THERMO FISHER SCIENTIFIC INDIA P.LTD, MUMBAI V. DCIT 10(3), MUMBAI

ITA 2701/MUM/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9204 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 05-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Corroborative evidences; Revised return; TDS; Set aside

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 2701 /MUM/ 2014 (ASSESSMENT YEAR 20 09 - 10 ) THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 403 - 404, B WING, DELPHI HIRANANDANI BUSINESS PARK MU MBAI - 400 076. V S . DCIT 10(3) MUMBAI ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 2177/MUM/2014 (ASSESSMENT YEAR 2009 - 10) DCIT 10(3) MUMBAI. V S . THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 403 - 404, B WING, DELPHI HIRANANDANI BUSINESS PARK MUMBAI - 400 076. ( APPEL LANT ) ( RESPONDENT ) PAN : AABCT3207A ASSESSEE BY SHRI NIRAJ SETH DEPARTMENT BY SHRI MANISH KUMAR SINGH DATE OF HEARING 9.4 . 201 9 DATE OF PRONOUNCEMENT 28. 6 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THESE ARE CROSS APPEALS BY THE ASSESSEE A ND REVENUE ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER DATED 4.2.2014 PURSUANT TO DIRECTION OF LEARNED DISPUTE RESOLUTION PANEL (DRP) DATED 26.12.2013 PERTAINS TO A.Y. 2009 - 10. ASSESSEES APPEAL : 2. FIRST ISSUE RAISED RELATES TO DENIAL OF DEPRECIA TION OF GOODWILL PURCHASED. 3. THE A SSESSEE IS AN INDIAN COMPANY, WHICH PROVIDES A RANGE OF PRODUCTS, SERVICES AND SOLUTIONS FOR RESEARCH, ANALYSIS, DISCOVERY AND DIAGNOSTICS. IT IS SUBSIDIARY COMPANY OF THERMO FISHER INDIA HOLDING BV, NETHERLANDS AND THE ULTIMATE PARENT OF THE GROUP IS THERMO FISHER SCIENTIFIC INC. USA. THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 2 4. BRIEF FACTS ON THIS ISSUE ARE THAT ASSESSEE ACQUIRED QU ALIGENS FINE CHEMICALS DIVISION FROM GLAXO S M ITHKLINE PHARMA LIMITED ('GSK') DURING FY 2007 - 08 (AY 2008 - 09) AND ANALYTICAL TECHNOL OGIES AND ENVIRONMENTAL INSTRUMENTATION DIVISION FROM CHEMITO TECHNOLOGIES PRIVATE LIMITED ('CTRL') DURING FY 2008 - 09 (AY 2009 - 10) ON A SLUMP SALE BASIS .ACQUIRED GOODWILL (ALONG WITH OTHER INTANGIBLES) WAS VALUED BY INDEPENDENT VALUERS AS UNDER: DEPRE CIATION ON THE ABOVE PURCHASED GOODWILL TOTALING TO RS. 21,28,26,691 WAS CLAIMED IN THE COURSE OF ASSESSMENT. THE AO DID NOT GRANT SUCH CLAIM OF DEPRECIATION AT RS. 21,28,26,691 AS THE CLAIM WAS NOT MADE BY FILING REVISED RETURN. RELIANCE WAS PLACED ON GOE TZE INDIA LIMITED VS. CIT (284 ITR 323) (SC). 5. BEFORE DRP ASSESSEE SUBMITTED THAT THE DECISION IN THE CASE OF GOETZE INDIA LTD. (SUPRA) IS NOT APPLICABLE. RELIANCE WAS ALSO PLACED ON PRINCIPLES DISCUSSED IN SMIFS SECURITIES LTD. (348 ITR 302)(SC). HOWEV ER, DRP REJECTED THE ASSESSEES OBJECTION BY HOLDING THAT DEPRECIATION WAS CLAIMED BY A REVISED RETURN. HENCE, FRESH CLAIM OF THE ASSESSEE BY REVISED RETURN WAS REJECTED. 6. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 7. WE FIND THAT DECISION IN THE CASE OF GOETZ INDIA LTD. (SUPRA) ITSELF , HON'BLE APEX COURT HAS HELD THAT THE SAID DECISION WOULD NOT IMPINGE UP ON THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 3 THE POWER OF ITAT TO ADJUDICATE GROUNDS RAISED OTHERWISE THEN BY REVISED RETURN. FURTHERMORE, LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT NO W ON THE ISSUE OF DEPRECATION ON GOODWILL AND SIMILAR INTANGIBLE ASSETS HON'BLE APEX COURT IN THE CASE OF SMIFS SECURITIES LTD. (24 TAXMANN.COM 222) HAS ALREADY DEALT WITH THE ISSUE. I N THE S AID DECISION OF HON'BLE APEX HAVE HELD THAT GOODWILL COVERS UNDER EXPLANATION (III) TO SECTION 32(1) AND THUS IT IS ELIGIBLE FOR DEPRECIATION. 8. UPON CAREFUL CONSIDERATION, WE FIND THAT THIS ISSUE HAS BEEN DISMISSED AT THE OUTSET BY THE ASSESSING OFFICER ON THE GROUND THAT IT HAS BEEN CLAIMED BY WAY OF REVISED RETURN. SINCE THE ISSUE HAS NOT AT ALL BEEN EXAMINED, WE DEEM IT APPROPRIATE TO REMIT THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE ISSUE A FRESH. THE ASSESSING OFFICER SHALL TAKE INTO ACCOUNT DECISION OF HON'BLE APEX COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA). NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. BOTH COUNSEL FAIRLY AGREED TO THE ABOVE PR OPOSITION. 9. ANOTHER ISSUE RAISED RELATES TO DISALLOWANCE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF AND ESIC ON THE GROUND THAT THE SAME WAS PAID BEYOND DUE DATE UNDER PRESCRIBED ACT. ASSESSEES PLEA THAT AMOUNT WAS ALLOWABLE AS THE AMOUNT WAS PAID BEFO RE THE DUE DATE OF FILING OF RETURN OF INCOME FOR A.Y. 2009 - 10 WAS REJECTED. 10. UPON HEARING BOTH THE COUNSEL AND PERUSING THE RECORDS, IT TRANSPIRES THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY SEVERAL DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE APEX COURT. WE MAY REFER TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF GHATGE PATIL TRANSPORTS LTD. (53 TAXMANN.COM 141), WHEREIN HON'BLE JURISDICTIONAL HIGH COURT HAS REFERRED TO HON'BLE APEX COURT DECISION IN THE CA SE OF ALOM EXTRUSIONS LTD. (319 ITR 306), WHERE PAYMENTS MADE UPTO THE DATE OF FILING OF RETURN WAS TO BE THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 4 HELD ALLOWABLE. FOLLOWING THE ABOVE PRECEDENT, WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSEE. 11. ANOTHER ISSUE RAISED RELATING TO FOLLOWING TRANSFE R PRICING ADJUSTMENT : - PAYMENTS TOWARDS REIMBURSEMENT OF SALARY EXPENSES AT RS. 13,03,654/ - INSTEAD OF RS. 1,30,36,054/ - PAYMENTS TOWARDS REIMBURSEMENT OF INTERNET EXPENSES AT RS. NIL INSTEAD OF RS. 94,06,983/ - . PAYMENTS TOWARDS REIMBURSEMENT OF ACQUISITI ON EXPENSES AT RS. NIL INSTEAD OF RS. 1,50,06,729. PAYMENTS TOWARDS REIMBURSEMENT OF CLEANING INWARD, PROFESSIONAL AND INSURANCE EXPENSES AT RS. NIL INSTEAD OF RS. 46,00,726/ - . 12. THE TPO HAS MADE ADJUSTMENTS OF RS. 4,20,50,492/ - ON ACCOUNT OF REIMBURSE MENT OF EXPENSES. 13. BRIEF FACTS ON THIS ISSUE ARE AS UNDER : - THE TPO ISSUED SHOW CAUSE WHY ALP OF INTERNATIONAL TRANSACTION BE NOT CONSIDERED AS NIL. AS ASSESSEE DID NOT PRODUCE EVIDENCE TO SHOW THAT EXPENSES WERE INCURRED BY AE AND REIMBURSED AT COST ADJUSTMENTS WERE MADE TO THE TUNE OF RS.4,20,50,492/ - . THE DRP NOTED THAT DETAILS ARE AS UNDER: SR. NO. NATURE OF REIMBURSEMENT AMOUNTS IN RS. BRIEF DESCRIPTION 1 REIMBURSEMENT OF SALARY EXPENSES 1,30,36,054 SALARY PAID TO MR. JACOBUS JOHANN ES BRUNO VAN DER STEUIJT (GENERAL MANAGER - INDIA SUBSEQUENTLY ELEVATED TO MANAGING DIRECTOR W.E.F. FEBRUARY 3, 2009). 2 REIMBURSEMENT OF INTERNET EXPENSES 94,06,983 AT&T INTERNET CONNECTIVITY CHARGES PAID TO THERMO FISHER SCIENTIFIC INC. (INCURRED ON BEH ALF OF THERMO FISHER INDIA) 3 REIMBURSEMENT OF ACQUISITION EXPENSES 1,50,06,729 ACQUISITION OF THE ANALYTICAL TECHNOLOGIES AND ENVIRONMENTAL INSTRUMENTATION DIVISION FROM CHEMITO TECHNOLOGIES PRIVATE LIMITED. 4 REIMBURSEMENT OF CLEANING INWARD EXPENSES , PROFESSIONAL CHARGES AND INSURANCE EXPENSES. 46,00,726 CLEARING INWARD, PROFESSIONAL AND INSURANCE EXPENSES PAID TO AES CLAIMED E INCURRED ON BEHALF OF THERMO FISHER TOTAL 42,050,492 THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 5 BEFORE LEARNED DRP, A SSESSEE FURTHER R ESPONDED THAT IN RESPECT O F REIMBURSEMENT OF SALARY EXPENSES THE CONCERN PERSON HAD COME TO INDIA ON SECONDMENT BASIS AS VICE PRESIDENT. THAT HE HAD BEEN ASSOCIATED WITH THE GROUP FOR MORE THAN A DECADE. THAT HE WAS SUBSEQUENTLY ELEVATED AS MANAGING DIRECTOR OF THERMO FISHER. FURT HER THE DRP IN THIS REGARD NOTED THE FOLLOWING SUBMISSIONS OF THE ASSESSEE : - T HE INTERNATIONAL ASSIGNMENT LETTER WAS PRODUCED FOR REIMBURSEMENT OF INTERNET EXPENSES, (II) IT WAS STATED THAT DURING FINANCIAL YEAR 2008 - 09, THE VENDOR (AT&T) PROVIDED GLOBAL NETWORK SERVICES TO THE GROUP, PURSUANT TO THE GROUP - LEVEL CONTRACTUAL ARRANGEMENT WITH THE PARENT COMPANY. SINCE, SUBSTANTIAL EVIDENCE IN THE FORM OF THIRD PARTY INVOICES AND OTHER DOCUMENTS ALWAYS VESTED WITH THE PARENT COMPANY IN OVERSEAS JURISDICTIONS , THE ASSESSEE COULD NOT OBTAIN THE SAME IN TIME DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, HOWEVER IN VIEW OF THE FACT THAT THE COMPANY, EVEN IN THE SUBSEQUENT YEARS HAS MADE REIMBURSEMENTS OF A SIMILAR NATURE (I.E. TOWARDS GLOBAL NETWORK SERVICES P ROVIDED BY AT&T) TO ITS PARENT COMPANY CONSIDERING THE UNAVAILABILITY OF THE DOCUMENTARY EVIDENCE FOR THE FY 2008 - 09, THE ASSESSEE PRODUCED THE THIRD PARTY SUPPORTING EVIDENCE IN THE FORM OF SERVICE INVOICES FROM AT&T, FOR FY 2012 - 13 IN SUPPORT OF THE SAID REIMBURSEMENT OF INTERNET EXPENSES, (III) FOR REIMBURSEMENT OF ACQUISITION EXPENSES THE ASSESSEE FURNISHED THE FOLLOWING: (A) THE EXTRACT IN THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2009 DISCLOSING THE PARTICULARS OF THIS TRANSACTION. (B) T HE BUSINESS TRANSFER AGREEMENT BETWEEN THERMO FISHER (THEN KNOWN AS THERMO ELECTRON LLS INDIA PVT. LTD.') AND CHEMITO TECHNOLOGIES PVT. LTD.; AND (C) THE REPORT FOR ALLOCATION OF THE SLUMP SALE CONSIDERATION . 14. THE DRP NOTED THAT THESE WERE FORWAR DED TO THE TPO. THE DRP NOTED THAT THE TPO HAS MENTIONED THAT NO CASE HAS BEEN MADE OUT WHY SUCH DETAILS WERE NOT PRODUCED DURING THE TP PROCEEDINGS. HENCE, THE TPO SUBMITTED THAT THE SAME SHOULD NOT BE ADMITTED. WITHOUT PREJUDICE, HE HAS STATED THAT THE B ILLS FOR INTERNET EXPENSES WERE NOT FOR RELEVANT PERIOD. THE DRP DELETED THE ADJUSTMENT ON ACCOUNT OF SALARY BUT SUSTAINED REST BY OBSERVING AS UNDER : - THE ARGUMENTS ARE CONSIDERED AND MATERIALS ON RECORD PERUSED. THE ASSESSEE HAS PRODUCED THE ASSIGNMENT LETTER WHICH SHOWS THAT THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 6 MR.JAOOBUS JOHANNES BRUNO VAN DER STEUIJT WAS SECONDED TO INDIA AS VICE PRESIDENT FOR THE RELEVANT YEAR TILL 03.02.2009. AS THE REIMBURSEMENT IS ON COST NO ADJUSTMENT I S CALLED FOR IN THIS REGARD. HOWEVER WITH RESPECT TO OTHER ADJUS TMENT AS ASSESSEE HAS NOT BEEN ABLE TO FURNI SH EVIDENCE THE SAME ARE UPHELD. 15. AGAINST THE ABOVE DIRECTION DELETING THE ADJUSTMENT ON SALARY, REVENUE IS IN APPEAL BEFORE US AND FOR SUSTAINING DISALLOWANCE ON ACCOUNT OF REIMBURSEMENT ON OTHER COUNTS, A SSESSEE IS I N APPEAL BEFORE US. 16. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AS REGARDS DELETION OF DISALLOWANCE ON ACCOUNT OF REIMBURSEMENT OF SALARY, WE FIND THAT THE SAME HAS BEEN DONE BY THE DRP ON ACCOUNT OF SUBMISSION OF ALL NECESSARY DETAILS REGARDING SECONDMENT OF EMPLOYEE FROM THE AE AND ALL RELEVANT DETAILS WERE SUBMITTED. THESE WERE ALSO FORWARDED TO THE TPO, WHO HAS NOT SUBMITTED ANYTHING ADVERSE ON THIS ACCOUNT. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION THERE IS NO INFIR MITY IN THE DIRECTION BY DRP DIRECTING FOR DELETION OF THE SAME. 17. AS REGARDS ADJUSTMENT ON ACCOUNT OF REIMBURSEMENT OF OTHER EXPENSES, WE NOTE THAT THE SAME HAS BEEN SUMMARILY UPHELD BY DRP WITHOUT DETAILED REASONING. THOUGH THE ASSESSEE HAS SUBMITTED THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SUBMIT TH E THIRD PARTY INVOICE AND OTHER DOCUMENTS WHICH VESTED WITH THE PARENT COMPANY IN THE OVERSEAS JURISDICTION , STILL SOME DOCUMENT S IN THIS CONNECTION WERE SUBMIT TED WHICH REMAINED TO BE EXAMINED AND APP RE CIATED. THE ASSESSEE ALSO STATED THAT IT COULD NOT OBTAIN THE DETAILS IN TIME DURING THE ASSESSMENT PROCEEDINGS. HENCE, IN OUR CONSIDERED OPINION, IN THE INTEREST OF JUS TICE THIS MATTER SHOULD BE REMITT ED TO THE ASSESSING OFFICER TO CONSIDER THE ISSUE AF RESH AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 18. ANOTHER GROUND RAISED RELATES TO DENIAL OF DEDUCTION FOR NON - COMPETE FEES. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING FOR THE SAME. HENCE, THIS GROUND IS DIS MISSED AS NOT PRESSED. THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 7 19. ANOTHER GROUND RAISED IS THAT THE ASSESSING OFFICER HAS ERRED IN NOT FOLLOWING DIRECTION OF DRP FOR GRANTING CONSEQUENTIAL DEPRECIATION ON THE WRITTEN DOWN VALUE OF SOFTWARE EXPENSES CONSIDERED TO BE DEPRECIABLE CAPITAL EXPENDIT URE IN COMPLETED ASSESSMENT PROCEEDINGS OF A.Y. 2007 - 08. 20. UPON CAREFUL CONSIDERATION, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH THE DRPS DIRECTION FOR A.Y. 2007 - 08. 21. ANOTHER ISSUE RAISED IS THA T THE ASSESSING OFFICER ARE NOT GRANTING THIRD PARTY TDS. 22. IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE SAME AND DECIDE AS PER LAW. REVENUES APPEAL : - 23. GROUNDS OF APPEAL READ AS UNDER : - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DISPUTE RESOLUTION PANEL ERRED IN DELETING THE ADJUSTMENT MADE BY AO/TPO OF RS. 1,30,36,054/ - ON ACCOUNT OF REIMBURSEMENT OF SALARY EXPENSES EVEN THOUGH ASSESSEE DID NOT PRODUCE EVIDENCE TO SHOW THAT EXPENSES WERE INCURRED BY AE AND REIMBURSED AT COST. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE DISPUTE RESOLUTION PANEL FAILED TO APPRECIATED THE FACT THAT IN INTRA GROUP SERVICES ASSESSEE HAS TO PROVE THAT SECO NDMENT WAS FOR THE BENEFIT OF THE ASSESSEE. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL. 4. THE APPELLANT PRAYS THAT THE DIRECTION OF DR P, MUMBAI ON THE ABOVE DIRECTIONS BE SET - ASIDE AND OF THE ASSESSING OFFICER BE RESTORED. THERMO FISHER SCIENTIFIC INDIA PVT. LTD. 8 24. WE HAVE ALREADY DEALT WITH THIS ISSUE IN ASSESSEES APPEAL IN ISSUE NO. 3 ABOVE, WHERE WE HAVE UPHELD THE DIRECTION OF THE DRP. ACCORDINGLY, THIS IS S UE RAISED BY THE REVENUE IS DISMISSED. 2 5 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 28 . 6 . 201 9 . SD/ - SD/ - (RAMALAL NEGI ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 28 / 6 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI