Emerson Climate Technologies (India) Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 1(2), Pune

ITA 1714/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4926 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 02-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / ITA NO.1714/PUN/18 / ASSESSMENT YEAR : 2014-15 EMERSON CLIMATE TECHNOLOGIES (INDIA) PRIVATE LIMITED, PLOT NO.23, RAJIV GANDHI INFOTECH PARK, PHASE II, HINJEWADI, PUNE 411 057 PAN : AAACK7291C VS. DCIT, CIRCLE-1(2), PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 18.09.2018 PASSED BY THE ASSESS ING OFFICER (AO) U/S.143(3) R.W.S.144C(13) OF THE INCOME-T AX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2014-15. APPELLANT BY SHRI DHANESH BAFNA RESPONDENT BY SHRI S.B. PRASAD DATE OF HEARING 13-02-2019 DATE OF PRONOUNCEMENT 14-02-2019 ITA NO.1714/PUN/2018 EMERSON CLIMATE TECHNOLOGIES (INDIA) PRIVATE LIMITE D 2 2. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE ADDITION OF RS.13,74,20,445/- MADE BY THE AO ON ACCOUNT OF TRA NSFER PRICING ADJUSTMENT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND WAS A JOINT VENTURE BETWEEN KIRLOSKAR BROTHERS LIMITED (KBL) AND COPELAND CORPORATION, USA FOR CARRYING ON THE ACTIVITIES OF PLANNING, DEVELOPMENT, MANUFACTURING, ASSEMBLING, MARKETING AND SELLING COMPRESSORS AND PARTS OF VARIOUS TYPES, MODELS AND VARIETIES. SUBSEQUENTLY, THE COPELAND CORPORATION, USA BOUGHT THE STAKE OF KIRLOSKAR BROTHERS LIMITED. THE ASSESSEE COMPANY FILED ITS RETURN DECLARING TOTAL INCOME OF RS.70.51 CRORE AND ODD. CERTAIN INTERNATIONAL TRANSACTIONS WERE REPORTED. THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS. ONE OF THE REPORTED TRANSACTIONS WAS PAYM ENT OF FEES FOR ADVISORY AND OTHER SERVICES WITH TRANSACTED VALUE OF RS.13,74,20,444/-. THE ASSESSEE APPLIED TRANSACTION AL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR DEMONSTRATING THIS TRANSACTION TO BE AT ALP. THE TPO REJECTED ITA NO.1714/PUN/2018 EMERSON CLIMATE TECHNOLOGIES (INDIA) PRIVATE LIMITE D 3 SUCH A METHOD AND APPLIED THE COMPARABLE UNCONTROLLED PRICE (CUP) METHOD FOR THIS INTERNATIONAL TRANSACTION. IN THIS EXERCISE, HE DETERMINED NIL ALP OF THE INTERNATIONAL TRANSACTIONS OF `RECEIPT OF ADVISORY AND OTHER SERVICES. THE ASSESSEE CARRIED THE MATTER BEFORE THE DISPUTE RESOLUTION PANEL (DRP). FOLLOWING THE VIEW TAKEN FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, NAMELY, 2013-14, THE DRP U PHELD THE TRANSFER PRICING ADJUSTMENT PROPOSED BY THE AO IN THE DRAFT ORDER PURSUANT TO THE ORDER PASSED BY THE TPO. THE AO MADE TRANSFER PRICING ADDITION OF RS.13.74 CRORE IN THE FIN AL ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE HAS COME U P IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED FROM THE ORDER PASSED BY THE TPO THAT IN DETERMINING THE ALP AT NIL OF THE INTERNATIONAL TRANSACTION OF `RECEIPT OF ADVISORY AND OTHER SERVICES, HE RELIED ON THE DRPS DIRECTION GIVEN FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, FOR WHICH THERE IS A MENTION AT PAGE 53 OF HIS ORDER. THE DRP, TOO, FOLLOWED ITS OWN ORDER FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WHICH ASPECT HAS BEEN DISCUSSED AT PAGE 32 OF THE ORDER IN ITA NO.1714/PUN/2018 EMERSON CLIMATE TECHNOLOGIES (INDIA) PRIVATE LIMITE D 4 WHICH THE DRP HAS OBSERVED THAT THE FACTS ARE IDENTICAL TO THE FACTS DISCUSSED BY THE DRP IN A.Y. 2013-14 AND, THEREFOR E, FOLLOWING THE SAME, THESE GROUNDS ARE DISMISSED. IT IS A MATTER OF RECORD THAT THE APPEAL FOR THE A.Y. 2013-14 CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL. VIDE ORDER DATED 06-06-2018, THE TRIBUNAL IN ITA NO.2432/PUN/2017 HAS HELD THE TNMM TO BE THE MOST APPROPRIATE METHOD IN PREFERENCE TO THE CUP APPLIED BY THE TPO. AFTER GIVING CERTAIN DIRECTIONS, THE MATTER HAS BEEN SENT BACK TO THE AO/TPO FOR DECIDING THE ISSUE ACCORDINGLY. IN REACHING THIS CONCLUSION, THE TRIBUNAL RELIED ON ITS OWN ORDER FOR THE A.YS. 2009-10 AND 2010-1 1 IN WHICH SIMILAR VIEW WAS CANVASSED. COPIES OF ALL SUCH OR DERS OF THE TRIBUNAL, RIGHT FROM THE A.YS. 2009-10 TO 2013-14, HAVE BEEN PLACED ON RECORD IN WHICH SIMILAR VIEW HAS BEEN TAKEN . THE LD. DR FAIRLY CONCEDED THAT THE FACTS AND CIRCUMSTANCE S OF THE INSTANT APPEAL ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF EARLIER YEARS. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET - ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR DECIDING THIS ISSUE AFRESH IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ITA NO.1714/PUN/2018 EMERSON CLIMATE TECHNOLOGIES (INDIA) PRIVATE LIMITE D 5 PROVIDED ADEQUATE OPPORTUNITY OF HEARING IN SUCH FRESH PROCEEDINGS. 5. GROUND NO.4 AGAINST THE ADDITION OF RS.40,33,460/- TOWARDS LEAVE ENCASHMENT, WAS NOT PRESSED BY THE LD. AR . THE SAME IS, THEREFORE, DISMISSED AS NOT PRESSED. 6. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH FEBRUARY, 2019. SD/- SD/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESID ENT PUNE; DATED : 14 TH FEBRUARY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-13, PUNE 4. 5. THE PR.CIT-5, PUNE , , / DR A, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.1714/PUN/2018 EMERSON CLIMATE TECHNOLOGIES (INDIA) PRIVATE LIMITE D 6 DATE 1. DRAFT DICTATED ON 13-02-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 13-02-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *