Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 9867 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-04-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2012-2013
Appeal Filed On
23-02-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 457 /P U N/20 1 7 / ASSESSMENT YEAR : 20 1 2 - 1 3 MAGNA AUTOMOTIVE INDIA PVT. LTD., (FORMERLY KNOWN AS MAGNA STEYR INDIA PVT. LTD.) 1 ST FLOOR, KAPIL ZENITH, SR. NO.55, HISSA NO.1, BAVDHAN KHURD, PUNE 4110 2 1 . / APPELLA NT PAN: AA FCS3693H VS. THE DY . COMMISSIONER OF INCOME TAX , CIRCLE 14, PUNE . / RESPONDENT ASSESSEE BY : S /S HRI VISPI PATEL AND SURESH DHOOT REVENUE BY : SHRI S.B. PRASAD , CIT / DATE OF HEARING : 26 . 0 3 . 201 9 / DATE OF PRONOUNCEMENT: 03 . 0 4 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF D CIT , CIRCLE - 14 , PUNE , DATED 26 . 12 .201 6 RELATING TO ASSESSMENT YEAR 20 1 2 - 1 3 PASSED UNDER SECTION 143(3) R .W.S. 144C(1 3 ) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUES RAISED IN THE PRESENT APPEAL ARE SQUARELY COVERED BY THE ORDERS OF TRIBUNAL STARTING FROM ASSESSMENT YEAR 2009 - 10 TO 2011 - 12. HE ITA NO. 45 7 /P U N/20 1 7 MAGNA AUTOMOTIVE INDIA PVT. LTD. 2 HOWEVER, POINTED OUT THAT GROUNDS OF APPEAL NO.1 TO 3 ARE NOT PRESSED. IN RESPECT OF GROUNDS OF APPEAL NO.5 TO 7, HE SUBMITTED THAT THE TRIBUNAL IN EARLIER YEARS HAD DIRECTED APPLICATION OF INTERNAL TNMM METHOD TO D ETERMINE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE AND ALSO DIRECTED THE ASSESSING OFFICER / TPO TO LOOK INTO OTHER ADJUSTMENTS TO CARVE OUT THE DIFFERENCES. HE SUBMITTED THAT IN CASE GROUNDS OF APPEAL NO.5 TO 7 AS DECIDE D BY THE TRIBUNAL IN EARLIER YEARS ARE ALLOWED, THEN GROUND OF APPEAL NO.4, AND GROUNDS OF APPEAL NO.8 TO 14 WOULD NOT SURVIVE. IN RESPECT OF GROUND OF APPEAL NO.15, HE POINTED OUT THAT THE ISSUE IS AGAINST ADJUSTMENT BEING MADE AT ENTITY LEVEL BASIS AND NOT ADJUSTMENT TO THE INTERNATIONAL TRANSACTIONS. IN THIS REGARD, HE PLACED RELIANCE ON THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011 - 12 WITH SPECIAL REFERENT TO PARA 8 OF THE SAID DECISION. 3. THE LEARNED DEPARTMENTAL REPRESENT ATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE GROUNDS OF APPEAL NO.1 TO 3 ARE NOT PRESSED AND HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 5. NOW, COMING T O THE ISSUE RAISED VIDE GROUNDS OF APPEAL NO.5 TO 7 WHICH READ AS UNDER: - 5. THE AO/TPO/DRP ERRED IN REJECTING THE INTERNAL TNMM ANALYSIS CONDUCTED BY THE APPELLANT ON THE BASIS OF AUDITED SEGMENTAL ACCOUNTS FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS , WITHOUT GIVING COGENT REASONS. 6. THE AO/TPO/DRP ERRED IN NOT CONSIDERING THE APPELLANTS CLAIM FOR DEDUCTION OF EXTRAORDINARY COST / NON - OPERATING EXPENSES LIKE UNDER - ITA NO. 45 7 /P U N/20 1 7 MAGNA AUTOMOTIVE INDIA PVT. LTD. 3 UTILIZATION OF MANPOWER CAPACITY AND INFRASTRUCTURE CAPACITY, ETC. WHILE COMPUTING TH E OPERATING MARGIN OF THE APPELLANT. 7. THE AO/TPO/DRP ERRED IN REJECTING THE AUDITED SEGMENTAL ACCOUNTS SUBMITTED BY THE APPELLANT FOR COMPUTING THE OPERATING MARGIN OF THE APPELLANT IN RELATION TO ITS TRANSACTIONS WITH ITS AES. 6. THE ASSESSEE WAS ENG AGE D IN RENDERING ENGINEERING AND DESIGN SERVICES IN AUTOMOBILE SECTOR TO THE FOREIGN, DOMESTIC AND TO NON - ASSOCIATED ENTERPRISES. IN ORDER TO BENCHMARK ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS OF PROVIDING ENGINEERING AND DESIGN SERVICES TO ITS A SSOCIATED ENTERPRISES, THE ASSESSEE FIRST SELECTED TNMM METHOD IN ITS TRANSFER PRICING STUDY REPORT. HOWEVER, DURING THE COURSE OF TP PROCEEDINGS, IT HAD REVISED ITS CLAIM TO INTERNAL CUP METHOD. SIMILAR WAS THE POSITION IN ASSESSMENT YEAR 2009 - 10 . THE TRIBUNAL WHILE DECIDING THE APPEAL IN ITA NO.314/PUN/2014, RELATING TO ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 05.06.2018 IN PARAS 14 TO 16 REMITTED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER/TPO TO DETERMINE ARM'S LENGTH PRICE OF INTERNATIONAL TRAN SACTIONS UNDERTAKEN BY THE ASSESSEE BY APPLYING MOST APPROPRIATE METHOD I.E. INTERNAL TNMM METHOD OF MAN - HOURLY RATES. THE ASSESSEE HAD ASKED FOR VARIOUS OTHER ADJUSTMENTS FOR CARVING OUT DIFFERENCES, WHICH WERE ALSO DIRECTED TO BE LOOKED OUT BY THE TPO F OR DETERMINING ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. THE RELEVANT FINDINGS OF TRIBUNAL ARE IN PARAS 14 TO 16 OF THE SAID ORDER , THE SAME ARE BEING REFERRED TO, BUT ARE NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. 7. THE ISSUE ARISING IN THE PRESENT APPEAL BEFORE US IS SIMILAR TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2009 - 10 (SUPRA) AND FOLLOWI NG THE SAME PARITY OF REASONING AS IN EARLIER YEARS, WE DIRECT THE ASSESSING OFFICER / TPO TO DETERMINE ARM'S LENGTH PRICE OF INTERNATIONAL T RANSACTIONS UNDERTAKEN BY THE ASSESSEE BY APPLYING INTERNAL TNMM METHOD OF MAN HOURLY RATES. THE TPO IS ITA NO. 45 7 /P U N/20 1 7 MAGNA AUTOMOTIVE INDIA PVT. LTD. 4 ALSO DIRECTED TO LOOK INTO THE CLAIM OF VARIOUS OTHER ADJUSTMENTS FOR CARVING OUT DIFFERENCES AND ALSO DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND DETERMINE THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. ACCORDINGLY, GROUNDS OF APPEAL NO.5 TO 7 ARE ALLOWED FOR STATISTICAL PURPOSES. AS POINTED OUT BY ASSESSEE IN WRITTEN SYNOPSIS AND ALSO A S ARGUED, GROUND OF APPEAL NO.4 AND GROUNDS OF APPEAL NO.8 TO 14 THUS, WOULD NOT SURVIVE. 8. NOW, COMING TO LAST ISSUE RAISED VIDE GROUND OF APPEAL NO.15, WHICH READS AS UNDER: - 15. THE AO/TPO/DRP ERRED IN MAKING ADJUSTMENT ON AN ENTITY LEVEL BASIS AND N OT RESTRICTING THE ADJUSTMENT TO THE ARM'S LENGTH PRICE ONLY TO THE INTERNATIONAL TRANSACTION. 9. THE ASSESSEE IS AGGRIEVED BY THE ORDERS OF AUTHORITIES BELOW IN MAKING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTIONS ON ENTITY LEVEL BASIS AND NOT RES TRICTING THE SAME TO INTERNATIONAL TRANSACTIONS. 10. THE TRIBUNAL IN ITA NO.352/PUN/2016 IN AN APPEAL FILED BY REVENUE RELATING TO ASSESSMENT YEAR 2011 - 12, VIDE ORDER DATED 12.10.2018 HAD DECIDED THE ISSUE IN TURN, RE LYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. ALSTOM PROJECTS INDIA LTD. IN INCOME TAX APPEAL NO.362 OF 2014, JUDGMENT DATED 14.09.2016, VIDE PARAS 6 TO 8 HAS HELD THAT ADJUSTMENTS, IF ANY, TO THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS IS TO BE RESTRICTED TO THE INTERNATIONAL TRANSACTIONS AND IS NOT TO BE MADE ON ENTITY LEVEL BASIS. 11. APPLYING THE SAID RATIO TO THE FACTS OF PRESENT CASE, WE DIRECT THE ASSESSING OFFICER / TPO TO RESTRICT THE ADDITION, IF ANY, ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNA TIONAL TRANSACTIONS TO INTERNATIONAL TRANSACTIONS ONLY AND ITA NO. 45 7 /P U N/20 1 7 MAGNA AUTOMOTIVE INDIA PVT. LTD. 5 NOT TO BE MADE ON ENTITY LEVEL BASIS . THE GROUND OF APPEAL NO.15 RAISED BY ASSESSEE IS THUS, ALLOWED. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, PARTLY ALLOWED. 1 2 . IN THE RESULT, THE AP PE AL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 3 RD DAY OF APRIL , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 3 RD APRIL , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DRP - 3 (WZ) , MUMBAI ; 4. THE CONCERNED CIT, PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE
