Demag Cranes & Components (India) Pvt. Ltd., Pune V. Deputy Commissioner of Inocme-tax,

ITA 328/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7236 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-10-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRUPAMA KOTRU
• Keywords: Transfer pricing; International transaction
• Section: 92C; 92

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.328/PUN/2014 / ASSESSMENT YEAR : 2009-10 DEMAG CRANES & COMPONENTS (INDIA) PVT. LTD. (TEREX INDIA PRIVATE LIMITED), GAT NO.330, 332, 333, 334, NANEKARWADI, CHAKAN, TALUKA KHED, PUNE 410 501 PAN : AABCM9351Q . /APPELLANT VS. DCIT, CIRCLE-1(2), PUNE . / RESPONDENT / APPELLANT BY : SHRI RAJENDRA AGIWAL / RESPONDENT BY : SMT. NIRUPAMA KOTRU / DATE OF HEARING : 31.10.2017 / DATE OF PRONOUNCEMENT: 31.10.2017 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF DRP/TPO/AO. THIS APPEAL WAS ORIGINALLY HEARD AND ADJUDICATED VI DE ITA NO.328/PUN/2014 ORDER DATED 19-10-2016. SUBSEQUENTLY, ON FINDING T HAT GROUND NOS. 10 AND 13 WERE ERRONEOUSLY DISMISSED AS NOT PRESSED VIDE PA RA 6 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA), M.A. NO.10/PUN/2017 WAS FILED BY THE ASSESSEE. THE M.A. WAS ALLOWED IN FAVOUR OF THE ASSESSEE VIDE ORDER DA TED 15-09-2017. PARA NO.5 OF THE M.A. IS RELEVANT AND WE PROCEED TO EXTRACT THE SAME AS UNDER : 5. THE REGISTRY IS DIRECTED TO LIST THE APPEAL OF ASSESSEE FOR HEARING ON 31-10-2017 FOR ADJUDICATING GROUND NOS. 10 AND 13 O NLY. . . . ITA NO.328/PUN/2014 DEMAG CRANES & COMPONENTS (INDIA) PVT. LTD., 2 CONSEQUENTLY, THE CASE OF NOW POSTED FOR HEARING IN THE REGULAR COURSE TODAY. 2. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT GROUND NOS. 10 AND 13 ARE TO BE ADJUDICATED IN THIS APPEAL. REFER RING TO GROUND NO.13 RELATING TO BENEFIT OF +/-5% RANGE LD. COUNSEL SUBMITTED THAT THE ASSESSEE SEEKS A DIRECTION TO THE AO TO APPLY THE RELEVANT PROVISION S AND GRANT THE REQUISITE BENEFIT TO THE ASSESSEE AS PER LAW. 3. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE DI RECT THE AO TO GIVE THE EFFECT TO THE ADJUSTMENTS EVENTUALLY CONFIRMED BY T HE TRIBUNAL AND WORK OUT THE RANGE AND DECIDE THE ISSUE AS PER LAW. ACCORDINGLY , GROUND NO.13 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4. REFERRING TO GROUND NO.10, LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE SAME RELATES TO INCORRECT COMPUTATION OF TRANSFER PRICING ADJUSTMENT TO THE MANUFACTURING ACTIVITY. 5. NARRATING THE RELEVANT FACTS OF THIS CASE, LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MANUFACTURING ACTIVITY OF THE AS SESSEE CONSISTS OF THE SALES AND PURCHASES INVOLVING INTERNATIONAL TRANSACTIONS WITH AES AND NON-AES. THE AO/TPO/DRP ERRONEOUSLY BENCHMARKED THE TRANSACTIONS WITH THE AE AT THE ENTITY LEVEL IGNORING THE FACT THAT THE TRANSACTIONS WITH AES ARE REQUIRED TO BE BENCHMARKED ADOPTING THE BASIS OF PROPORTIONALITY. IN THIS REGARD, LD. COUNSEL RELIED ON VARIOUS DECISIONS OF THE TRIBUNAL IN ASSE SSEES OWN CASE FOR THE A.YRS. 2006-07 TO 2008-09. 6. REFERRING TO THE ORDER OF THE TRIBUNAL FOR THE A .Y. 2006-07 IN ITA NO.120/PN/2011 ORDER DATED 04-01-2012, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE CAME UP FOR ADJUDICATI ON (WHERE ONE OF US IS A PARTY) AND READ OUT THE CONTENTS OF PARA NOS. 45 TO 49. ACCORDING TO THE ITA NO.328/PUN/2014 DEMAG CRANES & COMPONENTS (INDIA) PVT. LTD., 3 CONTENTS OF PARA 49, THE PRINCIPLE OF PROPORTIONALI TY IS UPHELD TO BE RELEVANT WHEN THERE IS DATA RELATING TO CONTROLLED AND UNCONTROLL ED COST/SALE PRICE RELATABLE TO THE INTERNATIONAL TRANSACTIONS WITH THE AES. FURTH ER, BRINGING OUR ATTENTION TO THE ORDER FOR A.Y. 2007-08 IN ITA NO.1683/PN/2011 ORDER DATED 31-12-2012, LD. COUNSEL DEMONSTRATED THE FACT OF DECIDING THE ISSUE IN FAOVUR OF THE ASSESSEE RELYING ON THE ABOVE REFERRED ORDER OF THE TRIBUNAL FOR A.Y. 2006-07. CONTENTS OF PARA NOS. 14 AND 15 ARE RELEVANT (PAGE 456 OF THE P APER BOOK) REFERRING TO THE ORDER OF THE TRIBUNAL FOR A.Y. 2008-09 IN ITA NO.26 3/PN/2013 ORDER DATED 24-12- 2013, LD. COUNSEL SUBMITTED THAT THE ABOVE REFERRED ORDERS WERE FOLLOWED IN FAVOUR OF THE ASSESSEE. CONTENTS OF PARA NOS. 12 A ND 13 ARE RELEVANT. (PAGE 506 AND 507 OF THE PAPER BOOK). HE FURTHER SUBMITTED T HAT IN THE A.YRS. 2010-11 AND 2011-12 THE DRP ALLOWED THE GROUND IN FAVOUR OF THE ASSESSEE RELYING ON THE ABOVE REFERRED ORDERS OF THE TRIBUNAL FOR A.YRS. 20 06-07 TO 2008-09. LD. COUNSEL THEREFORE PRAYED FOR ALLOWING THE GROUND IN FAVOUR OF THE ASSESSEE. 7. AFTER HEARING BOTH THE SIDES AND PERUSING THE OR DERS OF THE TRIBUNAL FOR A.YRS. 2006-07 TO 2008-09, WE FIND IT RELEVANT TO R EFER THE RELEVANT PARAS FROM THE ORDER OF THE TRIBUNAL FOR A.Y. 2008-09. FOR TH E SAKE OF COMPLETENESS, WE REPRODUCE THE OPERATIONAL PARA NOS. 12 AND 13 HEREU NDER : 12. SO FAR AS GROUND NO.7 IS CONCERNED, WE FIND A N IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR T HE IMMEDIATELY PRECEDING ASSESSMENT YEAR. WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE FROM PARAS 7 TO 15 OF THE ORDER AND FOLLOWING THE DECISION OF THE T RIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 ALLOWED THE CLAIM OF THE ASSESSEE B Y OBSERVING AS UNDER: 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS ON THIS ASPECT AND FIND OURSELVES INCLINED TO UPHOLD THE PLEA OF THE A SSESSEE. OSTENSIBLY, THE OBJECTIVE OF DETERMINING THE ARMS LENGTH PRICE U/S 92C OF THE ACT IN RELATION TO AN INTERNATIONAL TRANSACTION CARRIED OU T BY AN ASSESSEE WITH ITS AE IS TO SUPPLANT THE PROVISIONS OF SECTION 92(1) O F THE ACT, WHICH PRESCRIBES THAT INCOME ARISING FROM AN INTERNATIONA L TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ALP, AND THE MEANING OF THE EXPRESSION INTERNATIONAL TRANSACTION IS CONTAINED IN SEC. 92 B OF THE ACT TO MEAN A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES. THEREFORE, IT IS A NATURAL COROLLARY THAT THE ADJUSTMENT ARISING AS A RESULT OF TRANSFER PRICING ANALYSIS IS TO BE CONFINED TO INTERNATIONAL TRANSAC TIONS UNDERTAKEN WITH THE AES ALONE AND NOT IN RELATION TO NON-AE TRANSAC TIONS. SIMILAR POINT AROSE IN ASSESSEES OWN CASE FOR THE A.Y. 2006-07 I N ITA NO. 120/PN/2011 (SUPRA) WHEREIN TRIBUNAL AFTER REFERRIN G TO SUB-CLAUSES (I) ITA NO.328/PUN/2014 DEMAG CRANES & COMPONENTS (INDIA) PVT. LTD., 4 AND (II) OF RULE 10B(1)(E) OF THE RULES AND CERTAIN PRECEDENTS BY WAY OF DECISIONS OF THE COORDINATE BENCHES, FINALLY ACCEPT ED THE PLEA OF THE ASSESSEE IN THE FOLLOWING WORDS: 49. ALL THESE CITED DECISIONS IN GENERAL AND THE D ECISION IN THE CASE OF M/S. JT. JIN ELECTRONICS I P. LTD. VS. ACIT 36 SOT 227, IN PARTICULAR ARE UNIFORM IN ASSERTING THAT THE TP ADJUSTMENTS ARE TO BE COMPUTED NOT CONSIDERING THE ENTITY LEVEL SALES. RATHER IT SHOUL D BE DONE IDEALLY CONSIDERING THE RELATABLE SALES DRAWING THE QUANTIT ATIVE RELATIONSHIP TO THE IMPORTS FROM THE AES, I.E. CONTROLLED COST. THE PRI NCIPLE OF PROPORTIONALITY IS RELEVANT HERE AND IT IS A SETTLED LAW IN THIS RE GARD. IN THE SITUATION LIKE THE ONE IN THE INSTANT CASE OF THE ASSESSEE, THERE IS DATA RELATING TO CONTROLLED AND UNCONTROLLED COST PARTICULARS. THIS UNDISPUTED DATA IS SUFFICE TO ARRIVE THE PROPORTIONATE SALES RELATABLE TO THE INTERNATIONAL TRANSACTION WITH THE AES I.E. CONTROLLED COST. ACCO RDINGLY, THE GROUND NO. 10 RELATING TO INCORRECT COMPUTATION OF TRANSFER PR ICING ADJUSTMENT TO THE MANUFACTURING ACTIVITY IS ALLOWED PRO TANTO. 15. IN VIEW OF AFORESAID DISCUSSION WE THEREFORE, H OLD THAT THE ASSESSEE HAS TO SUCCEED ON THE SAID PLEA AND AS A RESULT GRO UND NO. 7 RAISED BY THE ASSESSEE STANDS ALLOWED. 13. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHICH IN TURN HAS FOLLOWED THE ORDER FOR ASSESSMENT YEAR 2006-07, THE GROUND RAISED BY T HE ASSESSEE IS ALLOWED. 8. THE PRINCIPLE OF PROPORTIONALITY AGAINST ENTITY LEVEL BENCHMARKING IS APPROVED IN ASSESSEES OWN CASE IN VARIOUS YEARS. CONSIDERING THE SETTLED NATURE OF THE ISSUE BY THE ORDERS OF THE TRIBUNAL (SUPRA), WE ARE OF THE VIEW THAT GROUND NO.10 RAISED BY THE ASSESSEE IS REQUIRED TO BE ALLOWED IN FAVOUR OF THE ASSESSEE TO MAINTAIN CONSISTENCY AND JUDICIAL DISCI PLINE. ACCORDINGLY, GROUND NO.10 RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL RELATING TO LIMITED PU RPOSE OF ADJUDICATION OF GROUND NOS. 10 AND 13 IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 31 ST OCTOBER, 2017. ITA NO.328/PUN/2014 DEMAG CRANES & COMPONENTS (INDIA) PVT. LTD., 5 / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A)-IT/TP, PUNE CIT(A)-13, PUNE , , B BENCH PUNE; / GUARD FILE.