DCIT, Noida V. M/s. Phoenix Lamps Ltd., Noida

ITA 1968/DEL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5547 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR SHASHWAT BAJPAI; SHARAD AGARWAL ADVS
• Keywords: Transfer pricing; International transaction
• Section: 10AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBE R & SHRI P. MAHARISHI, ACCOUNTANT MEMBER ITA NO.-1968/DEL/2016 ( ASSESSMENT YEAR: 2011-12) DCIT CIRCLE 2, ROOM NO. 408, 4 TH FLOOR, AAYAKAR BHAWAN, A-2D, SECTOR 24, NOIDA VS PHOENIX LAMPS LTD. (FORMERLY KNOWN AS HALONIX LTD.) 59A, NSEZ, PHASE-II, NOIDA PAN NO. AABCP7718G ASSESSEE BY DR. SHASHWAT BAJPAI & SH. SHARAD AGARWAL, ADVS. REVENUE BY SH. ATIQ AHMAD, SR. DR ORDER PER JOGINDER SINGH, J.M. THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 28.12.2015 OF THE LD. DRP-2, NEW DELHI, DIRECTING T HE ASSESSING OFFICER/DELETING THE ADDITION MADE BY THE AO OF RS. 71,84,46,215/- BY TAKING NET PROFIT RATIO AT THE RATE OF THE UNIT WHI CH WAS EXEMPTED U/S 10AA OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) IGNORING THE FACT THAT BOTH THE UNITS WERE ENGAGED IN MANUFACTUR E OF SIMILAR ITEM AND WERE LOCATED IN THE SAME AREA, WITH THE EXEMPTED UN IT ONLY DECLARING ABNORMALLY HIGH PROFIT, FOR WHICH NO SATISFACTORY E XPLANATION WAS PUT FORTH BY THE ASSESSEE AND FURTHER PLACING RELIANCE UPON THE DECISION IN DATE OF HEARING 02.04.2018 DATE OF PRONOUNCEMENT 02.04.2018 ITA NO. 196 8/DEL/2016 PHOENIX LAMPS LTD. 2 CIT VS. CALCUTTA DISCOUNT COMPANY LTD. (1973) 91 IT R 8, WHERE THE FACTS WERE DIFFERENT. 2. DURING HEARING, SHRI ATIQ AHMAD, SR. LD. DR, DEF ENDED THE ADDITION BY ADVANCING ARGUMENTS WHICH ARE IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, DR. SHASHWAT BAJAJ ALON G WITH SHRI SHRAD AGARWAL, LD. COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY INVITING OUR ATTENTION TO VARIOUS PARAS OF THE I MPUGNED ORDER AND PAGES 1 TO 8 OF THE PAPER BOOK (RELEVANT PAGE 7). 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIEF A RE THAT VIDE ORDER U/S 92CA(3) OF THE ACT REFERENCE U/S 92CA WAS MADE BY T HE JT. CIT VIDE LETTER DATED 11.10.2013 FOR DETERMINATION OF ARMS LENGTH PRICE OF INTERNATIONAL TAXATION ENTERED INTO BY THE ASSESSEE . THE LD. DRP VIDE DIRECTIONS U/S 144C(5) OF THE ACT DATED 28.12.2015 DELETED THE ADDITION MADE BY THE LD. AO RELYING UPON THE DECISION IN CIT VS. CALCUTTA DISCOUNT COMPANY LTD. (SUPRA). WE HAVE ANALYZED TH E FACTS AND FOUND THAT THE LD. DRP DULY CONSIDERED/EXAMINED THE MANUF ACTURING OPERATION IN INDIA IN FIVE UNITS WHICH ARE SUMMARIZ ED AS UNDER: S.NO. PARTICULARS OF THE MANUFACTURING UNIT FEATURE OF THE UNIT REMARKS (FOR AY 2011 - 12) AT THE TIME OF FILING RETURN OF INCOME BY HALONIX 1. UNIT AT PLOT A-1, AT PHASE-II, NOIDA, UTTAR PRADESH INCOME FROM THIS UNIT IS TAXABLE INCOME HAS BEEN OFFERED TO TAX 2. UNIT AT PLOT 59A, AT NOIDA