Autoneum Nittoku Sound Proof Products India Private Limited, Sriperambudur V. ACIT, CHENNAI

ITA 1425/CHNY/2014

• Counselvise Citation: 142521714 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 14-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2014
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 92C; 10B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1425 /MDS./201 4 ( !' #' / ASSESSMENT YEAR :2009-10) M/S.AUTONEUM NITTOKU SOUND PROOF PRODUCTS INDIA P LTD., ( FORMERLY RIETER NITTOKU AUTOMOTIVE SOUND PROOF PRODUCTS INDIA P LTD.) PLOT NO.RNS 15,RENAULT NISSAN SUPPLIER PARK, SIPCOT INDUSTRIAL GROWTH CENTRE , ORAGADAM, SRIPERUMBUDUR 602 105. VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(4), CHENNAI. PAN AAECR 1409 H ( / APPELLANT ) ( / RESPONDENT ) $% & ' / APPELLANT BY : MR.RAGHUNATHAN SAMPATH,ADVOCATE ()$% & ' / RESPONDENT BY : MR.MILIND MADLUIKAR BHUSARI, CIT, D.R * + & ,- / DATE OF HEARING : 14.09.2015 .# & ,- /DATE OF PRONOUNCEMENT : 29.09.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFICER PURSUANT TO THE ORDER OF THE T.P.O AND THE DIRECTIONS ISSUED BY THE D.R.P. ITA NO.1425/MDS/2014 2 2. THE ASSESSEE HAS RAISED SEVERAL ELABORATE GROUN DS IN ITS APPEAL; HOWEVER THE LEARNED COUNSEL FOR THE ASSESSEE CONCED ED THAT THE CRUX OF THE ISSUE IS THAT THE LD.TPO, AND THE LD. A .O UNDER THE DIRECTIONS ISSUED BY THE HONBLE DISPUTE RESOLUTION PANEL HAS ERRED BY DETERMINING THE DESIGN CHARGES PAID BY THE ASSES SEE COMPANY AS ` 1,90,72,196/- AGAINST THE ACTUAL PAYMENT OF ` 3,49,10,547/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AUTOMATIC SOUND PROOF AND HEAT PROOF PRODUCTS, FILED ITS RETURN OF INCOME ELE CTRONICALLY ON 30.09.2009. SUBSEQUENTLY THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS MADE ON 24.02.2014 U/S.143(3) R.W.S 144C OF INCOME TAX ACT. 4. THE LD. A.R. SUBMITTED BEFORE US THAT DURING TH E YEAR 2005 NISSAN MOTORS DECIDED TO INTRODUCE A NEW SERIES OF COMPACT CARS SIMULTANEOUSLY FOR THE MARKETS OF CHINA, INDIA AND THAILAND. THE CAR WAS NAMED AS MARCH FOR CHINA MARKET AND MICRA FOR INDIAN AND THAILAND MARKETS. M/S.NITTOKU DEVELOPED INITIAL DES IGNS FOR TRIM PRODUCTS AND ALSO CARRIED OUT VARIOUS DESIGN MODIFI CATIONS AS ITA NO.1425/MDS/2014 3 REQUIRED BY NISSAN. DURING THE DESIGN STAGE, M/S.N ITTOKU WAS IN CONSULTATION WITH NISSAN ABOUT THE TYPE OF MATERIAL S USED AND DEPLOYED QUALIFIED ENGINEERS WITH LONG EXPERIENCE I N DEVELOPING VARIOUS PRODUCTS LIKE CARPETS, DASH-INNER-OUTER AND SPACES FOR THE NEW SERIES OF CARS. M/S.NITTOKU HAD THUS DEVELOPED THE NEW DESIGNS FOR PRODUCTION FOR CARS IN CHINA, INDIA AND THAILAN D WHICH WAS APPORTIONED TO THE THREE JOINT VENTURE COMPANIES OF M/S. RIETER AND M/S.NITTOKU I.E., M/S. SUMMIT REITER NITTOKU SOUNDP ROOF COMPANY (THAILAND), M/S. REITER AUTOMOTIVE SOUND PROOF PROD UCTS (INDIA) PVT LTD.,(INDIA) THE ASSESSEE COMPANY AND M.S REITER NI TTUKU GUANGHOU AUTOMOTIVE SOUND-PROOF CO. LTD., (CHINA) ON THE BAS IS OF ANNUAL EXPECTED SALES VOLUME INDICATED BY NISSAN AS FOLLOW S:- COUNTRY XO2A VOLUME XO2B VOLUME TOTAL ESTIMATED VALUE APPORTION MENT RATIO INDIA 1,30,586 1,02,265 2,32,851 48.1% CHINA 55,440 60,000 1,15,440 23.8% THAILAND 81,780 54,355 1,36,135 28.1% TOTAL 2,67,806 2,16,620 4,84,4236 100% ITA NO.1425/MDS/2014 4 5. IT WAS FURTHER SUBMITTED THAT, THE LD. A.O. UNDE R THE DIRECTIONS OF LD. TPO, HAS DETERMINED THE ALP FOR THE PRODUCTION DEVELOPMENT EXPENSES PAID TO M/S NITTOKU AT RS. 1,90,72,196/- A S AGAINST THE ACTUAL PAYMENT OF RS. 3,49,10,547/- BASED ON THE AC TUAL SALES FOR THE ENTIRE YEAR EFFECTED BY NISSAN IN INDIA, CHINA AND THAILAND WHICH IS WORKED OUT AS FOLLOWS:- COUNTRY EXPECTED SALES BY ASSESSE E APPORTIO N MENT RATIO BY ASSESSE E APPORTION MENT BASED ON ESTIMATED SALES (RS.) ACTUAL SALES APPORTIO N MENT RATIO BASED ON ACTUAL SALES APPORTION MENT BASED ON ACTUAL SALES (RS.) DIFFERENCE (RS.) INDIA 232,851 48.07 34,910,547 75,906 26.26 1,90,7 2,196 1,58,38,351 CHINA 115,440 23.83 17,307,521 152,536 52.76 3,82,8 9,649 THAILAND 136,135 28.10 20,410,251 60,665 20.98 1,52 ,66,474 484,426 100 72,628,319 289,107 100 72,628,319 6. IT WAS FURTHER SUBMITTED BY THE LD. AR THAT THE HONBLE DRP UPHELD THE DRAFT ORDER OF THE LD. AO. THE LD. DR CO NCEDED TO THE ABOVE SUBMISSION OF THE LD. AR. THEREAFTER, THE LD. AR VEHEMENTLY ARGUED BY STATING THAT THE REVENUE HAS NOT FOLLOWED ANY OF THE PRESCRIBED METHOD ENVISAGED IN RULE 10B OF THE RULES FOR DETERMINING THE ARMS LENGTH PRICE AS PROVIDED UNDER SECTION 92C OF THE ACT. HE FURTH ER SUBMITTED THAT THE DETERMINATION OF ARMS LENGTH PRICE FOR PAYMENT OF ITA NO.1425/MDS/2014 5 PRODUCT DEVELOPMENT EXPENSES ON THE BASIS OF APPORT IONMENT OF COST BASED ON THE ESTIMATED SALES OR ACTUAL SALES IS NOT A PRESCRIBED METHOD FOR DETERMINING THE ALP UNDER THE PROVISIONS OF THE ACT. HE, THEREFORE, PLEADED THAT THE MATTER MAY REMITTED BAC K TO THE FILE OF THE LD. TPO FOR DE NOVO CONSIDERATION. LD. DR COULD NO T CONTROVERT TO THE SUBMISSIONS OF THE LD. AR AND THEREAFTER CONCED ED THAT THE MATTER MAY BE SENT BACK TO THE FILE OF THE LD.T.P.O FOR DENOVO CONSIDERATION. 7. AFTER HEARING BOTH SIDES, WE FIND MERIT IN THE C ONTENTION OF THE LD. AR. IT IS APPARENT FROM THE ORDER OF THE LD. T PO AND DRP THAT THE PRESCRIBED METHOD FOR DETERMINING ALP UNDER RULE 10 B OF THE ACT HAS BEEN LOST SIGHT OFF BY THE REVENUE AS WELL AS BY TH E ASSESSEE AND THEY HAD PROCEEDED TO COMPUTE THE ALP BY APPORTIONI NG THE COST ON THE BASIS OF ESTIMATED SALES. THIS METHOD OF COMPU TATION ADAPTED BY BOTH THE ASSESSEE AND REVENUE IS ERRONEOUS AND NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THEREFORE, WE REMI T THE MATTER BACK TO THE FILE OF LD. TPO TO COMPUTE THE ALP FOR THE PROD UCT DEVELOPMENT EXPENSES INCURRED BY THE ASSESSEE BY FOLLOWING THE PROVISIONS OF THE ACT AND BY CONSIDERING THE ISSUE AFRESH. ITA NO.1425/MDS/2014 6 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 29 TH SEPTEMBER, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 29 TH SEPTEMBER, 2015. K S SUNDARAM. & (,/0 1 0#, /COPY TO: 1. $% /APPELLANT 2. ()$% /RESPONDENT 3. * 2, ( ) /CIT(A) 4. * 2, /CIT 5. 05 (,6! /DR 6. ' 7+ /GF