Deputy Commissioner of Income-tax, V. Amphenol Internconnect (I) P. Ltd., Pune

ITA 477/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9541 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O A MAO
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

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. 477/PUN/2015 / ASSESSMENT YEAR : 2010-11 DCIT, CIRCLE - 8, PUNE . / APPELLANT V/S AMPHENOL INTERCONNECT (I) PVT. LTD., 105, INDUSTRIAL ESTATE, BHOSARI, PUNE 26 PAN : AACCA3419J . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK & SHRI MAHAVIR J AIN REVENUE BY : SHRI O.A. MAO / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE AO/DRP FOR THE ASSESSMENT YEAR 2010-11. 2. THE GROUND, AS RAISED BY THE REVENUE READS AS UN DER : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HONBLE DRP WAS JUSTIFIED IN REJECTING THE CUP METHOD ADOPTED B Y TPO, WHICH IS A DIRECT METHOD FOR WORKING OUT THE ARMS LENGTH OF T HE INTERNATIONAL TRANSACTION AND UNCONTROLLED TRANSACTION; PROVIDES FOR INSTANT COMPARISON OF THE PRICES OF THE PRODUCTS/SERVICES; AND WHEN THE OECD GUIDELINES IN PARA 1.70 CLEARLY SUGGESTS THAT AN ATTEMPT SHOULD BE MADE TO REACH A REASONABLE ACCOMMODATION KEEPING IN MIND THE IMPRECISION OF THE VARIOUS METHODS AND THE PREFEREN CE FOR HIGHER DEGREES OF COMPARABILITY AND A MORE DIRECT AND CLOS ER RELATIONSHIP TO THE TRANSACTION? / DATE OF HEARING :09.05.2017 / DATE OF PRONOUNCEMENT: 12.05.2017 2 ITA NO.477/PUN/2015 3. BRIEFLY STATED, THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY, AN INDIAN SUBSIDIARY OF AMPHENOL CORPORATION, DESIGNS, MANUFACTURES AND MARKETS ELECTRICAL, ELECTRONIC, FIBER OPTIC CONNECT ORS, INTERCONNECTOR SYSTEMS AND COAXIAL AND FLAT-RIBBON CABLES ETC. THE ASSESSE E FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-11 ON 14.10.2010 DECLARING TOTAL INCOME OF RS.51,16,29,426/-. AS THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS, A REFERENCE U/S. 92CA(1) OF THE INCOM E TAX ACT WAS MADE TO THE TPO FOR DETERMINATION OF ARM'S LENGTH PRICE. 4. DURING THE COURSE OF TRANSFER PRICING ASSESSMENT PROCEEDINGS, THE TPO OBSERVED FROM THE DETAILS IN RESPECT OF EXPORT OF FINISHED GOODS THAT THE ASSESSEE HAD CHARGED LESS FROM THE ASSOCIATED ENTER PRISES FOR THE SAME PRODUCTS AS COMPARED TO THE PRICE CHARGED FROM THIR D PARTIES. ACCORDINGLY, THE TPO APPLIED INTERNAL CUP (COMPARABLE UNCONTROLL ED PRICE) AND MADE ADJUSTMENT OF RS.27,78,020/ - ON THIS ACCOUNT. SIMI LARLY, IN RESPECT OF IMPORT OF RAW MATERIALS, THE TPO NOTED THAT THE ASSOCIATED ENTERPRISES WERE PAID AT THE HIGHER RATE THAN THE PRICE PAID TO THIRD PARTIE S IN CASE OF IMPORT OF SOME OF THE SAME PRODUCTS. ACCORDINGLY, THE TPO APPLIED INTERNAL CUP AND MADE ADJUSTMENT OF RS.17,43,232/- ON THIS ACCOUNT ALSO. THUS, THE TRANSFER PRICING OFFICER PASSED ORDER U/S.92CA(3) OF THE INCOME TAX ACT, 1961 DATED 15-01-2014 WHEREIN AN ADJUSTMENT OF RS.45,21,252/- WAS MADE TO THE VALUE OF INTERNATIONAL TRANSACTIONS OF THE ASSESSEE COMPA NY IN RESPECT OF THE INTERNATIONAL TRANSACTIONS RELATING TO EXPORT O F FINISHED PRODUCTS OF ASSOCIATED ENTERPRISES. IN THE LIGHT OF THE PROVIS IONS OF SECTION 92CA(3) OF THE ACT, THE ASSESSING OFFICER PASSED A DRAFT ORDER U/S. 143(3) R.W.S 144C(1). 5. THE ASSESSEE FILED OBJECTION BEFORE THE DRP AND RELIED HEAVILY ON THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ITA NOS .1486/PN/2010, 3 ITA NO.477/PUN/2015 1548/PN/2011 & 142/PN/2013 ORDER DATED 30-05-2014 F OR THE ASSESSMENT YEARS 2006-07 TO 2008-09. ASSESSEE ALLEGED THAT TH E COMPARABLES ADOPTED BY THE TPO WITHOUT PROVIDING ADJUSTMENTS TO VARIOUS FACTORS ARE UNSUSTAINABLE. ADOPTING OF CUP METHOD AS APPROPRIA TE ONE WAS ALSO CONTESTED BEFORE THE DRP. CONSIDERING THE ORDER OF THE TRIBUNAL, THE DRP GRANTED RELIEF TO THE ASSESSEE VIDE ITS ORDER DATED 24-12-2014. ACCORDINGLY, THE AO PASSED THE FINAL ORDER DATED 18-02-2015. 6. AGGRIEVED BY THE ABOVE RELIEF GRANTED BY THE DRP , THE REVENUE IS IN APPEAL BEFORE US. 7. THE REVENUE RAISED THE ABOVE REFERRED GROUND STA TING THAT CUP METHOD IS REQUIRED TO BE ADOPTED IN PLACE OF TNMM M ETHOD CHOSEN BY THE ASSESSEE. IT IS THE OPINION OF THE REVENUE THAT WH EN DIRECT COMPARABILITY IS AVAILABLE BY VIRTUE OF COMPARABLE CASES, THE CUP ME THOD IS FOUND TO BE MOST APPROPRIATE METHOD. 8. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE DRPS ORDER DATED 24-12-2014 AND READ OUT TH E CONTENTS OF PARA NOS. 3.15 TO 3.17 WHICH READ AS UNDER : 3.15 THE ASSESSEE SUBMITTED THAT THE TPO ALSO DISR EGARDED AND IGNORED TRIBUNAL RULINGS WHICH HAVE LAID DOWN P RINCIPLES THAT THE TRANSACTIONS WILL NOT BE CONSIDERED AS SIM ILAR FOR THE PURPOSE OF BENCHMARKING TRANSACTIONS UNDER CUP METH OD MERELY ON ACCOUNT OF SIMILAR PRODUCTS SOLD TO AES T O THIRD PARTIES. THESE RULINGS ARE AS UNDER: INTERVET INDIA PRIVATE LIMITED VS ACIT (ITA NO.3185 /MUM/2006 ACIT VS. DUFON LABORATIORIES (2010-TII-26-ITAT-MUM- TP) RANBAXY LABORATORIES LTD. VS. ASSTT. CIT (208-TII-0 1-ITAT- DEL-TP) GHARDA CHEMICALS LTD. VS. THE DEPUTY COMMISSIONER O F INCOME TAX (ITA NO.2242/MUM/06) SCHUTZ DISHMAN BIOTECH PVT. LTD. VS. DCIT (ITA NO.3 590 & 3751/AHD/2007) 4 ITA NO.477/PUN/2015 DRESSER-RAND INDIA PVT. LTD. VS. ACIT (ITA NO.8753/ MUM/2010 AY 2006-07) AZTEC SOFTWARE AND TECHNOLOGY (ITAT BANGALORE) AND MSS INDIA PVT. LTD., (ITAT, PUNE). DCIT VS. QUARK SYSTEMS (P) LTD. (ITAT NO.100/CHD/20 09 AY 2004-05) AND QUARK SYSTEMS (P) LTD. ITO (ITA NO.115/CHD/2009 - AY 2004-05) 3.16 THE ASSESSEE HAS SUBMITTED THAT FOR AY 2006-07 , 2007-08 AND 2008-09, ON SIMILAR FACTS, THE THEN DRP HAD