Spicer India Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 429/PUN/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7079 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 10-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: R D ONKAR
• Keywords: Transfer pricing
• Section: 143(3); 10B; 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , ! ' # , % & BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.429/PUN/2015 ! ( ( / ASSESSMENT YEAR : 2006-07 SPICER INDIA PRIVATE LIMITED, (FORMERLY KNOWN AS SPICER INDIA LIMITED), 29 MILESTONE, PUNE NASHIK HIGHWAY, VILLAGE : KURULI, TAL: KHED, PUNE 410 501. PAN NO.AAECS1869C. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE. . / RESPONDENT / APPELLANT BY : SHRI R.D. ONKAR / RESPONDENT BY : SHRI P.S. NAIK ) / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE ORDE R OF COMMISSIONER OF INCOME TAX (A) PUNE - 6 DATED 30.01.2015 FOR THE ASSESSMENT YEAR 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF DRIVE SHAFTS COMPONENTS, UNI VERSAL JOINTS AND VARIOUS COMPONENTS FOR TRANSMISSION SYSTEM. A SSESSEE / DATE OF HEARING : 06.02.2017 / DATE OF PRONOUNCEMENT: 15.02.2017 2 ITA NO.429/PUN/2015 AY.NO.2006-07 FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 29.11.2006 DECLARING TOTAL INCOME AT RS.NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3 ) VIDE ORDER DT.30.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS.NIL AFTER ALLOWING THE CLAIM DEDUCTION OF RS.13,37,07,947/- U/S 10B AND SETTING OF BROUGHT FORWARD UNABSORBED DEPREC IATION. THEREAFTER THE ASSESSMENT WAS SUBJECTED TO REVISION U/ S 263 BY LD. CIT, WHO HELD THAT ORDER PASSED BY AO U/S 143(3) WA S ERRONEOUS AND PREJUDICE TO THE INTEREST OF REVENUE ON ACCOUNT OF THE FACT THAT AO HAD FAILED TO APPLY HIS MIND WITH RESPECT TO THE APPLICATION OF PROVISIONS OF SEC.10B(7) R.W.S 80IA8 AND 80IA(10 ). LD. CIT THEREFORE VIDE ORDER DT.25.03.2013 PASSED U/S 26 3 OF THE ACT DIRECTED THE AO TO RESTRICT THE DEDUCTION U/S 10B AS PER THE DIRECTIONS CONTAINED UNDER THE ORDER. PURSUANT TO THE DIRECTIONS OF LD. CIT, ORDER WAS REFRAMED U/S 143(3) R.W.S. 263 BY OR DER DT.25.03.2013 AND THE TOTAL INCOME BEFORE SETTING OF BROU GHT FORWARD LOSS WAS DETERMINED AT RS.26,72,54,965/-. AGGRIEVED BY THE ORDER OF LD. CIT, ASSESSEE IS NOW IN APPEAL BEFORE US. 1. THE LEARNED CIT A ERRED IN CURTAILING THE DEDUC TION CLAIMED BY THE APPELLANT RS . 6.55 CRORES IN RESPECT OF PROFITS DERIVED F R OM ITS EXPORT ORIENTED UNDERTAKING (EOU) ELIGIBLE FOR DEDUCTION UNDER SECTION 10B OF THE INC OME TAX ACT BY RS . 2.33 CRORES BY REFERRING TO AND IN EFFECT CONF I RMING INVOCATION OF THE PROVISIONS OF SECTION 10B ( 7) READ WITH SECTION 80 IA (10) OF THE INCOME TAX ACT , 1961 BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX CI R CLE 10 PUNE (A.O . ) 2. THE LEARNED CIT A IN CURTAIL I NG THE DEDUCTION AS AFORESAID ERRED IN REFERRING TO THE DIFFERENCE BETW EEN THE INDICATIVE PROFIT MARK UP GIVEN BY OUTSIDE CONSULTA NT ON THE BASIS OF AVERAGE PROFIT MARK UP EARNED BY COMPANIES OUTSIDE INDIA AND THE ACTUAL PROFIT MARK UP EARNED BY THE APPELLANT IN EXPORTS OF COMPONENTS FROM THE EOU TO ITS ASSOCIATED ENTERPRISE (AE) THOUGH THE SAID ACTUAL P ROFIT MARK UP WAS CONSISTENT WITH ARM ' S LENGTH PRICE (ALP) AND THEREFORE ACCEPTED BY THE TRANSFER PRICING OFFICER (TPO) IN THE TP AUDIT TO BE AT ALP. THE LEARNED CIT A ERRED IN DRAWING AN ADVERSE INFERENCE FROM THE AFORESAID 3 ITA NO.429/PUN/2015 AY.NO.2006-07 COMPARISON THAT THE PROFIT EARNED BY THE APPELLANT WAS IN EXCESS OF ORDINARY PROFIT. 