ACIT, Coimbatore V. M/s. India Trimmings (P) Ltd., Annur

ITA 1865/CHNY/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9441 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2011
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Transfer pricing

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.591/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S INDIA TRIMMINGS P. LTD 6/636, PILLAIPPANPALAYAM TELUNGUPALAYAM POST ANNUR, COIMBATORE 641 653 VS. THE A SSTT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE IV(2) COIMBATORE [PAN AAACI 6394 N] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NO.1865/MDS/2011 / ASSESSMENT YEAR : 2007-08 THE ASS TT. COMMISSIONER OF INCOME-TAX COMPANY CIRCLE IV(2) COIMBATORE VS. M/S INDIA TRIMMINGS P. LTD 6/636, PILLAIPPANPALAYAM TELUNGUPALAYAM POST ANNUR, COIMBATORE 641 653 ( &' / APPELLANT) ( ()&' /RESPONDENT) ASSESSEE BY : SHRI S. SRIDHA R, ADVOCATE DEPARTMENT BY : DR. B.NISCHAL, JCIT / DATE OF HEARING : 07 - 03 - 2016 / DATE OF PRONOUNCEMENT : 29 - 0 4 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER BOTH ASSESSEE AND REVENUE FILED APPEALS FOR ASSES SMENT YEARS 2009-10 AND 2007-08 RESPECTIVELY. SINCE COMMO N ISSUE ARISES ITA NO.591/14 1865/11 :- 2 -: FOR CONSIDERATION IN BOTH THE APPEALS, WE HEARD THE M TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. LET US FIRST TAKE UP ASSESSEES APPEAL I.T.A.NO. 5 91/MDS/ 2014 FOR ASSESSMENT YEAR 2009-10. 3. SHRI S.SRIDHAR, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING OF ORNAMENTAL TRIMMINGS, TASSELS AND TIEBACKS. IN THE COURSE OF THE BUSINESS ACTIVITY, THE ASSESSEE ENTE RED INTO BUSINESS TRANSACTIONS WITH M/S CONSO INTERNATIONAL CORPORATI ON, BRITISH TRIMMINGS LTD. AND WIND MILLS WRIGHTS COMPANY, WHI CH ARE ASSOCIATED ENTERPRISES OF THE ASSESSEE. THE LD. C OUNSEL FURTHER SUBMITTED THAT THE ASSESSEES INTERNATIONAL TRANSA CTIONS EXCEEDED ` 15 CRORES, THEREFORE, THE MATTER WAS REFERRED TO THE T RANSFER PRICING OFFICER FOR DETERMINATION OF ARMS LENGTH PRICE. TH E TPO AFTER CONSIDERING VARIOUS COMPARABLES, SUGGESTED UPWARD A DJUSTMENT. REFERRING TO THE ORDER OF THE TPO, THE LD. COUNSEL SUBMITTED THAT THE COMPARABLES SELECTED BY THE TPO ARE MANUFACTURING T OWELS, FABRICS, GARMENTS AND OTHER TEXTILE ITEMS. WHEREAS THE ASSE SSEE IS MANUFACTURING ORNAMENTAL TRIMMINGS WHICH IS USED AS CURTAIN IN THE WINDOWS AND DOORS, THEREFORE, THE COMPARABLES SELEC TED BY THE TPO HAS FUNCTIONAL DIFFERENCE, HENCE, THE SAME CANNOT B E COMPARABLES FOR MAKING ADJUSTMENT. THE LD. COUNSEL FURTHER SUBMITT ED THAT WHAT IS TO ITA NO.591/14 1865/11 :- 3 -: BE COMPARED IS ONLY ORNAMENTAL TRIMMING OR A SIMILA R PRODUCT OF THE OTHER COMPANIES. SINCE SUCH AN EXERCISE WAS NOT DO NE BY THE AUTHORITIES BELOW, ACCORDING TO THE LD. COUNSEL, TH E MATTER NEEDS TO BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE-EXAMINATION. 4. ON THE CONTRARY, DR. B. NISCHAL, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE COMPARABLES SELEC TED BY THE ASSESSEE ARE ALSO NOT MANUFACTURING ORNAMENTAL TRIM MINGS, THEREFORE, THE ASSESSEE CANNOT NOW CLAIM THAT THE COMPANIES S ELECTED BY THE TPO ARE NOT COMPARABLES. MOREOVER, THE ASSESSEE I S IN THE BUSINESS OF MANUFACTURING AND EXPORTING OF FABRICS. THE COM PARABLES SELECTED BY THE TPO ARE ALSO IN THE BUSINESS OF MANUFACTURI NG FABRICS WHICH MAY BE USED AS TOWELS OR GARMENTS OR OTHERWISE. TH E BASIC PRODUCTION OF THE COMPARABLE IS ONLY FABRICS, THERE FORE, THE ASSESSEE CANNOT NOW CLAIM THAT THE COMPANIES SELECTED BY THE TPO ARE NOT COMPARABLES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE ASSESSEE IS MANUFACTURING AND EXPORTING ORNAMENTAL TRIMMINGS, TASSELS AND TIEBACKS. THE ASSESSEE IS NOT MANUFAC TURING ANY OTHER PRODUCT. THE COMPARABLE SELECTED BY THE TPO IS MAN UFACTURING TOWELS, FABRICS AND GARMENTS. ORNAMENTAL TRIMMINGS MAY BE A SPECIES ITA NO.591/14 1865/11 :- 4 -: OF FABRICS. HOWEVER, WHEN ORNAMENTAL FABRICS ARE MANUFACTURED BY THE ASSESSEE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ORNAMENTAL FABRICS MANUFACTURED BY THE OTHER COMPAN IES WHICH ARE EXPORTED, NEEDS TO BE COMPARED FOR MAKING TRANSFER PRICING ADJUSTMENT. THIS FACT WAS NOT CONSIDERED BY THE DR P. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATT ER NEEDS TO BE RECONSIDERED BY THE AUTHORITIES BELOW. IT IS OPEN TO THE ASSESSING OFFICER TO REFER THE MATTER ONCE AGAIN TO THE TPO F OR CONSIDERING THE EXACT PRODUCT MANUFACTURED BY THE ASSESSEE WITH TH AT OF THE COMPANIES WHICH ARE MANUFACTURING AN IDENTICAL/SIMI LAR PRODUCT. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ENTIRE ISSUE RAISED BY THE ASSESSEE IS REMITTED BA CK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL R EFER THE MATTER ONCE AGAIN TO THE TPO/DRP AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. 7. NOW, COMING TO REVENUES APPEAL I.T.A.NO.1865/MDS/2 011, FOR ASSESSMENT YEAR 2007-08, DR. B.NISCHAL, LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT PASSED THE ASSESSMENT ORD ER IN CONSONANCE WITH THE DIRECTION OF THE DRP. THE REVENUE HAS ALS O RAISED AN ITA NO.591/14 1865/11 :- 5 -: ADDITIONAL GROUND. ACCORDING TO THE LD. DR, SINCE THE PROVISIONS OF SEC. 144C WAS NOT FOLLOWED BY THE ASSESSING OFFICER, NON -ISSUE OF DRAFT ASSESSMENT ORDER CANNOT BE A REASON TO SET ASIDE TH E ORDER OF THE ASSESSING OFFICER. ACCORDING TO THE LD. DR, THE NO N-ISSUE OF DRAFT ORDER U/S 144C OF THE ACT IS ONLY A PROCEDURAL IRREGULARI TY WHICH CAN BE CURED AT ANY STAGE OF THE PROCEEDINGS. THEREFORE, THE CI T(A) IS NOT JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE. 8. ON THE CONTRARY, SHRI S.SRIDHAR, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT ADMITTEDLY, THE ASSESSING OFFICER HA S NOT PASSED THE DRAFT ASSESSMENT ORDER AS REQUIRED U/S 144C(1) OF THE ACT. AFTER 1.10.2009, IF THE ASSESSING OFFICER INTENDS TO MAKE ANY ADJUSTMENT IN THE TRANSFER PRICING MATTER, HE HAS TO FIRST PASS A DRAFT ASSESSMENT ORDER. IN THIS CASE, ADMITTEDLY, THE DRAFT ASSESSME NT ORDER WAS NOT PASSED BY THE ASSESSING OFFICER. THE ASSESSMENT OR DER IS PASSED AFTER 1.10.2009. REFERRING TO THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF VIJAY TELEVISION(P) LTD VS DRP, 369 ITR 113 , THE LD. COUNSEL SUBMITTED THAT PASSING OF DRAFT ASSESSMENT ORDER IS A MANDATORY REQUIREMENT. ACCORDING TO THE LD. COUNSEL, THE DEF ECT IN NOT PASSING DRAFT ASSESSMENT ORDER IS NOT A CURABLE DEFECT, THE REFORE, THE CONTENTION OF THE REVENUE THAT IT IS ONLY A PROCEDU RAL IRREGULARITY IS NOT SUSTAINABLE. ITA NO.591/14 1865/11 :- 6 -: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. SE C. 144C(1) OF THE ACT MANDATES THE PASSING OF DRAFT ASSESSMENT ORDER WHER EVER THE ASSESSING OFFICER IS PASSING ORDER AFTER 1.10.2009 MAKING TRANSFER PRICING ADJUSTMENT. IN THIS CASE, THE ASSESSMENT O RDER WAS PASSED ON 30.12.2010, THEREFORE, IT IS A MANDATORY REQUIREMEN T FOR THE ASSESSING OFFICER TO PASS A DRAFT ASSESSMENT ORDER. BY WAY O F ADDITIONAL GROUND, THE REVENUE NOW ADMITS BEFORE THIS TRIBUNAL THAT DR AFT ASSESSMENT ORDER WAS NOT PASSED EVEN THOUGH TRANSFER PRICING A DJUSTMENT WAS MADE, THEREFORE, IT CONTENDS THAT IT IS ONLY A PROC EDURAL IRREGULARITY. THE JURISDICTIONAL HIGH COURT IN THE CASE OF VIJAY TELEVISION(P) LTD.(SUPRA) HAS CONSIDERED THIS ISSUE AND FOUND THA T THE DEFECT IN NOT PASSING THE DRAFT ASSESSMENT ORDER CANNOT BE CURED AT ALL. IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH COURT, THE DEFE CT IN NOT PASSING THE DRAFT ASSESSMENT ORDER U/S 144C(1) OF THE ACT CANNOT BE CURED AT THIS STAGE. THEREFORE, THE FINAL ORDER PASSED BY T HE ASSESSING OFFICER IS NULL AND VOID AND WITHOUT JURISDICTION. ACCORD INGLY, THE APPEAL OF THE REVENUE STANDS DISMISSED. 10. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. 11. TO SUMMARIZE, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL OF THE REVE NUE IS DISMISSED. ITA NO.591/14 1865/11 :- 7 -: ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 29 TH APRIL, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF