M/s Alumeco India Extrusion Limited, Hyderabad V. ITO, Ward-6(4), Hyderabad, Hyderabad

ITA 1929/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6609 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 22-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2014
• Court: TRIBUNAL
• Department Lawyers: S MO HARANA
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1 9 29 /H YD /201 4 ASSESSMENT YEAR: 20 1 0 - 11 M/S. ALUMECO INDIA EXTRUSION L IMITED, TOO PRAN MANDAL, MEDAK DISTRICT [PAN: AA BCP7715M ] VS INCOME TAX OFFICER , WARD - 6 ( 4 ), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. V.S.S. PRASAD, A R FOR REVENUE : S HRI S. MOHARANA, D R DATE OF HEARING : 29 - 0 4 - 201 6 DATE OF PRONOUNCEMENT : 29 - 0 4 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL PREFERRED BY ASSESSEE AGAINST THE ORDER OF ASSESSING OFFICER (AO) U/S. 143(3) R.W.S. 144C OF THE INCOME TAX ACT [ACT] CONSEQUENT TO THE DIRECTIONS OF THE DISPUTE RESOL UTION PANEL [DRP] , HYDERABAD DT. 19 - 09 - 2014 . 2. BRIEFLY STATED, ASSESSEE IS A MANUFACTURER OF ALUMIN I UM EXTRUDED PRODUCTS. ASSESSEE FILED ITS RETURN OF INCOME FOR AY. 2010 - 11 SHOWING TOTAL INCOME AT NIL AFTER THE ADJUSTMENT OF BROUGHT FORWARD LOSSES . A S ASSESSEE HAD INTERNATIONAL TRANSACTIONS I.T.A. NO. 1929 / HYD / 20 14 : - 2 - : WITH THE ASSOCIATED ENTERPRISE [AE], THE MATTER WAS REFERRED TO THE TRANSFER PRICING [TPO] U/S. 92CA (3) OF THE ACT WHO HAS PASSED AN ORDER ON 30 - 08 - 2013 DETERMINING ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICE [ALP] U/S. 92CA AT RS. 3,83,31,381/ - . THE AO VIDE HIS DRAFT ORDER DT. 30 - 12 - 2013, DETERMINED THE GROSS TOTAL INCOME AT RS. 15,05,50,569/ - BEFORE SET - OFF OF BROUGHT FORWARD LOSSES. ASSESSEE FILED OBJECTIONS MAINLY CONTESTING THE MOST APPROPRIATE METHOD TO BE A DOPTED. IT WAS THE CONTENTION THAT TPO IS NOT JUSTIFIED IN REJECTING THE MOST APPROPRIATE METHOD ADOPTED BY ASSESSEE AS COMPARABLE UN - CONTROLLED PRICE (CUP) METHOD FOR DETERMINING THE ALP IN RESPECT OF INTERNATIONAL TRANSACTIONS OF PURCHASE OF ALUMINUM BI LLETS AND INGOTS OF RS. 31.06 CRORES. IT WAS ALSO CONTENDED BEFORE THE DRP THAT TPO OUGHT TO HAVE ACCEPTED CUP METHOD ADOPTED BY ASSESSEE AS MOST APPROPRIATE METHOD. IT ALSO CONTESTED THE COMPARABLES SELECTED BY THE AO UND ER TNMM ALONG WITH OTHER ISSUES. T HE DRP VIDE PARA 4 OF THE O RDER, DISCUSSED THE OBJECTIONS AND THE ORDERS OF THE ITAT IN EARLIER YEARS AND VIDE PARA 5 DIRECTED THE AO AS UNDER: THE PANEL PERUSED THE ABOVE ORDER OF HON'BLE ITAT. SINCE FACTS AND ISSUES WERE AY. 2010 - 11 ARE IDENTICAL, T HOSE RELATING TO AYS. 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09 . RESPECTFULLY FOLLOWING THE HON'BLE ITATS ORDER IN ASSESSEES OWN CASE, THE AO/TPO IS DIRECTED TO FOLLOW THE DIRECTIONS OF THE HON'BLE TRIBUNAL THIS YEAR ALSO AND RECOMPUTED THE ALP ACCORDINGLY. THE AO HOWEVER, PASSED THE ORDER ADOPTING THE ORDER OF THE TPO AND DETERMINED THE ALP USING TNMM AS THE MAM. 3. ASSESSEE HAS RAISED VARIOUS GROUNDS AS UNDER: I.T.A. NO. 1929 / HYD / 20 14 : - 3 - : 1. THE LEARNED (LD) ASSESSING OFFICER (AO) IS ERRONEOUS IN LAW AND ON THE FACTS OF THE CA SE. 2. THE LD. TPO IS NOT JUSTIFIED IN LAW IN REJECTING THE MOST APPROPRIATE METHOD (MAM) ADOPTED BY THE APPELLANT AS COMPARABLE UNCONTROLLED PRICE METHOD (CUP) FOR DETERMINING THE ARMS LENGTH PRICE IN RESPECT OF INTERNATIONAL TRANSACTIONS OF PURCHASE O F ALUMINIUM BILLETS, INGOTS OF RS. 31,06,69,931/ - . 3. THE LD. ASSESSING OFFICER(AO)/TRANSFER PRICING OFFICER (TP) OUGHT TO HAVE ACCEPTED THE CUP METHOD ADOPTED BY THE APPELLANT FOR PURCHASES OF ALUMINIUM BILLETS AND INGOTS AS THE MOST APPROPRIATE METHOD (MAM). 4. THE LD. DRP OUGHT NOT TO HAVE SUGGESTED TO BENCHMARK THE INTERNATIONAL TRANSACTIONS UNDER COST PLUS METHOD (CPM) WHEN BOTH THE APPELLANT AND LD. AO HAD SELECTED TNMM AS THE MOST APPROPRIATE METHOD. 5. THE LD. DRP OUGHT TO HAVE APPRECIATED TH AT COMPARABLE SELECTED BY THE LD. TPO IS FUNCTIONALLY DIFFERENT AND ACCORDINGLY THE SAID COMPARABLE COMPANY LIGHT ALLOY PRODUCTS LIMITED OUGHT TO HAVE BEEN EXCLUDED FOR BENCHMARKING PURPOSES. 6. THE LD. AO/TPO IS NOT JUSTIFIED IN REJECTING 6 OUT OF THE 12 COMPARABLES SELECTED BY THE ASSESSEE WHILE ADOPTING THE TRANSACTION NET MARGIN METHOD (TNMM). 7. THE LD. AO/TPO OUGHT TO HAVE ACCEPTED ALL THE COMPANIES SELECTED BY THE APPELLANT AS COMPARABLES AND OUGHT TO HAVE ACCEPTED THE INTERNATIONAL TRANSACTION S AS COMPLYING WITH THE ARMS LENGTH STANDARD. 8. THE LD. TPO IS NOT JUSTIFIED IN NOT GIVING THE WORKING CAPITAL ADJUSTMENT WHILE MAKING THE TRANSFER PRICING ADJUSTMENT. 9. THE LEARNED ASSESSING OFFICER (AO) IS NOT JUSTIFIED IN LAW IN DETERMINING THE IN COME AT RS. 7,22,81,070/ - AS AGAINST INCOME OF RS. NIL RETURNED BY THE APPELLANT. I.T.A. NO. 1929 / HYD / 20 14 : - 4 - : 10. THE LD. AO IS ERRONEOUS IN LAW IN NOT CONSIDERING THE BROUGHT FORWARD LOSSES WHILE DETERMINING THE TOTAL INCOME OF THE ASSESSEE. 11. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING WITH THE PREVIOUS APPROVAL OF THE HON'BLE TRIBUNAL. 4. THIS CASE WAS HEARD ON 22 - 02 - 2016 AND LD. COUNSEL AND DR MADE VARIOUS SUBMISSIONS. HOWEVER, IT WAS NOTICED THAT THE DRP HAS ALREADY DIRECTED ADOPTING CUP METHOD AS MOST APPR OPRIATE METHOD, WHEREAS TPO HAS NOT FOLLOWED THE DIRECTIONS AND ADOPTED TNMM AS THE MOST APPROPRIATE METHOD AND MADE THE ADDITION. THEREFORE, MANY OF THE GROUNDS RAISED BY ASSESSEE BECOME ACADEMIC IN NATURE. IN VIEW OF THAT, THE CASE WAS AGAIN RE - FIXED F OR CLARIFICATIONS AND AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE AO HAS NOT FOLLOWED THE DIRECTIONS OF THE DRP. CONSEQUENTLY, IT IS FELT THAT THE ORDER OF AO HAS TO BE SET ASIDE AND MATTER HAS TO BE RESTORED TO HIS FILE SO AS TO FOLLOW THE D IRECTIONS OF THE DRP WHICH ARE MANDATORY. 5 . AS SEEN FROM THE GROUND NOS. 2 TO 4, ASSESSEE IS ALSO RAISING CONTRADICTORY GROUNDS. IN GROUND NOS. 2 & 3, ASSESSEE IS CONTESTING THE ISSUE THAT AO/TPO OUGHT TO HAVE ACCEPTED CUP METHOD ADOPTED BY ASSESSEE. A T THE SAME TIME IN GROUND NO. 4, ASSESSEE IS OBJECTING TO THE DRPS DIRECTIONS WHEN DRP ACCEPTED ASSESSEES CONTENTIONS BEFORE IT AND DIRECTED THE AO TO FOLLOW THE CUP METHOD AS WAS BEING DONE IN EARLIER YEARS AND AS UPHELD BY ITAT. GROUND NOS. 2, 3 & 4 A RE CONTRADICTORY TO EACH OTHER. 6 . THEREFORE, THIS FORUM CANNOT ENTERTAIN THE CONTENTIONS OF ASSESSEE EITHER WAY AS THE DRP HAS ALREADY ACCEPTED AND DIRECTED I.T.A. NO. 1929 / HYD / 20 14 : - 5 - : THE AO TO FOLLOW CUP METHOD . ITS MANDATORY THAT AO HAS TO FOLLOW THE DRP DIRECTIONS. AS ALREADY STATED AO DID NOT FOLLOW THE METHOD DIRECTED BY DRP . IN VIEW OF THIS, WE DIRECT THE AO TO PASS ORDERS IN COMPLIANCE TO DRP DIRECTIONS. ASSESSEE HAS TO FURNISH NECESSARY DETAILS AND ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY. WITH THESE DIRECTIONS, THE OR DER OF AO DT. 30 - 10 - 2014 IS SET ASIDE AND ENTIRE ASSESSMENT IS RESTORED TO THE FILE OF AO TO DO IT AS PER THE DIRECTIONS OF THE DRP. 7. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH APRIL, 2016 TNMM I.T.A. NO. 1929 / HYD / 20 14 : - 6 - : COPY TO : 1. M/S. ALUMECO INDIA EXTRUSION LIMITED , KALLAKAL VILLAGE, TOOPRAN MANDA L, MEDAK DISTRICT. C/O. PRASAD & PRASAD CHARTERED ACCOUNTANTS , FLAT NO. 301, MJ TOWERS, 8 - 2 - 698, ROAD NO. 12, BANJARA HILLS, HYDERABAD. 2 . INCOME TAX OFFICER , WARD - 6 ( 4 ), HYDERABAD. 3. DISPUTE RESOLUTION PANEL (DRP), HYDERABAD. 4. THE DIRECTOR OF I NCOME TAX , INTERNATIONAL TAXATION, INCOME TAX TOWERS, HYDERABAD. 5. THE ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICING), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.