Asst.C.I.T., Bangalore V. M/s Millipore (India) Ltd., Bangalore

ITA 327/BANG/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8480 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Assessee Lawyers: K.K. CHAYTHANYA
• Keywords: Transfer pricing; International transaction; Reasonable cause; Notional interest; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 92A; 10B; 143(1); 201; 144C; 143(2); 13; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, B E NGAL U R U BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER IT (TP) A NO. 327/ BANG/20 1 5 (ASSESSMENT YEAR: 20 09 - 10 ) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 4(1)(2), BENGALURU. VS APPELLANT M/S.MILLIPORE (INDIA) LTD. NO.50A, 2 ND PHASE, PEENYA INDUSTRIAL AREA, BENGALURU - 560058. PAN: AACCM 1226 B RESPONDENT AND CO NO.188/BANG/2015 (IN IT (TP) A NO. 327/ BANG/20 15) (ASSESSMENT YEAR: 2009 - 10 ) (BY TH E ASSESSEE) REVENUE BY : SMT. SWAPNA DAS, JCIT ASSESSEE BY : SHRI K.K. CHAYTHANYA, ADVOCATE DATE OF HEARING : 06/12/2016 DATE OF PRONOUNCEMENT : 07 /0 3 /2017 O R D E R PER I NTURI RAMA RAO, AM : THE APPEAL IS BY THE REVENUE AND T HE CROSS OBJECTIONS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) - IV, BENGALURU, DATED 05/12/2014 FOR THE ASSESSMENT YEAR 2009 - 10. 2. BRIEFLY FACTS OF THE CASE ARE THAT THE ASSESSEE IS ACCOMPANY DULY REGISTERED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINES S OF IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 2 OF 13 MANUFACTURE OF FILTERING AND PURIFYING MACHINERY, APPARATUS, LAB WATER SYSTEMS AND RESEARCH, RESEARCH AND DEVELOPMENT, SOFTWARE DEVELOPMENT AND EXPORT OF FILTRATION SYSTEMS. IT FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10 ON 30/09/2009 DECLARING TOTAL INCOME OF RS.33,04,13,330/ - . AFTER PROCESSING THE SAID RETURN OF INCOME UNDER THE PROVISIONS OF SECTION 143(1) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] THE C ASE WAS SELECTED FOR SCRUTINY BY ISSUING REQUISITE NOTICE U/S 143(2) OF THE ACT. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED TH A T THE ASSESSEE - COMPANY SHOWN INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AES) . THEREFORE, HE REFERRED THE MATTER TO THE TRANSFER PRICING OFFICER [TPO] FOR PURPOSE OF DETERMINING ARMS LENGTH PRICE [ALP] IN RESPECT OF SUCH INTERNATIONAL TRANSACTIONS. THE TPO HAS PASSED ORDER U/S 92CA OF THE ACT ON 08/01/2013 BY DETERMINING THE AL P RATE AT 17.22% IN RESPECT OF OUTSTANDING RECEIVABLES EXCEEDING SIX MONTHS FROM ITS AES AND SUGGESTED ADJUSTMENT OF RS.12,57,185/ - UNDER THE PROVISIONS OF SECTION 92CA OF THE ACT. THE F INAL ASSESSMENT ORDER U/S 143(3) R.W.S. 144C OF THE ACT WAS PASSED BY THE AO ON 26/05/2013 . 