Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 8431 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-08-2021
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
I1
Assessment Year
2016-2017
Appeal Filed On
30-04-2021
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 478/DEL/2021: ASSTT. YEAR: 2016-17 ALCATEL LUCENT INDIA LTD., 202-206, TOLSTOY HOUSE, 15, TOLSTOY MARG, NEW DELHI-110001 VS ACIT, CIRCLE-1(1), NEW DELHI (APPELLANT T (RESPONDENT) PAN NO. AACCA8667N ASSESSEE BY : SH. DEEPAK CHOPRA, ADV. & SH. ANKUL GOYAL, ADV. REVENUE BY : SH. SURENDERPAL, CIT DR DATE OF HEAR ING: 09 . 08 .20 21 DATE OF PRONOUNCEMENT: 16 .0 8 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31.03.2021 PASSED BY THE AO U/S 143 (3) R.W.S. 144C(3) AND R.W.S 143(3A) & 143(3B) OF THE INCOME TAX ACT, 1961. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO, HAS ERRED IN DETERMINING TH E TAXABLE INCOME OF THE APPELLANT FOR THE SUBJECT ASSESSMENT YEAR AT INR 111,30,04,560/- AS AGAINST THE RETURNED INCOME OF INR 61,86,41,220/-. 1.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN MAKING SEVERAL ADDITIONS BASED ON MERE CONJUNCTURES AND SURMISES, ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 2 IGNORING THE FACTUAL MATRIX OF THE APPELLANT AS WEL L AS THE NATURE OF THE TRANSACTIONS UNDERTAKEN BY THE APPELLANT. 1.2 THAT THE LD. AO FAILED TO APPRECIATE THE SUBMISSIONS MADE/ CONTENTIONS RAISED BY THE APPELLA NT AND FURTHER ERRED IN MAKING SEVERAL OBSERVATIONS AN D INFERENCES IN THE IMPUGNED ASSESSMENT ORDER WHICH ARE FACTUALLY INCORRECT AND LEGALLY UNTENABLE. TRANSFER PRICING GROUNDS 2. THAT, IN FRAMING THE IMPUGNED ASSESSMENT ORDER, THE REFERENCE MADE BY THE LD. AO, UNDER SECTION 92CA(1) OF THE ACT SUFFERS FROM JURISDICTIO NAL ERROR, AS THE LD. AO, HAD NOT RECORDED ANY REASONS NOR HE HAD ANY MATERIAL WHATSOEVER ON THE BASIS OF WHIC H HE COULD EVEN REACH A PRIMA-FACIE OPINION, THAT IT WAS NECESSARY OR EXPEDIENT TO REFER THE MATTER TO THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX, INTERNATIONAL TAX & TRANSFER PRICING - 1(1), NEW DE LHI (LD. TPO) FOR COMPUTATION OF ARMS LENGTH PRICE (ALP). 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HONBLE DISPUTE RESOLUTION PANEL (HONBLE DRP) HAVE ERRED, IN MAK ING AN ADJUSTMENT OF INR 4,41,74,915 IN RELATION TO THE INTERNATIONAL TRANSACTION PERTAINING TO PURCHASE OF CAPITAL GOODS FROM AES WITHOUT DETERMINING THE ALP OF THE TRANSACTION IN ACCORDANCE WITH THE PROVISIONS O F SECTION 92CA(3) READ WITH SECTION 92C(3) OF THE ACT . 3.1 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. TPO/ THE LD. AO HAVE ERRED IN MAKIN G/ UPHOLDING THE TRANSFER PRICING ADJUSTMENT IN RELATI ON TO THE INTERNATIONAL TRANSACTION PERTAINING TO PURCHAS E OF CAPITAL GOODS FROM AES WITHOUT ISSUING ANY SHOW CAU SE NOTICE TO THE APPELLANT OR GRANTING AN OPPORTUNITY OF BEING HEARD WHICH VIOLATES THE PRINCIPLE OF NATURAL JUSTICE. 3.2 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE DRP ERRED IN OBSERVING THAT THE ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 3 APPELLANT DID NOT PROVIDE ANY EVIDENCE TO SUPPORT T HE ARMS LENGTH NATURE OF THE INTERNATIONAL TRANSACTIO N OF PURCHASE OF CAPITAL GOODS WITHOUT APPRECIATING THAT NO INFORMATION WAS REQUESTED FROM THE APPELLANT IN RELATION TO THE TRANSACTION IN QUESTION EITHER BY T HE OFFICE OF LD. TPO OR BY THE HONBLE DRP. APPELLANT HAD USED COMBINED TRANSACTION APPROACH AND USED TRANSACTIONAL NET MARGIN METHOD ('TNMM) TO DETERMINE THE ALP OF THE TRANSACTION AND NO INFORMATION WAS PENDING FOR APPLICATION OF SUCH METHOD. IN CASE HONBLE DRP / LD. TPO PROPOSED TO USE SOME OTHER METHOD FOR DETERMINING THE ALP THEN ADEQUATE OPPORTUNITY SHOULD BE GIVEN TO THE APPELLA NT TO DEFEND THE METHOD USED IN PREPARING THE TRANSFER PRICING (TP) DOCUMENTATION AND PROVIDE INFORMATIO N, IF ANY, REQUESTED. 3.3 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, HONBLE DRP ERRED IN REJECTING THE USE OF COMBINED TRANSACTION APPROACH TO DETERMINE THE ALP OF INTERNATIONAL TRANSACTION OF PURCHASE OF CAPITAL GOODS. 3.4 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HONBLE DRP HAVE ERRED IN ARBITRARILY REJECTING THE APPROACH USED BY THE APPELLANT IN DETERMINING THE ALP OF THE INTERNATION AL TRANSACTION PERTAINING TO PURCHASE OF CAPITAL GOODS WITHOUT PROVIDING ANY COGENT REASON IN RELATION TO THE SAME. 3.5 THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HONBLE DRP HAVE ERRE D IN MAKING A TRANSFER PRICING ADDITION IN RELATION T O THE INTERNATIONAL TRANSACTION OF PURCHASE OF CAPITAL GO ODS WITHOUT DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION USING ANY OF THE SIX METHODS PRESCRIBED UNDER SECTION 92C OF THE ACT READ WITH RULE 10B OF THE RULES. 3.6 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HONBLE DRP HAVE ERRED IN FOLLOWING AN ASSUMPTION - BASED APPROACH F OR THE PURPOSE OF PROPOSING THE TRANSFER PRICING ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 4 ADJUSTMENT, WHEREIN THE LD. TPO HAS ARBITRARILY ASSUMED THAT THE AES CHARGED A MARKUP OF 8% IN RELATION TO SALE OF CAPITAL GOODS TO THE APPELLANT. 3.7 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HON'BLE DRP HAVE ERRED IN MAKING/UPHOLDING THE ADDITION OF INR 4,41 74,915 MADE BY FOLLOWING THE APPROACH OF DISALLOWIN G THE ALLEGED MARK-UP @ 8%, WHICH HAS BEEN CHARGED BY THE AE ON SALE OF CAPITAL GOODS WITHOUT APPRECIATIN G THAT EVEN GOING BY THE LD. TPOS APPROACH, ONLY THE DEPRECIATION PORTION OF SUCH ALLEGED MARKUP WOULD HAVE BEEN CONSIDERED AS DEDUCTION WHILE COMPUTING THE INCOME CHARGEABLE TO TAX UNDER THE HEAD PGBP FO R AY 2016-17. THE REMAINING AMOUNT WOULD NOT HAVE BEEN CONSIDERED FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE TO TAX. 3.8 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HONBLE DRP HAVE ERRED IN MAKING/ UPHOLDING ADDITIONAL TRANSFER PRIC ING ADJUSTMENT AT THE RATE OF 15% OF INR 3,84,12,970 WITHOUT APPRECIATING THAT ONCE THE ENTIRE AMOUNT OF INR 3,84,12,970 HAS BEEN PROPOSED TO BE DISALLOWED BY THE LD. TPO, ANY ADDITIONAL ADJUSTMENT FOR DEPRECIATION WOULD RESULT IN DUAL ADJUSTMENT. 3.9 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO/ LD. TPO / HONBLE DRP HAVE ERRED IN REDUCING THE AMOUNT OF DEPRECIATION ALLOWA NCE WITHOUT SIMULTANEOUSLY REDUCING THE REVENUE EARNED BY THE APPELLANT ON SUCH DEPRECIATION COST SINCE TH E APPELLANT WAS REMUNERATED ON COST PLUS BASIS FOR PROVISION OF CSD SERVICES ITS AES AND THE COST BASE FOR SUCH INTERNATIONAL TRANSACTION INCLUDED THE AMOUNT OF DEPRECIATION ON PURCHASE OF CAPITAL GOODS. CORPORATE TAX GROUNDS 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN DISALLOWING THE LIQUIDATED DAMAGES OF INR 1,77,13,487/- INCURRED BY THE APPELLANT PURSUANT TO BREACH OF ITS CONTRACTUAL ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 5 ARRANGEMENTS ON THE GROUNDS THAT THE SAME COULD NOT BE VERIFIED. 4.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO HAS ERRED IN SUMMARILY J/~ REJECTING THE APPELLANT'S CONTENTIONS AND NOT CONSIDERING THE BINDING JUDICIAL PRECEDENTS WHICH SQUARELY APPLIES TO THE FACTS OF THE APPELLANTS CA SE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN DISALLOWING THE INT EREST ON FOREIGN TERM LOAN AMOUNTING TO INR 13,57,00,000/ - U/S 40(A)(I) OF THE ACT. 5.1. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HA S ERRED IN NOT CONSIDERING THE DIRECTION OF THE HONB LE DRP AND PROCEEDING TO DISALLOW THE ENTIRE AMOUNT OF INR 13,57,00,000/- BEING INTEREST LIABILITY AS PER BOOKS OF ACCOUNTS INSTEAD OF INR 5,06,995/-, WHICH HAS ACTUALLY BEEN CHARGED TO PROFIT AND LOSS ACCOUN T FOR THE SUBJECT ASSESSMENT YEAR. 5.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO HAS ERRED IN HOLDING THAT TH E APPELLANT HAS FAILED TO PROVIDE ANY DETAILS IN RELA TION TO THE SAID GROUND WITHOUT PROVIDING ANY OPPORTUNIT Y OF BEING HEARD. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN MAKING AN ADDITION OF INR 3,33,65,030/- TO THE INCOME OF THE APPELLANT ALLEGING THAT THE SAID AMOUNT HAS NOT BEEN RECOGNIZ ED AS REVENUE IN THE BOOKS OF ACCOUNTS. 6.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO HAS ERRED IN DRAWING ADVERSE INFERENCE BY HOLDING THAT THE PURPORTED EXCESS AMOU NT AS PER FORM 26AS OVER BOOKS OF ACCOUNTS BY ITSELF AMOUNTS TO UNDERREPORTING OF INCOME. 6.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO HAS ERRED IN REJECTING THE APPELLANTS CONTENTION THAT THE DIFFERENCE APPEARIN G IN ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 6 THE AMOUNT OF REVENUE RECOGNIZED AS PER BOOKS OF ACCOUNTS OF THE APPELLANT AND AS PER FORM 26AS IS O N ACCOUNT OF DIFFERENT ACCOUNTING POLICIES BEING FOLL OWED BY THE PAYER/CUSTOMER AND THE APPELLANT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW', THE LD. AO HAS ERRED IN MAKING AN ADDITION OF INR 30,74,09,825/- BASIS THE ORDER OF THE LD. TPO DATED 18 NOVEMBER 2020 PASSED PURSUANT TO DIRECTION S OF THE HONBLE DRP WITHOUT CONSIDERING THE ORDER OF THE LD. TPO PASSED UNDER SECTION 154 OF THE ACT DAT ED 26 MARCH 2021 REDUCING THE AMOUNT OF TP ADDITION TO INR 4,41,74,915/-. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO, HAS ERRED IN COMPUTING THE TAX PAYABLE BY CONSIDERING THE ASSESSED INCOME AT INR 170,50,50,356/- INSTEAD OF ASSESSED INCOME OF INR 111,30,04,560/-. 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO, HAS ERRED IN CONSIDERING RETURN ED INCOME OF INR 61,88,16,224/- AS AGAINST INR 61,86,41,220/- 10. THAT ON THE FACTS IN THE CIRCUMSTANCES OF THE E ASE AND IN LAW, THE LD. AO HAS ERRED IN LEVYING INTERES T UNDER SECTION 234B OF THE ACT. 11. THAT ON FACTS IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT MECHANICALLY AND WITHOUT RECORDING ANY ADEQUATE SATISFACTION FOR ITS INITIATION. 3. THE MOOT ISSUE REGARDING THE TRANSFER PRICING RA ISED BY THE ASSESSEE RELATES TO ADJUSTMENT ON ACCOUNT OF CAPITA L GOODS PURCHASED FROM AE. DURING THE YEAR, THE ASSESSEE PU RCHASED CAPITAL GOODS OF RS.48,01,62,130/- FROM THE AE. THE AO HELD THAT THE PURCHASE OF CAPITAL GOODS CANNOT BE BENCHM ARKED UNDER TNMM. THE AO OBSERVED THAT AE HAS CHARGED A M ARKUP OF ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 7 8% ON THIS SALE. THE TPO DID NOT ALLOW RS.3,84,12,9 70/- BEING THE 8% MARKUP ON THE CAPITAL GOODS PURCHASED BY THE ASSESSEE AND ALSO DISALLOWED THE DEPRECIATION OF RS.57,61,94 5/- AND THUS MAKING AN ADJUSTMENT OF TOTAL AMOUNT OF RS.4,41,74, 915/-. 4. WE HAVE GONE THROUGH THE DECISION OF THE LD. DRP ON THIS ISSUE. THE PANEL HELD THAT THE PURCHASE OF CAPITAL GOODS DOES CONSTITUTE A SEPARATE INTERNATIONAL TRANSACTION IN TERM OF EXPRESS STATUTORY PROVISIONS CONTAINED IN SECTION 9 2B(1) R.W. EXPLANATION (1)(A). THE LD. DRP ALSO HELD THAT THE ALP OF THE INTERNATIONAL TRANSACTION PERTAINING TO PURCHASE OF CAPITAL GOODS FROM AE HAS BEEN DETERMINED ALONG WITH OTHER TRANSA CTION COVERED CSD SEGMENT OF THE ASSESSEE UNDER COMBINED TRANSACTION APPROACH CANNOT BE ACCEPTED. 5. THE OPERATIVE PART OF THE ORDER OF THE LD. DRP I S REPRODUCED FOR THE SAKE OF CONVENIENCE: IT HAS BEEN ARGUED ON BEHALF OF THE ASSESSEE THAT T HE TPO HAS VIOLATED THE PRINCIPLES OF NATURAL JUSTICE BY NOT P ROVIDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THAT THE TPO PROCEEDED TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION IN AN AD-HOC MANNER WITHOUT APPLYING ANY OF THE SIX METHO DS PRESCRIBED UNDER INDIAN TP REGULATIONS AS MANDATED BY SECTION 92CA(3) OF THE ACT AND CBDTS INSTRUCTION NO.3/2016. RELIANCE WAS PLACED ON LUMAX INDUSTRIES LTD. VS AC IT IN ITA NO. 5252/DEL/2011 AND AWB INDIA PVT. LTD. VS DCIT IN IT A NO. 6480/DEL/2012. IT IS ALSO CONTENDED THAT THE TPO DI D NOT GIVEN ANY COGNIZANCE TO THE FACT THAT THE DEPRECIATION WHICH WAS CHARGED TO PROFIT AND LOSS ACCOUNT OF THE ASSESSEE WAS INCLUDE D IN THE COST BASE ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 8 OF THE ASSESSEE WHICH WAS RECOVERED FROM THE AES AL ONG WITH A MARKUP OF 8%. ACCORDINGLY, THE ALP OF INTERNATIONAL TRANSACTION P ERTAINING TO PURCHASE OF CAPITAL GOODS FROM AES WAS DETERMINED A LONG WITH THE OTHER TRANSACTIONS COVERED UNDER THE CSD SEGMENT OF THE ASSESSEE UNDER COMBINED TRANSACTION APPROACH AND THE TPO ACC ORDINGLY, MADE TWO FOLD ADJUSTMENT VIZ., ALLEGED MARKUP OF 8% ON T HE PURCHASE COST I.E. RS.3,84,12,970/- AND DEPRECIATION OF 15% ON AL LEGED MARKUP OF 8% I.E. RS.57,61,945/-. THE PANEL HAS CAREFULLY CONSIDERED THE RIVAL CONTEN TIONS. IT IS NOTICED THAT THE PURCHASE OF CAPITAL GOODS DOES CONSTITUTE A SEPARATE INTERNATIONAL TRANSACTION IN TERMS OF EXPRESS STATU TORY PROVISIONS CONTAINED IN SECTION 92B(1) READ WITH EXPLANATION ( 1)(A) AND NEEDS TO BE SEPARATELY BENCHMARKED, ESPECIALLY FOR THE PU RPOSE OF CALCULATING DEPRECIATION AND OTHER COST RELATED EXP ENSES AS HELD BY THE DELHI BENCH OF THE ITAT IN HONDA MOTORCYCLE & S COOTERS INDIA PVT. LTD. VS ACIT (2015) 56 TAXMANN.COM 237. THE CO NTENTION OF THE ASSESSEE THAT THE ALP OF INTERNATIONAL TRANSACTION PERTAINING TO PURCHASE OF CAPITAL GOODS FROM AES HAS BEEN DETERMI NED ALONG WITH THE OTHER TRANSACTIONS COVERED UNDER THE CSD SEGMEN T OF THE ASSESSEE UNDER COMBINED TRANSACTION APPROACH, CANNO T THEREFORE BE ACCEPTED. THE PANEL ALSO NOTICES THE FACT THAT THE ASSESSEE A PART FROM MERE MAKING A BALD STATEMENT THAT THE ALP OF INTERNATION AL TRANSACTION OF CAPITAL GOODS IS INCLUDED IN OTHER TRANSACTIONS UND ER CSD SEGMENT HAS NOT FILED EITHER BEFORE THE TPO OR BEFORE THIS PANEL. THE PURCHASE BILLS OF THESE GOODS IN THE HANDS OFF ITS AE AND NECESSARY EVIDENCE AS TO WHETHER THE AE HAS SOLD THESE GOODS TO THE ASSESSEE AT THE SAME PRICE AT WHICH THEY WERE PURCHASED BY T HE AE OR WITH ANY MARKUP VALUE. NOR HAS THE ASSESSEE TAKEN PAINS TO GIVE ITS OWN ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 9 DATA OF COMPARABLES TO SHOW ANY ARMS LENGTH COMPAR ISON. THUS, IN THE ABSENCE OF THESE PURCHASE BILLS AND EVIDENCE, T HE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS IN THIS REGARD AND IT CANNOT, THEREFORE, BE STATED THAT THE INTERNATIONAL TRANSACTION RELATI NG TO PURCHASE OF CAPITAL GOODS IS AT ARMS LENGTH. THE PANEL IS FORT IFIED IN ITS DECISION BY THE HOLDING OFF THE DELHI BENCH OF THE ITAT IN D HR HOLDING INDIA PVT. LTD. VS DCIT (2020) 117 TAXMANN.COM 469, WHERE ON IDENTICAL FACTS , THE ITAT OBSERVED THUS: 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO/TPO/DRP AND THE PAPER BOOK ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE TPO IN THE I NSTANT CASE WHILE REJECTING THE CONTENTION OF THE ASSESSEE THAT PURCH ASE OF FIXED ASSETS SHOULD BE ACCEPTED AT ARM'S LENGTH NOTED THA T DESPITE AMPLE OPPORTUNITIES PROVIDED TO THE TAXPAYER, THE TAXPAYE R MERELY PROVIDED COPY OF SAMPLE INVOICES CORRESPONDING BILLS OF ENTR Y BUT FAILED TO PROVIDE MARK-UP, IF ANY, ON THE COST OF THE FIXED A SSETS IN THE HANDS OF THE AE'S. NO CONTEMPORANEOUS DOCUMENTARY EVIDENC E WAS SUBMITTED BY THE TAXPAYER FOR DEDUCING THE AE BOOK VALUE/MARKUP CHARGED. THE PRIMARY ONUS WAS ON THE PART OF THE TA XPAYER TO ESTABLISH THE COST OF GOODS IN THE HANDS OF THE AE WHICH EXPORTED IT TO THE TAXPAYER. FURTHER THE TAXPAYER ALSO FAILED T O PROVIDE ANY SUPPORTING DOCUMENT/EVIDENCE AS PROVIDED AS PER RUL E 10 D OF THE IT RULES..... ... 17. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE AS SESSEE THAT THE TPO DID NOT PROVIDE ANY COMPARABLE DATA AND DID NOT APPLY ANY METHOD TO BENCH MARKUP THE SAID TRANSACTION. IT IS ALSO HIS SUBMISSION THAT AS PER PROVISION SECTION 92 CA OF T HE IT ACT THE TPO IS REQUIRED TO DETERMINE THE ARMS LENGTH PRICE AND NOT DECIDED THE ALLOWABILITY OF TRANSACTION. SINCE THE ASSESSEE IN THE INSTANT CASE HAS ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 10 NOT FILED THE PURCHASE BILLS OF THESE ASSETS IN THE HANDS OF ITS AE AND AS TO WHETHER THE AE HAS SOLD THESE ASSETS TO THE A SSESSEE AT THE SAME PRICE AT WHICH THEY WERE PURCHASED BY THE AE O R WITH ANY MARK-UP VALUE, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE CONTENTION OF THE ASSESSEE THAT THE PURCHASE OF MED ICAL EQUIPMENTS ARE AT ALP CANNOT BE ACCEPTED. THE ASSESSEE MADE AN ARGUMENT THAT UNDER THE INDIAN TP REGULATIONS, THE TPO WAS OBLIGATED TO DETERMINE THE ALP OF AN INTERNATIONAL TRANSACTION BY APPLYING THE MOST APPR OPRIATE METHOD AND NOT BY ANY ADHOC METHOD. RELIANCE WAS PLACED ON LUMAX INDUSTRIES LTD. VS ACIT IN ITA NO. 5252/DEL/2011, A WB INDIA PVT. LTD. VS DCIT IN ITA NO. 6480/DEL/2012, MC RETAIL PV T. LTD. VS ACIT IN ITA NO. 1777/M/2016, ACIT VS KOCH CHEMICAL TECHN OLOGY GROUP (INDIA) LTD. IN ITA NO. 8091/MUM/2011, 7236/MUM./20 20, 7958/MUM/2011, TNS INDIA PVT. LTD. VS ACIT IN ITA N O. 944/H/07, 194 & 74/H/08, 793/H/09, 654 & 655/H/10 & 7/H/2012 AND NLC NALCO INDIA LTD. IN ITA NO. 529/KOL/2008 IN THIS RE GARD. THE CONTENTION OF THE ASSESSEE IS WELL FOUNDED BUT THIS CONTENTION CAN HOLD GOOD ONLY IF THE RELEVANT MATERIAL IS MADE AVA ILABLE TO THE TPO OR BEFORE THIS PANEL, WHICH IS A CONTINUATION OF AS SESSMENT PROCEEDINGS IN TERMS OF LAW EXPLAINED BY THE HONBL E BOMBAY HIGH COURT IN VODAFONE INDIA SERVICES (P) LTD. VS UNION OF INDIA (2013) 39 TAXMANN.COM 201. HOWEVER, EVEN AFTER THE TPO UND ERTOOK THE BENCHMARKING IN THE MANNER AS HE DID, NO EVIDENCE W AS MADE AVAILABLE TO THIS PANEL IN THE FORM OF PURCHASE BIL LS OF THESE GOODS IN THE HANDS OFF ITS AE AND NECESSARY EVIDENCE AS TO W HETHER THE AE HAS SOLD THESE GOODS TO THE ASSESSEE AT THE SAME PR ICE AT WHICH THEY WERE PURCHASED BY THE AE OR WITH ANY MARKUP VALUE, IN ORDER TO FACILITATE DETERMINATION OF ALP IN TERMS OF SECTION 92CA(3) OF THE ACT. ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 11 6. FROM THE ABOVE, THE FOLLOWING POINTS EMERGED, THE ASSESSING OFFICER MADE ADJUSTMENT BY DENYING TH E 8% MARKUP CHARGED BY THE AE ON THE SUPPLY OF CAPITAL G OODS AND DISALLOWED THE DEPRECIATION ALSO TO THAT EXTENT . THE ASSESSEE CONTESTED THAT THE PURCHASE OF CAPITAL GOODS CANNOT BE BENCHMARKED SEPARATELY. THE MAIN ARGUMENT WAS THE DEPRECIATION DO FORM A COMPONENT OF OPERATI NG COST AND HENCE CANNOT BE GIVEN SEPARATE TREATMENT. IT WAS ARGUED THAT THE ALP OF THE INTERNATIONAL TRA NSACTION PERTAINING TO PURCHASE OF CAPITAL GOODS FROM AE HAS BEEN DETERMINED ALONG WITH OTHER TRANSACTION COVERED CSD SEGMENT OF THE ASSESSEE UNDER COMBINED TRANSACTION APPROACH. THE LD. DRP HELD THAT THE ASSESSEE FAILED TO PRODUC E EVIDENCES TO SUBSTANTIATE THE PURCHASES AND NO EVID ENCES HAVE BEEN FILED BEFORE THE PANEL OR BEFORE THE TPO. THE ASSESSEE AT GROUND NOS. 3.1 & 3.2 SUBMITTED THA T ADEQUATE OPPORTUNITY HAS NOT BEEN GIVEN BEFORE FINA LIZING THE ORDER BY THE TPO. 7. IN THIS REGARD, WE FIND THAT THE CO-ORDINATE BEN CH OF ITAT IN THE CASE HONDA MOTORCYCLE & SCOOTERS INDIA PVT. LTD. VS ACIT (2015) 56 TAXMANN.COM 237 HELD THAT EACH INTERNATIO NAL TRANSACTION CAN BE BENCHMARKED SEPARATELY BY APPLYI NG MAM OUT OF THE PRESCRIBED METHODS. IT SAYS, A BARE READING OF SECTION 92C(1) BRINGS OUT THAT: (I) THE ALP IS REQUIRED TO BE DETERMINED OF ' AN' INTERNATIONAL TRANSACTION; AND (II) THE ALP OF SUCH AN INTERNATIONAL TRANSACTION I S TO BE DETERMINED BY APPLYING THE MOST APPROPRIATE METHOD OUT OF THE ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 12 PRESCRIBED METHODS WHICH, INTER ALIA , INCLUDE CUP AND TNMM. THE FIRST INGREDIENT IS THAT THE ALP SHOULD BE DETE RMINED IN RELATION TO AN INTERNATIONAL TRANSACTION. IT IS DISCERNIBLE FROM THE DEFINITION OF INTERNATIONAL TRANSACTION GIVEN I N SECTION 92B THAT IT REFERS TO 'A TRANSACTION' BETWEEN TWO OR MO RE ASSOCIATED ENTERPRISES. THE TERM 'TRANSACTION' HAS BEEN DEFINE D IN SECTION 92F(V) AND ALSO IN RULE 10A( D ). THE RULE DEFINES THE TERM 'TRANSACTION' TO INCLUDE: 'A NUMBER OF CLOSELY LINK ED TRANSACTIONS. 'THUS, WHERE THE TRANSACTIONS ARE NOT CLOSELY LINKED, THEN THEIR ALP SHOULD BE DETERMINED SEPARAT ELY FOR EACH INTERNATIONAL TRANSACTION AND SUCH DETERMINATION OF ALP FOR 'AN' INTERNATIONAL TRANSACTION AS PER SECTION 92C(1) IS DONE AS PER THE MOST APPROPRIATE METHOD, BEING ONE OF THE METHO DS GIVEN IN THE PROVISION. TO PUT IT SIMPLY, EACH INTERNATIO NAL TRANSACTION IS VIEWED SEPARATELY AND INDEPENDENT OF OTHER INTER NATIONAL TRANSACTIONS FOR DETERMINING ITS ALP BY USING ONE O F THE GIVEN METHODS, WHICH IS THE MOST APPROPRIATE METHOD HAVIN G REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTIO N OR FUNCTIONS PERFORMED, ETC. IT IS IMPERMISSIBLE TO COMBINE ALL THE INTERNATIONAL TRANSACTIONS FOR DETERMINING THEIR AL P IN A UNIFIED MANNER WHEN SUCH TRANSACTIONS ARE DIVERSE IN NATURE . 