REJECTE D THE OBJECTIONS OF THE ASSESSEE AND UPHELD THE ORDER OF THE TPO. THE A SSESSEE PREFERRED APPEAL BEFORE THE HON'BLE ITAT,PUNE. THE ITAT, PUNE VIDE ITS ORDER DATED 30 TH MAY, 2014 HAS UPHELD THE STAND OF THE ASSESSE AND ALLOWED ITS APPEAL AGAINST THE ORDERS OF THE DRP. FINDINGS : 3.17 WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSE SSEE AS WELL AS THE FINDINGS AND ORDER OF THE TPO. WE HAVE ALSO CON SIDERED THE ORDER DATED 30 TH MAY, 2014 OF THE ITAT, PUNE FOR THE EARLIER ASSESSM ENT YEARS 2006-07, 2007-08 AND 2008-09. IN THE EARLIER ASSESSMENT YEARS, THE ISSUES INVOLVED BEFORE THE ITAT WERE ADJUSTMENT S MADE BY THE TPO TO SOME OF THE TRANSACTIONS IN RESPECT OF EXPOR TS AND IMPORTS AND PAYMENT OF COMMISSION BY THE ASSESSEE TO ITS AE. TH E ITAT HAS DEALT WITH ALL THE THREE ISSUES AND GIVEN ITS FINDING IN FAVOUR OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED BEFORE US A NO TE ON THE ITAT ORDER AND POINTS OF SIMILARITY WITH THE FACTS OF TH E ASSESSEE'S CASE IN THE CURRENT AY 2010-11. UPON GOING THROUGH THE SAME , WE FIND THAT THE ISSUES INVOLVED BEFORE THE DRP IN THE CURRENT A SSESSMENT YEAR RELATE TO ADJUSTMENTS MADE BY THE TPO IN RELATION T O SOME OF THE EXPORTS AND IMPORTS ON REASONING SIMILAR TO THE EAR LIER ASSESSMENT YEARS WHICH HAVE NOW BEEN ADJUDICATED BY THE ITAT, PUNE IN FAVOUR OF THE ASSESSEE. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE RA TIO LAID DOWN BY THE HONBLE ITAT, PUNE IN THE ASSESSEES OWN CASE FOR T HE EARLIER ASSESSMENT YEARS, THE ASSESSEES OBJECTION IS ALLOW ED. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED NOT TO MAKE ANY A DJUSTMENT WITH REGARD TO THE EXPORT OF FINISHED GOODS AND IMPORT O F RAW MATERIALS. 9. FROM THE ABOVE, WE FIND IN PRINCIPLE THE FACTS A RE THE SAME. IN THOSE YEARS TOO, TRANSFER PRICING ADJUSTMENTS WERE MADE T O THE TRANSACTIONS WITH ASSOCIATED ENTERPRISES WITH REFERENCE TO THE EXPORT OF GOODS AND IMPORT OF THE RAW MATERIALS. APPROPRIATENESS OF THE TNMM MET HOD WAS ALSO THE ISSUE IN THOSE YEARS. TRIBUNAL DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE REVENUE ON THOSE ISSUES . AFTER HEARING BOTH THE 5 ITA NO.477/PUN/2015 SIDES AND PERUSING THE CONTENTS OF THE DRP, WE ARE OF THE OPINION THAT THE ORDER PASSED BY THE DRP WITH REFERENCE TO THE MOST APPROPRIATE ACCOUNTING METHOD FOR TP STUDY, IS FAIR AND REASONABLE AND SAM E DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUND RAISED BY TH E REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF MAY, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 12 TH MAY, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// /ASSISTANT REGISTRAR , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-13, PUNE 4. CIT-13, PUNE 5. , , B BENCH / DR, ITAT, B BENCH PUNE; 6. / GUARD FILE.