Appeal details
Counselvise Citation
[2019] 115 COUNSELVISE.COM (IT) 7592 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
11 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-10-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
15-10-2019
Assessment Year
2014-2015
Appeal Filed On
14-11-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO. 1748/PUN/2018 / ASSESSMENT YEAR : 2014-15 SPICER INDIA PRIVATE LIMITED, 29 MILESTONE, PUNE-NASHIK HIGHWAY, VILLAGE KURULI, TALUKA KHED, DISTRICT PUNE PAN : AAECS1869C VS. ACIT, CIRCLE-10, PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER DATE D 27-09-2018 PASSED BY THE ASSESSING OFFICER U/S.143(3) R .W.S. 144C(13) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2014-15. 2. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE MAKING O F THE TRANSFER PRICING ADJUSTMENT IN RESPECT OF ROYALTY PAYMENT. APPELLANT BY SHRI R.D. ONKAR RESPONDENT BY SHRI T. VIJAYA BHASKAR REDDY, CIT DATE OF HEARING 16-10-2019 DATE OF PRONOUNCEMENT 17-10-2019 ITA NO.1748/PUN/2018 SPICER INDIA PRIVATE LIMITED 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN DECLARING TOTAL INCOME OF ODD RS.75.67 CRORE. SUC H RETURN WAS ACCOMPANIED BY THE AUDIT REPORT IN FORM NO. 3CEB INDICATIN G INTERNATIONAL TRANSACTIONS, INTER ALIA, OF PAYMENT OF ROYALTY AMOUNTING TO RS.15,36,43,405/-. THE ASSESSING OFFICER ( AO) MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DE TERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS/SPECIFIED DOMESTIC TRANSACTIONS. THE TPO OBSERVED THAT THE ASSESSEE APPLIED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF PAYM ENT OF ROYALTY. AFTER ENTERTAINING OBJECTIONS FROM THE ASSESSEE, THE TPO DETERMINED NIL ALP OF THE INTERNATIONAL TRANSACTION BY HOLDING THAT THE ASSESSEE DID NOT RECEIVE ANY BENEFIT FROM TH E PAYMENT OF ROYALTY. THE DISPUTE RESOLUTION PANEL (DRP), ON P AGE 10 OF ITS ORDER, OBSERVED THAT THE ISSUE RAISED WAS SIMI LAR TO THAT DECIDED BY IT IN ITS ORDER FOR THE A.Y. 2012-13. RELEVANT P ARTS OF ITS ORDER FOR SUCH PRECEDING YEAR HAVE BEEN REPRODUCED O N PAGES 11 AND 12 OF THE IMPUGNED ORDER BY THE DRP. CONSIDERING THE FACTS AND CIRCUMSTANCES AS IDENTICAL TO THOSE FOR THE A.Y. 2012-13 , THE DRP UPHELD THE ACTION OF THE TPO ON THIS SCORE. THE AO PASSE D THE ITA NO.1748/PUN/2018 SPICER INDIA PRIVATE LIMITED 3 FINAL ORDER MAKING TRANSFER PRICING ADDITION, INTER ALIA, ON THIS SCORE, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IT IS PERTINENT TO NOTE THAT THE DRP CONFIRMED THE ACTION OF THE TPO BY RELYING ON ITS ORDER FOR THE A.Y. 2012-13. IT IS INTERESTING TO NOTE THAT THE ORDER PASSED BY THE AO, IMPLEMENTING THE DIRECTION OF THE DRP, FOR THE A.Y. 2012-13 CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL. VIDE ITS ORDER D ATED 11-12-2018 IN ITA NO.2948/PUN/2016, THE TRIBUNAL HAS DELETE D SIMILAR TRANSFER PRICING ADJUSTMENT BY FOLLOWING ITS ORDERS FOR THE A.YS. 2009-10 TO 2011-12. RELEVANT DISCUSSION HAS BEEN MADE IN PARA 6 OF THE ORDER OF THE TRIBUNAL. THE LD. DR TRIED TO DIS TINGUISH THE FACTS OF THE INSTANT CASE VIS--VIS THE PRECEDING YEAR BY CONTENDING THAT THE TECHNOLOGY, IN RESPECT OF WHICH THE ROYALT Y WAS PAID, WAS ACTUALLY ACQUIRED FROM THE ASSOCIATED ENTERPRISES A BOUT 15 YEARS AGO AND THERE WAS NO RATIONALE IN CONTINUING TO M AKE THE PAYMENT. IN OUR CONSIDERED OPINION, THIS POINT DOES NOT C ARRY ANY WEIGHT BECAUSE WHAT WAS RELEVANT FOR THE IMMEDIATELY PRECED ING YEAR CONTINUES TO REMAIN SO EVEN FOR THE YEAR UNDER CONS IDERATION IN AS MUCH AS THE SITUATION HAS NOT UNDERGONE ANY CHANGE IN ONE YEAR, ITA NO.1748/PUN/2018 SPICER INDIA PRIVATE LIMITED 4 WHEN WE CONSIDER THAT THE TECHNOLOGY WAS ACQUIRED 15 YEARS AGO. RESPECTFULLY FOLLOWING THE PRECEDENT, WE DELETE THE TRANSFER P RICING ADDITION MADE ON THIS SCORE. 5. THE ONLY OTHER ISSUE WHICH SURVIVES IN THE INSTANT APPEAL IS AGAINST THE TRANSFER PRICING ADDITION OF RS.15,36,43,405/-, BEING, MANAGEMENT FEE TO ASIA INVESTMENT PVT. LTD., WHICH IS A SP ECIFIED DOMESTIC TRANSACTION. THE TPO DISCUSSED THE PAYMENT OF MANAGEMENT FEE ALONG WITH PAYMENT OF ROYALTY JOINTLY FROM PARA 15 ONWARDS OF HIS ORDER. THE ASSESSEE WAS SHOW CAUS ED AS TO WHY NIL ALP OF THE MANAGEMENT FEE SHOULD NOT BE DETERMINED. IN RESPONSE, THE ASSESSEE SUBMITTED DETAILS BEING INVOICES; DETAILS OF EXPERTS AND FACILITIES WHICH WERE AVAILABLE FOR TRAINING TO THE EMPLOYEES; E-MAIL COMMUNICATIONS; AND MANUALS ETC. THE TP O DID NOT FIND ANYTHING CONVINCING AND DETERMINED NIL ALP OF THE SPECIFIED DOMESTIC TRANSACTION OF PAYMENT OF MANAGEMENT FEE. THE DRP APPROVED THE ACTION OF THE AO IN THE DRAFT ORDER, INCO RPORATING THE TRANSFER PRICING ADJUSTMENT. 6. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD, IT IS OBSERVED THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE IMMEDIATELY PRECEDIN G ITA NO.1748/PUN/2018 SPICER INDIA PRIVATE LIMITED 5 ASSESSMENT YEAR 2013-14. VIDE ORDER DATED 04-07-2019, THE TRIBUNAL IN ITA NO.609/PUN/2018 HAS UPHELD THE ORDER PASSED BY THE LD. CIT(A) DECIDING THIS ISSUE IN FAVOUR OF THE ASSESSEE . RELEVANT DISCUSSION HAS BEEN MADE IN PARA 7 ONWARDS OF THE TRIBUNAL ORDER. IN DECIDING THIS ISSUE SO, THE TRIBUNAL ALSO CONSIDERED ITS OWN ORDER FOR A.Y. THE 2012-13. SINCE THE FACTS AND CIRCUMSTANCES OF THIS ISSUE ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE IMMEDIATELY PRECEDING YEAR, RESPECTFULLY FOLLOWING THE PRECEDENT, WE OVERTURN THE IMPUGNED ORDER AND ORDER TO DELETE THE ADDITION. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SY AL) JUDICIAL MEMBER VICE P RESIDENT PUNE; DATED : 17 TH OCTOBER, 2019 ITA NO.1748/PUN/2018 SPICER INDIA PRIVATE LIMITED 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PR. CIT-V, PUNE , , C / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 16-10-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 16-10-2019 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. *
