DCIT, Pondicherry V. Tweezerman (India) Pvt. Ltd., Pondicherry

ITA 2401/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9073 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 24-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Transfer pricing; International transaction
• Section: 10B; 10; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2401/MDS/2014 ( )( / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE I, D.P. THOTTAM, MUTHIALPET, PONDICHERRY 605 003. V. M/S TWEEZERMAN (INDIA) PVT. LTD., C-24, INDUSTRIAL ESTATE, THATTANCHAVADY, PONDICHERRY 605 003. PAN : AABCT 3599 F (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SMT. VIJAYALAKSHMI, CIT -.+, / 0 / RESPONDENT BY : SH. B. RAMAKRISHNAN, C.A. 1 / 2% / DATE OF HEARING : 12.05.2016 3') / 2% / DATE OF PRONOUNCEMENT : 17.06.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) VI, CHEN NAI, DATED 30.06.2014 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2 I.T.A. NO.2401/MDS/14 2. SMT. VIJAYALAKSHMI, THE LD. DEPARTMENTAL REPRESE NTATIVE, SUBMITTED THAT THE ASSESSEE-COMPANY MADE INTERNATIO NAL TRANSACTION WITH M/S ZWILLING INTERNATIONAL GMBH, G ERMANY IN RESPECT OF SALE OF FINISHED GOODS. SINCE THE INTER NATIONAL TRANSACTIONS EXCEEDED ` 15 CRORES, IT WAS REFERRED TO THE TRANSFER PRICING OFFICER UNDER SECTION 92CA OF THE INCOME-TA X ACT, 1961 (IN SHORT 'THE ACT') FOR COMPUTATION OF ARM'S LENGTH PR ICE. ACCORDING TO THE LD. D.R., THE TRANSFER PRICING OFFICER, AFTER C ONSIDERING THE SALES MADE BY THE ASSESSEE AND OTHER COMPARABLE COMPANIES , DETERMINED THE ARITHMETIC MEAN OF COMPARISON AT 38. 40%. SINCE THE ARITHMETIC MEAN OF THE PROFIT LEVEL INDICATOR O F THE ASSESSEE- COMPANY IS AT 69.68%, THE ARM'S LENGTH PRICE WAS DE TERMINED AT ` 11,39,48,865/-. ACCORDINGLY, THE PROFIT OF THE ASS ESSEE ELIGIBLE FOR DEDUCTION UNDER SECTION 10B WAS DETERMINED AS AGAIN ST THE CLAIM OF THE ASSESSEE AT ` 15,94,74,284/-. IN FACT, THE ASSESSING OFFICER DETERMINED THE ELIGIBLE PROFIT UNDER SECTION 10B OF THE ACT AT ` 8,30,44,003/- ACCORDING TO THE LD. D.R., THE ASSES SING OFFICER DISALLOWED THE EXCESS PROFIT OVER AND ABOVE THE ARM 'S LENGTH PRICE DETERMINED BY THE TRANSFER PRICING OFFICER AND REDU CED THE DEDUCTION UNDER SECTION 10B OF THE ACT BY AN AMOUNT OF ` 7,64,30,281/-, BEING THE DIFFERENCE BETWEEN THE CLA IM MADE BY THE 3 I.T.A. NO.2401/MDS/14 ASSESSEE TO THE EXTENT ` 15,94,74,284/- AND THE PROFIT DETERMINED BY THE ASSESSING OFFICER AT ` 8,30,44,003/-. 3. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBM ITTED THAT THE CIT(APPEALS), BY PLACING RELIANCE ON THE DECISI ON OF THIS BENCH OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE IN I.T.A . NO.1130/MDS/2009 DATED 15.04.2010, DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE LD. D.R., THE EXCES S PROFIT DECLARED BY THE ASSESSEE, OVER AND ABOVE THE ARM'S LENGTH PR ICE DETERMINED BY THE TRANSFER PRICING OFFICER, HAS TO BE EXCLUDED WHILE COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. THE EXCESS PROFIT DECLARED BY THE ASSESSEE UNDER SECTION 10B OF THE ACT WAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE, THE ARM'S LENGTH PRICE WAS LESS THAN THE PRICE CLAIMED BY THE ASSESSEE. ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER HA S RIGHTLY DISALLOWED THE CLAIM UNDER SECTION 10B OF THE ACT. 4. ON THE CONTRARY, SH. B. RAMAKRISHNAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ADM ITTEDLY THE TRANSFER PRICING OFFICER DETERMINED THE ARM'S LENGT H PRICE LESS THAN THE SALE PRICE DECLARED BY THE ASSESSEE. REFERRING TO SECTION 92(3) OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT T HE COMPUTATION OF 4 I.T.A. NO.2401/MDS/14 ARM'S LENGTH PRICE HAS THE EFFECT OF REDUCING THE I NCOME CHARGEABLE TO TAX OR INCREASING THE LOSS, AS THE CASE MAY BE. THEREFORE, THE PROVISIONS OF SECTION 92 OF THE ACT WHICH PROVIDES FOR COMPUTATION OF INCOME FROM INTERNATIONAL TRANSACTION SHALL NOT BE APPLICABLE. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, THE TRANSFER PRICING OFFICER COMPUTED THE ARM'S LENGTH PRICE LESS THAN T HE SALE PRICE DECLARED BY THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ARM'S LENGTH PRICE DETERMINED B Y THE TRANSFER PRICING OFFICER HAS THE EFFECT OF REDUCING THE INCO ME CHARGEABLE TO TAX AS DECLARED BY THE ASSESSEE. HENCE, ACCORDING TO THE LD. REPRESENTATIVE, THE PROVISIONS OF SECTION 92 OF THE ACT IS NOT APPLICABLE AT ALL. 5. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT AN IDENTICAL ISSUE CAME BEFORE THIS TRIBUNAL I N THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2004-05 AND 2008-09. THIS TRIBUNAL, AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD, FOUND THAT THERE CANNOT BE ANY DISALLOWANCE IN RESPECT OF THE EXCESS PROFIT DECLARED BY THE ASSESSEE OVER AND ABOVE THE ARM'S L ENGTH PRICE DETERMINED BY THE TRANSFER PRICING OFFICER. THE LD . REPRESENTATIVE PLACED COPIES OF THE ORDERS OF THIS TRIBUNAL ON REC ORD. IN FACT, THE 5 I.T.A. NO.2401/MDS/14 CIT(APPEALS) FOLLOWED THE ORDERS OF THE TRIBUNAL AN D ALLOWED THE CLAIM MADE BY THE ASSESSEE UNDER SECTION 10B OF THE ACT. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE REVENUE CANNOT HAVE ANY GRIEVANCE AT ALL. 6. SH. B. RAMAKRISHNAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, FURTHER SUBMITTED THAT IN THIS CASE, AFTE R RECEIVING THE TRANSFER PRICING OFFICERS ORDER, THE ASSESSING OFF ICER HAS PASSED THE ASSESSMENT ORDER STRAIGHTAWAY WITHOUT PASSING A DRAFT ASSESSMENT ORDER. REFERRING TO SECTION 144C OF THE ACT, THE LD. REPRESENTATIVE SUBMITTED THAT WITH EFFECT FROM 1 ST OCTOBER, 2009, THE ASSESSING OFFICER HAS TO MANDATORILY PASS A DRAFT A SSESSMENT ORDER IF THERE WAS A PROPOSAL FOR VARIATION IN THE LOSS O R INCOME RETURNED, WHICH IS PREJUDICIAL TO THE INTEREST OF THE ASSESSE E. IN THIS CASE, ACCORDING TO THE LD. REPRESENTATIVE, ADMITTEDLY, TH E DRAFT ASSESSMENT ORDER WAS NOT PASSED. THEREFORE, ACCORD ING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER CANNOT MAKE A NY ADJUSTMENT IN THE INTERNATIONAL TRANSACTION. THE LD. REPRESEN TATIVE PLACED HIS RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN VI JAY TELEVISION (P.) LTD. V. DRP (2014) 46 TAXMANN.COM 100. THE LD . REPRESENTATIVE PLACED ON RECORD A COPY OF THE MADRA S HIGH COURT 6 I.T.A. NO.2401/MDS/14 JUDGMENT. THE LD. REPRESENTATIVE SUBMITTED THAT TH E ASSESSING OFFICER HAS NOT FOLLOWED THE ORDER OF THIS TRIBUNAL MERELY BECAUSE THE MATTER WAS SAID TO BE PENDING BEFORE THE HIGH C OURT. ACCORDING TO THE LD. REPRESENTATIVE, MERE PENDENCY OF APPEAL BEFORE THE HIGH COURT CANNOT BE A REASON TO TAKE A DIFFERENT VIEW O N THE ISSUE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE DECLARED PROFIT BEFORE TAX AT ` 16,13,09,998/-. THE PROFIT DECLARED BY THE ASSESSEE AFTER THE TAX WAS ` 15,94,74,284/-. THE PROFIT LEVEL INDICATOR OF THE ASSESSEE-COMPANY IS 6 9.68%. THE TRANSFER PRICING OFFICER DETERMINED ARITHMETIC MEAN OF COMPARABLES AT 38.40%. ACCORDINGLY, HE DETERMINED THE PROFIT O N SALE MADE TO ASSOCIATE ENTERPRISE AT ` 11,39,48,865/- AS AGAINST THE PROFIT DECLARED BY THE ASSESSEE AT ` 15,94,74,284/-. THE ASSESSING OFFICER, IN FACT, ALLOWED DEDUCTION UNDER SECTION 1 0B OF THE ACT AT ` 8,30,44,003/- AS AGAINST THE CLAIM OF THE ASSESSEE AT ` 15,94,74,284/- AND ACCORDINGLY HE DISALLOWED THE CL AIM OF THE ASSESSEE TO THE EXTENT OF ` 7,64,30,281/-. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE DECLARED THE P ROFIT AT ` 15,94,74,284/- AND THE TRANSFER PRICING OFFICER DET ERMINED THE 7 I.T.A. NO.2401/MDS/14 PROFIT, AFTER DETERMINING THE ARITHMETIC MEAN AT 38 .40%, AT ` 11,39,48,865/-, WHETHER THE EXCESS PROFIT DECLARED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 10 B OF THE ACT? THIS ISSUE WAS EXAMINED BY A CO-ORDINATE BENCH OF T HIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2004-05 IN I.T.A. NO.1130/MDS/2009 DATED 15.04.2010. AN IDENTICAL IS SUE WAS EXAMINED BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2008- 09 ALSO. IN FACT, THE CIT(APPEALS), BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL, ALLOWED THE CLAIM OF THE ASSESSEE BY HOLD ING THAT THE EXCESS PROFIT DECLARED BY THE ASSESSEE OVER AND ABO VE THE ARM'S LENGTH PRICE DETERMINED BY THE ASSESSEE WAS ELIGIBL E FOR DEDUCTION UNDER SECTION 10B OF THE ACT. THE ASSESSING OFFICE R SIMPLY REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT AN APPEAL IS PENDING FOR DISPOSAL BEFORE THE HIGH COURT. THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT MERE PENDENCY OF THE APPEAL BEFORE THE HIGH COURT CANNOT BE A REASON TO TAKE A DIFFERENT V IEW. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 8 I.T.A. NO.2401/MDS/14 ORDER PRONOUNCED ON 17 TH JUNE, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 17 TH JUNE, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-VI, CHENNAI-34 4. 1 92 /CIT, PONDICHERRY 5. 7: -2 /DR 6. ( ; /GF.