3. THE LEARNED CIT A ERRED IN LAW BY CONFIRMING ADO PTION OF THE INDICATIVE ARITHMETIC MEAN OF PROFIT MARK UP EA RNED BY FOREIGN COMPARABLES OUTSIDE INDIA AS BENCHMARK OF ORDINARY PROFIT AND ADOPTION OF THAT MEASURE TO BRI NG TO CHARGE PROFIT EARNED BY THE APPELLANT AS MORE THAN ORDINARY PROFIT BY INVOKING THE PROVISIONS OF SECTI ON 10 B (7) READ WITH SECTION 80 IA (10) OF THE INCOME TAX ACT 4. THE LEARNED CIT A FAILED TO APPRECIATE THAT THE PRO VISIONS OF SECTION 10B (7) READ WITH SECTION 80IA (10) COUL D ONLY BE INVOKED WHERE BOTH THE PARTIES TO THE TRANSACTION W ERE TAXABLE IN INDIA AND ARRANGEMENT BETWEEN THE TWO PA RTIES WAS SUCH THAT IT CAUSED TAX EROSION IN INDIA AND NO T OTHERWISE. 5. THE LEARNED CIT A ER R ED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD EARNED AND OFFERED TO TAX S I M I LAR PROF I T MARK UPS CONS I STENTLY I N THE PRECED I NG AS WELL AS SUCCEEDING YEAR/S INCLUDING THE PRECED I NG YEAR/S WHEREIN EOU WAS NOT FORMED AND SET UP. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT AGAINST THE ORDER PASSED BY LD. CIT U/S 263 OF THE ACT, ASSESSEE HAD PREFERRED APPEAL BEFORE THE TRIBUNAL. HE SUBMITTED THAT THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS SET ASIDE THE ORDER P ASSED BY LD. CIT. HE POINTED TO THE RELEVANT ORDER OF ITAT, WHERE IN THE ORDER OF LD. CIT PASSED U/S 263 HAS BEEN SET ASIDE. HE THEREFORE SUBMITTED THAT SINCE THE ORDER PASSED U/S 263 ITSELF HAS BEEN SET ASIDE, THE IMPUGNED CONSEQUENTIAL ORDER PASSED BY THE AO U/S 143(3) R.W.S. 263 HAS BECOME REDUNDANT AND THEREFORE RE QUIRES NO ADJUDICATION. LD.D.R. DID NOT CONTROVERT THE SUBMISSIONS MAD E BY LD.A.R. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, ASSESSEE HAD APPEALED AGAINST THE ORDER PASSED BY LD. CIT U/S 263 OF THE ACT. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DT.08.07.2015 HAS SET ASIDE THE ORDER OF LD. CIT PASSED U/S 263. 4 ITA NO.429/PUN/2015 AY.NO.2006-07 SINCE THE ORDER PASSED U/S 263 ITSELF HAS BEEN SET ASID E, THE CONSEQUENTIAL ORDER PASSED U/S 143(3) R.W.S. 263 HAS NO S TANDING AND REQUIRES NO ADJUDICATION. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE ORDER OF THE CO- ORDINATE BENCH OF THE TRIBUNAL OF ITAT SETTING ASIDE THE O RDER PASSED BY LD. CIT U/S 263 OF THE ACT HAS BEEN SET ASIDE BY HIGHER JUDICIAL FORUM. IN VIEW OF THE AFORESAID FACTS, WE ARE OF TH E VIEW THAT THE GROUNDS RAISED BY THE ASSESSEE IN THE PRESEN T APPEAL HAVE BEEN RENDERED ACADEMIC AND THE APPEAL OF ASSESSEE HAS BECOME INFRUCTUOUS. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED AS INFRUCTUOUS. ORDER PRONOUNCED ON THE 15 TH DAY OF FEBRUARY, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER % / ACCOUNTANT MEMBER PUNE; ! DATED : 15 TH , FEBRUARY, 2017. YAMINI ) * +',- .-' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. THE CIT-(A)-6, PUNE THE. CIT-V, PUNE. #$% & 1 &'(, * '(, / DR, ITAT, B PUNE; %+, - / GUARD FILE. )! / BY ORDER, //// // TRUE COPY // T // // TRUE COPY // //TRUE COPY// . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.