DCIT, New Delhi V. M/s. Bombardier Transportation India Pvt. Ltd., New Delhi

ITA 2373/DEL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6136 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I1
• Assessment Year: 2010-2011
• Appeal Filed On: 22-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Transfer pricing; International transaction

Judgement Text

ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBE R AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBE R ITA NO. 2373/DEL/2015 ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE-5(1), ROOM NO. 390, C.R. BUILDING, I.P. ESTATE, NEW DELHI. VS BOMBARDIER TRANSPORTATION INDIA PVT. LTD., UNIT NO. 11, 21 GROUND FLOOR, THE GRAND HOTEL, VASANT KUNJ, PHASE-II, NELSON MANDELA ROAD, NEW DELHI-110070 (PAN: AAACA5584C) APPELLANT RESPONDENT C.O. NO. 201/DEL/2018 (IN ITA NO. 2373/DEL/2015) ASSESSMENT YEAR: 2010-11 BOMBARDIER TRANSPORTATION INDIA PVT. LTD., UNIT NO. 11, 21 GROUND FLOOR, THE GRAND HOTEL, VASANT KUNJ, PHASE-II, NELSON MANDELA ROAD, NEW DELHI-110070 (PAN: AAACA5584C) VS DCIT, CIRCLE-5(1), ROOM NO. 390, C.R. BUILDING, I.P. ESTATE, NEW DELHI. APPELLANT RESPONDENT DEPARTMENT BY: SHRI SANJAY I. BARA, C.I.T. DR ASSESSEE BY : SHRI VISHAL KALRA, ADVOCATE DATE OF HEARING : 14.05.2019 DATE OF PRONOUNCEMENT : 07.08.2019 O R D E R PER SUDHANSHU SRIVASTAVA, JM: ITA 2373/DEL/2015 IS THE DEPARTMENTS APPEAL PREFE RRED AGAINST THE FINAL ASSESSMENT ORDER PASSED SUBSEQUEN T TO THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL -1, NEW DELHI ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 2 (DRP) FOR ASSESSMENT YEAR 2010-11. THE CROSS OBJEC TION HAS BEEN PREFERRED BY THE ASSESSEE. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE BOMBARDIER INDIA IS PART OF THE BOMBARDIER GROUP. IT IS ASSOCIATED WITH THE INDIAN RAILWAYS AS A COMPONENTS SUPPLIER FOR PROPULSION AN D SIGNALLING SYSTEMS. THE BUSINESS OF THE ASSESSEE COMPANY IS S PLIT INTO VARIOUS SUB-DIVISIONS WHICH INCLUDE PROPULSION, RAI L CONTROL SYSTEMS OR SIGNALLING AND MAINLINE AND METROS. THE RETURN OF INCOME WAS FILED DECLARING A LOSS OF RS. 7,92,91,82 3/-. SINCE THE TAXPAYER HAD UNDERTAKEN INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES, A REFERENCE WAS MADE BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER (TPO) IN TE RMS OF PROVISIONS OF SECTION 92CA(1) OF THE INCOME TAX ACT, 1961 (HER EINAFTER CALLED 'THE ACT') AND VIDE ORDER DATED 29.01.2014, THE TPO PROPOSED AN ADDITION OF RS. 1,42,49,84,550/- AND THE ASSESSING OFFICER IN HIS DRAFT ASSESSMENT ORDER PROPOSED TO ASSESS THE TAXPA YER AT AN INCOME OF RS. 1,34,56,92,730/-. THEREAFTER, THE AS SESSEE APPROACHED THE LEARNED DRP AND THE LD. DRP ALLOWED PARTIAL RELIEF TO THE ASSESSEE. IN VIEW OF THE DIRECTIONS OF THE LD. DRP, FINAL ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OFFICE R ON 22.7.2015. AGAINST THE FINAL ASSESSMENT ORDER BOTH THE ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 3 DEPARTMENT AS WELL AS THE ASSESSEE PREFERRED APPEAL S BEFORE THIS TRIBUNAL. THE APPEAL OF THE ASSESSEE WAS HEARD ON 2.9.2015 AND THE ORDER WAS PRONOUNCED ON 4.11.2015 IN WHICH THE ASSESSEES APPEAL WAS PARTLY ALLOWED. HOWEVER, THE APPEAL OF THE DEPARTMENT WAS NOT LISTED AND THE SAME HAS COME UP FOR HEARING BEFORE US NOW. SUBSEQUENTLY, THE ASSESSEE ALSO FIL ED THE C.O. AGAINST THE SAID DEPARTMENTAL APPEAL. 2.1 AT THE OUTSET, THE LD. AR SUBMITTED THAT GROUND NO. 1, 2 AND 3 OF THE DEPARTMENTS APPEAL ARE IDENTICAL TO GROUN D NO. 3.6 OF THE ASSESSEES APPEAL WHICH HAS SINCE BEEN SETTLED IN F AVOUR OF THE ASSESSEE. HE REFERRED TO GROUND NO. 3.6 OF THE ASS ESSEES APPEAL AND THEREAFTER REFERRED TO PARA 35 TO 42 OF THE ORD ER OF THE ITAT IN ASSESSEES APPEAL BEARING ITA 1626/D/2015 AND SUBMI TTED THAT IN GROUND NO. 3.6, THE ASSESSEE HAD CHALLENGED THE MODIFICATION PROPOSED BY THE TPO OF THE ECONOMIC ANALYSIS UNDERT AKEN BY THE ASSESSEE IN THE TRANSFER PRICING DOCUMENTATION BY I NTRODUCING TWO NEW COMPARABLE COMPANIES NAMELY TITAGARH WAGONS LTD. AND TEXMACO LTD. BASED ON ARBITRARY ACCEPT/REJECT OF CO MPARABLES AND IT ALSO HIGHLIGHTED THAT THESE TWO COMPANIES WE RE NOT COMPARABLE TO THE ASSESSEE IN TERMS OF FUNCTIONS PE RFORMED, ASSETS EMPLOYED AND RISKS ASSUMED. THE LD. AR SUBM ITTED THAT ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 4 THE DEPARTMENTS GROUND 1, 2 AND 3 ARE ALSO CHALLEN GING THE SAME DIRECTION OF THE LD. DRP. IT WAS SUBMITTED THAT TH E TRIBUNAL HAD AFTER HEARING BOTH THE PARTIES ON THE ISSUE ADJUDIC ATED THE ISSUE IN PARAGRAPH 42 OF THE ORDER IN ASSESSEES APPEAL A S UNDER:- 42. WE HAVE PERUSED THE RECORDS AND THE PROCEEDIN GS AS WELL AS HEARD BOTH THE SIDES. IT CAN BE SEEN THA T WHILE DECIDING THE COMPARABLES LD. TPO HAS NOT TAKE N INTO CONSIDERATION THE PROPER INFORMATION RELATED T O THE FREE OF COST MATERIAL PROVIDED BY THE RAILWAYS TO TITAGARH WAGONS LTD. AS WELL AS TO TEXMACO LTD. AND THUS THE SAID INFORMATION IS NECESSARY TO TAKE INTO ACCOUNT THE FUNCTIONS PERFORMED, ASSETS EMPLOYED AN D RISKS ASSUMED (FAR), LD. DRP IN HIS FINDING ALSO HAS DIRECTED LD. TPO TO TAKE THESE ASPECT WHILE ALLOWIN G THE SAID COMPARABLES. THERE IS NO DOUBT THAT THESE TWO COMPANIES ARE HAVING THE MAJOR ROLE IN SUPPLYING COACHES TO THE INDIAN RAILWAY AND THESE ARE PROPER COMPARABLES IF ALL THE ASPECTS ARE TAKEN INTO CONSIDERATION INCLUDING THE FREE OF COST MATERIAL V ALUE. THEREFORE, LD. TPO IS DIRECTED TO TAKE INTO ACCOUNT 30% ADDITIONAL COST BASE TO ACCOUNT FREE OF COST MATE RIAL AND REVISED THE OP/TC MARGIN OF 13.65% FOR DETERMIN ING THE ARMS LENGTH MARGIN AS CLAIMED BY THE ASSESSEE. 2.2 THE LD. AR SUBMITTED THAT THE TPO HAD BEEN DIRECTED BY THE ITAT TO TAKE INTO ACCOUNT 30% ADDITIONAL COST B ASE TO ACCOUNT FOR FREE OF COST MATERIAL AND REVISE THE OP/TC MARG IN FOR DETERMINING THE ARMS LENGTH MARGIN. THE LD. AR AL SO SUBMITTED THAT THE DEPARTMENT HAD THEREAFTER APPROACHED THE H ONBLE HIGH COURT OF DELHI AGAINST THE ORDER PASSED BY THE ITAT AND THE HONBLE HIGH COURT IN ITA 391/2016 VIDE ORDER DATED 27.7.2016 ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 5 HAD DISMISSED THE APPEAL OF THE DEPARTMENT AND THUS , THE ORDER OF THE ITAT HAD BECOME FINAL AND BINDING IN SO FAR AS THIS ISSUE WAS CONCERNED. THE LD. AR FURTHER SUBMITTED THAT T HE DEPARTMENTS APPEAL DESERVES TO BE DISMISSED BECAUS E IDENTICAL GROUND IN ASSESSEES APPEAL HAD BEEN PARTLY ALLOWED BY THE ITAT AND HAD BEEN UPHELD BY THE HONBLE DELHI HIGH COURT . THE LD. AR ALSO SUBMITTED THAT THE C.O. OF THE ASSESSEE WOU LD BECOME INFRUCTUOUS IN CASE THE DEPARTMENTS APPEAL IS DISM ISSED. 3.0 IN RESPONSE, THE LD. C.I.T. DR PLACED EXTENSIVE RELIANCE ON THE FINDINGS OF THE TPO AND ASSAILED THE DIRECTIONS OF THE LD. DRP. HOWEVER, HE COULD NOT NEGATE THE FACT THAT THE GROU NDS RAISED BY THE DEPARTMENT WERE IDENTICAL TO GROUND NO. 3.6 OF THE ASSESSEES APPEAL WHICH HAS SINCE BEEN RESTORED TO THE TPO FOR TAKING 30% AS ADDITIONAL COST BASE OF ACCOUNT FOR FREE OF COST MATERIAL AND THEREAFTER REVISE THE OP/TC MARGIN OF THE ASSESSEE. THE LD. C.I.T. DR FAIRLY ACCEPTED THAT THIS ORDER HAS BEEN UPHELD BY THE HONBLE DELHI HIGH COURT INASMUCH AS THE DEPARTMENTS APPEA L AGAINST THE SAID ORDER HAD BEEN DISMISSED. 3.1 HAVING HEARD BOTH THE PARTIES AND AFTER HAVING PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDER OF THE TRIB UNAL IN ASSESSEES APPEAL AND THE ORDER OF THE HONBLE DELH I HIGH COURT ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 6 AS AFORESAID, WE AGREE WITH THE CONTENTIONS OF THE LD. AR. WE NOTE THAT THE GROUNDS RAISED BY THE DEPARTMENT ARE AKIN TO GROUND 3.6 OF THE ASSESSEES APPEAL WHICH HAS SINCE BEEN RESTO RED TO THE TPO FOR THE PURPOSE OF RECOMPUTING THE OP/TC MARGIN AFT ER TAKING INTO ACCOUNT 30% ADDITIONAL COST BASE TO ACCOUNT FO R FREE OF COST MATERIAL. THEREFORE, ON SIMILAR REASONING AND LOGI C AS APPLIED BY THE COORDINATE BENCH IN ASSESSEES APPEAL FOR THIS YEAR IN ITA NO. 1626/DEL/2015, WE DISMISS THE GROUNDS RAISED BY THE DEPARTMENT AFTER DULY NOTING THAT THE HONBLE DELHI HIGH COURT HAS ALSO UPHELD THE ORDER OF THE TRIBUNAL. THUS, T HE DEPARTMENTS APPEAL IS DISMISSED. 3.2 SINCE THE APPEAL OF THE DEPARTMENT HAS BEEN DIS MISSED, THE C.O. PREFERRED BY THE ASSESSEE BECOMES INFRUCTUOUS AND IS DISMISSED. 4. IN THE RESULT, BOTH THE APPEAL OF THE DEPARTMENT AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE STANDS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2019. SD/- SD/- (R.K. PANDA) (SUDHANSHU SRI VASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 7 TH AUGUST, 2019 GS ITA NO. 2373/DEL/2015 & CO 201/D/18 ASSESSMENT YEAR: 2010-11 7 COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER