AMD Research & Development Centre India P. Ltd., Hyd, Hyderabad V. DCIT, Circle-1(1), Hyd, Hyderabad

ITA 372/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6327 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S RAGHUNATHAN
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.372/HYD/2016 ASSESSMENT YEAR 2011-2012 AMD RESEARCH AND DEVELOPMENT CENTRE INDIA P. LTD., HYDERABAD-500081. PAN AABCC3447R VS. DCIT, CIRCLE-1(1), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. S. RAGHUNATHAN FOR REVENUE : MR. K.J. RAO DATE OF HEARING : 11.08.2016 DATE OF PRONOUNCEMENT : 11.08.2016 ORDER PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE-COMPANY IS DIRECTED AGAINST THE ORDER PASSED BY THE DCIT, CIRCLE-1(1), HY DERABAD AND IT PERTAINS TO THE A.Y. 2011-2012. 2. ADMITTEDLY THERE ARE INTERNATIONAL TRANSACTIONS WITH THE A.ES AND THEREFORE, THE CASE WAS REFERRED TO THE TPO WITH THE PRIOR APPROVAL OF THE CIT FOR MAKING APPROPRIATE ADJU STMENTS UNDER SECTION 92CA OF THE ACT. THE TPO PASSED AN ORDER UNDER SECTION 92CA(3) OF THE I.T. ACT, 1961 ON 31.12.2014 WH ICH WAS FORWARDED TO THE ASSESSEE. THE TPO, IN HIS ORDER, REC OMMENDED FOR AN ADJUSTMENT OF RS.8.77 CRORES UNDER SECTION 92CA OF THE ACT. ACCORDINGLY, A DRAFT ASSESSMENT ORDER WAS PASSED AND THE SAME WAS FORWARDED TO THE ASSESSEE. ON A PETITION FILED BY THE 2 ITA.NO.372/HYD/2016 AMD RESEARCH & DEVELOPMENT CENTRE INDIA P. LTD., HYDERABAD. ASSESSEE BEFORE THE DRP, RAISING OBJECTIONS AGAINST THE DRAFT ORDER, THE DRP ISSUED DIRECTIONS TO THE ASSESSING OFFI CER TO EXCLUDE CERTAIN COMPANIES FROM THE SET OF COMPARABLES. THE DRP HAS ALSO DIRECTED THE ASSESSING OFFICER TO CONSIDER THE MARGIN IN THE CASE OF THE ASSESSEE AS WELL AS COMPARABLES AFTER EXCLUDING DEPRECIATION. THE OPERATING COST OF THE ASSESSEE AFTE R EXCLUDING DEPRECIATION WORKED OUT AT RS.116,18,73,142. THE ADJUS TED ARMS LENGTH MARGIN WAS 26.13%. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSES SEE HAS RAISED AS MANY AS 08 GROUNDS OF APPEAL. AT THE TIME OF HEARIN G LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, SUBMITTE D THAT THEY ARE PRESSING ONLY GROUND NO.2 AND OTHER GROUNDS ARE NOT PRESSED. GROUND NO.2 READS AS UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN CONTRARY TO LAW, THE LD. A.O. ERRED IN NOT APPRECIATING THE FACT, THAT THE ARMS LENGTH PRICE (ALP) SO DETERMINED BY THE LD. A.O, FALLS WITHIN THE AMBIT OF FIVE PERCENT RANGE OF THE VALUE OF THE INTERNATIONAL TRANSACTION AS PRESCRIBED UNDER PROVI SO TO SECTION 92C(2) OF THE ACT AND THEREBY MAKING TRANSF ER PRICING (TP) ADJUSTMENT OF INR 4,15,82,463/- IN T HE ORDER OF THE LD. A.O, WHICH IS ERRONEOUS TO THE EXT ENT OF NOT COMPLETELY INCORPORATING THE BINDING DIRECTIONS OF THE HONBLE DRP WHILE FINALISING THE ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT. 3 ITA.NO.372/HYD/2016 AMD RESEARCH & DEVELOPMENT CENTRE INDIA P. LTD., HYDERABAD. 4. LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT, CENTRAL-III VS. M/S. FIRESTONE INTERNATIONAL (P) LTD., ITA.NO.1354 OF 2013 DATED 15 TH JUNE, 2015 AS WELL AS THE DECISION OF ITAT B BENCH, HYDERABAD IN ASSESSEES OWN CASE FOR THE A.Y. 2010-2011 (ITA.NO.275/HYD/2015 DATED 20.11.2 015) WHEREIN UNDER IDENTICAL CIRCUMSTANCES THE BENCH HELD TH AT IT IS THE DUTY OF THE OFFICERS CONCERNED TO APPLY SAFE HARB OUR RULE AND WHEREVER IT IS WITHIN THE TOLERANCE LEVEL OF 5% THE BEN EFIT HAS TO BE PASSED ON TO THE ASSESSEE AND ALP HAS TO BE DETERM INED ACCORDINGLY. 5. THE LD. D.R. FAIRLY ADMITTED THAT THE ISSUE STANDS COVERED BY THE AFORECITED DECISIONS. 6. HAVING REGARD TO THE RIVAL CONTENTIONS, WE ALLOW GROUND NO.2 OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO CONSIDER THE ELIGIBILITY OF TOLERANCE LEVEL OF 5% WH ILE DETERMINING THE ALP AND TO RE-DETERMINE THE TAXABLE INCOME ACCORD INGLY. SINCE NO ARGUMENTS WERE ADVANCED ON OTHER GROUNDS, TH EY ARE DISMISSED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.0 8.2016. SD/- SD/- (B. RAMAKOTAIAH) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT HYDERABAD, DATED 11 TH AUGUST, 2016 VBP/- 4 ITA.NO.372/HYD/2016 AMD RESEARCH & DEVELOPMENT CENTRE INDIA P. LTD., HYDERABAD. COPY TO 1. AMD RESEARCH AND DEVELOPMENT CENTRE INDIA P. LTD., 8 TH FLOOR, BUILDING NO.11, RAHEJA I.T. PARK-MINDSPACE, SURVEY NO.64, APIIC SOFTWARE LAYOUT, MADHAPUR, HYDERABAD 500081. 2. THE DCIT, CIRCLE-1(1), AAYAKAR BHAVAN, HYDERABAD . 3. DRP-1, G-16, GROUND FLOOR, CENTRAL REVENUE BUILDINGS , QUEENS ROAD, BENGALURU 560 001, 4. PR. CIT-1, HYDERABAD. 5. DCIT (TPO)-1, 3 RD FLOOR, D BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 6. D.R. ITAT B BENCH, HYDERABAD. 7. GUARD FILE