Flextronics Technologies (India) Pvt. Ltd., Kancheepuram V. ACIT (OSD), CHENNAI

ITA 322/CHNY/2017

AI Insights

The case revolves around an appeal by Flextronics Technologies (India) Private Limited against the assessment order concerning transfer pricing adjustments related to the import of fixed assets from various associated enterprises (AEs). The TPO had issued a notice to the assessee to furnish details regarding the assets purchased, but the assessee failed to provide adequate documentation. Consequently, the TPO and later the DRP, determined the ALP of the assets at NIL, leading to a suggested transfer pricing adjustment of \\u20b91.15 crores. The Tribunal dismissed the appeal, agreeing with the lower authorities that the assessee did not substantiate the purchase costs.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134880 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-01-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-02-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Cost of acquisition
• Section: 143(3); 144C; 92CA

Judgement Text

आयकर अपीलीय अिधकरण, ‘डी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ŵी वी. दुगाŊ राव, Ɋाियक सद˟ एवं ŵी मनोज कु मार अŤवाल, लेखा सद˟ के समƗ । Before Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member आयकर अपील सं./I.T.A. No.322/Chny/2017 िनधाŊरण वषŊ/Assessment Year: 2012-13 Flextronics Technologies (India) Private Limited [appeal by Flexpower India Private Limited, that has merged with Flextronics Technologies (India) Private Limited, Plot No. 3, Phase II, SIPCOT Industrial Park, Sandavellure C Village, Sriperumbudur Taluk, Kancheepuram District, Tamil Nadu 602 106. [PAN:AAACF5248E] Vs. The Assistant Commissioner of Income Tax (OSD), Corporate Range 2, Room No. 403, Wanaparthy Block, No. 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600 034. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri Ajit Kumar Jain, C.A. ŮȑथŎ की ओर से/Respondent by : Dr. S. Palanikumar, CIT सुनवाई की तारीख/ Date of hearing : 10.01.2023 घोषणा की तारीख /Date of Pronouncement : 13.01.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the assessment order passed under section 143(3) r.w.s. 144C (13) of the Income Tax Act, 1961[“Act” in short] relevant to the assessment year 2012-13. 2. The ld. Counsel for the assessee has not pressed ground Nos. 1 I.T.A. No.322/Chny/17 2 to 18.1 and accordingly, the above grounds are dismissed as not pressed. 3. The only issue raised for adjudication in Ground Nos. 19 to 28 is with respect to transfer pricing adjustment in relation to import of fixed assets. 4. The assessee has imported following fixed assets from assessee’s Associated Enterprises [AE]: i. Flextronics Manufacturing Mex S.A. de C.V., Mexico ii. Flextronics International KFT, Hungary iii. Flextronics International Poland SP iv. Power System Technologies (Shenzhen) Co Ltd. v. Power System Technologies Co Ltd, Hong Kong vi. Flextronics Manufacturing Juarez S De R L De, Chihuahua vii. Flextronics Electronics Technology (Shenzhen) Co Ltd. The Assessing Officer made a reference under section 92CA of the Act, in the case of the assessee to the Transfer Pricing Officer (TPO) and accordingly, the TPO has issued a notice under section 92CA(2) of the Act dated 31.10.2014 to furnish the details of documents and information in respect of fixed assets purchased. The TPO has noted that the assessee has used TNMM to benchmark the asset purchased by stating that the depreciation charge with respect to the assets has I.T.A. No.322/Chny/17 3 been included in operating costs which confirms to ALP. The TPO has observed that the assessee’s stand cannot be accepted as depreciation is not the international transaction but asset purchase is the international transaction on which ALP ought to have been established. Further, the depreciation does not justify the correctness of the purchase cost. The assessee was required to demonstrate the ALP of the asset purchased from AE through either competitive quotes/ in case of purchase and transfer with the invoices and in case of transfer of used assets through the transfer value. The assessee has not filed any details before the TPO in respect of purchase value of the asset originally purchased by the AE, how long they have used, what is the cost of the asset after using, etc, were not filed before the TPO. Therefore, the TPO has adopted purchase cost at NIL and accordingly, suggested TP adjustment of ₹.1.15 crores towards purchase of fixed assets. Subsequently, by following the TPO order, the Assessing Officer passed draft assessment order dated 22.03.2016. 5. Against the draft assessment order passed by the Assessing Officer, the assessee carried the matter in appeal before the ld. DRP. The ld. DRP, vide order dated 07.10.2016 confirmed the draft assessment order by observing that the asset purchase is an I.T.A. No.322/Chny/17 4 international transaction and the correctness of the purchase cost has to be determined as per the provisions of the Act. However, in the absence of evidence/documents maintained by the assessee, the TPO does not have any alternative but to presume the cost at NIL. No further evidence/document has been brought on record before the DRP also and therefore, the ld. DRP rejected the objections raised by the assessee. 6. Subsequently, the Assessing passed the final assessment order under section 143(3) r.w.s. 144C(13) of the Act dated 30.11.2016 by making adjustment in accordance with the directions given by the ld. DRP. 7. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the TPO determined the ALP at NIL, which is not correct and the ld. DRP confirmed the same is also not correct and submitted that it has to be reversed. He further submitted that the TPO has accepted that the machineries have come to India and having accepted, the cost of the asset, ALP cannot be decided at NIL. He further submitted that the purchase cost of the asset at ₹.1.15 crores has not been routed I.T.A. No.322/Chny/17 5 through profit and loss account and only depreciation has been claimed and therefore, no adjustment can be made. 8. On the other hand, the ld. DR has submitted that the assessee has imported second hand machineries and details of purchase by the AE, details in respect of utilization of fixed assets by AE, invoices/bills, etc. were not produced. Therefore, the TPO correctly came to a conclusion that the cost of the asset i.e., 2 nd hand machineries at NIL and strongly supported the orders of authorities below. 9. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee. The only issue for consideration before us is that the assessee has purchased various fixed asset from different AEs. The TPO has asked the assessee to produce invoices/bills, date of purchase by AE and utilization of the machineries, etc. and the assessee has not filed any details before the TPO. No details were brought on record either before the ld. DRP or even before the Tribunal. Therefore, by considering the entire facts and circumstances of the case, we are of the considered opinion that the TPO has rightly came to a conclusion that the ALP of the old I.T.A. No.322/Chny/17 6 machineries at NIL, which was confirmed by the ld. DRP. We find no infirmity in the order passed by the ld. DRP/Assessing Officer. Accordingly, the ground raised by the assessee is dismissed. 10. In the result, the appeal filed by the assessee is dismissed. Order pronounced on 13 th January, 2023 at Chennai. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 13.01.2023 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.