3. AGGRIEVED BY THE ABOVE DISALLOWANCES , THE ASSESSEE - COMPANY PREFERRED AN APPEAL BEFORE THE CIT(A) WHO, VIDE IMPUGNED ORDER ALLOWED THE APPEAL IN RESPECT OF ISSUES ON APPORTIONMENT OF INTEREST ON WORKING CAPITAL, FACTORY OVERHE ADS AND DIRECTOR S REMUNERATION BETWEEN EOU I.E. 10B UNIT AND NON - IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 3 OF 13 10B UNITS. HOWEVER, THE CIT(A) HAD CONFIRMED APPORTIONMENT OF SALARIES OF RS.17,03,108/ - TO 10B UNIT AND ALSO UPHELD THE ALP ADJUSTMENT IN RESPECT OF OUTSTANDING RECEIVABLES EXCEEDING SIX MONTHS FROM ITS AES AS LABOR RATE. FURTHER, THE CIT(A) HAD NOT ADJUDICATED GROUND RELATING TO GRANT OF CREDIT FOR TDS OF RS.67,87,988/ - . 4. THE REVENUE IS IN APPEAL BEING AGGRIEVED BY THE DELETION OF ADDITION IN RESPECT OF APPORTIONMENT OF INTEREST ON WOR KING CAPITAL, FACTORY OVERHEAD AND DIRECTOR S REMUNERATION TO 10B UNIT. T HE ASSESSEE IS IN CROSS OBJECTION S BEING AGGRIEVED BY THE UPHOLDING OF APPORTIONMENT OF SALARIES OF RS.17,03,108/ - TO 10B UNIT AND NON - ADJUDICATION OF GROUND REGARDING GRANT OF CREDI T FOR TDS AND UPHOLDING ALP ADJUSTMENT IN RESPECT OF RECEIVABLE ETC. EXCEEDING SIX MONTHS FROM ITS AES. 5. NOW, WE SHALL TAKE UP THE REVENUE S APPEAL. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 4 OF 13 6. THE ONLY GRIEVANCE SOUGHT TO BE REDR ESSED BY THE REVENUE IN THIS APPEAL IS THAT THE CIT(A) WAS NOT JUSTIFIED IN GRANTING RELIEF IN RESPECT OF APPORTIONMENT OF WORKING CAPITAL INTEREST OF RS.23,93,491/ - ; FACTORY OVERHEAD OF RS.1,03,70,449/ - AND DIRECTORS REMUNERATION OF RS.20,01,831/ - TO 10B UNITS. THE CIT(A) DELETED ADDITION ON THE GROUND THAT THE ASSESSEE - COMPANY HAD MAINTAINED SEPARATE BOOKS OF ACCOUNT IN RESPECT OF 10B UNIT AND NON - 10B UNIT AND WITHOUT POINTING ANY DISCREPANCIES IN THE BOOKS OF ACCOUNT MAINTAINED , T HE AO WAS NOT JUSTIFIE D IN APPORTIONING THE ABOVE EXPENDITURE TO 10B UNIT. 7. AFTER HEARING RIVAL SUBMISSIONS AND PERUSING MATERIAL, WE FIND THAT THE AO HAD NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNT NOR HAD HE REJECTED THE BOOKS OF ACCOUNT. IT IS NEITHER THE CASE OF TH E AO THAT ANY OF THE EXPENSES WAS NOT PROPERLY ALLOCATED TO 10B UNITS NOR WAS THE CASE OF THE AO THAT THE EXPENDITURE , WHICH IS INCURRED EXCLUSIVELY FOR 10B UNIT WAS NOT CLAIMED AS A DEDUCTION. THE AO MERELY PROCEED ED ON SURMISES AND CONJECTURE TO MAKE AD DITION WHICH IS NOT PERMISSIBLE UNDER LAW AND THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE CIT(A). HENCE, THE APPEAL OF THE REVENUE IS DISMISSED. IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 5 OF 13 8. THE ASSESSEE HAS FILED CROSS OBJECTIONS OBJECTING THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION IN RESPECT OF APPORTIONMENT OF SALARY EXPENDITURE OF RS.17,03,108/ - TO 10B UNIT AND ADDITION IN RESPECT OF ALP IN RESPECT OF RECEIVABLES DUE FROM AES AND NOT ADJUDICATING THE GROUND OF ALLOWANCE OF ON CREDIT FOR TDS OF RS.67,87,98 9/ - . 9. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF CROSS OBJECTIONS: IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 6 OF 13 IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 7 OF 13 10. AT THE OUTSET, IT IS NOTICED THAT THERE IS A DELAY OF 112 DAYS IN FILING OF CROSS OBJECTIONS. THE ASSESSEE HAD FILED CONDONATION PETITION PRAYING FOR CONDONATION O F DELAY ON THE GROUND THAT THE DELAY HAS OCCURRED BECAUSE OF RE - STRUCTURE IN THE ORGANIZATION AND THE KEY PERSONNEL AND EMPLOYEES LOOKING AFTER TAX MATTERS LEFT THE ORGANIZATION, THERE WAS NO DELIBERATE INTENTION ON THE PART OF THE ASSESSEE. THUS, IT WAS PRAYED THAT IT WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE IN FILING CROSS OBJECTIONS. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NO SERIOUS OBJECTION IN CONDONING THE DELAY. IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 8 OF 13 11. AFTER HEARING BOTH SIDES, WE ARE SATISFIED THAT THE ASSESSEE - COMPANY I S PREVENTED BY SUFFICIENT REASONABLE CAUSE IN FILING CROSS OBJECTIONS WITHIN STIPULATED PERIOD. HENCE, THE DELAY IS CONDONED. 12. NOW, WE PROCEED TO DISPOSE OF THE CROSS OBJECTIONS. THE CIT(A) CONSIDERED THE APPORTIONMENT OF A SUM OF RS.17,03,108/ - BY OB SERVING AS UNDER: 13 . THE ASSESSEE - COMPANY HAD PLACED NO MATERIAL BEFORE US OR BEFORE THE CIT(A) CONTROVERTING ABOVE FINDING OF THE AO AND THE REASONING OF THE AO CANNOT BE FOUND FAULT WITH. THEREFORE, IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 9 OF 13 GROUND NO.4 OF CROSS OBJECTIONS IS DISMISSED. GR OUND NO.2 OF CROSS OBJECTION CHALLENGES THE CONFIRMATION OF ALP ADJUSTMENT IN RESPECT OF AMOUNT DUE FROM AES. THE TPO MADE ADJUSTMENT ON ACCOUNT OF NOTIONAL INTEREST FOR NON - REALIZATION OF ITS DUES. THERE IS NO DISPUTE THAT THE TRANSACTION IN QUESTION IS NOT AN INDEPENDENT TRANSACTION. IT IS AN INTEGRAL PART OF TRANSACTION OF SALE MADE TO AE AND THEREFORE, IT HAS TO BE CONSIDERED ALONG WITH MAIN TRANSACTION. IT IS ONLY W.E.F. ASSESSMENT YEAR 2012 - 13 AMENDMENT TO SECTION 92A WAS BROUGHT IN THE STATUTE BOO K. SINCE AMENDMENT IS NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION, LAW LAID DOWN BY SEVERAL CO - ORDI NATE BENCHES LIKE GOLDSTAR JEWELLERY LTD. VS. JCIT (ITA NO.6570/MUM/2012 DATED 14/01/2015) IS APPLICABLE AND IN THE CASE OF M/S.AVNET INDIA PV T. LTD., VS. DCIT [IT(TP)A NO.757/BANG/2011 DT.18/11/2015] TO WHICH ONE OF US IS A PARTY, IT HAS BEEN HELD AS FOLLOWS: IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 10 OF 13 IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 11 OF 13 IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 12 OF 13 RESPECTFULLY FOLLOWING THIS DECISION, WE HOLD THAT NO ALP ADJUSTMENT IS PERMISSIBLE ON THIS ISSUE. THIS CROSS OBJECTION IS ALLOWED. IT (TP) A NO .327 & CO 188 /BANG/201 5 PAGE 13 OF 13 14. GROUND NO.5 OF CROSS OBJECTION DEALS WITH NON - GRANTING OF CREDIT FOR TDS OF RS.67,87,898/ - . FROM THE PERUSAL OF THE CIT(A) S ORDER, IT IS FOUND THAT THERE IS NO FINDING OF THE CIT(A) ON THIS ISSUE. HENCE, GROUND NO.5 OF CROSS OBJECTIONS IS N OT MAINTAINABLE. 15. IN THE RESULT, THE CROSS OBJECTIONS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 TH MARCH , 201 7 S D/ - SD/ - (VIJAY PAL RAO) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : B EN GAL URU D A T E D : 07 /0 3 /2017 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE