Assistant Commissioner of Income-tax, Circle - 9, Pune V. Gestamp Pune Automotive India Private Limited, Pune

ITA 2717/PUN/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7593 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-10-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 20-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.2717/PUN/2017 / ASSESSMENT YEAR : 2011-12 ACIT, CIRCLE-9, PUNE VS. GESTAMP PUNE AUTOMOTIVE INDIA PVT. LTD., (FORMERLY KNOWN AS SUNGWOO GESTAMP HITECH (PUNE) PVT. LTD.), GAT NO.374, 517-521 AND 523, VILLAGE TAKWE BUDRUK, TAL. MAVAL, PUNE 412106 PAN : AAMCS2106G (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 08-08-2017 PASSED BY THE COMMISSIONER OF INCOME-TAX ( APPEALS) IN RELATION TO THE ASSESSMENT YEAR 2011-12. 2. THE ONLY EFFECTIVE GROUND IN THE APPEAL READS AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADJUSTMENT ONLY ON THE VALUE OF INTERNATIONAL TRANSACTIONS OF IMPORT OF CDK MATERIA LS? APPELLANT BY SHRI T. VIJAYA BHASKAR REDDY, CIT RESPONDENT BY SHRI R.D. ONKAR DATE OF HEARING 16-10-2019 DATE OF PRONOUNCEMENT 17-10-2019 ITA NO.2717/PUN/2017 GESTAMP PUNE AUTOMOTIVE INDIA PVT. LTD., 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN DECLARING TOTAL LOSS OF ODD RS.18.14 CRORE. SUCH RETURN WAS ACCOMPANIED BY THE AUDIT REPORT IN FORM NO. 3CEB INDICATIN G INTERNATIONAL TRANSACTIONS. THE ASSESSING OFFICER (AO) MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (TPO) FOR DETER MINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS. ONE OF THE INTERNATIONAL TRANSACTIONS OF PURCHASE OF ITEMS OF ASSEMB LY CKD MATERIALS FROM ASSOCIATED ENTERPRISES (AES) AMOUNTED TO O DD RS.26.50 CRORE. THE ASSESSEE APPLIED THE RESALE PRICE ME THOD (RPM) FOR BENCHMARKING THE INTERNATIONAL TRANSACTION OF PURCHA SE OF ITEMS OF ASSEMBLY CKD MATERIALS. THE TPO REJECTED THIS METH OD AND APPLIED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD. THE TPO CHOSE CERTAIN COMPARABLE S WITH THEIR AVERAGE PROFIT LEVEL INDICATOR (PLI) OF 10.23%. HE CO MPUTED TRANSFER PRICING ADJUSTMENT OF RS.13,00,63,586/- FROM THIS TRANSACTION, WHICH AMOUNT WAS ADDED BY THE AO IN HIS ORDER. THE ASSESSEE CHALLENGED SUCH ADDITION BEFORE THE LD. FIRST APPE LLATE AUTHORITY, INTER ALIA, ALLEGING THAT THE TRANSFER PRICING ADJUSTMENT SHOULD BE CONFINED TO THE INTERNATIONAL TRANSACTIONS ALONE AND N OT THE ENTITY LEVEL TRANSACTIONS, AS WAS DONE BY THE TPO. THE LD . CIT(A) VIDE PARA NO.2.1.43 ON PAGE 37 OF THE IMPUGNE D ORDER ITA NO.2717/PUN/2017 GESTAMP PUNE AUTOMOTIVE INDIA PVT. LTD., 3 DIRECTED THAT THE ADJUSTMENT SHOULD BE MADE ONLY TO THE VALUE O F INTERNATIONAL TRANSACTIONS, WHICH IS THE SUBJECT MATTER OF GROUND RAISED BY THE REVENUE BEFORE THE TRIBUNAL, AS REPRODUC ED ABOVE. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RE LEVANT MATERIAL ON RECORD. IT IS SEEN FROM THE TPOS ORDER THAT TH E INTERNATIONAL TRANSACTION OF PURCHASE OF ITEMS OF ASSEMBLY CKD MATERIALS AMOUNTED TO ODD RS.26.50 CRORE. WHILE COMPUTING THE TRANSFER PRICING ADJUSTMENT, THE TPO STARTED WITH `PRICE CHARG ED (OPERATING REVENUE OF THE ASSESSEE) AT RS.59,67,27,834 /-. THEN HE TOOK UP THE FIGURE OF `OPERATING COST AT RS.69,09,87,750 /-. BY CONSIDERING THE ARMS LENGTH MARGIN AT 10.23%, HE COMPUTE D THE AMOUNT OF TRANSFER PRICING ADJUSTMENT UNDER CONSIDERATION. THE LD. AR SUBMITTED THAT THE FIGURES OF `PRICE CHARGED AND `OPE RATING COST TAKEN BY THE TPO ARE ENTITY LEVEL FIGURES OF THE PUR CHASE OF ITEMS OF ASSEMBLY CKD MATERIALS, WHICH ALSO INCLUDE THE VALUE OF TRANSACTIONS WITH NON-AES. THE LD. CIT(A) HAS DIRECTED THAT THE TRANSFER PRICING ADJUSTMENT SHOULD BE RESTRICTED TO THE AMOUNT OF INTERNATIONAL TRANSACTIONS ALONE. THIS ISSUE IS NO MORE RES INTEGRA IN VIEW OF SEVERAL JUDGMENTS PASSED BY VARIOUS HIGHER FORUMS INCLUDING THE HONBLE JURISDICTIONAL HIGH COURT HOLDING THAT THE TRANSFER PRICING ADJUSTMENT SHOULD BE RESTRICTED ONLY TO THE ITA NO.2717/PUN/2017 GESTAMP PUNE AUTOMOTIVE INDIA PVT. LTD., 4 INTERNATIONAL TRANSACTIONS AND NOT THE ENTITY LEVEL TRANSACTIONS. TH E HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. PHOENIX MECANO (INDIA) PVT. LTD. (2019) 414 ITR 704 (BOM.) HAS HELD THAT THE TRANSFER PRICING ADJUSTMENT MADE AT ENTITY LEVEL SHOULD BE RESTR ICTED TO THE INTERNATIONAL TRANSACTIONS ONLY. HERE, IT IS PERTINENT TO MENTION THAT THE DEPARTMENTS SLP AGAINST THE JUDGMENT IN THE CA SE OF PHOENIX MECANO (INDIA) PVT. LTD. HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT IN CIT VS. PHOENIX MECANO (INDIA) PVT. LTD. (2018) 402 ITR 32 (ST.). SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. THYSSEN KRUPP INDUSTRIES PVT. LTD. (2016) 381 ITR 413 (BOM.) AND CIT VS. TARA JEWELS EXPORTS (P). LTD. (2010) 381 ITR 404 (BOM.) . SINCE THE VIEW CANVASSED BY THE LD. CIT(A) ACCORDS WITH THAT OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE AFORENOTED CASES, WE, THEREF ORE, UPHOLD THE SAME. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (R.S.SY AL) JUDICIAL MEMBER VICE P RESIDENT PUNE; DATED : 17 TH OCTOBER, 2019 ITA NO.2717/PUN/2017 GESTAMP PUNE AUTOMOTIVE INDIA PVT. LTD., 5 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PR. CIT-V, PUNE , , C / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 16-10-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 16-10-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *