Renault Nissan Technology & Business Cenre India Pvt. Ltd., Kancheepuram V. DCIT Corporate Circle 5(1), CHENNAI

ITA 3193/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1051 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO
• Keywords: Transfer pricing

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.3193/CHNY/2017 ( )( / ASSESSMENT YEAR : 2013-14 M/S RENAULT NISSAN TECHNOLOGY AND BUSINESS CENTRE INDIA PVT. LTD., ASCENDAS IT PARK, MAHINDRA WORLD CI TY, SEZ NO.TP 2/1 NATHAM SUB POST OFFICE, KANCHEEPURAM DISTRICT, TAMIL NADU 603 002. PAN : AADCR 7253 E V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(1), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI SRIRAM SESHADRI, CA -.+, / 0 / RESPONDENT BY : DR. M. SRINIVASA RAO, CIT 1 / 2% / DATE OF HEARING : 07.08.2018 3') / 2% / DATE OF PRONOUNCEMENT : 12.09.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE ASSESSING OFFICER DATED 30.10.2017 CONSEQUENT T O THE DIRECTION OF THE DISPUTE RESOLUTION PANEL DATED 20.09.2017. 2 I.T.A. NO.3193/CHNY/17 2. SHRI SRIRAM SESHADRI, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERATION IS SELECTION OF COMPARABLE CASES. ACCORDING TO THE LD . REPRESENTATIVE, M/S ACROPETAL TECHNOLOGIES LTD. WAS SELECTED AS COM PARABLE BY THE ASSESSEE INITIALLY. ON REVIEWING OF INFORMATION AV AILABLE IN THE PUBLIC DOMAIN, DURING THE COURSE OF TRANSFER PRICIN G PROCEEDINGS, THE ASSESSEE CAME TO KNOW THAT THERE WERE SOME IRREGULA RITIES COMMITTED BY M/S ACROPETAL TECHNOLOGIES LTD. AND PR OCEEDINGS WERE PENDING BEFORE SECURITY EXCHANGE BOARD OF INDI A, THEREFORE, IT HAS TO BE EXCLUDED. ACCORDING TO THE LD. REPRESENT ATIVE, THE ASSESSEE REQUESTED THE TRANSFER PRICING OFFICER TO EXCLUDE M/S ACROPETAL TECHNOLOGIES LTD. AS A COMPARABLE CASE. HOWEVER, THE TPO AND DRP REFUSED TO EXCLUDE M/S ACROPETAL TECHNO LOGIES LTD. ACCORDING TO THE LD. REPRESENTATIVE, IN CASE M/S AC ROPETAL TECHNOLOGIES LTD. IS REMOVED FROM COMPARABLE CASES, THERE IS NO NEED FOR ANY ADJUSTMENT OF ARM'S LENGTH PRICE. 3. ON THE CONTRARY, DR. M. SRINIVASA RAO, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT M/S ACROPETAL TECHNO LOGIES LTD. WAS SELECTED AS COMPARABLE CASE BY THE ASSESSEE ITSELF. THEREFORE, 3 I.T.A. NO.3193/CHNY/17 ACCORDING TO THE LD. D.R., THE ASSESSEE CANNOT NOW SAY THAT IT HAS TO BE REMOVED FROM COMPARABLE CASE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE ITSELF SELECTED M/S ACROP ETAL TECHNOLOGIES LTD. AS ONE OF THE COMPARABLES. WHEN THE ASSESSEE CAME TO KNOW THAT SOME ADVERSE INFORMATION ABOUT M/ S ACROPETAL TECHNOLOGIES LTD., NOTHING WRONG IN BRINGING IT TO THE NOTICE OF THE TRANSFER PRICING OFFICER AND DRP AND REQUEST FOR RE MOVAL OF THAT COMPARABLE FROM CONSIDERATION. THEREFORE, THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE TPO AS WELL AS DRP ARE BOUND TO CONSIDER THE INFORMATION WHICH WAS BROUGHT TO THEIR NOTICE SUBSEQUENT TO THE FILING OF TRANSFER PRICING DOCUME NTATION. HENCE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE TRANSFER PRICING OFFICER. ACCO RDINGLY, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE AND T HE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REFER THE MATTER ONCE AGAIN TO THE TR ANSFER PRICING OFFICER. THE TRANSFER PRICING OFFICER SHALL CONSID ER THE SO-CALLED INFORMATION SAID TO BE COLLECTED BY THE ASSESSEE SU BSEQUENT TO FILING 4 I.T.A. NO.3193/CHNY/17 OF TRANSFER PRICING DOCUMENTATION AND THEREAFTER DE CIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE. THE ASSESSING OFFICER SHALL FOLLO W THE STATUTORY PROVISIONS AND PASS THE NECESSARY ORDERS AS PROVIDE D UNDER SECTION 144C OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXCLU SION OF EXPENDITURE INCURRED IN FOREIGN CURRENCY TOWARDS CO MMUNICATION AND INSURANCE FROM THE TOTAL TURNOVER. 6. WE HEARD SHRI SRIRAM SESHADRI, THE LD. REPRESENT ATIVE FOR THE ASSESSEE AND DR. M. SRINIVASA RAO, THE LD. DEPA RTMENTAL REPRESENTATIVE. THE DISPUTE RESOLUTION PANEL EXCLU DED THE EXPENDITURE INCURRED BY THE ASSESSEE IN FOREIGN CUR RENCY TOWARDS COMMUNICATION AND INSURANCE FROM THE EXPORT TURNOVE R. HOWEVER, IT WAS NOT EXCLUDED FROM TOTAL TURNOVER. THE REASON P OINTED OUT BY THE DRP IS THAT THE DECISION OF DRP CANNOT BE APPEA LED AGAINST BY THE DEPARTMENT, THEREFORE, IN ORDER TO KEEP THE MAT TER ALIVE, THEY COULD NOT FOLLOW THE DECISION OF SPECIAL BENCH IN I TO V. SAK SOFT LIMITED (2009) 313 ITR (AT) 353. 5 I.T.A. NO.3193/CHNY/17 7. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF INCOME-TAX ACT, MORE PARTICULARLY SECTION 253 OF THE ACT. SEC TION 253(2A) OF THE ACT AS IT STOOD TILL 31.05.2006 ENABLED THE COM MISSIONER TO DIRECT THE ASSESSING OFFICER TO FILE AN APPEAL AGAI NST THE DIRECTION OF DISPUTE RESOLUTION PANEL BEFORE THIS TRIBUNAL. HOW EVER, SUB- SECTION (2A) WAS OMITTED BY FINANCE ACT, 2016 WITH EFFECT FROM 01.06.2016. THEREFORE, AS RIGHTLY OBSERVED BY THE DRP, THERE IS NO PROVISION FOR FILING OF APPEAL BY THE DEPARTMENT AG AINST DRPS DIRECTION BEFORE THIS TRIBUNAL. HOWEVER, THAT DOES NOT MEAN THAT DISPUTE RESOLUTION PANEL CAN IGNORE THE ORDER OF TH IS TRIBUNAL. WHEN THIS TRIBUNAL FOUND THAT EXPENDITURE INCURRED IN FOREIGN CURRENCY CANNOT FORM PART OF EXPORT TURNOVER AND TO TAL TURNOVER, THE SAME HAS TO BE FOLLOWED. IN FACT, A SIMILAR VIEW W AS TAKEN BY THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2009-10 IN I.T.A. NO.1009/MDS/2014 DATED 16.11.2016. IN VI EW OF THE ABOVE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE LOW ER AUTHORITY. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO E XCLUDE THE EXPENDITURE INCURRED BY THE ASSESSEE FROM BOTH THE EXPORT TURNOVER AND TOTAL TURNOVER. THE ORDERS OF THE DRP AS WELL AS THE ASSESSING OFFICER ARE MODIFIED ACCORDINGLY. 6 I.T.A. NO.3193/CHNY/17 8. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXCLU SION OF FOREIGN EXCHANGE GAIN FROM PROFITS OF THE UNDERTAKING. 9. WE HEARD SHRI SRIRAM SESHADRI, THE LD. REPRESENT ATIVE FOR THE ASSESSEE AND DR. M. SRINIVASA RAO, THE LD. DEPA RTMENTAL REPRESENTATIVE. THE GAIN DUE TO FOREIGN EXCHANGE F LUCTUATION ON THE EXPORT IS A PROFIT FROM EXPORT, THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME CANNOT BE EXCLUDED . IN FACT, THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2009-10 HAD TAKEN A SIMILAR VIEW BY PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. PENTASOFT TECHNOLOGIES LTD. (2012) 347 ITR 578. 10. IN VIEW OF THE ABOVE, THE ORDERS OF THE LOWER A UTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO TREAT THE GAIN DUE TO FOREIGN EXCHANGE FLUCTUATION AS PART OF THE EXPO RT PROFIT. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7 I.T.A. NO.3193/CHNY/17 ORDER PRONOUNCED ON 12 TH SEPTEMBER, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 12 TH SEPTEMBER, 2018. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. ITO(OSD)/SECRETARY, DRP-2, BENGALURU 4. PRINCIPAL CIT-5, CHENNAI. 5. CIT(TP), CHENNAI 6. JCIT, TPO-2, CHENNAI 7. 79 -2 /DR 8. ( : /GF.