The ACIT, Circle-1(1)(2), Vadodara V. M/s. Kemrock Industries and Exports Ltd., Vadodara

ITA 1592/AHD/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7235 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘डी ’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “ D ” BENCH, AHMEDABAD ] ] BEFORE SHRI PRAMOD M. JAGTAP, VICE PRESIDENT AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.1592/Ahd/2016 Assessment Year : 2009-10 The ACIT Cir.1(1)(2) Vadodara Vs M/s.Kemrock Industries & Exports Ltd. Vill. Asoj, Vadodara-Halol Expressway Taluka – Waghodia Vadodara – 391 510 PAN : AAACK 8810 B ी / (Appellant) / (Respondent) Assessee by : - None - Revenue by : Shri Mohd Usman, CIT-DR /Date of Hearing : 12/05/2022 /Date of Pronouncement: 15/06/2022 आदेश/O R D E R PER PRAMOD M. JAGTAP, VICE-PRESIDENT This appeal is preferred by the Revenue against the order of Ld. Commissioner of Income-tax (Appeals)-1, Vadodara [CIT(A)] dated 04 th March-2016 and the solitary issue involved therein relates to Transfer Pricing adjustment. 2. The assessee, in the present case, is a company which is engaged in the business of manufacturing of Fiberglass Reinforced Polymer Composite Products and Resins. The return of income for the year under consideration was filed by it on 30/09/2009 declaring a total income of Rs.11,52,94,990/-. The said return was selected for scrutiny under CASS and a notice ITA No.1592/Ahd/2016 ACIT vs.M/s. Kemrock Industries & Exports Ltd. AY: 2009-10 2 u/s.143(2) of Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued by the Assessing Officer to the assessee on 18/08/2010 and 24/08/2010. As noted by the Assessing Officer during the course of assessment proceedings, the assessee-company had entered into International Transactions with its Associated Enterprises (AEs), aggregate value of which exceeded Rs.5 crores. He, therefore, made a reference to the TPO u/s.92CA of the Act for determining the Arm’s Length Price (ALP) of the said transactions. After examining the Transfer Pricing study report furnished by the assessee, the TPO accepted the price charged by the assessee to its Associated Enterprises(AEs) as ALP except in respect of the International Transactions representing the sale of finished goods, i.e. resins. In respect of these transactions, the turnover filter adopted by the assessee at Rs.75 crores to Rs.400 crores was not accepted by the TPO and the same was revised by him at Rs.10 crores to Rs.1000 crores being 1/10 th and 10 times of the turnover of the assessee-company. In the Transfer Pricing study report, the assessee-company had rejected comparables from Government Sector, Foreign Sector and Co-operative Sector. The TPO accepted the same only in respect of Government owned companies and held that other entities could not be rejected as comparables solely on the basis of that they belonged to Foreign Sector and Co-operative Sector. The TPO also rejected the entities having less than 90% of their turnover from manufacturing. He also rejected certain entities from the list of final comparables on the basis of peculiar economic circumstances as specifically pointed out by him. The TPO thus accepted only one entity selected by the assessee as comparable and selected seven more entities as comparables by carrying out a fresh search. In the Transfer Pricing study report, operative profit to sales was taken by the assessee as the Profit Level Indicator (PLI) ITA No.1592/Ahd/2016 ACIT vs.M/s. Kemrock Industries & Exports Ltd. AY: 2009-10 3 which was changed by the TPO to operative profit to operative cost. Accordingly, the PLI of the assessee-company was computed by the Assessing Officer at 02.80% as against the PLI of the comparables calculated at 08.10% and a Transfer Pricing adjustment of Rs.5,48,31,917/- was determined by the TPO. In the assessment made by the Assessing Officer u/s.143(3) of the Act read with section 144C(1) of the Act vide an order dated 18/03/2013, an addition to that extent as determined by the TPO was made by the Assessing Officer to the total income of the assessee on account of Transfer Pricing adjustment. 3. The addition made by the Assessing Officer on account of Transfer Pricing adjustment was challenged by the assessee in appeal filed before the Ld.CIT(A) and various objections were raised on behalf of the assessee before the Ld.CIT(A) in the methodology adopted by the TPO to determine the Transfer Pricing adjustment. One of the objections raised by the assessee regarding turnover filter of Rs.100 crores to Rs.1000 crores adopted by the TPO as against Rs.75 crores to Rs.400 crores adopted by the assessee was not accepted by the Ld.CIT(A) and overruling the same, he upheld the turnover filter adopted by the TPO. He also upheld the action of the TPO in accepting the entities from Foreign Sector and Co-operative Sector as comparables. The objection raised by the assessee in relation to the search process carried out by the TPO was also overruled by the Ld.CIT(A) observing that the same was based upon acceptable norms. As regards the assessee’s claim for working capital adjustment, the Ld.CIT(A) held that working capital adjustment was already allowed by the TPO and the assessee could not point out any specific defect in the same. Having rejected all these objections raised by the assessee, the Ld.CIT(A), however, ITA No.1592/Ahd/2016 ACIT vs.M/s. Kemrock Industries & Exports Ltd. AY: 2009-10 4 accepted the claim of the assessee that the Transfer Pricing adjustment should be restricted only in respect of turnover of the assessee-company relating to the sale of resins to its Associated Enterprises (AEs) and the same should not be done in relation to all the transactions as wrongly done by the TPO. For this proposition, the Ld.CIT(A) relied on the decision of Delhi Bench of this Tribunal in the case of Aithent Technologies (P.) Ltd. vs. DCIT, Circle-1(1), New Delhi reported in (2015) 57 taxmann.com 10 (Delhi Trib). Aggrieved by the order of the Ld. CIT(A), the Revenue has preferred this appeal on the following ground: “On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in law and fact in holding that the adjustment should be restricted to the turnover of the assessee company relating to the sale of resins to its AEs only.” 4. At the time of hearing fixed before the Tribunal, none has appeared on behalf of the assessee. There was a similar non-compliance on the part of the assessee even when this appeal was earlier fixed for hearing on various occasions. Therefore, this appeal of the Revenue is being disposed of ex-parte qua the respondent-assessee after hearing the arguments of the Ld.DR and perusing the relevant material available on record. It is observed that the solitary issue involved in this appeal of the Revenue relating to the restriction of Transfer Pricing adjustment only in respect of the relevant international transaction of the assessee-company with its AEs representing sale of resins is squarely covered by various judicial pronouncements including the decision of Delhi Bench of this Tribunal in the case of Aithent Technologies (P.) Ltd. (supra) relied upon by the Ld.CIT(A) in his impugned order. At the time of hearing before us, the Ld.DR has also not been able to dispute this position. He has also not cited ITA No.1592/Ahd/2016 ACIT vs.M/s. Kemrock Industries & Exports Ltd. AY: 2009-10 5 any case-law which is in favour of Revenue on this issue. We, therefore, respectfully follow the decision of Coordinate Bench of this Tribunal in the case of Aithent Technologies (P.) Ltd. (supra) and uphold the impugned order of the Ld.CIT(A) directing the Assessing Officer to restrict the Transfer Pricing adjustment only in respect of international transaction of the assessee-company with its AEs representing the sale of resins. 5. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 15 th June, 2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (PRAMOD M. JAGTAP) VICE-PRESIDENT Ahmedabad, Dated 15/06/2022 . ी. य , . . ./T.C. NAIR, Sr. PS ! "# /Copy of the Order forwarded to : 1. "!ी $% / The Appellant 2. &य$% / The Respondent. 3. '(')* य य + / Concerned CIT 4. य य + )"!ी (/ The CIT(A)-1, Vadodara 5. . /ीय )* , य "!ी य ")* , ज /DR,ITAT, Ahmedabad, 6. / 12 3 /Guard file. / BY ORDER, &य ! //True Copy// ह य !'जी (Asstt. Registrar) य "!ी य ")* , ITAT, Ahmedabad