The ITO, Ward-1(4), Baroda V. Kawin Interactive Pvt.Ltd., Baroda

ITA 4474/AHD/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50640 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-08-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 20-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Difference of opinion; Assessment record

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'.#$%, '& ' ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NOS.4474 & 4475/AHD/2007 ( ) * ) * ) * ) * / / / / ASSESSMENT YEARS : 2002-03 & 2003-04 ) THE ITO WARD-1(4) BARODA ) ) ) ) / VS. KAWIN INTERACTIVE PVT.LTD. 53-A KUNJ SOCIETY ALKAPURI BARODA 390 005 + '& ./,- ./ PAN/GIR NO. : AABCK 9626 Q ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ' / APPELLANT BY : SHRI O.P.BATHEJA, SR. D.R. /0+. 2 1 ' / RESPONDENT BY : SHRI SUNIL TALATI )3 2 & / / / / DATE OF HEARING : 23/09/2011 4$* 2 & / DATE OF PRONOUNCEMENT : 23/09/2011 '5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : SINCE THERE WAS A DIFFERENCE OF OPINION BETWEEN T HE LD.MEMBERS CONSTITUTING D BENCH OF I.T.A.T. AHMEDABAD WITH R EGARD TO THE FOLLOWING ISSUES, THE MATTER WAS REFERRED TO THIRD MEMBER U/S.255(4) OF I.T. ACT, 1961 FOR HIS OPINION AS PROPOSED BY LD.JM . 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHE THER THE COST PLUS METHOD AS ADOPTED BY THE ASSESSEE WAS THE CORR ECT METHOD TO ITA NOS.4474 & 4475/AHD/2007 ASST.YEARS 2002-03 & 2003-04 - 2 - DETERMINE THE ARMS LENGTH PRICE OF THE IMPUGNED S ERVICE CHARGES RECEIVED FROM THE ASSOCIATE ENTERPRISES? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WH ETHER THE ASSESSEE HAS FULFILLED ITS STATUTORY OBLIGATION AS CONTEMPLATED IN THE STATUE AND DISCHARGED ITS ONUS IN DETERMINING T HE FAIR ARMS LENGTH PRICE OF THE IMPUGNED TRANSACTION? QUESTION BY LD.AM WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS MADE BY THE AO U/S.92C(3) OF THE ACT IN THE AYS 2002-03 & 2003-04, WITHOUT RECORDING ANY FINDINGS ON THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSE SSEE AND IGNORING THE PARAMETERS SET OUT IN THE RELEVANT RUL ES 10B(1) & 10C(2) OF THE IT RULES, 1962 AS ALSO PRINCIPLES OF NATURAL JUSTICE & MANDATE PROVISIONS OF SEC. 250(6) OF THE ACT, EVEN WHEN THERE IS NOTHING TO SUGGEST THAT THE ASSESSEE DISCHARGED ITS ONUS NOR SUBMITTED RELEVANT INPUTS FOR DETERMINING ALP VIZ. DATA OF COMPARABLE CONTROLLED OR UNCONTROLLED TRANSACTIONS CARRIED IN SAME OR SIMILAR CIRCUMSTANCES AND FAR ANALYSIS 2. THE RESPECTED THIRD MEMBER HAS RESOLVED THIS CON TROVERSY IN THE FOLLOWING MANNER AND ALSO FAMED THE QUESTION AS UND ER:- 3. AT THE TIME OF HEARING BEFORE ME, IT WAS STATE D BY THE LEARNED COUNSEL THAT VARIOUS QUESTIONS REFERRED BY THE LEAR NED JM AND LEARNED AM NEED NOT TO BE DECIDED. HE PROPOSED THA T THE FOLLOWING QUESTION SHOULD BE ADJUDICATED BY THE THI RD MEMBER, WHICH WILL RESOLVE THE ENTIRE CONTROVERSY. 1. WHETHER THE APPEAL OF THE REVENUE IS REQUIRED TO BE DISMISSED AS HELD BY THE LEARNED JM OR WHETHER THE MATTER ITA NOS.4474 & 4475/AHD/2007 ASST.YEARS 2002-03 & 2003-04 - 3 - SHOULD BE RESTORED TO THE ASSESSING OFFICER AS PROP OSED BY THE LEARNED AM. 4. THE LEARNED DR ALSO FAIRLY AGREED THAT IF THE A BOVE QUESTION AS PROPOSED BY THE LEARNED COUNSEL IS ANSWERED, THEN I T WILL BE SUFFICIENT TO RESOLVE THE ISSUE. 5. I HAVE CAREFULLY CONSIDERED SUBMISSIONS OF BOTH THE SIDES WITH REGARD TO MODIFICATION OF THE POINT OF DIFFERENCE. SECTION 255(4) UNDER WHICH THE POINT OF DIFFERENCE IS REFERRED TO THE THIRD MEMBER READS AS UNDER: 255. PROCEDURE OF APPELLATE TRIBUNAL .. . (4) IF THE MEMBERS OF A BENCH DIFFER IN OPINION ON ANY POINT, THE POINT SHALL BE DECIDED ACCORDING TO THE OPINION OF THE MAJORITY, IF THERE IS A MAJORITY, BUT IF THE MEMBER S ARE EQUALLY DIVIDED, THEY SHALL STATE THE POINT OR POIN TS ON WHICH THEY DIFFER, AND THE CASE SHALL BE REFERRED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL FOR HEARING ON SUCH POINT OR POINTS BY ONE OR MORE OF THE OTHER MEMBERS OF THE APPELLAT E TRIBUNAL, AND SUCH POINT OR POINTS SHALL BE DECIDED ACCORDING TO THE OPINION OF THE MAJORITY OF THE MEM BERS OF THE APPELLATE TRIBUNAL WHO HAVE HEARD THE CASE, INC LUDING THOSE WHO FIRST HEARD IT. FROM THE ABOVE IT IS EVIDENT THAT WHEN THE MEMBERS OF A BENCH DIFFER ON ANY POINT OF DIFFERENCE AND THEY ARE EQUA LLY DIVIDED OVER THE POINT OF DIFFERENCE, THE POINT OF DIFFERENCE IS REFERRED TO OTHER MEMBER SO THAT THE POINT CAN BE DECIDED ACCORDING T O THE OPINION OF THE MAJORITY MEMBERS INCLUDING THE THIRD MEMBER. THUS, THE QUESTION REFERRED TO SHOULD BE OF SUCH NATURE THAT UPON ANSWERING OF SUCH QUESTIONS, THERE WOULD BE MAJORITY OPINION OF THE MEMBERS SO AS TO ADJUDICATE THE APPEAL. IN THE CASE UNDER CONSIDERATION BEFORE ME, THE FACTS ARE THAT THE AO HAD MADE CERT AIN ADDITIONS BY WAY OF TRANSFER PRICING ADJUSTMENTS WHICH WAS DELET ED BY THE CIT(A). ON APPEAL, THE LEARNED JM UPHELD THE ORDER OF THE CIT(A) THEREBY DISMISSING THE APPEALS OF THE REVENUE. WH ILE THE LEARNED ITA NOS.4474 & 4475/AHD/2007 ASST.YEARS 2002-03 & 2003-04 - 4 - AM PROPOSED TO SET ASIDE THE MATTER BACK TO THE FIL E OF THE AO. THEREFORE, THE MAIN CONTROVERSY IN THE ORDER OF BOT H THE MEMBERS IS WHETHER THE REVENUES APPEAL IS TO BE DISMISSED OR WHETHER THE MATTER IS REQUIRED TO BE SET ASIDE TO THE FILE OF T HE AO. ON THIS PARAMETER, IN MY OPINION, THE QUESTION PROPOSED BY THE ASSESSEES COUNSEL, WHICH IS ALSO AGREED UPON BY THE LEARNED D R IS THE PROPER QUESTION TO BE ANSWERED BY THE THIRD MEMBER. BECAUSE, ONCE THE QUESTION AS PROPOSED BY THE LEARNED COUNSE L IS ANSWERED, THE APPEAL CAN BE DECIDED AS PER THE MAJORITY VIEW. IN VIEW OF THE ABOVE, I ACCEPT THE MODIFIED QUESTION AS PROPOSED B Y THE LEARNED COUNSEL FOR THE ASSESSEE AND ALSO AGREED UPON BY TH E LEARNED DR AND PROCEED TO ANSWER THE SAME. 3. HONBLE VICE PRESIDENT (AZ), AS THIRD MEMBER IN THESE CASES, AFTER HEARING THE PARTIES AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, CONCURRED WITH THE PROPOSED ORDER OF THE LD.J.M., VIDE ORDER DATED 12/08/2011 FOR ASSESSMENT YEARS 2002-03 AND 2 003-04, BY OBSERVING AS UNDER:- 13. COMING BACK TO THE MERIT OF ADDITION BY THE A O IS CONCERNED, THE CIT(A) DELETED THE ADDITION ONLY ON THE BASIS OF REMAND REPORT OF THE AO, IN WHICH HE FAIRLY ADMITTE D THAT THERE WAS NO BASIS ON THE ASSESSMENT RECORD HOW THE AO H AS DETERMINED ALP. THE AO ALSO ADMITTED THAT THE T HREE CASES RELIED UPON IN THE ASSESSMENT ORDER ARE NOT COMPARA BLE. ON THESE FACTS, THE CIT(A) DELETED THE ADDITION. AT THE TIM E OF HEARING BEFORE ME, REVENUE COULD NOT JUSTIFY HOW THE CIT(A) WAS WRONG IN DELETING THE ADDITION. IN VIEW OF THE ABOVE FACTS, I AGREE WITH THE LEARNED JM THAT THE REVENUES APPEAL IS REQUIRED TO BE DISMISSED. 14. THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE APPEAL FOR A.Y. 2003-2004 ARE IDENTICAL, AND THEREFORE, IN THIS YEA R ALSO, I AM OF THE OPINION THAT THE REVENUES APPEAL IS REQUIRED T O BE DISMISSED AS HELD BY THE LEARNED JM. ITA NOS.4474 & 4475/AHD/2007 ASST.YEARS 2002-03 & 2003-04 - 5 - 15. THE MATTER WILL NO GO BACK TO THE DIVISION BEN CH FOR PASSING ORDER IN ACCORDANCE WITH MAJORITY VIEW. THEREFORE, IN ACCORDANCE WITH THE MAJORITY VIEW, BO TH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 23/09/2011. SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 23/ 09 /2011 6..), .)../ T.C. NAIR, SR. PS '5 '5 '5 '5 2 /7 8'7* 2 /7 8'7* 2 /7 8'7* 2 /7 8'7*/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-I, BARODA 5. 7<# /) , , / DR, ITAT, AHMEDABAD 6. # =3 / GUARD FILE. '5) '5) '5) '5) / BY ORDER, 07 / //TRUE COPY// > >> >/ // / , , , , ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION..23/09/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/09/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.26.9.11. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 26.9.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.9.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER