DCIT, Bangalore V. M/s Festo Controls Pvt. Ltd., Bangalore

ITA 209/BANG/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2429 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Period of limitation; Condonation of delay; TDS; Set aside
• Section: 143(3); 234B; 250

Judgement Text

IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B, BANGALORE BEFORE SHRI A.K.GARODIA, ACCOUNTANT MEMBER AND SMT.BEENA PILLAI, JUDICAL MEMBER SL. NO ITA/IT(TP)A NO. ASST. YEAR APPELLANT RESPONDENT 1 IT(TP)A NO.969(B)/2014 2009 - 10 THE DCIT, CIRCLE - 11(3), BANGALORE M/S FESTO INDIA PVT.LTD. 237B, BOMMASANDRA INDUSTRIAL AREA, BANGALORE - 560 099 AAACF2940F 2 IT(TP)A NO. 1028 (B)/201 4 2009 - 10 M/S FESTO INDIA PVT.LTD. 237B, BOMMASANDRA INDUSTRIAL AREA, BANGALORE - 560 099 AAACF2940F THE DCIT, CIRCLE - 11(3), BANGALORE 3 IT(TP)A N O .209(B)/2015 2010 - 11 THE DCIT, CIRCLE - 3(1)(1), BANGALORE M/S FESTO INDIA PVT.LTD. 237B, BOMMASANDRA INDUSTRIAL AREA, BANGALORE - 560 099 AAACF2940F 4 CO . NO.74(B)/2017 (IN IT(TP)A NO.209(B)/2015 2010 - 11 THE DCIT, CIRCLE - 3(1)(1), BANGALORE M/S FESTO INDIA PVT.LTD. 237B, BOMMASANDRA INDUSTRIAL AREA, BANGALORE - 560 099 AAACF2940F REVENUE BY : MS. NEERA MALHOTRA, CIT ,DR APPELLANT BY : S HRI NAGESHWAR RAO, ADVOCATE DATE OF HEARING : 0 7 - 11 - 2019 DATE OF PRONOUNCEMENT : S21 - 11 - 2019 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : PRESENT APPEALS HAVE BEEN FILED BY ASSESSEE AS WELL AS REVENUE AGAINST ORDER PASSED BY LD.CIT (A) DATED 29/05/14 FOR ASSESSMENT IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 2 YEAR 2009 - 10 AND ORDER DATED 30/12/2014 PASSED BY LD.DCIT CIRCLE 3(1) (2) FOR ASSESSMENT YEAR 2010 - 11 ON FOLLOWING GROUNDS OF APPEAL: I TA NO. 1028/B/2014 ( A SSESSMENT YEAR 2009 - 10) BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, FESTO CONTROLS PRIVATE LIMITED ['FESTO INDIA' OR 'THE APPELLANT' OR 'THE COMPANY'] RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - IV (HEREINAFTER REFERRED TO AS THE LEARNED CIT(A)) UNDE R SECTION 250 OF THE I N COME TAX ACT, 1961(ACT) ON THE FOLLOWING GROUNDS; 1 THE ORDER OF THE LEARNED AO IS BASED ON INCORRECT INTERPRETATION OF LAW AND THEREFORE IS BAD IN LAW. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ASSESSING THE TOT A L INCOME OF THE APPELLANT T RS.42,01,21,617/ - AS AGAINST RETURN E D INCOME OF R S.31,26,88,290/ - COMPUTED BY THE APPELLANT. TRA NSFER PRICING GROUNDS: 3. THE LEARNED CIT(A) ERRED IN LAW AND IN FACTS, BY UPHOLDING THE APPROACH OF THE AO/TRANSFER PRICING OFFICER IN REJECTING THE RESALE PRICE METHOD (RPM) ADOPTED BY THE APPELLANT AS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE IMPUGNED INTERNATIONAL TRANSACTION AND ADOPTING THE TRANSACTIONAL NET MARGIN METHOD ('TNMM') INSTEAD. 4. THE LEARNED TPO AND THE LEARNED AO ERRED , IN LAW AND IN FACTS, IN U PHOLDING THE F R ESH COMPARABLE SEARCH UN D E R TAKEN BY THE LEARNED TPO/AO DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS USING INFORMATION/D A TA WHICH WAS NOT AVAILABLE TO THE ASSESSEE AT T H E TIME OF SATISFYING THE MANDATORY DOCUMENTATION REQUIREMENTS. IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 3 5. THE LEARNED CIT(A) HAS ERRED (ALONGWITH THE LEARNED TPO AND THE LEARNED AO) IN LAW AND IN FACTS, IN REJECTING THE USE OF MULTIPLE YEAR DATA AND USING DATA FOR THE FY 2008 - 09 ONLY IN DETERMINATION OF ALP UNDER TNMM; 6. THE LEARNED TPO AND THE LEARNED AO ERRED, IN LAW AND IN FACTS, BY REJECTING THE COMPANIES ADOPTED AS COMPARABLE BY THE APPELLANT IN THE TRANSFER PRICING STUDY FOR DETERMINATION OF A LP . 7. THE LEARNED TPO HAS ERRED, IN LAW AND IN FACTS, BY UPHOL D ING CER TA IN COMPANIES SELECTED BY THE LEARNED TPO/AO SELECTING CERTAIN COMPANIES WHICH ARE FUNCTIONALLY DIFFERENT, AS COMPARABLE TO THE APPELLANT FOR DETERMINATION OF ALP. 8. WITHOUT PREJUDICE TO OUR CONTENTION THAT TNMM SHOULD NOT BE CONSIDERED AS THE MOST APPROPRIATE METHOD, THE LEARNED CIT(A) HAS ERRED (ALONG WITH THE LEARNED TPO AND THE AND THE LEARNED AO ), IN LAW AND IN FACTS, BY SELECTING COMPANIES BASED ON UNREASONABLE C OMPARABILITY CRITERIA: A. REJECTION OF COMPANIES WHOSE DATA FOR FY 2008 - 09 WAS NOT AVAILABLE; B. REJECTION OF COMPANIES WITH REVENUE WAS BELOW RS. 1 CRORE; AND C. REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT ON THE GROUND THAT THE COMPARABLES WERE HAVING DIFFERENT ACCOUNTING YEAR (OTHER THAN MARCH 31 OR COMPANIES WHOSE FINANCIAL STATEMENTS WERE FOR A PERIOD OTHER THAN 12 MONTHS) 9. WITHOUT PREJUDICE TO OUR CONTENTION THAT TNMM SHOULD NOT BE CONSIDERED AS THE MOST APPROPRIATE METHOD, THE LEARNED TPO AND THE LEARNED AO ERRED , IN LAW AND IN FACTS, IN NOT PROVIDING THE BENEFIT OF WORKING CAPITAL ADJUSTMENT BY ADJUSTING THE NET MARGINS OF THE COMPARABLE COMPANIES; IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 4 10. THE LEARNED CIT(A) HAS ERRED (ALONGWITH THE LEARNED AO), IN LAW, AND IN FACTS, IN LEVYING INTEREST UNDER SECTIONS 234B AN 234C OF THE ACT RESPECTIVELY. 11. THE LEARNED IT(A) HAS ERRED ALONGWITH THE LEARNED AO, IN LAW AND IN FACTS, IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT.. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CAVES LEAVE TO ADD, ALTER, AMEND, VARY OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HARING OF THE APPE A L, SO AS TO ENABLE THE HONBLE TRIBUNAL TO DECIDE ON THE APPEAL IN ACCORDANCE WITH THE LAW . ITA NO.969/B/2014 (ASSESSMENT YEAR : 2009 - 010) BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, FESTO CONTROLS PRIVATE LIMITED ['FESTO INDIA' OR 'THE APPELLANT' OR 'THE COMPANY'] RESPECTFULLY CRAVES LEAVE TO PREFER AN APPEAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER ('AO') DATED 31 JANUARY 2013 (RECEIVED BY US ON 15 FEBRUARY 2013) UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (THE 'AC T'), ON THE FOLLOWING GROUNDS: 1 THE ORDER OF THE LEARNED AO IS BASED ON INCORRECT INTERPRETATION OF LAW AND THEREFORE IS BAD IN LAW. 2 THE LEARNED TRANSFER PRICING OFFICER ('TPO') AND THE LEARNED AO HAVE ERRED, IN LAW AND IN FACTS, BY NOT ACCEPTING THE ECONOM IC ANALYSIS UNDERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE INCOME - TAX RULES, 1962 ('RULES'), AND HOLDING THAT THE APPELLANT'S INTERNATIONAL TRANSACTIONS (I.E. PAYMENT OF SAP CHARGES TO FESTO GERMANY AND IMPORT OF FIN ISHED GOODS FOR TRADING) ARE NOT AT ARM'S LENGTH. TRADING TRANSACTION IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 5 3.THE LEARNED TPO AND THE LEARNED AO ERRED, IN LAW AND IN FACTS, BY REJECTING THE RESALE PRICE METHOD ('RPM') ADOPTED BY THE APPELLANT AS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ARM'S LENGTH PRICE ('ALP') OF THE IMPUGNED INTERNATIONAL TRANSACTION AND ADOPTING THE TRANSACTIONAL NET MARGIN METHOD ('TNMM') INSTEAD. 4.THE LEARNED TPO AND THE LEARNED AO ERRED , IN LAW AND IN FACTS, IN UNDERTAKING A FRESH COMPARABLE SEARCH DURING THE CO URSE OF ASSESSMENT PROCEEDINGS USING INFORMATION/ DATA WHICH WAS NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF SATISFYING THE MANDATORY DOCUMENTATION REQUIREMENTS; 5. THE LEARNED TPO AND THE LEARNED AO ERRED , IN LAW AND IN FACTS. IN REJECTING THE USE OF MU LTIPLE YEAR DATA AND USING DATA FOR THE FY 2008 - 09 ONLY IN DETERMINATION OF ALP UNDER TNMM; 6. THE LEARNED TPO AND THE LEARNED AO ERRED, IN LAW AND IN FACTS, BY REJECTING THE COMPANIES ADOPTED AS COMPARABLE BY THE APPELLANT IN THE TRANSFER PRICING STUDY FO R DETERMINATION OF ALP . . 7. THE LEARNED TPO AND THE LEARNED AO ERRED, IN LAW AND IN FACTS, BY SELECTING CERTAIN COMPANIES WHICH ARE FUNCTIONALLY DIFFERENT, AS COMPARABLE TO THE APPELLANT FOR DETERMINATION OF ALP. 8. WITHOUT PREJUDICE TO OUR CONTENTION THAT TNMM SHOULD NOT BE CONSIDERED AS THE MOST APPROPRIATE METHOD, THE LEARNED TPO AND THE LEARNED AO ERRED, IN LAW AND IN FACTS, BY SELECTING COMPANIES BASED ON UNREASONABLE COMPARABILITY CRITERIA: REJECTION OF COMPANIES WHOSE DATA FOR FY 2008 - 09 WAS NOT AVAIL ABLE; REJECTION OF COMPA NIES WITH REVENUE WAS BELOW RS. 1 CRORE; AND IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 6 REJECTING CERTAIN COMPARABLE COMPANIES IDENTIFIED BY THE APPELLANT ON THE GROUND THAT THE COMPARABLES WERE HAVING DIFFERENT ACCOUNTING YEAR (OTHER THAN MARCH 31 OR COMPANIES WHOSE FINANCIA L STATEMENTS WERE FOR A PERIOD OTHER THAN 12 MONTHS) WITHOUT PREJUDICE TO OUR CONTENTION THAT TNMM SHOULD NOT BE CONSIDERED AS THE MOST APPROPRIATE METHOD, THE LEARNED TPO AND THE LEARNED AO ERRED , IN LAW AND IN FACTS, IN NOT PROVIDING THE BENEFIT OF WORK ING CAPITAL ADJUSTMENT BY ADJUSTING THE NET MARGINS OF THE COMPARABLE COMPANIES; PAYMENT OF SAP CHARGES TRANSACTION 10. THE LEARNED TPO AND THE LEARNED AO HAVE ERRED, IN LAW AND IN FACTS, BY HOLDING THAT THE PAYMENTS HAVE BEEN MADE IN RELATION TO THE IMPLEMENTATION OF SAP ERP PLATFORM AND BY OVERLOOKING THE FACT THE PAYMENTS ARE IN RELATION TO THE MAINTENANCE AND TROUBLESHOOTING OF THE PLATFORM. 11. THE LEARNED TPO AND THE LEARNED AO HAVE ERRED, IN LAW AND IN FACTS, BY CONSIDERING COMPARABLE UNCONTROLLE D PRICE ('CUP') METHOD AS MOST APPROPRIATE METHOD AND CONSIDERING THE PRICES PAID BY COMPANIES TOWARDS SAP IMPLEMENTATION FOR DETERMINING THE ARM'S LENGTH PRICE ('ALP') IN CASE PAYMENT OF SAP MAINTENANCE CHARGES PAID. 12. THE LEARNED TPO AND THE LEARNED AO ERRED, IN LAW AND IN FACTS, BY APPLYING CUP METHOD, WITHOUT UNDERTAKING AN OBJECTIVE ANALYSIS FOR IDENTIFYING COMPARABLE TRANSACTIONS AND MERELY RELYING ON THE ORDER PASSED BY THE TPO FOR AY 2007 - 08 AND AY 2008 - 09 AND DETERMINING THE ALP IN RESPECT OF PAY MENTS OF CHARGES TO AES AS NIL. 13. THE LEARNED AO HAS ERRED, IN LAW AND FACTS, IN ASSESSING / COMPUTING THE TOTAL INCOME AT RS. 42,01,21,617 AND COMPUTING THE ADDITIONAL TAX LIABILITY OF RS. 5,43,69,672. IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 7 14. THE LEARNED AO ERRED IN LAW AND IN FACTS, IN LEVYING INTEREST OF RS.1,78,54,085/ - AND RS.21,315 UNDER SECTION 234B AND SECTION 234C OF THE ACT, RESPECTIVELY. 15. THE LEARNED AO ERRED IN LAW AND IN FACTS, BY INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1) (C ) OF THE ACT. THE APPELLANT SUBMITS THAT EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CAVES LEAVE TO ADD, ALTER, AMEND, VARY OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HARING OF THE APPEAL, SO AS TO ENABLE THE LEARNED COMMISSIONER(APPEALS) TO DECIDE THE APPEALS ACCORDING TO L AW. ITA NO. 209/B/2015 (ASSESSMENT YEAR : 2010 - 11 ) 1. THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL ARE OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DISPUTE RESOLUTION PANEL ERRED IN DIRECTING THE TPO/AO TO EXC LUDE THE COMPARABLE M/S ENERGY DEVELOPMENT CO. LTD., BY HOLDING THAT THE SAME IS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE COMPANY WITHOUT APPRECIATING THE FACT THAT IN ASSESSEE'S OWN CASE FOR AY 2009 - 10, CIT(A) HAD UPHELD THE SELECTION OF THIS COMPANY AS A COMPARABLE COMPANY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AS PER THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL, WHETHER WORKING CAPITAL ADJUSTMENT CAN BE MADE ON THE BASIS OF ADVANCE RECEIVED FROM AES IN ABSENCE OF DEBTORS AND INVENTORY IN THE CASE OF ASSESSEE FOR CALCULATING THE COST OF WORKING CAPITAL BUILT IN THE PROFIT MARGIN. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DISPUTE RESOLUTION PANEL IS NOT JUSTIFIED IN DIRECTING THE TPO TO ADJUST THE PROFIT MARGIN OF THE ASSESSEE FOR THE ENTIRE IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 8 AMOUNT OF ADVANCES RECEIVED FROM AE ON THE GROUND THAT THERE IS TIME VALUE FOR MONEY. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL IN SO FAR AS IT REL ATES TO THE ABOVE GROUNDS MAY BE REVERSED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. CO NO. 74/B/2017 (ASSESSMENT YEAR 2010 - 11) 1. THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL ARE OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DISPUTE RESOLUTION PANEL ERRED IN DIRECTING THE TPO/AO TO EXCLUDE THE COMPARABLE M/S ENERGY DEVELOPMENT CO. LTD., BY HOLDING THAT THE SAME IS NOT FUNCTIONALLY COMPARABLE TO THE ASSES SEE COMPANY WITHOUT APPRECIATING THE FACT THAT IN ASSESSEE'S OWN CASE FOR AY 2009 - 10, CIT(A) HAD UPHELD THE SELECTION OF THIS COMPANY AS A COMPARABLE COMPANY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AS PER THE DIRECTIONS OF THE DISPUTE RESOLUTIO N PANEL, WHETHER WORKING CAPITAL ADJUSTMENT CAN BE MADE ON THE BASIS OF ADVANCE RECEIVED FROM AES IN ABSENCE OF DEBTORS AND INVENTORY IN THE CASE OF ASSESSEE FOR CALCULATING THE COST OF WORKING CAPITAL BUILT IN THE PROFIT MARGIN. 4. ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE THE DISPUTE RESOLUTION PANEL IS NOT JUSTIFIED IN DIRECTING THE TPO TO ADJUST THE PROFIT MARGIN OF THE ASSESSEE FOR THE ENTIRE AMOUNT OF ADVANCES RECEIVED FROM AE ON THE GROUND THAT THERE IS TIME VALUE FOR MONEY. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE DIRECTIONS OF THE DISPUTE IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 9 RESOLUTION PANEL IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DE LETE ANY OF THE GROUNDS MENTIONED ABOVE. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : A T THE OUTSET LD.AR SUBMITTED THAT ISSUES RAISED BY ASSESSEE AS WELL AS REVENUE AND CROSS APPEALS FILED FOR ASSESSMENT YEAR 2009 - 10 AS WELL AS FOR ASSESSMENT YEAR 2010 - 11 ARE IDENTICAL AND TP ADDITIONS ARE BASED ON SIMILAR FACTS AND CIRCUMSTANCES. IT HAS BEEN SUBMITTED THAT THE TP ADJUSTMENT FOR ASSESSMENT YEAR 2009 - 10 , ARE FOR TRADING SEGMENT AS WELL AS INTRA - GROUP SERVICES AND COMPARABLES SELECTED FOR COMPUTING ADP OF T RANSACTION IN TRADING SEGMENT, W HEREAS FOR ASSESSMENT YEAR 2010 - 11 ADJUSTMENT IS BASED ONLY IN RESPECT OF TRADING SEGMENT. 2.1 FOR THE SAKE OF CONVENIENCE , WE ARE CONSIDERING THE FACTS AS EMANATING FOR ASSESSMENT YEAR 2009 - 10: IT HAS BEEN SUBMITTED THAT AS SESSEE IS A COMPANY ENGAGED IN BUSINESS OF MANUFACTURING AND TRADING A PNEUMATIC EQUIPMENTS USED IN INDUSTRY AUTOMATION. ASSESSEE IN THE TRANS FER PRICING STUDY HAS CATEGORISED FOLLOWING ACTIVITIES BEING CARRIED OUT FOR YEAR UNDER CONSIDERATION: A) MANUFACTUR ING OF PNEUMATIC PRODUCTS AND COMPONENTS TO FESTO GROUP OF COMPANIES. B) IMPORT OF FINISHED PRODUCTS FROM FESTO GROUP FOR RESALE IN INDIA. C) PAYMENTS MA D E BY ASSESSEE IN LIEU OF INTRA - GROUP SERVICES UNDER THE HEAD SAP SERVICE CHARGE PAYABLE TO M/S FESTO GROUP. IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 10 IN RESPECT OF TRADING SEGMENT ASSESSEE APPLIED RPM TO BE MOST APPROPRIATE METHOD WHEREAS LD.TPO APPLIED TNMM. LD.TPO ALSO OBSERVED THAT ASSESSEE HAD MADE PAYMENT IN RESPECT OF INTRA - GROUP SERVICES UNDER THE HEAD SAP SERVICE CHARGES, PAYABLE TO FESTO GERMANY, AMOUNTING TO RS.3,70,71,906/ - . LD.TPO OBSERVED THAT ASSESSEE ANALYSED THE TRANSACTION BY USING CUP METHOD, WHICH WAS REJECTED BY LD.TPO. LD.TPO DISALLOWED THE SAME BY HOLDING THAT ASSESSEE DID NOT SHOW HOW UNRELATED PARTIES WOULD CHARGE IN SIMILA R CIRCUMSTANCES, AND THAT IN ASSESSEES CASE AS PER THE AGREEMENT ENTERED WITH ITS AE, SAP CHARGES WAS TO BE PAID AT THE TIME OF IMPLEMENTATION, WHEREAS ASSESSEE PAID SUCH CHARGES EVERY YEAR. 2.2 ASSESSEE ALSO RAISED ADDITIONAL GROUND IN RESPECT OF METHOD S ADOPTED BY LEARN ED TPO , WHILE COMPUTING A LP FOR TRADING SEGMENT WHICH READS AS UNDER: ADDITIONAL GROUNDS OF APPEAL IN ADDITION TO THE GROUNDS OF OBJECTIONS RAISED BEFORE THE HONBLE BENCH. THE PETITIONER HEREBY WISHES TO SUBMIT THE FOLLOWING ADDITIONAL GROUNDS AFTER GROUND NO 12: GROUND NO 13: THE LEARNED CIT(A)/ AO/ TPO HAS ERRED, IN LAW AND IN FACTS, BY REJECTING ASHCO INDUSTRIES LIMITED, BOMBARDIER TRANSPORTATION INDIA LIMITED AND K DHANDAPA NI & CO LIMITED ADOPTED AS COMPARABLE BY THE APPELLANT FOR DETERMINATION OF ALP. GROUND NO 14 THE LEARNED CIT(A)/ AO/ TPO HAS ERRED, IN LAW AND IN FACTS, BY UPHOLDING THE INCLUSION OF ENERGY DEVELOPMENT COMPANY LIMITED AND GEMINI COMMUNICATIONS LIMITED SEL ECTED BY THE LEARNED TPO/AO, FOR DETERMINATION OF ALP. IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 11 THE PETITIONER SUBMITS THAT THE ABOVE ADDITIONAL GROUNDS ARE BEING RAISED BY WAY OF ABUNDANT CAUTION. THE ADDITIONAL GROUNDS RAISE ISSUES WHICH ARE FUNDAMENTAL TO THE APPEAL AND THE NON - ADMISSION AND NON - ADJUDICATION OF THE SAME WOULD RESULT IN AN INCOMPLE TE APPRECIATION AND ADJUDICATION OF THE MATTER. THE PETITIONER SUBMITS THAT THE FAILURE TO RAISE THESE GROUNDS AT AN EARLIER STAGE IS NEITHER WILFUL NOR WANTON BUT DUE TO THE REASONS STATED ABOVE. NO PREJUDICE WOULD BE CAUSED TO THE RESPONDENT BY REASON OF THE ABOVE ADDITIONAL GROUNDS BEING ADMITTED AND ADJUDICATED AND ACCORDINGLY THE BALANCE OF CONVENIENCE IS IN FAVOUR OF SUCH AN ORDER BEING PASSED BY THIS HON'BLE TRIBUNAL. IN THE ABOVE CIRCUMSTANCES, THE PETITIONER PRAYS THAT THIS HON'BLE TRIBUNAL BE PLEASED TO; I) ADMIT AND ADJUDICATE THE ABOVE ADDITIONAL GROUNDS; AND (II) PASS ANY OTHER ORDER THAT MAY BE REQUIRED IN THE CIRCUMSTANCES OF THE CASE AND RENDER JUSTICE. 2.3 LD.AR SUBMITTED THAT ASSESSEE HAS ENTERED INTO ADVANCED PRICING AGREEMENT FOR AS SESSMENT YEARS 2014 - 15 TO 2018 - 19 COVERING ALL INTERNATIONAL TRANSACTIONS UNDERTAKEN BY ASSESSEE DURING THE SAID PERIOD. FURTHER D.AR FAIRLY SUBMITTED THAT YEARS UNDER CONSIDERATION ARE NOT COVERED BY SAID APA. IT HAS BEEN SUBMITTED THAT APA COVERS TRADING TRANSACTION, WHICH HAS BEEN DISPUTED BY LD.TPO FOR YEARS UNDER CONSIDERATION. LD.AR SUBMITTED THAT IN APA OPERATING MARGIN AGREED FOR THE TRANSACTION IS RS.3.5% BY USING TNMM AS MOST APPROPRIATE METHOD. L D.AR ALSO SUBMITTED THAT FAR ANALYSIS OF TRADING SEGMENT FOR YEAR UNDER CONSIDERATION IS IDENTICAL TO YEARS COVERED UNDER APA. HE THUS PRAYED FOR ROLLBACK SAME MARGIN TO BE APPLIED TO THE YEAR UNDER IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 12 CONSIDERATION AS AGREED IN APA. LD.AR FILED WRITTEN SUBMI SSION REGARDING THE SAME, WHEREIN HE PLACED RELIANCE ON FOLLOWING DECISION IN SUPPORT OF THIS CONTENTION: AXA TECHNOLOGIES SHARED SERVICES PVT.LTD ITA (TP) A NO. 659/BANG/2012; 3I INDIA PVT.LTD. ITA NO. 581/MUM/2015 WARBURG PRINCESS INDIA PVT.LTD., ITA NO. 6981/MUM/2012 AMERIPRISE INDIA PVT.LTD. ITA NO. 206/2016 TIETO IT SERVICES INDIA PVT.LTD ITA NO. 242/PUN/2015 3. PER CONTRA, LD.CIT, DR PLACED RELIANCE UPON DECISION OF PUNE BENCH OF THIS TRIBUNAL IN CASE OF HONEYWELL AUTOMATION INDIA LTD VS ACIT REPORTED IN (2019) 101 TAXMANN.COM 6. SHE SUBMITTED THAT ISSUE MAY BE SET ASIDE TO LD.AO/TPO FOR VERIFYING FAR ANALYSIS OF ASSESSEE FOR YEAR UNDER CONSIDERATION VIS - A - VIS YEARS COVERED UNDER APA. 3.1 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT O F RECORDS PLACED BEFORE US. 3.2 WE HAVE GONE THROUGH THE DECISIONS RELIED UPON BOTH SIDES COPIES OF WHICH HAVE BEEN PLACED ON RECORD. AMONGST THE DECISIONS RELIED UPON BY LD.AR, IT IS OBSERVED THAT COORDINATE BENCHES OF THE T RIBUNAL ANALYSED COMPARABLES AN D THEN CONCLUDED THAT MARGIN ADOPTED IN APA WAS WITHIN IS PERMISSIBLE RANGE WITH MARGIN COMPUTED BY ASSESSEE THEREIN. OTHER DECISION WAS ON THE ISSUE WHERE, TRANSACTIONS HAVE BEEN CONSIDERED AT A PARTICULAR MARGIN UNDER APA, AND SEPARATE ADJUSTMENT BY TPO DETERMINING ALP OF SAME TRANSACTION WAS HELD TO BE CONTRARY. IN THE DECISION RELIED UPON BY LD.AR OF COORDINATE BENCH OF THIS TRIBUNAL , ISSUE WAS IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 13 REMANDED BACK TO LD. AO/TPO. WE ARE THEREFORE UNABLE TO AGREE TH AT CONTENTION BY ASSESSEE STAND ON THE ISSUE O ROLL BACK SQUARELY COVERED BY DECISIONS RELIED UPON BY LD.AR. 3.3 HOWEVER, IN DECISION RELIED UPON BY LD.CIT DR, IT IS OBSERVED THAT DETAILED ANALYSIS ON ISSUE OF ROLL BACK HAS BEEN CONSIDERED AS UNDER: 5.1 FURTHER, BRINGING OUR ATTENTION TO THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ABICOR BINZEL PRODUCTION (INDIA) (P.) LTD. V. DY.CIT IN ITA NOS.2253 TO 2255/PUN/2014 AND ITA NO.139/PUN/2014, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THIS CASE THE APA IS FOUND APPLICABLE TO THE E ARLIER ASSESSMENT YEARS IN THOSE CASES, AS THE CASE MAY BE, WHEN THE FACTS OF THE A.Y. 2008 - 09 ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR COVERED IN THE APA. FOR THE SAKE OF CONVENIENCE, THE SAME ARE EXTRACTED HERE AS UNDER: 1. IN THE CASE OF ABICOR BINZEL PRODUCTION (INDIA) PVT. LTD. V. DY.CIT (ITA NOS. 2253 TO 2255/PUN/2014 'IN THE LIGHT OF FACT THAT ASSESSEE HAS ENTERED INTO APA, THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSMENT YEAR 2009 - 10 HAS DIRECTED ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF APA AS NATURE OF TRANSACTIONS ARE SIMILAR. IF THEY ARE OF SIMILAR N ATURE, THE SAME CAN BE DECIDED AFRESH IN LINE WITH THE TERMS AND CONDITIONS OF APA. THE APPEALS OF THE ASSESSEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSE WITH AFORESAID DIRECTIONS.' 2. IN THE CASE OF ABICOR BINZEL PRODUCTION (INDIA) PVT. LTD. V. DY.CIT (IT A NO.139/PN/2014) 'THE ASSESSEE HAS MADE A REQUEST SINCE IT HAD ENTERED INTO ADVANCE PRICING AGREEMENT (APA) WITH CBDT COVERING NINE YEARS FROM AY 2010 - 11 TO AY 2013 - 14 UNDER ROLLBACK PROVISIONS AND FROM AYS. 2014 - 15 TO 2018 - 19 BEING THE BALANCE APA PERIOD , SIMILAR PROPOSITION SHOULD BE APPLIED TO THE YEAR UNDER IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 14 CONSIDERATION ALSO AS THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AES IN THE INSTANT ASSESSMENT YEAR ARE IDENTICAL TO THE INTERNATIONAL TRANSACTIONS WHICH WERE PART OF THE A PA PROCEEDINGS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED.' 3. IN THE CASE OF RANBAXY LABORATORIES LTD. V. ACIT (ITA NO.196/DEL/2013) 'IT IS CLEAR THAT IF THE INTERNATIONAL TRANSACTIONS ARE SAME IN THE YEAR OF APA AND THE YEAR FOR WHI CH ROLLBACK IS APPLIED, ROLL BACK IS ALLOWED TO THE ASSESSEE ON CERTAIN NORMAL CONDITION OF FILING RETURN OF INCOME, REPORT OF ACCOUNTANT AND A REQUEST IN SPECIFIED FORMAT. OFFCOURSE, IT HAS ALSO NORMAL REVENUE SAFEGUARDING EXCLUSION CLAUSES OF INCOME GOIN G BELOW THE RETURNED INCOME AND WHERE ITAT HAS PASSED AN ORDER ON THE SUBJECT. THEREFORE EVEN THE RULES PROVIDE THAT IF THE INTERNATIONAL TRANSACTIONS ARE SAME IN THE YEAR OF APA AND IN THE PAST YEAR THAN BOTH THE PARTIES, ASSESSEE AND CBDT MAY AGREE FOR A PPLYING THE AGREEMENTS CONTAINED IN APA AGREED. ** ** ** NEEDLESS TO SAY THAT LD.TPO/AO SHALL GIVE DUE WEIGHTAGE TO THE ADVANCE PRICING AGREEMENT SIGNED BY THE ASSESSEE WITH CBDT ON OTHER ISSUES ALSO (OTHER THAN THE ISSUE OF SELECTION OF TESTED PARTY) FOR DETERMINATION OF ALP AND IN CASE OF ANY DIVERGENT VIEW, THE ASSESSEE SHALL BE GRANTED AN ADEQUATE OPPORTUNITY TO SUBSTANTIATE ANY CLAIM/ARGUMENTS ON THE MANNER OF DETER MINATION OF ALP. 4. IN THE CASE OF RBS INDIA DEVELOPMENT CENTRE PVT. LTD. V. ACIT (ITA NO.5538/DEL/2010), THE TPO DID NOT TAKE INTO CONSIDERATION OTHER INCOME WHICH WAS IN THE NATURE OF OPERATING INCOME. THE AR PLACED THE APA BEFORE THE HON'BLE BENCH AND P OINTED OUT THAT THE OTHER INCOME WAS PART OF OPERATING INCOME AS PER THE TERMS OF THE AGREEMENT. THE ISSUE WAS RESTORED BACK TO THE FILE OF THE LD. AO/TPO FOR VERIFICATION OF THE ASSESSEE'S CLAIM.' IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 15 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMANDED TO THE FILE OF AO/TPO, AS THE CASE MAY BE, FOR THE PURPOSE OF COMPARING THE FACTS OF THE CASE AND THE RELEVANT TERMS OF AGREEMENT BETWEEN THE CBDT AND THE ASSESSEE. AO IS DIRE CTED TO EXAMINE THE FACTS CLOSELY AND CONCLUDE THE ASSESSEE ON THE ISSUE OF APPLICABILITY OF APA TO THE ASSESSEE'S CASE FOR THE YEAR UNDER CONSIDERATION IN PRINCIPLE. AO IS ALSO DIRECTED TO CONSIDER THE ABOVE CITED DECISIONS OF PUNE BENCH OF THE TRIBUNAL A S WELL AS DELHI BENCH OF THE TRIBUNAL FOR THE LEGAL PROPOSITION OF DECIDING THE ISSUE IN THE LIGHT OF APAS. ACCORDINGLY, THE GROUNDS NOS. 14 TO 17 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ROLL BACK PROVISIONS ARE DEALT WITH AS PER RUL E 10MA OF INCOME TAX RULES 1962. WE HAVE PERUSED APA DATED 31/07/2018 FOR ASSESSMENT YEARS 2014 - 15 TO 2018 - 19, BETWEEN ASSESSEE AND CBDT IN RESPECT OF AES MOST PARTICULARLY MENTIONED IN APPENDIX 1(A). IN APA SIGNED BY ASSESSEE, THERE IS NO ROLL BACK PROVI SION FOR YEARS UNDER CONSIDERATION. HOWEVER, CIRCUMSTANCES WHICH PROVIDES FOR APPLYING THE RULE, NEEDS TO BE ANALYSED. THE TRANSACTION MUST BE IDENTICAL IN TERMS OF FUNCTIONS, RISKS ASSUMED REGARDING INTERNATIONAL TRANSACTION MUST BE SAME. 4. HAVING REGARDS TO ABOVE DISCUSSION, WE FIND IT NECESSARY TO SET ASIDE THE ISSUE TO LD.TPO/AO TO VERIFY FAR OF ASSESSMENT YEARS FOR WHICH APA WAS ENTERED AND ASSESSMENT YEARS UNDER CONSIDERATION. LD.AO/TPO SHALL COMPARE INTERNATIONAL TRANSACTION FOR YEARS UNDER CO NSIDERATION AND TERMS OF APA AND TO COMPUTE ALP OF TRANSACTION IN ACCORDANCE WITH LAW. UNDER SUCH CIRCUMSTANCES, ADDITIONAL GROUND RAISED BY ASSESSEE BECOMES ACADEMIC AND THEREFORE, W ARE NOT ADJUDICATING THE SAME. IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 16 ACCORDINGLY, CROSS APPEAL FILED BY ASSESS EE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND APPEAL FILED BY REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ASSESSMENT YEAR 2010 - 11 AT THE OUTSET, IT HAS BEEN SUBMITTED THAT PLEA HAS BEEN RAISED BY ASSESSEE IN CROSS OBJECTION FILED BY ASSESSEE W HICH IS FILED WITH DELAY OF 18 MONTHS. THE ONLY DISPUTED SEGMENT BY LD.TPO FOR YEARS UNDER CONSIDERATION IS REGARDING TRADING SEGMENT. SUBMISSIONS ADVANCED BY BOTH SIDES ARE SIMILAR FOR ASSESSMENT YEAR 2010 - 11. ASSESSEE PRAYED FOR CONDONATION OF DELAY VI DE APPLICATION DATED 17/01/2017. ASSESSEE VIDE AFFIDAVIT DATED 17/01/2017 SUBMITTED THAT DELAY TO FILE CROSS OBJECTION WITHIN PERIOD OF LIMITATION IS DUE TO LACK OF ADVICE TO ASSESSEE. CONSIDERING AFOR E STATED REASON, WE AR E INCLINED TO CONDONE THE DELAY AND A D MIT THE CROSS OBJECTION. AS WE HAVE DEALT WITH THE ISSUE WHILE DECIDING ASSESSEES CROSS APPEAL FOR ASSESSMENT YEAR 2009 - 10, VIEW TAKEN THEREIN SHALL APPLY MUTATIS MUTANDIS FOR ASSESSMENT YEAR 2010 - 11. ACCORDINGLY, CROSS OBJECTION FILED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL FI LED BY REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 11 - 2019 SD/ - S D / - (A.K.GARODIA) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 - 11 - 2019 *AM IT (TP) A NO S . 969,1 0 28/B/2014 & 209(B)/2015, CO NO.74(B)/2017 17 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR 6.ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRA R