Eaton Industries Manufacturing Gmbh, Pune V. Dy, Director of Income tax, Pune

ITA 2468/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8534 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Transfer pricing; Opportunity of being heard; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S.PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2468/PN/2012 (ASSESSMENT YEAR : 2009-10) EATON INDUSTRIES MANUFACTURING GMBH, 145, OFF MUMBAI-PUNE ROAD, PIMPRI, PUNE - 411018 .. APPELLANT PAN NO.AABCE6833D VS. DY.DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION-I), PUNE .. RESPONDENT ASSESSEE BY : SHRI VISHAL KALRA REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 04-12-2014 DATE OF PRONOUNCEMENT : 09-12-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27-10-2012 PASSED U/S.143(3) R.W.S. 144C(13) OF THE I.T. ACT BY THE DY. DIRECTOR OF IT (INTERNATIONAL TAXATION-I ), PUNE FOR A.Y. 2009-10. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD AO ERRED IN ASSESSING THE INCOME OF THE APPELLA NT UNDER THE NORMAL PROVISIONS OF THE ACT AT RS 3,93,13, 710 AS AGAINST RETURNED INCOME OF RS 2,57,91,567 BASED ON THE DIRECTIONS RECEIVED FROM HON'BLE DISPUTE RESOLUTION P ANEL ('DRP'). 2 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD AO/DRP ERRED IN DISALLOWING THE CORPORATE COS T ALLOCATION EXPENSES AMOUNTING TO RS. 1,35,22,144 ALLE GING THAT THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE TO SUPPORT ALLOWABILITY OF THE EXPENDITURE INCURRED AND FURTHER ERRED IN TREATING THE ARM'S LENGTH PRICE IN RELATION TO CORPORATE COST ALLOCATION TRANSACTION AS NIL. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE COMPANY WAS INCORPORATED ON 01-04-2005 AND HAS A BRANCH OFFICE IN INDIA. THE BRANCH OFFICE IS ENGAGED IN THE BUSINESS OF IDENTI FYING AND EVALUATING RAW MATERIAL SUPPLIERS, PROVIDING QUALIT Y ASSURANCE SERVICES TO EATON GROUP TO ENSURE THAT QUALITY GOOD S ARE PROCURED, TO PROVIDE SERVICES IN CONNECTION WITH COLLATION AN D SHIPMENT OF GOODS AND TO COORDINATE TIMELY PAYMENTS TO INDIAN S UPPLIERS. IT FILED ITS RETURN OF INCOME ON 26-09-2009 DECLARING TOTAL INCOME AT RS.2,57,91,567/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAS DEBITED RS.1,35,22,14 4/- UNDER THE HEAD CORPORATE COST ALLOCATION. THE AO ASKED THE ASSESSEE TO SUBMIT THE BASIS OF ALLOCATION OF CORPORATE COST AND THE EVIDENCES FOR RECEIPT OF ACTUAL SERVICES. THE ASSESSEE FILED CERTAIN DETAILS JUSTIFYING SUCH CLAIM. HOWEVER, THE AO NOTED THAT THE ASSESSEE HAS NEITHER PRODUCED THE BASIS OF ALLOCATION NOR PRODUC ED THE DOCUMENTARY EVIDENCES FOR THE RECEIPT OF ACTUAL SER VICES. HE, THEREFORE, ASKED THE ASSESSEE TO PRODUCE THE ABOVE INFORMATION AND ASKED TO SHOW CAUSE AS TO WHY THE ABOVE EXPENDITURE SHALL NOT BE DISALLOWED U/S.37(1). 2.2 THE ASSESSEE ONLY EXPLAINED ORALLY BEFORE THE AO THE BASIS OF ALLOCATION. HOWEVER, SINCE IT DID NOT PRODUCE A NY DOCUMENTARY EVIDENCE FOR THE SAME AS CALLED FOR BY THE AO, THE AO HELD THAT 3 ASSESSEE FAILED TO PROVE THE ACTUAL SERVICES RECEIV ED FOR INCURRING THE EXPENDITURE. ACCORDING TO HIM, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE EXPENSES DEBITED TO THE PROFIT AND L OSS ACCOUNT ARE USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS AND FOR THE EXPENSES INCURRED, IT RECEIVED ACTUAL SERVICES. HE , THEREFORE, PROPOSED DISALLOWANCE OF RS.1,35,22,144/-. THE ASS ESSEE APPROACHED THE DRP WHO UPHELD THE ACTION OF THE AO. THE AO ACCORDINGLY MADE ADDITION OF RS.1,35,22,144/- TO TH E TOTAL INCOME OF THE ASSESSEE. AGGRIEVED WITH SUCH ORDER OF THE AO, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE FILED AN APPLIC ATION REQUESTING ADMISSION OF THE FOLLOWING ADDITIONAL EV IDENCES UNDER RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE S, 1963: A. COPY OF THE TRANSFER PRICING REPORT FOR THE A.Y. 2009-10. B. COPY OF THE SERVICE AGREEMENT ENTERED INTO BETWEE N THE ASSESSEE AND EIMG, SWITZERLAND C. WORKING SHEET CONTAINING BREAK UP OF COST ALLOCAT ED BY ETPL TO DIFFERENT EATON INDUSTRIES. D. COPY OF THE VOUCHERS/DEBIT NOTES IN RELATION TO CO ST ALLOCATION AND EMAILS (SAMPLE BASIS) TO SHOW THE RENDERE D SERVICES TO THE ASSESSEE. 3.1 SO FAR AS THE ADDITIONAL EVIDENCE NO.1 IS CONCE RNED, HE SUBMITTED THAT THE COPY OF THE TRANSFER PRICING REP ORT IS ALREADY IN THE RECORDS OF THE AO, THEREFORE, HE IS NOT PRESSIN G FOR ADMISSION OF THE SAME. SIMILARLY, THE COPY OF THE SERVICE AGREE MENT AS PER ADDITIONAL EVIDENCE NO.2 IS ALSO AVAILABLE WITH THE DEPARTMENT IN THE PRECEDING ASSESSMENT YEARS. THEREFORE, HE IS N OT PRESSING FOR ADMISSION OF THE SAME. HOWEVER, HE PRESSED FOR ADM ISSION OF THE ADDITIONAL EVIDENCE NOS. 3 AND 4 STATING THAT THE A SSESSEE HAS A VERY 4 SMALL SET UP IN INDIA AND DOES NOT HAVE SEPARATE AC COUNTS, TAX, INTERNAL AUDIT OR ADMINISTRATIVE TEAM OF ITS OWN OW ING TO WHICH THE EVIDENCE, SOUGHT TO BE FURNISHED BY THE ASSESSEE WI TH THIS APPLICATION COULD NOT BE FURNISHED BEFORE THE LOWE R AUTHORITIES OWING TO ASSESSEES INABILITY TO OBTAIN THE NECESS ARY DETAILS IN TIME. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT ADM ISSION OF THESE ADDITIONAL EVIDENCES IS IMPORTANT FOR ADJUDICATION OF THE APPEAL. FURTHER, THESE DOCUMENTS DO NOT REQUIRE FRESH INVES TIGATION INTO THE FACTS. HE ACCORDINGLY REQUESTED THAT ADDITIONAL EV IDENCES FILED BY THE ASSESSEE SHOULD BE ADMITTED. REFERRING TO THE COPY OF THE ASSESSMENT ORDER FOR A.Y. 2007-08 AND 2008-09, HE SUBMITTED THAT NO SUCH DISALLOWANCE WAS MADE IN THE PRECEDING 2 YE ARS. REFERRING TO THE COPIES OF THE ORDER SHEET, HE SUBMITTED THAT THE ASSESSEE HAS FILED VARIOUS DETAILS AS REQUIRED BY THE AO FROM TI ME TO TIME. HE ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE AO SHOULD BE DELETED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY OBJECTED TO THE ADMISSION OF THE ADDITIONA L EVIDENCES. HE SUBMITTED THAT DESPITE SUFFICIENT OPPORTUNITY GRANT ED BY THE AO AS APPEARING FROM THE ENTRIES IN THE ORDER SHEET, THE ASSESSEE DID NOT PRODUCE THE DETAILS. EVEN DURING PROCEEDINGS BEFOR E DRP ALSO, HE DID NOT PRODUCE THOSE DETAILS. THEREFORE, THE ADDI TIONAL EVIDENCES SHOULD NOT BE ADMITTED. STRONGLY SUPPORTING THE OR DER OF THE AO HE SUBMITTED THAT THE ADDITION SHOULD BE SUSTAINED. 5 5. AFTER CONSIDERING THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, WE ADMIT THE ADDITIONAL EVIDENCES FILED BY THE ASSE SSEE. SINCE THESE EVIDENCES GO TO THE ROOT OF THE MATTER FOR ADJUDICA TION OF THE ALLOWABILITY OF CORPORATE COST OF ALLOCATION EXPENS ES, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO W ITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO EXPLAI N HIS CASE. THE AO SHALL DECIDE THE ISSUE AFRESH AND AS PER LAW AFT ER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 09-12-2014. SD/- SD/- (R.S.PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 09 TH DECEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. DRP, PUNE 4. THE D.R, B PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE