M/S. BAYER CROP SCIENCE LTD, MUMBAI V. THE CIT (A) RG-X, MUMBAI

ITA 2444/MUM/2007

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8761 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 24-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 28-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJEET KUMAR JAIN
• Keywords: Transfer pricing; International transaction; Retrospective amendment; Question of law
• Section: 92C

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI .. , ! '# $% , & !, ' BEFORE SHRI R.S.SYAL, AM AND SHRI AMIT SHUKLA, JM ./ ITA NO.2444/MUM/2007 ( &) * &) * &) * &) * / / / / ASSESSMENT YEAR : 2003-2004 M/S.BAYER CROPSCEIENCE LIMITED BAYER HOUSE, CENTRAL AVENUE HIRANANDANI GARDENS, POWAI MUMBAI 400 076. PAN : AAACB9651K. THE ADDL.COMMISSIONER OF INCOME-TAX RANGE 10(3) MUMBAI. ( +, / // / APPELLANT) ) ) ) ) / VS. ( -.+,/ RESPONDENT) +, / // / 0 0 0 0 / APPELLANT BY : SHRI MAYUR KISNADWALA -.+, / 0 / 0 / 0 / 0 / RESPONDENT BY : SHRI AJEET KUMAR JAIN ) / # / / / / DATE OF HEARING : 24.09.2012 12* / # / DATE OF PRONOUNCEMENT : 26.09.2012 !$ !$ !$ !$ / / / / O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 12.0 1.2007 IN RELATION TO THE ASSESSMENT YEAR 2003-2004. 2. IT MERITS TO MENTION THAT THE ASSESSEE HAS RAISE D AN ADDITIONAL GROUND WHICH IS WITHOUT PREJUDICE TO GROUND NO.2 RA ISED IN THE MEMO OF APPEAL. THROUGH THIS ADDITIONAL GROUND IT HAS BE EN CONTENDED THAT IF THE ADDITION IS TO BE SUSTAINED U/S 145A THEN TH E CORRESPONDING ADJUSTMENT SHOULD BE MADE IN THE VALUE OF THE OPENI NG STOCK FOR ITA NO.2444/MUM/2007 M/S.BAYER CROPSCEIENCE LIMITED. 2 ASSESSMENT YEAR 2004-2005. NO SERIOUS OBJECTION WAS TAKEN BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE QUESTION OF ADMISSION OF THIS ADDITIONAL GROUND. CONSIDERING THE FACT THAT T HE ADDITIONAL GROUND SO RAISED BY THE ASSESSEE INVOLVES ONLY SUBSTANTIAL QUESTION OF LAW WITHOUT CONSIDERATION OF ANY FRESH FACTS, WE ADMIT THIS ADDITIONAL GROUND AND TAKE IT UP FOR HEARING ON MERITS. 3. GROUND NO.2 OF THE ASSESSEES APPEAL AND THE ADD ITIONAL GROUND ARE AGAINST SUSTENANCE OF DISALLOWANCE OF ` 3,11,59,239 ON ACCOUNT OF SECTION 145A. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE SHOWED AN INCOME OF ` 3.11 CRORE ON ACCOUNT OF SECTION 145A. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS CLAIMED THAT THE SAID SUM OF ` 3.11 CRORE WAS NOT LIABLE TO BE ADDED BECAUSE THE A SSESSEE- COMPANY ERRONEOUSLY CLAIMED CREDIT OF MODVAT ON THE RAW MATERIAL AND PACKING MATERIAL ON THE BASIS OF PURCHASE AND N OT ON THE BASIS OF CONSUMPTION. THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE ASSESSEES CONTENTION. HE, THEREFORE, MADE THE ADDI TION. THE LEARNED CIT(A) UPHELD THE ADDITION SO MADE BY THE ASSESSING OFFICER. 4. HAVING HEARD BOTH SIDES AND PERUSED THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSMENT YEAR UNDE R CONSIDERATION IS 2003-04. SECTION 145A HAS BEEN MADE APPLICABLE W. E.F. THE A.Y. 1999-2000. THIS SECTION PROVIDES THAT THE VALUAT ION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DET ERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING ITA NO.2444/MUM/2007 M/S.BAYER CROPSCEIENCE LIMITED. 3 REGULARLY EMPLOYED BY THE ASSESSEE AND FURTHER ADJU STED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS ETC. PAID OR INCU RRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AS ON THE DATE OF VALUATION. AS PER THE PRESCRIPTION OF THIS SECTION, WHICH IS APPLICABLE TO THE YEAR UNDER CONSIDERATION, THE AMOUNT OF TAX, DUTY, CESS ETC. IS LIABLE TO BE INCLUDED IN THE VALUE OF PURCHASES, SA LES, OPENING AND CLOSING STOCK. IT IS NOT APPROPRIATE TO INCLUDE THE CLOSING MODVAT IN THE FIGURE OF CLOSING STOCK WITHOUT MODIFYING THE FIGURES OF PURCHASES, SALES AND OPENING STOCK. THE HONBLE JUR ISDICTIONAL HIGH COURT IN CIT VS. MAHALAXMI GLASS WORKS PVT. LTD. [(2009) 31 8 ITR 116 (BOM.)] AND THE HONBLE DELHI HIGH COURT IN CIT VS. MAHAVIR ALLUMINIUM [(2008) 297 ITR 77 (DEL.)] HAVE HELD TO THIS EXTENT. AS THE AUTHORITIES BELOW HAVE NOT ADJUSTED ALL THE REL EVANT FIGURES WITH THE AMOUNT OF TAX, DUTY, CESS ETC., WE SET ASIDE TH E IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF A.O. FOR DECI DING IT AFRESH IN ACCORDANCE WITH THE AFORE-NOTED JUDGEMENTS AND THE PROVISIONS OF SECTION 145A. IN VIEW OF OUR THIS DECISION ON GROU ND NO.2, THE ADDITIONAL GROUND BAS BECOME ACADEMIC. 5. LAST GROUND OF THE ASSESSEES APPEAL IS AGAINST THE REJECTION OF BENEFIT OF 5% MARGIN AS PRESCRIBED IN PROVISO TO SE CTION 92C(2) IN DETERMINING THE ARMS LENGTH PRICE (ALP) OF ITS EX PORT TRANSACTIONS. FILTERING OUT UNNECESSARY DETAILS IT IS OBSERVED TH AT THE ASSESSEES INTERNATIONAL TRANSACTIONS WERE REFERRED TO THE TPO FOR DETERMINATION OF ALP. THE TPO PROPOSED ADJUSTMENT OF ` 19,23,948, FOR WHICH ITA NO.2444/MUM/2007 M/S.BAYER CROPSCEIENCE LIMITED. 4 ADDITION WAS MADE BY THE A.O. IT WAS ARGUED BEFORE THE LD. FIRST APPELLATE AUTHORITY THAT THE TPO OUGHT TO HAVE ALLO WED STANDARD ADJUSTMENT OF 5% BEFORE MAKING ADDITION AS PER PROV ISO TO SECTION 92C(2). THE LEARNED CIT(A) REJECTED THIS CONTENTION BY HOLDING THAT SINCE THE ALP EXCEEDED THE PRICE DECLARED BY THE AS SESSEE BY MORE THAN 5%, THE ENTIRE EXCESS WAS LIABLE TO BE ADDED. IT IS THIS DIRECTION OF THE LEARNED CIT(A) AGAINST WHICH THE ASSESSEE HA S COME UP IN APPEAL BEFORE US. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE DISPU TE ABOUT THE QUESTION AS TO WHETHER PLUS MINUS 5% STANDARD ADJUS TMENT SHOULD BE ALLOWED WHILE DETERMINING THE ALP OR THE ENTIRE AMO UNT REPRESENTING DIFFERENCE BETWEEN ALP AND THE DECLARED PRICE SHOUL D BE ADDED WHERE THE DIFFERENCE EXCEEDS 5%, HAS BEEN SET TO RE ST BY THE FINANCE ACT, 2012 WITH THE INSERTION OF SUB-SECTION (2A) TO SECTION 92C WITH RETROSPECTIVE EFFECT. WITH THIS AMENDMENT IT HAS BEE N MADE CLEAR THAT WHERE THE VARIATION BETWEEN ARITHMETICAL MEAN AND P RICE AT WHICH THE TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN EXCEEDS 5% OF ARITHMETICAL MEAN, THE ASSESSEE SHALL NOT BE ENTITLED TO EXERCIS E THE OPTION. THE LEARNED AR WAS FAIR ENOUGH TO CONCEDE THAT THE RETR OSPECTIVE AMENDMENT BY THE FINANCE ACT, 2012 HAS THE EFFECT OF UPHOLDING THE OPINION TAKEN BY THE LEARNED CIT(A). IN VIEW OF THI S AMENDMENT TO SECTION 92C, WE HOLD THAT THE LEARNED CIT(A) WAS JU STIFIED IN NOT GRANTING STANDARD ADJUSTMENT OF 5%. THIS GROUND IS NOT ALLOWED. ITA NO.2444/MUM/2007 M/S.BAYER CROPSCEIENCE LIMITED. 5 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 26 TH DAY OF SEPTEMBER, 2012. !$ / 12* 3!)4 2 / 5 SD/- SD/- (AMIT SHUKLA) (R.S.SYAL) & ! & ! & ! & ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; 3!) DATED : 26 TH SEPTEMBER, 2012. DEVDAS* !$ / -&#'6 76*# !$ / -&#'6 76*# !$ / -&#'6 76*# !$ / -&#'6 76*#/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. 8 () / THE CIT(A)-X, MUMBAI. 4. 8 / CIT 5. 6;5 -&#&) , , / DR, ITAT, MUMBAI 6. 5< = / GUARD FILE. !$) !$) !$) !$) / BY ORDER, .6# -&# //TRUE COPY// > > > >/ // /? @ ? @ ? @ ? @ ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI