AGILITY LOGISTICS P.LTD, MUMBAI V. DCIT RG 9(1)(1), MUMBAI

ITA 2056/MUM/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1476 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 23-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 201; 13; 11

Judgement Text

IT (TP) A NO. 2056 /MUM/ 2017 ASSESSMENT Y EAR: 2012 - 13 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH, MUMBAI [CORAM : PRAMOD KUMAR (VICE PRESIDENT) A ND RAVISH SOOD (JUDICIAL MEMBER) ] IT (TP) A NO. 2056 /MUM/ 2017 ASSESSMENT Y EAR: 2012 - 13 AGILITY LOGISTICS PRIVATE LIMITED .APPELLANT POLARIS, A - 501/502, 5 TH FLOOR, OFF M AROL MAROSHI ROAD, MAROL, ANDHERI (E), MUMBAI - 400 059 [PAN: AAACL 3717 A ] VS DY. CIT - RANGE 9(1)(1) ..........RESPONDENT ROOM NO. 260A, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 APPEARANCES BY HIRALI DESAI/NISHANT SHAH/CHANDNI SHAH FOR T HE AP P ELLANT SUNIL JHA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : OCTOBER 21 , 2020 DATE OF PRONOUNC EMENT : DECEMBER 8 TH , 2020 ORDER PER PRAMOD KUMAR, VP : 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED THE CORRECTNESS OF THE ORDER DATED 31.01.2012 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) R.W.S . 144C(13) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 201 2 - 13 . 2. GRIEVANCE OF THE ASSESSEE, IN SUBSTANCE, IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE A.O./TPO/DRP ERRED IN CONFIRMING THE UPWARD ADJUSTMENT OF RS.10.88,57,721/ - TO THE INCOME OF THE ASSESSEE IN RESPECT OF INTERNATIONAL TRANSACTION OF FREIGHT RECEIPTS AND EXPENSES. IT (TP) A NO. 2056 /MUM/ 2017 ASSESSMENT Y EAR: 2012 - 13 PAGE 2 OF 4 3. THE ASSESSEE BEFORE US IS A LOGISTIC SERVICE PROVIDER, OFFER ING A COMPREHENSIVE PORTFOLIO OF INTERNATIONAL, DOMESTIC AND SPECIALIZED FREIGHT HANDLING SERVICES. THE ASSESSEE IS A PART OF AGILITY GROUP, HEADED BY AGILITY HOLDINGS INC. USA WHICH HOLDS 100% SHAREHOLDING IN THE ASSESSEE COMPANY, THROUGH ITS STEP DOWN S UBSIDIARIES NAMELY AGILITY HOLDING LOGISTICS PTE. LTD. (SINGAPORE), AGILITY LOGISTICS LTD. (HONG KONG) AND AGILITY INTERNATIONAL LOGISTICS PTE. LTD. (SINGAPORE). 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TPO/ DRP BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 6 . LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE IS NOW COVERED, BY A COORDINATE BENCH DECISION IN THE ASSESSEES OWN CASE FOR A.Y S . 2010 - 11 AND 2011 - 12 . IN THE SAID ORDER, I.E. DY. CIT VS. AGILITY LOGISTICS PVT. LTD. [IT (TP) A NO S . 1873/MUM /1 5 & 818/MUM/16 ORDER DATED 3 RD SEPTEMBER, 2020 ], THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS: 3. BRIEF FACTS ARE, THE ASSESSEE , AS STATED BY THE REVENUE AUTHORITIES IS A RESIDENT COMPANY OFFERING COMPREHENSIVE PORTFOLIO OF INTERNATIONAL AND DOMESTIC AND SPECIALIZED FREIGHT HANDLING SERVICES. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACT IONS WITH ITS OVERSEAS ASSOCIATED ENTERPRISES (AES) AND IN COURSE OF SUCH TRANSACTIONS HAS PAID FREIGHT EXPENSES TO THE AES AND HAS ALSO RECEIVED FREIGHT REVENUE FROM THE AES. FOR BENCHMARKING SUCH TRANSACTION, THE ASSESSEE HAS APPLIED CUP AS THE MOST APPR OPRIATE METHOD. FOR COMPARABILITY PURPOSE, THE ASSESSEE HAS RELIED UPON COMPARABLE AGREEMENTS ENTERED INTO BY THE GROUP COMPANIES WITH THIRD PARTIES, WHEREIN, THE TERMS ARE SIMILAR TO THE TERMS OF AGREEMENT BETWEEN THE ASSESSEE AND THE GROUP COMPANIES. BEF ORE THE TRANSFER PRICING OFFICER, THE ASSESSEE HAD SUBMITTED THAT AS PER CORPORATE POLICY, AFTER PAYMENT OF COST THE PROFITS ARE SHARED EQUALLY BETWEEN THE AES THAT HAVE PARTICIPATED IN TRANSACTIONS. IT WAS ALSO EMPHASIZED THAT THE TERMS OF CONTRACT BETWEE N THE GROUP COMPANIES WITH THE THIRD PARTIES AS WELL AS THE ASSESSEE REMAINS THE SAME AS PER WHICH THE RESIDUAL GROSS PROFIT IS SHARED BETWEEN THE ORIGINAL COMPANY AND THE DESTINATION COMPANY AT 50:50 RATIO. IN SUPPORT OF SUCH CLAIM, THE ASSESSEE ALSO FURN ISHED ALL RELEVANT AND NECESSARY INFORMATION AND EVIDENCES. FURTHER, TO CORROBORATE THE BENCHMARKING UNDER CUP, THE ASSESSEE ALSO PROVIDED AN ALTERNATIVE ECONOMIC ANALYSIS BY APPLYING TRANSACTIONAL NET MARGIN METHOD (TNMM) WITH OPERATING PROFIT (OP)/VALUE ADDED EXPENDITURE (VAE) AS THE PROFIT LEVEL INDICATOR (PLI). UNDER TNMM, THE ASSESSEE SELECTED SEVEN COMPARABLES WITH MEAN OP/VAE OF 30% AS AGAINST THE OP/VAEJ SHOWN BY THE ASSESSEE AT 22.76%. THUS, IT WAS CLAIMED THAT TH E TRANSACTIONS WITH THE AES ARE AT ARM'S LENGTH. IT (TP) A NO. 2056 /MUM/ 2017 ASSESSMENT Y EAR: 2012 - 13 PAGE 3 OF 4 4. THE TRANSFER PRICING OFFICER, HOWEVER, DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND REJECTED CUP METHOD APPLIED BY ASSESSEE. HOLDING THAT TNMM IS THE MOST APPROPRIATE METHOD, THE TRANSFER PRICING OFFICER PROCEEDED TO BENCHMARK THE TRANSACTION WITH THE AE BY APPLYING TNMM WITH OPERATING PROFIT (OP)/ TOTAL COST (TC) AS THE PLI. OUT OF SEVEN COMPARABLES SELECTED BY THE ASSESSEE, THE TRANSFER PRICING OFFICER REJECTED CERTAIN COMPARABLES AND ULTIMATELY PROPOSED ADJUSTMENT OF RS. 51,35,70,591, IN ASSESSMENT YEAR 2010 - 11 AND RS. 14,53,03,285, IN ASSESSMENT YEAR 2011 - 12. IN TERMS WITH THE ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER, THE ASSESSING OFFICER MADE ADDITIONS IN THE DRAFT ASSESSMENT ORDERS. AGAINST THE/ DRAFT ASSESSMENT ORDER SO PASSED, THE ASSESSEE RAISED OBJECTIONS BEFORE LEARNED DRP. 5. HAVING TAKEN NOTE OF THE FACT THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES IN ASSESSEE'S OWN CASE, THE TRANSFER PRICING OFFICE HIMSELF IN ASSESSM ENT YEAR 2002 - 03 AND 2003 - 04 HAS ACCEPTED CU AS THE MOST APPROPRIATE METHOD AND DID NOT PROPOSE ANY ADJUSTMENT AND FURTHER, THE TRIBUNAL IN ASSESSEE'S OWN CASE IN ASSESSMENT YEAR 2004 - 05, 2005 - 06 AND 2006 - 07 HAS ACCEPTED THE BENCHMARKING DON E BY THE ASSESS EE BY APPLYING CUP METHOD, FOLLOWED THE SAME AN J DELETED THE ADDITIONS MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTME NT IN BOTH THE ASSESSMENT YEARS UNDER DISPUTE. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS A COMMON POINT BETWEEN THE LEARNED COUNSEL APPEARING ON BEHALF OF THE PARTIES THAT THE ISSUE IN DISPUTE IS COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL RENDERED IN THE PRECEDING ASSESSMENT YEARS. IN THIS CONTEXT, THE L EARNED COUNSEL FOR THE ASSESSEE HAS DREW OUR ATTENTION TO THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IN THE ORDERS PASSED FOR THE ASSESSMENT YEAR 2004 - 05 TO 2009 - 10. ON A PERUSAL OF THE MATERIAL PLACED BEFORE US, WE FIND THAT WHILE DECIDING IDENTICAL ISSUE IN ASSESSEE'S OWN CASE IN ASSESSMENT YEAR 2004 - 05 IN ITA NO.2000/ MUM./2010, DATED 25 TH JANUARY 2012, THE TRIBUNAL HAS ACCEPTED THE BENCHMARKING DONE BY THE ASSESSEE UNDER CUP METHOD AND HAS ALSO HELD THAT THE PROFIT SHARING RATIO OF 50:50 IS PREVALENT BOT H IN RESPECT OF AGREEMENT ENTERED INTO BETWEEN GROUP COMPANIES WITH UNRELATED PARTIES AS WELL AS THE ASSESSEE. THE SAME VIEW WAS EXPRESSED BY THE TRIBUNAL IN ASSESSMENT YEAR 2005 - 06 VIDE ITA NO.6004/MUM./2010, DATED 25 TH JANUARY 2012, IN ASSESSMENT YEAR 20 07 - 08 VIDE ITA NO. 8648/MUM./2011 / DATED 13 TH APRIL 2012, IN ASSESSMENT YEAR 2008 - 09 VIDE IT(TP)A NO.7508/MUM./2012 / DATED 23 RD JULY 2013 AND IN ASSESSMENT YEAR 2009 - 10 VIDE IT(TP) NO.H89/MUM./2014, DATED 19 TH NOVEMBER 2014. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE FACTS ON THE BASIS OF WHICH THE TRIBUNAL HAS DECIDED THE ISSUE IN THE PRECEDING ASSESSMENT YEARS REMAIN UNCHANGED IN THE IMPUGNED ASSESSMENT YEARS AS WELL. IN FACT, LEARNED DRP FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEARS 2004 - 05 TO 2006 - 07 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE CONSISTENT VIEW EXPRESSED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE IN PRECEDING ASSESSMENT YEAR AS NOTED AB OVE, WE UPHOLD THE DECISION OF LEARNED DRP IN BOTH THE YEARS UNDER APPEAL. GROUNDS ARE DISMISSED. IT (TP) A NO. 2056 /MUM/ 2017 ASSESSMENT Y EAR: 2012 - 13 PAGE 4 OF 4 7 . WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE PLE A OF THE ASSESSEE , AND DELETE THE IMPUGNED ARMS LENGTH PRICE ADJUSTMENT OF RS. 10,88,57,721/ - . THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 8 . IN THE RESULT THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 8 TH DECEMBER , 20 20 . SD/ - SD/ - RAVISH SOOD PRAMOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) MUMBAI , D ATED THE 8 TH D AY OF DECEMBER , 2020 ROSHANI, SR. PS COPIES TO : (1) THE APPLICANT (2) THE RESPONDEN T (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI