M/s. Ecom Gill Coffee Trading Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 1389/BANG/2010

• Counselvise Citation: 138921114 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-04-2012
• Assessment Year: misc
• Appeal Filed On: 06-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIII
• Assessee Lawyers: CHYTANYA K K
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.K SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER ITA NO.138 9/BANG/2010 (ASST. YEAR - 2006-07) M/S ECOM GILL COFFEE TRADING PVT. LTD., #489/11, BOREWELL ROAD, WHITEFILED, BANGALORE-560 066. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-11(3), BANGALORE. . RESPONDENT PAN NO.AAACE 7863N. APPELLANT BY : SHRI CHYTANYA K.K, ADVOCATE RESPONDENT BY : SHRI ETWA MUNDA, CIT-III DATE OF HEARING : 19-04-2012 DATE OF PRONOUNCEMENT : 26-04-2012 O R D E R PER SMT. P MADHAVI DEVI, JUDICIAL MEMBER THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE PROCEED INGS OF THE DISPUTE RESOLUTION PANEL AT BANGALORE DATED 28.09.2010. TH E APPEAL ARISES OUT OF THE PROCEEDINGS COMPLETED U/S 144C(5) R.W.S 144C(8) OF THE INCOME-TAX ACT, 1961. ITA NO.1389/B/10 2 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE COMPUTATION AND ADJUSTMENT MADE TO THE ARMS LENGTH PRICE (ALP) BY THE TPO/AO AND CONFIRMED BY THE DRP. 3. THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS O F APPEAL, THE MAIN GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO THE REJ ECTION OF CUP METHOD FOLLOWED BY THE ASSESSEE AND ADOPTING THE TRANSACTI ONAL NET MARGIN METHOD (TNMM) FOR COMPUTING THE ALP OF THE INTERNATIONAL T RANSACTION AND ALSO AGAINST THE ORDER OF THE DRP IN NOT CONSIDERING THE ASSESSEES OBJECTIONS RELATING TO THE COMPARABLES ADOPTED BY THE TPO. 4. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ELABORATELY ARGUED ON THE NON-COMPARABILITY OF TH E ASSESSEES CASE WITH THAT OF INDIA PRODUCTS LTD., ONE OF THE COMPARABLE ADOPTED BY THE TPO ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE AND THAT OF IND IA PRODUCTS LTD., ARE NOT COMPARABLE AT ALL. HE HAS DRAWN OUR ATTENTION TO V ARIOUS PAGES OF PAPER BOOK FILED BEFORE US RELATING TO THE BUSINESS ACTIVITIES OF INDIA PRODUCTS LTD., (WHICH HAS BEEN DOWN LOADED FROM THE INTERNET) TO DEMONSTR ATE THAT INDIA PRODUCTS LTD.,IS MAINLY DEALING WITH SPICES, WHILE THE ASSE SSEE IS DEALING IN COFFEE. HE SUBMITTED THAT THOUGH IN SOME OF THE SITES, IT IS M ENTIONED THAT INDIA PRODUCTS LTD., IS ALSO TRADING IN COFFEE AND HENCE TAKEN A S A COMPARABLE, IT IS STILL NOT ITA NO.1389/B/10 3 COMPARABLE. HE HAS ALSO DRAWN OUR ATTENTION TO THE NET MARGINS OF ALL THE THREE COMPARABLES TAKEN BY THE TPO TO DEMONSTRATE THAT WH EN THE NET MARGINS ARE TAKEN ON GLOBAL BASIS AND ON THE INDIA SPECIFIC BAS IS, THERE ARE LARGE VARIATIONS. HE SUBMITTED THAT ONLY THE LIKES OR EQUALS CAN BE C OMPARED WITH EACH OTHER WHILE IN THE CASE BEFORE US, THE COMPARABLE TAKEN B Y THE TPO, I.E INDIA PRODUCTS LTD., IS NOT IN THE BUSINESS OF TRADING I N COFFEE AND HENCE CANNOT BE CONSIDERED AS A COMPARABLE. FURTHER HE ALSO SUBMIT TED THAT OTHER COMPARABLE ADOPTED BY THE TPO, I.E BALANOOR PLANTATION & INDS. LTD., IS MAINLY IN THE PLANTATION ACTIVITY, WHEREAS THE TAX PAYER IS INVOL VED IN THE TRADING OF COFFEE AND THEY ARE FUNCTIONALLY DIFFERENT BUT THE TPO AS WELL AS THE DRP HAVE FAILED TO CONSIDER THE SAME. 5. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW : 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT BOTH THE TPO AS WELL AS T HE DRP HAVE NOT CONSIDERED THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE C OMPARABLES SELECTED BY THE TPO FOR ARRIVING AT THE ALP. AS SEEN FROM THE SUBMI SSIONS OF THE ASSESSEE, THE GLARING DIFFERENCES THAT APPEARS TO US ARE THAT I NDIA PRODUCTS LTD., IS IN THE BUSINESS OF PROCESSING AND TRADING IN SPICES, WHERE AS THE ASSESSEE IS IN THE BUSINESS OF TRADING IN COFFEE. FURTHER THE TPO HAS ALSO OBSERVED IN HIS REMAND REPORT TO THE DRP THAT THE ANNUAL ACCOUNTS OF THE COMPANY INDIA PRODUCTS ITA NO.1389/B/10 4 LTD., ARE NOT AVAILABLE IN THE PUBLIC DOMAIN. TH US, IN OUR VIEW WITHOUT PROPER INFORMATION RELATING TO THE ACTIVITIES CARRIED ON B Y THE COMPANY INDIA PRODUCTS LTD., AND ALSO THE SEGMENTAL INFORMATION RELATING ITS INCOME FROM VARIOUS SOURCES AND ACTIVITIES, THE SAID COMPANY CANNOT BE TAKEN AS COMPARABLE FOR COMPUTING THE ALP. ACCORDING TO US, THE DRP HAS N OT DEALT WITH THE ISSUE IN A JUDICIOUS MANNER. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE TO THE FILE OF THE AO/TPO FOR RECONSIDERATION OF THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE METHOD OF COMPUTING THE AL P I.E WHAT IS THE MOST APPROPRIATE METHOD, CUP OR TNMM AND ALSO THE COMPAR ABLES ADOPTED BY THE TPO. THUS, THE ISSUES ARE SET ASIDE FOR DENOVO CON SIDERATION. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVEN AMPLE OPPO RTUNITY OF HEARING. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 TH APR, 2012. SD/- SD/-+ (N.K SAINI) (P MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 26/04/12 VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, ITAT, BAN GALORE. ITA NO.1389/B/10 5