AMCOL MINERALS AND MATERIALS (INDIA) PRIVATE LIMITED, Thane V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, Thane

ITA 149/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3586 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2013-2014
• Appeal Filed On: 05-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY CHOKSHI
• Keywords: Transfer pricing; International transaction; Additional evidence; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT, AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 149 / MUM . /201 8 ( ASSESSMENT YEAR : 20 1 3 1 4 ) AMCOL MINERALS AND MATERIALS INDIA PVT. LTD. OFFICE NO.6, 3 RD FLOOR ROSA VISTA BUILDING OPP. SURAJ WATER PARK WAGBIL, GORBUNDER ROAD THANE (WEST) 400 615 PAN AAJCA2681D . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1 , THANE . RESPONDENT REVENUE BY : SHRI UJJAWAL KUMAR ASSESSEE BY : SHRI SANJAY CHOKSHI DATE OF HEARING 17 . 02 .20 20 DATE OF ORDER 04.03.2020 O R D E R PER SAKTIJIT DEY. J.M. THE CAPTIONED APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 24 TH OCTOBER 2017, PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT') PERTAINING TO THE ASSESSMENT YEAR 2013 14, IN PURSUANCE TO THE DIRECTION S OF THE DISPUTE RESOLUTION PANEL 1 (DRP), MUMBAI. 2 AMCOL MINERALS AND MATERIALS INDIA PVT. LTD. 2. THE GROUNDS RAISED IN THE MEMORANDUM OF APPEAL ARE CONCERNING THE ISSUE OF ADDITION MADE OF ` 1,53,16,666, ON ACCOUNT OF ADJUSTMENT MADE TO THE ARM'S LENGTH PRICE OF CERTAIN INTERNATIONAL TRANSACTIONS WI TH THE ASSOCIATED ENTERPRISE (A E). 3. BRIEF FACTS ARE, THE ASSESSEE , A RE SIDENT COMPANY , IS STATED TO BE ENGAGED IN THE BUSINESS OF MINERALS BLENDING, WAREHOUSING AND TRADING OF CHROMITE SAND, B ENTONITE AND ALLIED PRODUCTS. AS STATED BY THE TRANSFER PRICING OFFI CER, TO SUPPLEMENT ITS BUSINESS THE ASSESSEE IMPORT S CHROMITE S AND FROM ITS GROUP COMPANY IN SOUTH AFRICA AND SOLD TO CUSTOMERS IN INDIA. AS STA TED, THE ASSESSEE ALSO IMPORTS B ENTONITE AND RELATED MINERALS FROM ITS A E IN USA AND A USTRALIA FOR FURTHER PROCESSING/ BLENDING WITH OTHER M INERALS/ INGREDIENT TO BE UTILIZED IN THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE. IT IS STATED THAT THE ASSESSEE IS A SUBSIDIARY OF AMCOL, MAURITIUS, WHICH IS ULTIMATELY OWNED BY MIN ER ALS TECHNOLOGIES INC., USA. DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE ENTERED INTO VARIOUS INT ERNATIONAL TRANSACTION S, SUCH AS , PROC UREMENT OF RAW MATERIALS FROM AES IN AUSTRALIA AN D USA, PURCHASE OF GOODS FROM A E IN SOUTH AFRICA FOR THE PURPOSE OF TRADING, PURC HASE OF FIXED ASSETS FROM THE AE IN EUROPE, ROYALTY FOR USE OF INTANGIBLE ASSETS, MANAGEMENT SERVICE, ISSUE OF EQUITY SHARES, ETC. IN THE TRANSFER PRICING OFFICER REPORT, THE ASSESSEE 3 AMCOL MINERALS AND MATERIALS INDIA PVT. LTD. BENCH MARKED ALL THESE TRANSACTIONS BY APPLY ING TRANSACTIONAL NET MARGIN METHOD ( TNMM ) AT ENTITY LEVEL. A FTER EXAMINING THE TRANSFER PRICING STUDY REPORT AND OTHER MATERIALS, THE TRANSFER PRICING OFFICER WAS NOT SATISFIED WITH ASSESSEES BENCH MARKING INSOFAR AS IT RELATES TO PURCHA SES OF RAW MATERIALS FROM THE A E S . THEREFORE, HE P ROCEEDED TO INDEPENDENTLY BEN CH MARK THE ARM'S LENGTH PRICE OF THE PURC HASE OF RAW MATERIAL FROM THE A E S . IN THE PROCESS, HE REJECTED SOME OF THE COMPARABLES SELECTED BY THE ASSESSEE. ULTIMATELY, HE CONSIDERED A SINGLE COMPARABLE VIZ. ASHAPURA MINECHEM LTD. AND ADOPTING THE MARGIN OF T HE SAID COMPARABLE COMPUTED @ 15.52%, HE DETERMINED THE ARM'S LENGTH PROFIT AT ` 58,56,312, THEREBY , MAKING AN ADJUSTMENT OF ` 1,53,16,666. THE ADJUSTMENT SUGGESTED BY THE TRANSFER PRICING OFFICER WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. AGAINST THE D RAFT ASSESSMENT ORDER, THE ASSESSEE RA ISED OBJECTIONS BEFORE LEARNED DRP. HOWEVER, LEARNED DRP DID NOT FIND MERIT IN THE OBJECTIONS OF THE ASSESSEE. 4. BEFORE US, AT THE OUTSET, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SOME ERRORS HAVE CRE PT INTO THE ORIGINAL TRANSFER PRICING STUDY REPORT , AS , WHILE COMPUTING THE ARM'S LENGTH PRICE, CERTAIN ADJUSTMENT ON ACCOUNT OF CAPACITY UTILIZATION AND SCALE OF OPERATIONS IN RELATION TO COMPARABLE S WERE NOT CONSIDERED. FURTHER, HE SUBMITTED , FIGURES IN RELATION TO W ORKING OF ARM'S LENGTH PRICE DERIVED FROM 4 AMCOL MINERALS AND MATERIALS INDIA PVT. LTD. MANUFACTURING ACTIVITY BY UTILIZING THE RA W MATERIAL PURCHASED FROM THE A ES WERE INCORRECTLY MENTIONED IN THE TRANSFER PRICING STUDY REPORT. THUS, HE SUBMITTED , TO RECTIFY THE ERRORS IN THE ORIGINAL TRANSFER PRICIN G STUDY REPORT, THE ASSESSEE HAS PREPARED A REVISED TRANSFER PRICING STUDY REPORT FROM A REPUTED CHARTERED ACCOUNTANT FIR M WHICH HE WANTS TO SUBMIT AS ADDITIONAL EVIDENCE. HE SUBMITTED , SINCE THE ADDITIONAL EVIDENCE GOES TO THE ROOT OF THE ADDITION MADE, T HE SAME MAY BE ADMITTED AND ISSUE MAY BE RESTORED BACK TO TH E FILE OF THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER FOR EXAMINING THE REVISED TRANSFER PRICING STUDY REPORT AND DECIDE THE ISSUE ACCORDINGLY. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITT ED , THOUGH , SUFFICIENT OPPORTUNITY WAS GIVEN TO THE ASSESSEE AT DIFFERENT STAGES, THE ASSESSEE HAS NOT FURNISHED THE REVISED TRANSFER PRICING STUDY REPORT AT ANY EARLIER STAGE. HOWEVER, HE LEFT IT TO THE DISCRETION OF THE BENCH TO RESTORE THE ISSUE TO THE ASSESSING OFFICER. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN FROM THE APPLICATION FILED BY THE A SSESSEE UNDER RULE 29 OF THE IT( AT) RULE S , 1963, IT HAS PREPARED A REVISED TRANSFER PRICING STUDY REPORT RECTIFYING CERTAIN MISTAKES STATED TO HAVE CREPT INTO THE ORIGINAL TRANSFER PRICING STUDY REPORT FURNISHED BEFORE THE TRANSFER PRICING OFFICER . AN AFFIDAVIT SWORN BY AN OFFICER OF THE 5 AMCOL MINERALS AND MATERIALS INDIA PVT. LTD. ASSESSEE COMPANY HAS ALSO BEEN FILED EXPLAINING THE NEED FOR FILING THE ADDITIONAL EVIDE NCE AND THE BEARING IT HAS ON THE TRANSFER PRICING ADJUSTMENT. AFTER CONSIDERING THE RELEVANT FACTS AS WELL AS THE NATURE OF ADDITIONAL EVIDENCES FILED, WE ARE OF THE VIEW THAT THE REVISED TRANSFER PRICING STUDY REPORT FURNISHED BY THE ASSE SSEE MAY HAVE A CRUCIAL BEARING ON THE DISPUTED ISSUE. THE REFORE, IN THE INTEREST OF FAIR PLAY AND J USTICE, THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE NEEDS TO BE ADMITTED. 7. HOWEVER, CONSIDERING THE FACT THAT TH E AFORESAID ADDITIONAL EVIDENCE HAS BEEN FURNISHED FOR THE FIRST TIME BEFORE THIS TRIBUNAL AND THE REVENUE AUTHORITIES NEVER HAD AN OCCASION TO GO THROUGH THE SAME, WE ARE INCLINED TO RESTORE THE ISSUE RELATING TO THE TRANSFER PRICING ADJUSTMENT OF PURCHASE OF RAW MAT ERIALS TO THE ASSESSING OFFICER /TRANSFER PRICING OFFICER FOR FRESH ADJUDICATION AFTER TAKING NOTE OF THE REVISED TRANSFER PRICING STUDY REPORT. AT THIS JUNCTURE, WE MUST MAKE IT CLEAR , WE HAVE NOT EXPRESSED ANY OPINION ON THE MERIT S OF THE ISSUE WHICH HAS TO BE DECIDED BY THE ASS ESSI NG OFFICER/ TRANSFER PRICING OFFICER KEEPING IN VIEW ALL RELEVANT FACTS AND IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THE ASSESSEE MUST BE AFFORDED A REASONABLE OPPORTUNITY OF HEARING BEFORE DECIDING THE ISSUE. 6 AMCOL MINERALS AND MATERIALS INDIA PVT. LTD. 8. IT IS RELEVANT TO OBSERVE , BEFORE US THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND S CHALLENGING THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271G AND 271AA OF THE ACT. IN OUR VIEW, AT THIS STAGE THE GROUNDS RAISED BY THE ASSESSEE CHALLENGING THE INITIATION OF PENALTY PROCEEDINGS ARE PR EMATURE AS NO ORDERS HAVE BEEN PASSED IM POSING PENALTY. IT IS ALWAYS OPEN TO THE ASSESSEE TO RAISE OBJECTIONS, IF ANY, AGAINST IMPOSITION OF PENALTY ONLY IN COURSE OF SUCH PROCEEDING AND BEFORE THE CONCERNED AUTHORITY. THESE GROUNDS ARE DISMISSED. 9. IN THE R ESULT, APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN C OURT ON 04.03.2020 SD/ - PRAMOD KUMAR VICE PRESIDENT SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMB AI, DATED: 04.03.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI