Ikea Trading (India) Pvt. Ltd., Gurgaon V. ACIT, New Delhi

ITA 5259/DEL/2010

• Counselvise Citation: 525920114 RSA 2010
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANAT KAPOOR S; SSH SALIL KAPOOR
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Application of stay
• Section: 92C; 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI C.L. SETHI, JUDICIAL MEMBER I.T. A. NO.5259/DEL/2010 ASSESSMENT YEAR : 2006-07 IKEA TRADING (INDIA) PVT. LTD., ASSISTANT C OMMISSIONER OF INCOME-TAX, DLF INFINITY TOWER-A, VS. CIRCLE 11(1), NEW DELH I. 8 TH FLOOR, DLF CYBERCITY, SECTOR-25, GURGAON-122001. PAN: AAACI1483Q STAY PETITION NO.94/DEL/2011 (IN I.T. A. NO.5259/DEL/2010) ASSESSMENT YEAR : 2006-07 IKEA TRADING (INDIA) PVT. LTD., ASSISTANT C OMMISSIONER OF INCOME-TAX, DLF INFINITY TOWER-A, VS. CIRCLE 11(1), NEW DELH I. 8 TH FLOOR, DLF CYBERCITY, SECTOR-25, GURGAON-122001. (APPELLANT/APPLICANT) (RESPOND ENT) APPELLANT/APPLICANT BY : S/SH. SALIL KAPOOR & SANAT KAPOOR, ADVOCATES. RESPONDENT BY : NONE. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL AGAINST THE ASSESSMENT OR DER DATED 20.10.2011 MADE BY THE ASSESSING OFFICER UNDER SECT ION 143(3) READ WITH 2 SEC. 144C OF THE INCOME-TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS ALSO FILED AN APPLICATION FOR S TAY OF REALIZATION OF DEMAND. 3. THE ASSESSEES APPLICATION FOR STAY OF REALIZATI ON OF DEMAND HAD COME FOR HEARING ON 21.10.2011 WHEN AT THE REQUEST OF TH E DEPARTMENTAL REPRESENTATIVE THE MATTER WAS ADJOURNED TO 4.11.201 1. THEREAFTER, ON 4.11.2011 IT WAS DECIDED THAT THE APPEAL OF THE ASS ESSEE MAY BE PRE-PONED FOR HEARING AT AN EARLY DATE. THEREFORE, HEARING O F THE APPEAL WAS DIRECTED TO BE PRE-PONED TO 12 TH DECEMBER, 2011 ALONG WITH THE STAY APPLICATION, WH ICH WAS ALSO DIRECTED TO BE FIXED ON 12 TH DECEMBER, 2011. ON 12 TH DECEMBER, 2011, THE MATTER WAS ADJOURNED TO 15 TH DECEMBER, 2011 AS NONE FOR THE DEPARTMENT WAS PRESENT ON THAT DAY. TODAY I.E. ON 15 TH DECEMBER, 2011, THE LEARNED DR HAS FILED AN APPLICATION FOR ADJOURNMENT STATING THAT THE CASE REQUIRES PREPARATION AS TPO MATTER IS INVOLVED AND STAY MATTER IS ALSO INVOLVED AND SHORT ADJOURNMENT WAS REQUESTED. IT W AS NOTICED BY THE BENCH THAT THE ORDER OF THE DISPUTE RESOLUTION PENAL PASS ED UNDER SEC. 144C OF THE ACT IN PURSUANCE TO WHICH THE ASSESSING OFFICER PAS SED THE IMPUGNED ORDER WAS CRYPTIC AND NON-SPEAKING AND THE MATER INVOLVED THEREIN WOULD NEED FRESH ADJUDICATION AND CONSIDERATION BY THE LEARNED DRP BY PASSING A 3 SPEAKING AND REASONED ORDER. IN THE LIGHT OF THIS ASPECT OF THE MATTER, THE ADJOURNMENT APPLICATION FILED BY THE LEARNED DR WAS REJECTED AND THE LEARNED COUNSEL FOR THE ASSESSEE WAS HEARD. 4. GROUND NOS. 1 TO 8 ARE DIRECTED AGAINST THE TRAN SFER PRICING ADJUSTMENT MADE IN RESPECT OF THE INTERNATIONAL TRANSACTIONS. THE ASSESSING OFFICER MADE ADJUSTMENT OF RS.78,80,00,890/- UNDER SEC. 92C A(3) ON THE BASIS OF TRANSFER PRICING OFFICERS ORDER, AGAINST WHICH, TH E ASSESSEE FILED OBJECTION BEFORE THE LEARNED DRP. THE VARIOUS OBJECTIONS FIL ED BY THE ASSESSEE BEFORE THE LEARNED DRP CONTAINING 72 PAGES DISPUTING THE T POS ORDER IN MAKING ADJUSTMENTS TO THE INTERNATIONAL TRANSACTIONS HAVE BEEN DEALT WITH BY THE LEARNED DRP BY PASSING A VERY SHORT AND NON-SPEAKIN G ORDER AS UNDER:- WE AGREE THAT THE TPO HAS CORRECTLY CHOSEN THE COMPARABLES IN THIS CASE. WE AGREE WITH THE TPO ON THE LEGAL POSITION THAT T HE DATA OF ONLY THE RELEVANT FINANCIAL YEAR IS TO BE USED U NLESS THE ASSESSEE ESTABLISHES THAT THE DATA OF THE PRECEDING TWO YEARS DEMONSTRATE SETTLED FACTS WHICH HAVE INFLUENCED THE RESULTS OF THE FINANCIAL YEAR UNDER CONSIDERATION. IN THIS CA SE, THE ASSESSEE HAS NOT ESTABLISHED ANY SUCH FACTS. THE TPOS CONCLUSION THAT IN BENCH MARKING ITS INTERNATIONAL TRANSACTIONS, THE ASSESSEE SHOULD HAV E ALSO INCLUDED IN ITS COST THE VALUE OF THE SUPPLY CHAIN MANAGEMENT INTANGIBLES OWNED BY IT, THE HUMAN ASSET INTANGIBLE S OWNED BY IT AND THE ASSESSEES LOCATION ADVANTAGE AND RISK A SSUMED BY THE ASSESSEE HOWEVER IS FOUND TO BE CORRECT AS IN T HE SITUATION OF A SERVICE PROVIDER WHO IS CHARGING A FIXED PERCE NTAGE OF MARK UP OVER ITS COST AS GRANTED PROFITS, THE VALUE OF THE ABOVE 4 FACTOR LIKE ANY MARKETING INTANGIBLES AND HUMAN INT ANGIBLES OWNED BY THE ASSESSEE AND ITS LOCATION ADVANTAGE AR E NOT BEING COMPENSATED. 5. AFTER HEARING THE LEARNED COUNSEL FOR THE ASSESS EE AND THE DRPS ORDER, WE FIND THAT THE MATTER WITH REGARD TO THE T RANSFER PRICING ADJUSTMENT NEEDS TO BE RECONSIDERED AND RE-ADJUDICATED UPON BY THE LEARNED DRP AFTER PASSING A REASONED AND SPEAKING ORDER IN THE LIGHT OF THE POWERS AND FUNCTIONS GIVEN TO THE LEARNED DRP UNDER SEC. 144(5 ) TO 144C(13) OF THE ACT. IN SIMILAR SITUATION, THE HONBLE HIGH COURT OF DELHI AT NEW DELHI IN THE CASE OF VODAFONE ESSAR LTD. VS. DISPUTE RESOLUT ION PANEL [W.P. (C) 7028/2010] RESTORED THE MATTER TO THE LEARNED DRP T O PASS FRESH ORDER AFTER ASCRIBING COGENT AND GERMANE REASONS IN SUPPORT OF THE DECISION THAT MAY BE TAKEN BY THE LEARNED DRP. SIMILARLY ITAT, DELHI BE NCH `C, NEW DELHI IN THE CASE OF GAP INTERNATIONAL SOURCING INDIA PVT. L TD. VS. DCIT VIDE ITS ORDER DATED 10.12.2010 IN ITA NO.4073/DEL/2010, HAS REMITTED THE MATTER TO THE FILE OF THE LEARNED DRP FOR PASSING AFRESH SPEA KING AND REASONED ORDER. WE, THEREFORE, RESTORE THESE ISSUES RAISED IN GROUN D NOS.1 TO 8 REGARDING ADJUSTMENT OF ARMS LENGTH PRICE TO THE FILE OF THE LEARNED DRP FOR THEIR FRESH CONSIDERATION AND ADJUDICATION. THE LEARNED DRP SH ALL PASS A WELL REASONED AND SPEAKING ORDER ON ALL THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE 5 ASSESSING OFFICERS ORDER READ WITH TPOS ORDER. T HE LEARNED DRP SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 6. GROUND NOS.9 & 10 DIRECTED AGAINST THE ADDITION OF RS.9,52,418/- BY WAY OF DISALLOWANCE OF ADVANCES AND DEPOSITS WRITTE N OFF SHALL ALSO BE FRESHLY CONSIDERED BY THE LEARNED DRP AFTER PROVIDI NG THE ASSESSEE AN OPPORTUNITY TO PRODUCE ANY EVIDENCES OR DETAILS IN SUPPORT OF ASSESSEES CLAIM AND OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT, THE ISSUE INVOLVED IN THIS APPEAL ARE RESTORED BACK TO THE FILE OF THE LEARNED DISPUTE RESOLUTION PANEL FOR FR ESH ADJUDICATION AS STATED ABOVE. 8. SINCE THE APPEAL FILED BY THE ASSESSEE HAS BEEN DISPOSED OF BY RESTORING THE MATER BACK TO THE FILE OF THE LEARNED DRP FOR FRESH ADJUDICATION, THE STAY PETITION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND IS THUS, DISMISSED AS REDUNDANT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED FOR STATISTICAL PURPOSES AND THE STAY PETITION FILE D BY THE ASSESSEE STANDS DISMISSED AS INFRUCTUOUS. 10. THIS DECISION WAS PRONOUNCED ON 15 TH DECEMBER, 2011 IMMEDIATELY AFTER THE HEARING WAS OVER. SD/- SD/- (G.D. AGRAWAL) (C.L. SETHI) VICE PRESIDENT JUDICIAL MEMBER DATED: 15 TH DECEMBER, 2011. 6 ITA NO.5259/DEL/2010 & STAY PETITION NO.94/DEL/2011 . COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT/APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. BY ORDER *MG DY. REGISTRAR, ITAT.