St. Jude Medical India Pvt. Ltd, Hyderabad V. ACIT, Circle-3(2), Hyderabad

ITA 1990/HYD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6018 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1990/HYD/2011 ASSESSMENT YEAR 2007-2008 ST. JUDE MEDICAL INDIA P. LTD., HYDERABAD 500016. PAN AAICS9821J VS. THE ACIT, CIRCLE - 3(2) HYDERABAD. (APP ELL ANT) (RESPONDENT) FOR ASSESSEE : MR. R. VIJAYARAGHAVAN FOR REVENUE : SMT. K. MYTHILI RANI DATE OF HEARING : 11 .0 2 .2016 DATE OF PRONOUNCEMENT : 23 .0 2 .2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2007-08 AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 1 43(3) READ WITH SECTION 144C OF THE I.T. ACT. IN THIS APP EAL, THE ASSESSEE HAS RAISED 16 CONCISE REVISED GROUNDS OF A PPEAL, OUT OF WHICH, GROUND NOS. 1 TO 13 ARE AGAINST THE T .P. ADJUSTMENT PROPOSED BY THE TPO AND CONFIRMED BY THE DRP WHILE GROUND NO.14 IS AGAINST THE DISALLOWANCE OF THE CONTRIBUTION MADE BY THE ASSESSEE TO EMPLOYEES SUPERANNUATION FUND OF RS.2,49,270. GROUND NO.15 IS AGAINST THE LEVY OF INTEREST UNDER SECTION 234B, 23 4C AND 234D OF THE I.T. ACT. GROUND NO.16 IS GENERAL IN NA TURE AND NEEDS NO ADJUDICATION. 2 ITA.NO.1990/HYD/2011 ST. JUDE MEDICAL INDIA P. LTD., HYDERABAD. 2. AS REGARDS GROUND NOS. 1 TO 13 ARE CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE, MR. R. VIJAYARAGH AVAN, SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN DEVELOPMENT, MANUFACTURE AND DISTRIBUTION OF CARDIOVASCULAR MEDICAL DEVICES AND THAT IT ENTERED INTO AN INTERNATIONAL TAXATION WITH ITS AE DURING THE RELE VANT ASSESSMENT YEAR FOR (I) PURCHASE OF MEDICAL DEVICE AND (II) SALE OF CARDIO PRODUCTS. IT WAS SUBMITTED THAT THE ASSESSEE HEREIN PURCHASED MEDICAL DEVICES FROM ITS AE PRIMARILY FOR THE RE-SALE WHILE SOME MEDICAL DEVISE S ARE PURCHASED FOR ITS OWN USAGE ALSO. HE SUBMITTED THAT IN ITS T.P. STUDY, THE ASSESSEE HAD APPLIED RESALE PRICE M ETHOD (RPM) TO SUBMIT THAT THE TRANSACTION WAS AT ALP. THE TPO, HOWEVER, ADOPTED TNMM AS THE MOST APPROPRIATE METHOD AND PROPOSED AN ADJUSTMENT TO THE ASSESSEES MARGIN. 2.1. ASSESSING OFFICER, THEREAFTER, PASSED THE DRA FT ASSESSMENT ORDER IN ACCORDANCE WITH THE T.P. ORDER. AGAINST THE SAME, THE ASSESSEE PREFERRED ITS OBJECT IONS BEFORE THE DRP AND THE DRP CONFIRMED THE DRAFT ASSESSMENT ORDER AND ACCORDINGLY, THE A.O. PASSED T HE FINAL ASSESSMENT ORDER, AGAINST WHICH, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE MR. R. VIJAYARAGHAVAN, REITERATED THE SUBMISSIONS MADE BEF ORE THE AUTHORITIES BELOW AND SUBMITTED THAT VERY SAME ISSUE HAD ARISEN IN ASSESSEES OWN CASE FOR THE A.Y. 2006 -07 3 ITA.NO.1990/HYD/2011 ST. JUDE MEDICAL INDIA P. LTD., HYDERABAD. (ITA.NO.1626/HYD/2010 DATED 30.06.2011) AND FOR A.Y . 2009-10 (ITA.NO.145/HYD/2014 DATED 18.09.2015) WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE TPO/DRP TO RECONSIDER THE MOST APPROPRIATE METH OD TO BE ADOPTED I.E., WHETHER IT SHOULD BE RPM OR TNM M FOR DETERMINATION OF THE ALP AND ALSO DIRECTED THAT IF THE RPM IS TO BE ADOPTED AS THE MOST APPROPRIATE METHOD, TH EN THE TPO SHALL ALSO TAKE INTO CONSIDERATION THE COMPARAB LE COMPANIES SELECTED BY THE ASSESSEE, IN ADDITION TO THE COMPANIES SELECTED BY HIM, FOR DETERMINATION OF THE ALP. COPIES OF THE SAID ORDERS ARE FILED BEFORE US. 4. THE LD. D.R. WAS ALSO HEARD AND HE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT FOR THE SUBSEQUENT ASSESSMENT YEAR I.E., A.Y. 2009-10 IN ASSESSEES OW N CASE IN ITA.NO.145/HYD/2014 (CITED SUPRA), THIS TRIBUNAL AT PARA-6 OF ITS ORDER HAS HELD AS UNDER : 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSMENT YEA R BEFORE US IS A.Y 2009-10. THE ASSESSEE HAS BEEN PURCHASING MEDICAL DEVICES FROM ITS AES EVEN IN THE EARLIER A.YS AS IS EVIDENT FROM THE ORDER OF THIS TRIBUNAL IN ITA NO.1626/HYD/2010 FOR A.Y 2006- 07.ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT THE ASSESSEE HAD ENTERED INTO INTERNATION AL TRANSACTIONS FOR PURCHASE OF MEDICAL EQUIPMENTS AND THERE WAS NO DISPUTE WITH REGARD TO THE METHOD ADOPTED BY THE ASSESSEE DURING ITS TP STUDY. SUCH BEING THE CASE, THERE IS NO REASON AS TO WHY THE ASSESSEE SHOULD NOT BE ALLOWED TO ADOPT THE SAME 4 ITA.NO.1990/HYD/2011 ST. JUDE MEDICAL INDIA P. LTD., HYDERABAD. METHOD EVEN DURING THE RELEVANT A.Y. ON PERUSAL OF THE TPO ORDER, WE FIND THAT THE TPO HAS REPRODUCED THE PARAMETERS TO BE TAKEN INTO CONSIDERATION FOR ADOPTING THE RPM FOR COMPARABILITY ANALYSIS, BUT EXCEPT STATING THAT THE RPM METHOD CAN BE ADOPTED ONLY WHERE THE PRODUCTS ARE CLOSELY COMPARABLE, HE HAS NOT GIVEN DETAILED REASONING AS TO WHY THE SAID METHOD IS NOT APPLICABLE TO THE ASSESSEE. WE FIND T HAT THE TPO HAS NOT BROUGHT ON RECORD ANY EVIDENCE AS T O HOW THE PRODUCTS SOLD BY THE COMPARABLE COMPANIES ARE NOT SIMILAR TO THE PRODUCTS SOLD BY THE ASSESSE E HEREIN. WHEN THE TPO DESIRES TO REJECT THE METHOD CONSISTENTLY BEING FOLLOWED BY THE ASSESSEE AND DESIRES TO ADOPT A DIFFERENT METHOD, THE TPO IS REQUIRED TO GIVE HIS REASONING WHICH IS ABSENT IN T HE CASE BEFORE US. THEREFORE, WE DEEM IT FIT AND PROPE R TO REMAND THE ISSUE TO THE FILE OF THE TPO FOR DETERMINATION OF THE MOST APPROPRIATE METHOD FOR DETERMINATION OF THE ALP. FURTHER WE DIRECT THAT IF THE TPO HOLDS THAT THE RPM IS TO BE ADOPTED AS THE MOST APPROPRIATE METHOD, THEN THE TPO SHALL ALSO TAKE IN TO CONSIDERATION THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE IN ADDITION TO THE COMPANIES SELECTED BY HIM FOR DETERMINATION OF THE ALP. 5.1. AFTER TAKING NOTE OF THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE A.Y. 2009-10 AND ALSO T AKING NOTE THAT THE ISSUE ARISING IN THIS YEAR IS ALSO SI MILAR, WE DEEM IT FIT AND PROPER TO REMIT THESE ISSUES TO THE FILE OF THE TPO FOR RE-DETERMINATION OF THE MOST APPROPRIAT E METHOD FOR DETERMINATION OF THE ALP AND WE ALSO DIR ECT THE TPO TO CONSIDER THE COMPARABLES ADOPTED BY THE ASSESSEE IN ADDITION TO THE COMPANIES SELECTED BY H IM FOR DETERMINATION OF THE ALP IF IT IS HELD THAT THE RPM IS THE MOST APPROPRIATE METHOD. ACCORDINGLY, GROUND NOS. 1 TO 13 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5 ITA.NO.1990/HYD/2011 ST. JUDE MEDICAL INDIA P. LTD., HYDERABAD. 6. AS REGARDS GROUND NO.14 IS CONCERNED, IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THAT THIS IS AN ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESS EE IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT I N THE CASE OF TEX TOOL COMPANY LIMITED REPORTED IN 263 C TR 257 (SC) WHEREIN IT HAS BEEN HELD THAT THE CONTRIBU TION MADE TO LIC IS ALSO ELIGIBLE FOR DEDUCTION UNDER SE CTION 36(1)(V) OF THE I.T. ACT. HE SUBMITTED THAT THE A.O . HAS DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 36(1)(5) OF THE I.T. ACT ON THE GROUND THAT THE CONTRIBUTION IS TO EMPLOYEES SUPERANNUATION FUND WHICH HAS NOT BEEN APPROVED BY THE APPROPRIATE AUTHORITY. HE HAS SUBMI TTED THAT THE ASSESSEE HAS MADE THE CONTRIBUTION TO LIC AND AS HELD BY THE HONBLE SUPREME COURT, THE CONTRIBUTION TO LIC IS ALLOWABLE UNDER SECTION 36(1)(5) OF THE I.T. ACT, 1961. 7. THE LD. D.R. SUBMITTED THAT THE ASSESSEES CONTENTION THAT CONTRIBUTION TO THE LIC HAD NOT BEE N RAISED BEFORE THE A.O. OR THE DRP AND THEREFORE, IT CANNOT BE CONSIDERED AT THIS STAGE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES ON THIS ISSUE. HOWEVER, AS THIS IS A L EGAL ISSUE, WE DEEM IT FIT AND PROPER TO ADMIT THE ADDITIONAL E VIDENCE FILED BY THE ASSESSEE AND REMIT THIS ISSUE ALSO TO THE FILE OF THE A.O, TO EXAMINE THE ISSUE RELATING TO THE CONTR IBUTION MADE TO THE LIC AND CONSIDER THE SAME IN THE LIGHT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F TEX 6 ITA.NO.1990/HYD/2011 ST. JUDE MEDICAL INDIA P. LTD., HYDERABAD. TOOL COMPANY LIMITED (CITED SUPRA). ACCORDINGLY, GR OUND NO.14 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PU RPOSES. 9. GROUND NO.15 BEING CONSEQUENTIAL IN NATURE, THE A.O. IS DIRECTED TO GIVE CONSEQUENTIAL EFFECT, IF ANY, TO THE ASSESSMENT. GROUND NO.16 BEING GENERAL IN NATUR E, NEEDS NO ADJUDICATION. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.02.2016. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 23 RD FEBRUARY, 2016 VBP/- COPY TO 1. ST. JUDE MEDICAL INDIA P. LTD., NO.1 - 11 - 250/A, MATARANI SENSATION, LANE BESIDES SYNDICATE BANK, BEGUMPET, HYDERABAD 500 016. 2. THE ACIT, CIRCLE - 3(2), HYDERABAD. 3. THE DISPUTES RESOLUTION PANEL, HYDERABAD . 4 . CIT - 1/MEMBER, DRP, HYDERABAD. 5. ADDL. DIRECTOR OF INCOME TAX (TRANSFER PRICING), 6 TH FLOOR, B BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 5 . D.R. ITAT B BENCH, HYDERABAD 6 . GUARD FILE