SPECIAL ECONOMIC ZONE (NSEZ) PHASE-II, NOIDA, UTTAR PRADESH INCOME FROM THIS UNIT IS TAXABLE INCOME HAS BEEN OFFERED TO TAX 3. UNIT AT PLOT NO. 59D IN NSEZ, INCOME FROM THIS DEDUCTION HAS BEEN ITA NO. 196 8/DEL/2016 PHOENIX LAMPS LTD. 3 PHASE-II, NOIDA, UTTAR PRADESH UNIT IS ELIGIBLE FOR DEDUCTION U/S 10AA OF THE ACT CLAIMED U/S 10AA OF THE ACT 4. UNIT AT PLOT NO. 5, SIDCUL HARIDWAR, UTTARANCHAL INCOME FROM THIS UNIT IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT DEDUCTION COULD NOT BE CLAIMED U/S 80IC OF THE ACT, SINCE THERE WERE LOSSES AT THE COMPANY LEVEL 5. UNIT AT C-8, SELAQUI INDUSTRIAL AREA, DEHRADUN, UTTARANCHAL INCOME FROM THIS UNIT IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT DEDUCTION COULD NOT BE CLAIMED U/S 80IC OF THE ACT, SINCE THERE WERE LOSSES AT THE COMPANY LEVEL APART FROM THE ABOVE MANUFACTURING UNITS, THE ASSES SEE IS HAVING DEPOTS AT VARIOUS STATES ACROSS INDIA. GENESIS OF THE DRAFT ASSESSMENT ORDER U/S 144C(1) THE TABLE CONTAINING INTERNATIONAL TRANSACTIONS ARE GIVEN BELOW: S.NO. NATURE OF TRANSACTION METHOD SELECTED AMOUNT (INR) 1. EXPORT OF AUTOMOTIVE LAMPS COMPARABLE UNCONTROLLED PRICE 34,25,33,470 2. STANDBY LETTER OF CREDIT (SBLC FOR SHORT) NO BENCHMARKING REQUIRED 6,32,40,000 3. CORPORATE GUARANTEE (CG FOR SHORT) NO BENCHMARKING REQUIRED 10,71,86,440 FOR THE SUBJECT YEAR UNDER CONSIDERATION, THE ASSES SEE FILED ITS RETURN OF INCOME DECLARING A TOTAL LOSS OF RS. 4,71,75,358/- ON 26.11.2011. THEREAFTE R THE CASE WAS SELECTED FOR SCRUTINY. DETAILED QUESTIONNAIRES WERE ISSUED FROM TIME TO TIME BY THE AO TO THE ASSESSEE REQUIRING VARIOUS DETAILS/INFORMATION IN CONNECTION WITH THE RETURN O F INCOME FOR THE SUBJECT ASSESSMENT YEAR WHICH WERE DULY COMPLIED WITH. WHILE EXAMINING THE CASE OF THE ASSESSEE THE AO FOR MED THE VIEW THAT THE TRANSACTIONS IN RELATION TO CG & SBLC WERE OF INTERNATIONAL NATURE. HENCE, A R EFERENCE WAS MADE BY HIM TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE (ALP)OF THE IN TERNATIONAL TRANSACTIONS OF THE ASSESSEE. THE ASSISTANT COMMISSIONER OF INCOME TAX, TRANSFER PRIC ING OFFICER III(2)(1), NEW DELHI (TPO) PASSED ORDER DATED 30.01.2015 UNDER SECTION 92CA(3) OF THE ACT. SUBSEQUENTLY, THE DRAFT ASSESSMENT ORDER WAS ISSUED BY THE AO, PROPOSING TO INCREASE ASSESSEES INCOME TO RS. 72,35,06,590/- VIDE DRAFT ASSESSMENT ORDER DATED 30 .03.2015. IN THE IMPUGNED ASSESSMENT ORDER UNDER CONTENTION, THE AO MADE THE FOLLOWING ADDITIONS/DISALLOWANCES TO THE INCOME DISCLOSED BY THE ASSESSEES IN ITS RETURN OF INCOME: PARTICULARS AMOUNT (IN RS.) AMOUNT (IN RS.) RETURNED INCOME/(LOSS) (4,71,75,358) ADDITIONS: (A) SUPPRESSED PROFITS OF TAXABLE UNITS AT NOIDA (B) TRANSFER PRICING ADJUSTMENT 71,84,46,215 5,22,35,730 77,06,81,945 TOTAL ASSESSED INCOME 72,35,06,587 TOTAL ASSESSED INCOME (ROUNDED OFF) 72,35,06,590 2.2 IT IS FURTHER NOTED THAT THE LD. DRP ALSO CONSI DERED THE ASSESSMENT ORDER PASSED U/S 144C(1) OF THE ACT AND THE OBJECTIONS RAISED BY THE ASSESSEE. IT WAS OBSERVED (PAGE 5 OF THE IMPUGNED ORDER) THAT THE ASSESSEE WAS NOT ASKED BY THE ASSES SING OFFICER TO ITA NO. 196 8/DEL/2016 PHOENIX LAMPS LTD. 4 FURNISH THE DETAILS WITH RESPECT TO DISTINCTIVE ITE MS MANUFACTURED BY EACH UNIT. A REMAND REPORT WAS SORT FROM THE AO TO THE SUBMISSIONS/COMMENTS AND FINDING ON ADDITIONAL EVID ENCE FILED BY THE ASSESSEE DURING DRP PROCEEDINGS. THE REMAND REPORT DATED 16.11.2015 (RECEIVED BY DRP ON 30.11.2015) WHICH HA S BEEN REPRODUCED AT PAGE 5 ONWARDS. AT PAGE 6 OF THE IMP UGNED ORDER IT IS OBSERVED THAT THE LD. AO AS A MATTER OF FACT CONCED ED THE ORIGINAL CLAIM OF THE ASSESSEE THAT IT WAS MANUFACTURING DIFFERENT ITEMS IN DIFFERENT UNITS AND THE UNIT WISE PROFITABILITY, DECLARED BY THE ASSESSEE, WAS CORRECT AND ALL THE DETAILS WITH RESPECT TO MANUFAC TURING UNITS WERE PRODUCED BEFORE THE AO AT THE TIME OF THE ASSESSMEN T PROCEEDINGS. IT WAS FOUND BY THE LD. DRP THAT TAXABLE UNITS WERE MA NUFACTURING H7 BULBS MEANT FOR EUROPEAN MARKET/CONTINENT WHICH FET CHED HIGH PROFIT, WHEREAS H4 BULBS WERE MEANT FOR LOCAL MARKET WHERE THE RETURNS WERE LOW. THIS FACTUAL FINDING OF THE LD. DRP WAS NEVER CONTRADICTED BY THE REVENUE BEFORE THIS TRIBUNAL. SO FAR AS MANAGING T HE BUSINESS AFFAIRS BY THE ASSESSEE TO REDUCE ITS TAX LIABILITY THE LD. DRP DULY CONSIDERED THE DECISION FROM HONBLE APEX COURT IN CIT VS. CAL CUTTA DISCOUNT COMPANY LTD. (SUPRA), WHEREIN IT WAS HELD THAT IT I S THE DISCRETION OF THE ASSESSEE TO ARRANGE ITS AFFAIRS IN A MANNER WHICH A DVANCES HIS INTEREST SUBJECT TO THE CONDITIONS THAT THE TRANSACTION IN Q UESTION ARE BONAFIDE. IN THE INSTANT CASE, THIS FACTUAL MATRIX WAS NOT DO UBTED BY THE LD. AO ITA NO. 196 8/DEL/2016 PHOENIX LAMPS LTD. 5 RATHER IN THE REMAND REPORT IT WAS ACCEPTED BY THE AO THAT COST OF H4 AND H7 BULBS RECONCILE. THE LD. DRP DULY CONSIDER ED THE REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE AND THER EAFTER REACHED TO A CONCLUSION IN WHICH WE FIND NO INFIRMITY. WE AFFIR M THE SAME. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT, AT THE CONCLUSION OF THE HEARING, IN THE PRESENCE OF LD. COUNSEL FROM BO TH SIDES ON 02.04.2018. SD/- SD/- (P. MAHARISHI) (JOGINDER S INGH) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 02.04.2018 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO. 196 8/DEL/2016 PHOENIX LAMPS LTD. 6 THIS ORDER WAS DIRECTLY DICTATED ON COMPUTER TO THE P.S. 02.04.2018 DRAFT DICTATED ON 02.04.2018 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 02.04.2018 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 02.04.18 APPROVED DRAFT COMES TO THE SR.PS/PS 03.04.18 KEPT FOR PRONOUNCEMENT ON 02.04.18 FILE SENT TO THE BENCH CLERK 03.04.18 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.