DCIT, Circle - 10(2), Kolkata , Kolkata V. M/s. Vesuvius India Ltd., , Kolkata

ITA 1718/KOL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8099 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-08-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 10-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PAUL
• Keywords: Depreciation
• Section: 143(3); 144C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH VIRTUAL C KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1718/KOL/2018 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INCOME TAX, CIRCLE-10(2), AAYAKAR BHAWAN, P-7, CHOWRINIGHEE SQUARE, 3 RD FLOOR, KOLKATA-700 069 / V/S . M/S VESUVIUS INDIA LTD., P 104, TARA TALA ROAD, KOLKATA-700 088 [ PAN NO.AAACV 8995 Q ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI. SANJAY PAUL, ADDL. CIT-DR /BY RESPONDENT SHRI ASHISH PODDAR, FCA /DATE OF HEARING 13-08-2020 /DATE OF PRONOUNCEMENT -08-2020 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-22, KOLKATAS ORDER DATED 30.05.2018 PASSED IN CASE NO.119/CIT(A)-22/11-12/15-16/01., INVOLVING PROCEEDINGS 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. THE REVENUES SOLE SUBSTANTIVE GRIEVANCE RAISED IN THE INSTANT LIS SEEKS TO REVERSE THE CIT(A)S ACTION DELETING THE ARMS LEN GTH PRICE ADJUSTMENT OF 277,02,900/- UNDER THE HEAD MANAGEMENT AND TECHNICAL SERVICES . ITS CASE IS THAT ITA NO.1718/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(2), KOL. VS. M/S VESUVIUS INDIA LTD. PAGE 2 THE SINCE THE SAME ARE IN THE NATURE OF STEWARDSHIP ACTIVITIES BETWEEN ASSESSEE AND ITS OVERSEAS ASSOCIATE ENTERPRISES, THE TRANSFER PRICIN G OFFICERS ORDER DATED, 31.01.2015 HAD RIGHTLY DETERMINED ALP THEREOF AS NIL THEREBY PROPOSING ADJUSTMENT OF THE ENTIRE SUM IN ISSUE. 3. WE SEE NO REASON TO ACCEPT THE REVENUES FOREGOI NG SOLE SUBSTANTIVE GRIEVANCE. CASE FILE SUGGEST THAT THE SAME VERY ISSUE HAD ARIS EN BETWEEN THE PARTIES IN ASSESSMENT YEARS 2009-10 AND 2010-11 INVOLVING THE ASSESSEES APPEAL 206/KOL/2018 ALONGWITH REVENUES CROSS APPEAL(S) DECIDED ON 26.02.2020 ADJUDICATING THE VERY ISSUE I N ITS FAVOUR AS UNDER:- 20. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLU DING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE NOTE TH AT THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAD DECIDED THE MAT TER IN FAVOUR OF THE ASSESSEE BASED ON THE FOLLOWING OBSERVATIONS: A) THE ASSESSEE HAS REAPED BENEFITS OF OPERATIONAL EFFICIENCY, ACCOUNTING & MANAGEMENT REPORTING EFFICIENCY THROUGH THE EXECUTI ON OF THE AGREEMENT. B) THE SERVICES RENDERED BY THE AE WERE NOT IN THE NATURE OF STEWARDSHIP ACTIVITIES. LD COUNSEL SUBMITTED THAT APPELLANT HAD ENTERED INT O A SERVICE AGREEMENT (SA) DATED 22-02-2008 WITH ITS AE, I.E. VESUVIUS GROUP S.A, BE LGIUM (VGSA) FOR PROVISION OF VARIOUS MANAGEMENT AND SUPPORT SERVICES. IN TERMS O F ARTICLE 3 OF THE SA, VGSA HAS PROVIDED VARIOUS SERVICES TO THE APPELLANT UNDER TH E FOLLOWING CATEGORIES: SALES, MARKETING, VIP SUPPORT HUMAN RESOURCES; MANUFACTURING, ENGINEERING DEVELOPMENTS; & FINANCE, INFORMATION SYSTEMS, BUSINESS SUPPORT & DEVELOPMENT. IN TERMS OF ARTICLE 4 OF THE SA, THE APPELLANT HAS AGREED AND UNDERTAKEN TO PAY A SERVICE FEE FOR SPECIFIC AND SHARED SERVICES. FURTH ER, IN TERMS OF THE SAID ARTICLE, ALL DIRECT AND INDIRECT COST INCURRED BY VGSA IN RENDER ING SUCH SERVICES SHALL BE BROKEN INTO THE FOLLOWING 3 SERVICE CATEGORIES, INCLUDING ALL COSTS OF PERSONNEL, DEPRECIATION OF EQUIPMENT, OUTSIDE SERVICES AND OVERHEADS EXPENS ES: MARKETING, VIP AND TECHNICAL SALES SUPPORT (SERVI CE CATEGORY HUMAN RESOURCES SUPPORT (SERVICE CATEGORY - 2) FINANCE, INFORMATION SYSTEMS, BUSINESS SUPPORT AN D DEVELOPMENT, MANUFACTURING, ENGINEERING DEVELOPMENTS,(SERVICE CA TEGORY 3) THE BASIS OF CHARGE FOR SPECIFIC AND SHARED SERV ICES WERE AS UNDER: ITA NO.1718/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(2), KOL. VS. M/S VESUVIUS INDIA LTD. PAGE 3 FOR SPECIFIC SERVICES : ON COST BASIS OR THE BASIS OF MAN DAYS @ EURO 2000/1500 FOR SENIOR MANAGEMENT/OTHER EMPLOYEES RES PECTIVELY. FOR SHARED SERVICES : ON THE BASIS OF PRE-DEFINED ALLOCATION KEYS: SERVICE CATEGORY - 1 : ON THE BASIS OF APPELLANT'S DIRECT SALES VS. VES UVIUS DIVISION CONSOLIDATED DIRECT SALES; SERVICE CATEGORY - 2 : ON THE BASIS-OF APPELLANT'S PERSONNEL COSTS VS. V ESUVIUS DIVISION'S CONSOLIDATED PERSONNEL COSTS, EXCLUDING HQ COSTS SERVICE CATEGORY - 3 : ON THE BASIS OF APPELLANT'S NET ASSETS VS. VESUV IUS DIVISION'S CONSOLIDATED NET ASSETS AFTER DEDUCTION OF STEWARDSHIP COSTS. A MARK-UP OF 5% IS APPLIED ON THE PORTION OF ALLOCA TED SERVICES AFTER EXCLUSION OF EXTERNAL SERVICE FEES AND CONSULTATIONS ALLOCATE D AT COST SUBJECT TO THE CONDITION THAT TOTAL AMOUNT OF FEES CHARGED BY VGSA SHALL NOT EXCEED 1 MIO. EUROS ON AN ANNUAL BASIS. WE NOTE THAT DURING THE YEAR, THE APPELLANT HAS AVA ILED MANAGEMENT SERVICES FROM ITS AE AMOUNTING TO RS.3,10,48,978/ - ( INCLUDING PAYMENT FOR SPECIFIC SERVICES AMOUNTING TO RS. 26,48,778/-, (PB.9 ). THE APPELLANT HAD APPLIED TNNM TO BENCHMARK THE SAID TRANSACTION WHERE THE WEIGHTED A VERAGE, OPERATING INDUSTRY MARGIN ON TURNOVER (MOT) & MARGIN ON COST (MOC) WAS 16.98% AND 20.45% RESPECTIVELY WHILE THE APPELLANT WAS OPERATING WITH MOT OF 19.19% AND MOC OF 23.74% RESPECTIVELY [ PB PAGE 23-43 AT PG NO. 39 ]. THE APPELLANT WAS CHARGED A MARK-UP OF 5% ON THE MANAGEMENT SERVICE FEES ALLOCA TED TO THE APPELLANT. IT IS SUBMITTED THAT THE WEIGHTED AVERAGE MARGIN ON TURNO VER IN CASE OF COMPANIES ENGAGED IN PROVIDING SIMILAR SERVICES IS 15.23% (PB.43), WH ICH IS MUCH HIGHER THAN THE MARK- UP OF 5% CHARGED FROM THE APPELLANT AND HENCE THE S AID TRANSACTION IS AT ALP. IN TERMS OF THE PROVISION OF SEC. 92C(3), THE TPO CAN PROCEED TO DETERMINE THE ALP ONLY ON FULFILMENT OF THE CONDITIONS SPECIFIED IN C LAUSE (A) TO (D) OF THE SAID SECTION. IN THE ABSENCE OF ANY DEFAULT IN COMPLYING WITH THE CONDITIONS AS SPECIFIED IN PROVISIONS OF 92C(3), REJECTION OF APPELLANT'S BENC HMARKING [ BY APPLYING CPM READ WITH TNMM ] IS NOT PERMISSIBLE UNDER THE LAW. FOR THAT ASSESS EE RELIED ON THE FOLLOWING CBDT CIRCULARS AND PRECEDENTS: CBDT'S CIRCULAR 12 OF 2001 DATED 23 RD AUGUST, 20 01 CBDT'S CIRCULAR 14 OF 2001 DATED 22ND NOVEMBER 20 01 PHILIPS SOFTWARE CENTRE PRIVATE LIMITED - VS. - A CIT [(2008) 15 DTR 0505 (BANG.)] [AFFIRMED BY THE HON'BLE KARNATAKA HIGH CO URT IN CIT V. PHILIPS SOFTWARE CENTRE (P.) LTD. [2018] 95 TAXMANN.COM 214 (KARNATAKA)] NLC NALCO (INDIA) LIMITED VS DCIT [ ITA NO. 529/KOL./2008 & ITA NO. 1256/KOL/2009 ] DCIT V. LANDIS+ GYR LTD. [2017] 86 TAXMANN.COM 10 9 (KOLKATA - TRIB.) BESIDES, SERVICES ARE NOT IN NATURE OF SHAREHOLDER ACTIVITY NOR STEWARDSHIP ACTIVITIES, AS THE EMAIL CORRESPONDENCES SUBMITTED [PB PAGE 69-190] SUBSTANTIATE THAT THE SERVICES ARE IN THE NATURE OF INTRA-GROUP SERVICES (PARA 7.14 OF OECD GUIDELINES).THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY UPHELD AND GROUND ITA NO.1718/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(2), KOL. VS. M/S VESUVIUS INDIA LTD. PAGE 4 NOS. 1 , 2 IN ITA NO. 207/KOL/2018 AND GROUND NO. 3 AND 4 IN ITA NO. 206/KOL/2018 RAISED BY THE REVENUE ARE DISMISSED . 4. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO PI N-POINT ANY CLINCHING DISTINCTION ON THIS IDENTICAL ISSUE BETWEEN THE PARTIES IN ALL THESE THREE ASSESSMENT YEARS(S). THE CIT(A) ALSO APPEARS TO HAVE ADOPTED JUDICIAL CONSIS TENCY IN THIS BACKDROP OF FACTS. WE THUS FIND NO REASON TO INTERFERE WITH THE CIT(A)S ORDER UNDER CHALLENGE DELETING THE IMPUGNED ADJUSTMENT ADDITION. 5. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 19/08/2020 SD/- SD/- ( ') () ') (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS * - 19/08/2020 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-10(2), AYAKAR BHAWAN POORVA, 3 RD FLOOR, P-7 CHOWRINGHEE SQ UARE, KOLKATA-700 069 2. /RESPONDENT-SHRI AMARJIT BANTHIA, 23A, N.S.ROAD,2 ND FLOOR, ROOM NO.8 KOLKATA-001 3. - . / CONCERNED CIT 4. . - / CIT (A) 5. / ))- , - /DR, ITAT, KOLKATA 6. 3 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ -,