M/s Yaskawa India Pvt Ltd , Bangalore V. Assistant Commissioner of Income Tax Circle-7(1)(2), Bangalore

ITA 2020/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8146 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 17-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: NARENDRA JAIN
• Keywords: Transfer pricing; Double taxation relief; Opportunity of being heard; International transaction; Period of limitation; Revised return; TDS
• Section: 43B; 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENTAND SHRI JASON P BOAZ, ACCOUNTANT MEMBER IT (TP) A NO. 2 0 20 /BANG/201 7 ASSESSMENT YEAR S : 20 1 2 - 1 3 M/S. YASKAWA INDIA PVT. LTD., NO.17/A, 2 ND MAIN, ELECTRONIC CITY, PHASE I, HOSUR ROAD, BENGALURU 560 100. PAN : A AAC Y 4408 P VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 7(1)(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. NARENDRA JAIN , ADVOCATE REVENUE BY : SHRI. C. H. SUNDAR RAO , CIT - DR DATE OF HEARING : 09 . 0 7 .201 9 DATE OF PRONOUNCEMENT : 19 . 0 7 .201 9 O R D E R PER JASON P BOAZ, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ORDER OF ASSESSMENT PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 28.12.2016; PURSUANT TO THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL 2, BANGALORE (DRP) UNDER SECTION 144C(5) OF THE ACT DATED 07.11.2016. THE RELEVANT ASSESSMENT YEAR IS 2012-13. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER:- 2.1 THE ASSESSEE, A COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADE OF VARIOUS TYPES OF INVENTORS, SERVERS AND OTHER ELECTRIC PRODUCTS, FILED ITS IT(TP)A NO.2020/BANG/2017 PAGE 2 OF 7 RETURN FOR ASSESSMENT YEAR 2012-13 ON 22.08.2012 DECLARING A LOSS OF RS.14,54,37,463/-. THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 29.11.2012 DECLARING A LOSS OF RS.11,57,35,181/- ON ACCOUNT OF MERGER OF M/S. YASKAWA ROBOTICS INDIA LTD., WITH THE ASSESSEE W.E.F. 01.04.2011. THE CASE WAS SELECTED FOR SCRUTINY AND A REFERENCE WAS MADE BY THE ASSESSING OFFICER (AO) TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINATION OF THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES (AE) IN THE YEAR UNDER CONSIDERATION. THE TPO VIDE ORDER UNDER SECTION 92CA OF THE ACT DATED 12.01.2016 PROPOSED TP ADJUSTMENT OF RS.5,33,32,392/- TO ALP OF ASSESSEES INTERNATIONAL TRANSACTIONS IN ITS MANUFACTURING SEGMENT. THE DRAFT ORDER OF ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) R.W.S. 144C(1) OF THE ACT VIDE ORDER DATED 30.03.2016 WHEREIN THE ASSESSEES LOSS WAS DETERMINED AT RS.(-)6,04,66,459/-; AFTER, INTER ALIA, INCLUDING THE TP ADJUSTMENT OF RS.5,33,32,392/-. 2.2 AGGRIEVED BY THE DRAFT ORDER OF ASSESSMENT DATED 30.03.2016 FOR ASSESSMENT YEAR 2012-13, THE ASSESSEE FILED ITS OBJECTIONS THERETO BEFORE THE DRP AND THE DRP ISSUED ITS DIRECTIONS THEREON UNDER SECTION 144C(5) OF THE ACT VIDE ORDER DATED 07.11.2016. PURSUANT THERETO, THE AO PASSED THE FINAL ORDER OF ASSESSMENT ON 28.12.2016 UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT WHEREIN THE ASSESSEES LOSS WAS DETERMINED AT RS.(-)5,78,05,643/-, INTER ALIA, INCLUDING THE TP ADJUSTMENT OF RS.5,62,42,416/-. 3. THE ASSESSEE, BEING AGGRIEVED BY THE FINAL ORDER OF ASSESSMENT DATED 28.12.2016 FOR ASSESSMENT YEAR 2012-13 HAS PREFERRED THIS APPEAL WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 7( I )(2), BENGALURU (HEREINAFTER REFERRED AS 'AO' FOR BREVITY), LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX. (TRANSFER PRICING) 2(2). BENGALURU (HEREINAFTER REFERRED AS 'TP0 - FOR BREVITY), AND THE HONOURABLE DISPUTE IT(TP)A NO.2020/BANG/2017 PAGE 3 OF 7 RESOLUTION PANEL-2(HEREINAFTER REFERRED AS 'DRP' FOR BREVITY) ('AO - . ' . 1 PO - AND DRP COLLECTIVELY REFERRED AS 'LOWER AUTHORITIES - FOR BREVITY) HAVE ERRED IN PASSING THE ORDER WHICH ARE BAD IN LAW 2. THE LEARNED AO HAS ERRED IN PASSING THE FINAL ASSESSMENT ORDER WITHOUT APPRECIATING THAT HE DOES NOT HAVE JURISDICTION OVER THE APPELLANT. THE LEARNED AO HAS ERRED IN EXERCISING JURISDICTION WITHOUT APPRECIATING THAT LEARNED ITO W-7(1)(4), BANGALORE HAD INITIATED ASSESSMENT AND PASSED DRAFT ASSESSMENT ORDER IN APPELLANT'S CASE AND THEREFORE AC1T CIRCLE 7(1)(2) HAD NO JURISDICTION OVER THE APPELLANT. THE ORDER PASSED WITHOUT JURISDICTION IS BAD IN LAW AND LIABLE TO BE QUASHED. 3. THE LEARNED ,AO HAS ERRED IN PASSING THE FINAL ASSESSMENT ORDER BEYOND THE PERIOD OF LIMITATION PRESCRIBED U/S 144(13) R/W SECTION 143(3) OF THE ACT. THE FINAL ASSESSMENT ORDER PASSED AFTER ONE MONTH FROM THE END OF THE MONTH IN WHICH DRP DIRECTIONS WERE RECEIVED IS BAD IN LAW. GROUNDS (TP-LEGAL ISSUES) 4. THE AO HAS ERRED IN MAKING REFERENCE TO TPO FOR DETERMINING ARM'S LENGTH PRICE WITHOUT DEMONSTRATING AS TO WHY IT WAS NECESSARY AND EXPEDIENT TO DO SO. THE DRP HAS ERRED IN CONFIRMING THE ACTION OF THE AO 5. THE LOWER AUTHORITIES HAVE ERRED IN: A. MAKING TRANSFER PRICING ADJUSTMENT OF RS. 5.62,42,416/- B. PASSING THE ORDER WITHOUT DEMONSTRATING THAT THE APPELLANT HAD MOTIVE OF TAX EVASION. C. NOT APPRECIATING THAT THERE IS NO AMENDMENT TO THE DEFINITION OF 'INCOME - AND CHARGING OR COMPUTATION PROVISION RELATING TO INCOME UNDER THE HEAD 'PROFITS & GAINS, OF BUSINESS OR PROFESSION' DO NOT REFER TO OR INCLUDE THE AMOUNTS COMPUTED UNDER CHAPTER X' AND THEREFORE ADDITION UNDER CHAPTER X IS BAD IN LAW; D. COMPUTING THE TP ADJUSTMENT AT RS.5,62,42,416/- WITHOUT GIVING THE BASIS OF COMPUTATION OF TP ADJUSTMENT IN THE FINAL ASSESSMENT ORDER. GROUNDS (TP MANUFACTURING SEGMENT) 6. THE LOWER AUTHORITIES HAVE ERRED IN: IT(TP)A NO.2020/BANG/2017 PAGE 4 OF 7 A. REJECTING THE CORRECT SEGMENTAL PROFIT AND LOSS STATEMENT SUBMITTED BY THE APPELLANT DURING THE TP ASSESSMENT PROCEEDINGS ON UNJUSTIFIED GROUNDS; B. CONDUCTING A FRESH TRANSFER PRICING ANALYSIS DESPITE ABSENCE OF ANY DEFECTS IN THE TRANSFER PRICING ANALYSIS SUBMITTED BY THE APPELLANT; C. ADOPTING INAPPROPRIATE FILTERS IN THE PROCESS OF SELECTING COMPARABLES; AND D. REJECTING K DHANDAPANI AND CO. LTD AS A COMPARABLE ON UNJUSTIFIED GROUNDS. 7. THE LOWER AUTHORITIES HAVE ERRED IN: A. IGNORING THE BUSINESS, COMMERCIAL AND INDUSTRY REALITIES AND ECONOMIC CIRCUMSTANCES APPLICABLE TO APPELLANT VIS A VIS THE COMPARABLES: B. NOT MAKING PROPER ADJUSTMENT FOR ENTERPRISE LEVEL AND TRANSACTIONAL LEVEL DIFFERENCES BETWEEN THE APPELLANT AND THE COMPARABLE COMPANIES: AND C. NOT PROVIDING CUSTOM DUTY ADJUSTMENT. ADJUSTMENT FOR UNDERUTILIZATION OF CAPACITY. ADJUSTMENT FOR INITIAL YEAR OF OPERATION, ADJUSTMENT FOR MARKETING FUNCTION AND RISK ADJUSTMENT. 8. ASSUMING WITHOUT ADMITTING THAT THE ADJUSTMENT IS TO HE MADE. THE LOWER INCOME TAX AUTHORITIES HAVE ERRED IN NOT ALLOWING THE BENEFIT OF THE +/- 5% RANGE PRESCRIBED IN THE PROVISO TO SECTION 92C(2). CORPORATE TAX GROUNDS 9. THE LOWER AUTHORITIES HAVE ERRED IN A. NOT APPRECIATING THAT RS. 22.49,827/- BEING EMPLOYEE'S CONTRIBUTION TO PF WAS INADVERTENTLY DISALLOWED BY THE APPELLANT IN THE REVISED RETURN OF INCOME DESPITE THE FACT THAT THE AMOUNTS WERE REMITTED WITHIN THE DUE DATE OF FILING RETURN OF INCOME AND THEREFORE ALLOWABLE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, RS. 22.49.827/- SHOULD BE ALLOWED AS DEDUCTION; AND B. NOT GIVING CREDIT FOR ADVANCE TAX PAID OF RS. 84.00,000 AND TDS OF RS. 9,37,869/-. IT(TP)A NO.2020/BANG/2017 PAGE 5 OF 7 4. GROUNDS 1 TO 8 (TRANSFER PRICING ISSUES) AND 9(B) CORPORATE TAX 4.1 AT THE OUTSET OF THE HEARING, THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT VIDE LETTER DATED 21.03.2019, THE ASSESSEE HAS SOUGHT WITHDRAWAL OF APPEAL FILED UNDER SECTION 253 OF THE ACT R.W.RULE 44H(4) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES). IN THIS LETTER; IT WAS SUBMITTED THAT THE ASSESSEE HAD FILED AN APPLICATION UNDER ARTICLE 25 OF THE MUTUAL AGREEMENT PROCEDURE (MAP) OF THE INDIA JAPAN DTAA IN RESPECT OF THE TRANSFER PRICING ADJUSTMENTS MADE IN THE FINAL ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2012-13. IT WAS FURTHER SUBMITTED THAT THE MAP PROCEEDINGS HAVE BEEN RESOLVED; AND A COPY OF THE INTIMATION TO THE ASSESSEE BY THE AO IN THIS REGARD VIDE LETTER NO. MAP/DCIT-C-7(I)(2)/2018-19 DATED 19.03.2019 HAS ALSO BEEN PLACED ON RECORD. THE ASSESSEE BY WAY OF THIS LETTER DATED 21.03.2019 INFORMS THE TRIBUNAL THAT THE ASSESSEE HAS ACCEPTED THE MAP RESOLUTION ARRIVED AT BY THE COMPETENT AUTHORITIES OF INDIA AND JAPAN AND WISHES TO WITHDRAW THE GROUNDS RAISED ON TRANSFER PRICING ISSUES IN THE PRESENT APPEAL. IN THIS REGARD, THE LEARNED AR SUBMITTED BEFORE THE BENCH THAT THE ASSESSEE WITHDRAWS GROUND NOS.1 TO 8 ON TRANSFER PRICING ISSUES RAISED IN RESPECT OF THE MAP RESOLUTION AND IN ADDITION THERETO GROUND NO.9(B) ON CORPORATE TAX. IN THESE CIRCUMSTANCES, AS NARRATED ABOVE, GROUND NOS. 1 TO 8 AND 9(B) RAISED BY THE ASSESSEE ARE RENDERED INFRUCTUOUS AND ARE DISMISSED AS WITHDRAWN. 5. GROUND NO.9(A) : EMPLOYEES CONTRIBUTION TO PF 5.1 IN THIS GROUND (SUPRA), THE ASSESSEE CONTENDS THAT THE AUTHORITIES BELOW ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD INADVERTENTLY DISALLOWED EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO RS.22,49,827/- IN THE REVISED RETURN DESPITE THE FACT THAT THE AMOUNTS WERE REMITTED WITHIN THE DUE DATES AND OUGHT TO HAVE ALLOWED THE SAME AS A DEDUCTION. THIS, IN SPITE OF AN OBJECTION BEING RAISED BEFORE THE DRP IN THIS REGARD, WHICH WAS BRUSHED ASIDE ON TECHNICAL GROUNDS AND IT(TP)A NO.2020/BANG/2017 PAGE 6 OF 7 NOT ON MERITS. IT IS CONTENDED THAT THE DEDUCTION IS TO BE ALLOWED IN VIEW OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SABARI ENTERPRISES (298 ITR 141) (KAR). 5.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS IN THE MATTER AND PERUSED THE MATERIAL ON RECORD. IN THE FACTS OF THE CASE ON HAND, ADMITTEDLY THE ASSESSEE CLAIMS THAT IT HAD INADVERTENTLY DISALLOWED EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO RS.22,49,827/- IN THE REVISED RETURN FILED BY IT FOR ASSESSMENT YEAR 2012-13. WE FIND THAT THIS ISSUE WAS RAISED BY THE ASSESSEE BEFORE THE DRP SEEKING THE ALLOWANCE OF SUCH DEDUCTION UNDER SECTION 43B OF THE ACT. THE DRP BRUSHED ASIDE THE ASSESSEES CLAIM HOLDING THAT IN VIEW OF SUB SECTION 1 OF SECTION 144C OF THE ACT, SINCE THE CLAIM DOES NOT RELATE TO ANY VARIATION MADE BY THE AO IN THE INCOME / LOSS RETURNED BY THE ASSESSEE FOR ASSESSMENT YEAR 2012-13, THE OBJECTION IS BEYOND THE SCOPE OF THE POWERS OF THE DRP. 5.2.2 WE ARE OF THE VIEW THAT, IF AS CONTENDED BY THE ASSESSEE, IT HAS ACTUALLY INADVERTENTLY DISALLOWED THE EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO RS.22,49,827/- IN THE REVISED RETURN OF INCOME FOR ASSESSMENT YEAR 2012-13, WHEN THE SAME WAS REMITTED WITHIN THE DUE DATE FOR FILING THE RETURN OF INCOME; THEN ITS CLAIM WOULD BE ALLOWABLE IN VIEW OF THE DECISION OF THE HONBLE KARNATAKA IN THE CASE OF CIT VS. SABARI ENTERPRISES (2008) 298 ITR 141 (KAR). WHATEVER MAY BE THE FETTERS PLACED ON THE SCOPE OF THE POWERS OF THE DRP, WITH DUE RESPECT, THERE CAN BE NO ESTOPPEL AGAINST THE APPLICATION / OPERATION OF LAW AS LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA). EVEN IF THE ASSESSEE HAS VOLUNTARILY DISALLOWED THIS AMOUNT, SINCE THE SAME IS CONTRARY TO THE BINDING DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), ASSESSEE IS WELL WITHIN ITS RIGHTS TO MAKE A FRESH CLAIM IN ACCORDANCE THEREWITH. IN THIS VIEW OF THE MATTER, WE HEREBY REMAND THIS ISSUE OF THE ASSESSEES CLAIM FOR BEING ALLOWED DEDUCTION IN RESPECT OF EMPLOYEES CONTRIBUTION TO PF AMOUNTING TO IT(TP)A NO.2020/BANG/2017 PAGE 7 OF 7 RS.22,49,827/- TO THE FILE OF THE AO FOR FACTUAL EXAMINATION , VERIFICATION AND ADJUDICATION THEREON AND TO ALLOW THE ASSESSEES CLAIM IF THE SAME IS FOUND TO BE IN ACCORDANCE WITH THE BINDING DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SABARI ENTERPRISES (2008) 298 ITR 141 (KAR). NEEDLESS TO ADD THE ASSESSEE SHALL BE AFFORDED ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS / SUBMISSIONS REQUIRED IN THIS REGARD, WHICH SHALL BE DULY CONSIDERED BEFORE DECIDING THE ISSUE. WE HOLD AND DIRECT ACCORDINGLY. CONSEQUENTLY, GROUND NO.9(A) OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JULY, 2019. SD/ - SD/ - (N. V. VASUDEVAN) VICE PRESIDENT (JASON P BOAZ) ACCOUNTANT MEMBER BANGALORE. DATED: 19 TH JULY, 2019. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.