Assistant Commisisoner of Income-tax, V. Faurecia Interior Systems India Pvt. Ltd., Pune

ITA 1722/PUN/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3015 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-05-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 30-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JAYDEEP S KULKARN I
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVE DI, AM . / ITA NO.1722 /PUN/2015 / ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-9, PUNE. ....... / APPELLANT / V/S. FAURECIA INTERIOR SYSTEMS INDIA PVT. LTD. T-187, PIMPRI INDUSTRIAL AREA, ( B.G.BLOCK), BHOSARI, PUNE-411 026. PAN : AACCT0275F / RESPONDENT APPELLANT BY : SHRI AJAY MODI. RESPONDENT BY : SHRI JAYDEEP S. KULKARN I / DATE OF HEARING : 17.05.2018 / DATE OF PRONOUNCEMENT : 24.05.2018 / ORDER PER SUSHMA CHOWLA, JM THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-1, PUNE DATED 21.10.2015 RELAT ING TO ASSESSMENT YEAR 2008- 09 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) 2 ITA NO.1722/PUN/2015 A.Y.2008-09 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 10A(7) OF THE I.T.ACT, 1961. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE ADDITION MADE U/S . 10A(7) OF THE I.T. ACT, 1961 OF RS.2,88,69,742/- 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CI T(A) IN HOLDING THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING PRO VISIONS OF SECTION 10A(7) OF THE ACT AND TO DELETE THE ADDITION OF RS.2,88,69,742/-. 4. BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSEE W AS A JOINT VENTURE COMPANY BETWEEN TATA COMP SYSTEMS LTD. INDIA (TACO) AND FAU RECIA AUTOMOTIVE HOLIDAYS, FRANCE WITH EQUAL SHARE HOLDING, HAD UNIT REGISTERE D IN THE SOFTWARE TECHNOLOGY PARK (STP) AND WAS ENGAGED IN THE BUSINESS OF DESIG N ENGINEERING SERVICES. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR A.Y .2008-09 ON 29.09.2009, DECLARING TOTAL INCOME OF RS.2,81,340/- AS PER NORM AL PROVISIONS OF THE I.T ACT, 1961 AND RS. 5,04,28,913/- AS PER SECTION 115JB OF THE I .T. ACT, 1961. IN THE RETURN FILED THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION UNDER SE CTION10A OF THE I.T. ACT, 1961 AND RS. 5,07,09,119/-. THE TRANSFER PRICING OF FICER (TPO) HAS PASSED ORDER UNDER SECTION 92CA(3) OF THE I.T. ACT, 1961 DATED 1 8.10.2011. THE TPO IN HIS ORDER, HAD REQUESTED THE AO TO VERIFY THE FEASIBILITY OF D ISALLOWANCE UNDER SECTION10A OF THE ACT IN VIEW OF SEC.10A(7) R.W.S.80IA (10) OF TH E ACT, AS THE OPERATING PROFIT MARGIN WAS HIGHER THAN THAT OF THE COMPARABLES SELE CTED BY THE ASSESSEE. THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE A SSESSEE ASKING THE ASSESSEE TO EXPLAIN ITS CLAIM OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE ASSESSEE EXPLAINED THAT THERE WAS NO ARRANGEMENT BETWEEN THE ASSESSEE AND COMPARABLES SELECTED BY 3 ITA NO.1722/PUN/2015 A.Y.2008-09 THE ASSESSEE. HENCE, THE PROVISIONS OF SECTION 10A( 7) R.W.S.80IA(10) ARE NOT ATTRACTED. THE ASSESSING OFFICER, HOWEVER, REJECTED THE SUBMISSIONS OF ASSESSEE HOLDING THAT ORDINARY PROFIT AS PER TRANSFER PRICIN G REPORT WAS 12.55% AS AGAINST 29.14% SHOWN BY THE ASSESSEE. ACCORDINGLY, EXCESS P ROFIT WORKED OUT AT RS.2,88,69,742/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE; IN TURN, DISALLOWING THE EXCESS CLAIM OF DEDUCTION UNDER SEC TION 10A OF THE ACT, THE ASSESSING OFFICER PASSED ORDER UNDER SECTION 143(3) R.W.S 144C(13) OF THE ACT. 5. BEFORE CIT(A), THE ASSESSEE PLEADED THAT THE COU RSE OF BUSINESS BETWEEN ASSESSEE AND GROUP COMPANY/AES WAS NOT SO ARRANGED AS COVERED UNDER SECTION 10A(7) R.W.S. 80IA(10) OF THE ACT. IT WAS FURTHER P OINTED OUT THAT ASSESSEE HAD NOT EARNED MORE THAN ORDINARY PROFITS AND THE MARGIN SH OWN BY COMPARABLES COULD NOT BE BENCH-MARKED FOR ORDINARY PROFITS AS PER SECTION 10A(7) OF THE ACT. IT WAS FURTHER POINTED OUT BY THE ASSESSEE THAT PROVISIONS OF SECT ION 10A(7) R.W.S. 80IA(10) OF THE ACT WERE NOT APPLICABLE TO THE INTERNATIONAL TRANSA CTIONS. THE CIT(A) HELD THAT OPERATING MARGINS OF THE ASSESSEE HAD BEEN FLUCTUAT ING OVER THE YEARS, DEPENDING UPON PERFORMANCE OF THE COMPANY. THE OPERATING MARG INS OF THE ASSESSEE HAD BEEN FLUCTUATING FROM 18.42% TO 38.73% WHICH SHOWS THAT OPERATING MARGINS WAS BASED UPON THE PERFORMANCE OF THE ASSESSEE FOR THE PARTICULAR ASSESSMENT YEAR. FURTHER, CIT(A) HAD PLACED RELIANCE ON THE DECISION OF PUNE BENCH OF TRIBUNAL IN THE CASE OF M/S. HONEY WELL AUTOMATION INDIA LTD. VS. D CIT, ITA NO.18/PN/2011 RELATING TO ASSESSMENT YEAR 2006-07 ORDER DATED 25.02.2015. THE CIT(A) RELYING ON THE DECISION OF PUNE BENCH OF TRIBUNAL IN THE CASE OF M /S. HONEY WELL AUTOMATION INDIA LTD. VS. DCIT (SUPRA.) HELD THAT THE ISSUE IN THE P RESENT APPEAL IS IDENTICAL AND HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INV OKING THE PROVISIONS OF SECTION 10A(7) R.W.S. 80IA (10) OF THE ACT AND ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. 4 ITA NO.1722/PUN/2015 A.Y.2008-09 6. NOW, THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. ON SLATED DATE OF HEARING, THE ASSESSEE MOVED AN APPLICATION FOR ADJOURNMENT. SINCE THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE DECISION OF PUNE BENCH OF TRIBUNAL IN THE CASE OF M /S. HONEY WELL AUTOMATION INDIA LTD. VS. DCIT (SUPRA.), ADJOURNMENT APPLICATION WAS REFUSED AND MATTER WAS HEARD. 8. ON PERUSAL OF THE RECORD, WE FIND THE ISSUE RAIS ED IN THE PRESENT APPEAL IS AGAINST INVOKING PROVISION OF SECTION 10A(7) R.W.S 80IA(10) OF THE ACT. THE ASSESSEE HAD ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS RELATED CONCERNS/AES. THE TRANSFER PRICING ISSUE WAS REFERRED BY THE ASSE SSING OFFICER TO TPO WHO ACCEPTED THE MARGINS SHOWN BY ASSESSEE @ 29.14% TO BE AT ARMS LENGTH. THE ASSESSING OFFICER HELD THAT ORDINARY PROFITS AS PER TRANSFER PRICING REPORT WAS @ 12.55% AS AGAINST 29.14% SHOWN BY THE ASSESSEE. NO ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICE WAS PROPOSED BY THE TPO. HOWEVER , THE TPO REQUESTED THE ASSESSING OFFICER TO VERIFY THE FEASIBILITY OF DISA LLOWANCE UNDER SECTION 10A (7) R.W.S 80IA(10) OF THE ACT ON THE SURMISE THAT THE ASSESSE E HAD EARNED HIGHER MARGINS THAN THE MEAN MARGINS EARNED BY COMPARABLES SELECTE D BY ASSESSEE. ACCORDINGLY, DEDUCTION CLAIMED UNDER SECTION 10A OF THE ACT WAS REWORKED AT RS. 2,88,69,742/- AND ADDED BACK THE TOTAL INCOME OF THE ASSESSEE. TH E CASE OF THE ASSESSEE BEFORE AUTHORITIES BELOW WAS THAT IN THE ABSENCE OF ANY AR RANGEMENT BETWEEN THE ASSESSEE AND ITS GROUP COMPANIES/AES, MARGINS EARNE D BY ASSESSEE COULD NOT BE HELD TO BE MORE THAN ORDINARY PROFITS. IT WAS ALSO STRESSED BY THE ASSESSEE THAT IT HAD NOT EARNED MORE THAN ORDINARY PROFITS. WE FIND THE ISSUE RAISED IN PRESENT APPEAL STANDS COVERED BY A SERIES OF DECISIONS OF P UNE BENCH OF TRIBUNAL AND ON THIS COUNT, WE RELY ON THE DECISION OF PUNE BENCH I N THE CASE OF M/S. HONEY WELL 5 ITA NO.1722/PUN/2015 A.Y.2008-09 AUTOMATION INDIA LTD. VS. DCIT (SUPRA). THE RELEVAN T PORTIONS OF THE TRIBUNALS ORDER IS REPRODUCED BY CIT(A) AT PAGE 12 TO 17 OF THE APP ELLATE ORDER. ONLY REFERENCE IS BEING MADE TO THE FINDINGS OF THE TRIBUNAL IN THE S AID DECISION BUT SAME IS NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. THE ISSUE ARISI NG IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL ON TH IS COUNT IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, WE FIND NO MERIT IN THE GRO UNDS RAISED IN APPEAL BY REVENUE AND HENCE, ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON THIS 24TH DAY OF MAY, 2018. SD/- SD /- ( ANIL CHATURVEDI) (SUSHMA CHOWLA) /ACCOUNTANT MEMBER /JUDICIAL MEMBER / PUNE; ! / DATED : 24 TH MAY, 2018 SB !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-1, PUNE. 4. THE PR.CIT-4, PUNE. 5. '#$ %& , ' %& , ()* , / DR, ITAT, A BENCH, PUNE. 6. $+, -. / GUARD FILE. // TRUE COPY // '/ / BY ORDER, 0 %* /PRIVATE SECRETARY ' %& , / ITAT, PUNE.