8. SINCE, THE ASSESSEE HAS BEEN DENIED PROPER OPPOR TUNITY, THE TPO AND THE LD. DRP DID NOT HAVE THE BENEFIT OF EXAMINING THE PURCHASE OF CAPITAL GOODS, THE ISSUE OF ALLOWAB ILITY OR NOT OF THE MARKUP OF 8% CHARGED BY THE AE HAS NOT BEEN DET ERMINED AS PER THE APPROVED METHODS, WE HEREBY DEEM IT FIT TO REMAND THE MATTER TO THE FILE OF THE LD. DRP TO DETERMINE THE ALP AS PER THE APPROVED METHODS AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE TO MAKE THEIR SUBMISSIONS. THE ASSESSEE IS ALSO ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 13 HEREBY DIRECTED TO COMPLY WITH THE DIRECTIONS OF TH E LD. DRP IN FURNISHING THE COMPLETE DETAILS AND SUBSTANTIATING THEIR CASE. LIQUIDATED DAMAGES: 9. THE ASSESSING OFFICER DISALLOWED LIQUIDATED DAMA GES INCURRED BY THE ASSESSEE PURSUANT TO BREACH OF CONT RACTUAL ARRANGEMENTS. 10. THE LD. DRP CONFIRMED THE ACTION OF THE AO ON T HE GROUNDS THAT THE LIQUIDATED DAMAGES DO NOT PERTAIN TO THE Y EAR AND CANNOT THEREFORE BE ALLOWED. SIMILAR ISSUE HAS BEEN ADJUDICATED BY THE CO-ORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014-15 IN ITA NO. 4706/DEL/2018 WH EREIN IT WAS HELD THAT THE CHARGES PERTAIN TO CONTRACTUAL OB LIGATION WHICH WAS NOT COMPLIED WITH BUT THE AO HELD IT AS P ENALTY. THE MATTER HAS BEEN REMANDED BACK TO THE FILE OF THE AO FOR FRESH EXAMINATION IN THE ASSESSMENT YEAR 2014-15 AS WELL AS 2013014. WE HAVE GIVEN DUE CONSIDERATION TO THE OBS ERVATIONS OF THE LD. DRP, THE EXPENSE ALSO DO NOT PERTAIN TO THE YEAR IN QUESTION. HENCE, THE AO IS HEREBY DIRECTED TO EXAMI NE THE ISSUE AFRESH WITH REGARD TO THE ALLOWABILITY OF THE EXPEN SES PER SE AND ALSO THE YEAR TO WHICH THE EXPENSES BELONG TO. INTEREST ON FOREIGN TERM LOAN: 11. THE AO DISALLOWED THE INTEREST PAID ON FOREIGN TERM LOAN AS NO TDS WAS DEDUCTED BY THE ASSESSEE. THE AO DISA LLOWED RS.13,57,00,000/- ON THE GROUNDS THAT THE ASSESSEE FAILED TO DEDUCT TDS ON THE INTEREST CREDITED IN THE BOOKS WH EREAS THE ITA NO. 478/DEL/2021 ALCATEL LUCENT INDIA LTD. 14 ASSESSEE SUBMITTED THAT ONLY AN AMOUNT OF RS.5,06,9 95/- HAS BEEN ACCRUED ON THE LOAN RECEIVED. 12. THE LD. DRP REFERRED THE MATTER TO THE AO FOR F ACTUAL VERIFICATION. SINCE, IT IS A MATTER OF FACTUAL VERI FICATION, WE DECLINE TO INTERFERE WITH THE ORDER OF THE LD. DRP. RECONCILIATION OF AMOUNTS IN 26AS: 13. THE REVENUE AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS RS.2,39,74,386/- AGAINST THE REVENUE AS PER 26A S OF RS.5,73,39,416/- THUS, REFLECTING A DIFFERENCE OF RS.3,33,65,030/- THE SUM WHICH HAS BEEN TREATED AS INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER AND THE LD. D RP. THE ASSESSEE IS HEREBY DIRECTED TO SUBMIT THE RECONCILI ATION STATEMENT AND THE ACCOUNTING PRINCIPLES USED WITH R EFERENCE TO THE CONTINUITY OF TREATING THE VARIOUS RECEIPTS. EFFECT OF ORDER U/S 154: 14. THE AO FAILED TO TAKE INTO CONSIDERATION THE OR DER U/S 154 PASSED BY THE TPO ON 26.03.2021 REDUCING THE TP ADD ITION. THE SAME IS HEREBY DIRECTED TO BE RECTIFIED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/08/2021. SD/- SD/- (SUCHITRA KAMBLE) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER . DATED: 16/08/2021 *SUBODH KUMAR, SR. PS*
