE ASSESSEE HAS MAINTAINED ALL THE RECORDS AS CONTEMPLATED IN SECTION 92D R.W.R. 10D OF THE INCOME TAX RULES. WHAT WAS ALLEGEDLY NOT PRODUCED BY THE ASSESSEE WAS THE COMP ARABLE DATA OF THE COMPETITOR. WE DO NOT FIND ANY LAPSE ON THE PART OF THE ASSESSEE IN MAINTAINING STATUTORY DOCUMENTS AS REQU IRED U/S. 92D I.T.A. NO. 1353/MDS/2013 6 OF THE ACT SO AS TO ATTRACT PENAL PROVISIONS. THER E IS NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. THEREFORE, THIS APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON THURSDAY , THE 24 TH OCTOBER, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 24 TH OCTOBER, 2013 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR