Glencore India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5368/DEL/2010

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2833 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 26-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARCHANA SHARMA AVASTHI
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Non passing of speaking order
• Section: 234B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SMT. BEENA PILLAI: JUDICIAL MEMBER ITA NO. 5368/DEL/2010 ASSTT. YR: 2006-07 GLENCORE INDIA PVT. LTD., VS. ACIT CIRCLE 12(1), 806, MEGHDOOT, 94, NEHRU PLACE, NEW DELHI. NEW DELHI. PAN: AAACG 3787 B ( APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI TARANDEEP SINGH CA ASSESSEE BY : MS. ARCHANA SHARMA AVASTHI CIT(DR ) DATE OF HEARING : 26/11/2016. DATE OF ORDER : 07/01/2016. O R D E R PER S.V. MEHROTRA, A.M: THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECTE D AGAINST THE ASSESSMENT ORDER DATED 12.10.2010 U/S 143(3)/ 144C, PURSUANT TO DRP DIRECTIONS DATED 22.9.2010 U/S 144C OF THE INCOME- TAX ACT, 1961. GROUNDS OF APPEAL RAISED ARE AS UNDER: 1. THAT ON FACTS AND IN LAW THE ORDERS PASSED BY THE ASSESSING OFFICER [HEREINAFTER REFERRED AS THE 'AO' ] / DISPUTE RESOLUTION PANEL [HEREINAFTER REFERRED AS THE 'DRP' ] / TRANSFER PRICING OFFICER [HEREINAFTER REFERRED AS T HE 'TPO'] ARE BAD IN LAW AND VOID AB-INITIO. 2 ITA 5368/DEL/2010 1.1 THAT ON FACTS AND IN LAW, THE ASSUMPTION OF JU RISDICTION BY THE AOITPO/DRP TO DETERMINE ARM'S LENGTH PRICE I S BAD IN LAW AND VOID AB-INITIO. 1.2 THAT ON FACTS AND IN LAW, THE DRP ERRED IN REJ ECTING THE GROUNDS OF OBJECTIONS RAISED \ BEFORE IT WITHOUT RE CORDING PROPER REASONS FOR SUCH REJECTION AND BY PASSING A NON SPEAKING ORDER. 2. THAT ON FACTS AND IN LAW THE AOIDRP ERRED IN MAKING/UPHOLDING AN ADDITION OF RS 8,55,92,971/- UN DER CHAPTER- X OF THE INCOME TAX ACT, 1961 3. THAT ON FACTS AND IN LAW THE DRP ERRED IN UPHOLD ING THE REJECTION OF CUP AS THE MOST APPROPRIATE METHOD FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTI ONS PERTAINING TO IMPORT OF PULSES. 3.1 THAT ON FACTS AND IN LAW THE TPO/DRP ALSO ERRE D IN REJECTING/ UPHOLDING THE COMPARABLE DATA FURNISHED BY THE ASSESSEE IN FORM OF SECONDARY CUP. 3.2 THAT ON FACTS AND IN LAW THE TPO/DRP ERRED IN HOLDING/UPHOLDING THAT IT WAS NOT POSSIBLE TO MAKE REASONABLE ADJUSTMENTS TO THE CUP DATA FURNISHED BY THE ASSESS EE. 4. WITHOUT PREJUDICE, ON FACTS AND IN LAW THE TPO/D RP ERRED IN HOLDING/UPHOLDING TNMM AS THE MOST APPROPRIATE METH OD FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANS ACTIONS PERTAINING TO IMPORT OF PULSES. 4.1 THAT ON FACTS AND IN LAW WHILE APPLYING TNMM T HE TPOIDRP ERRED IN: (A) NOT CONDUCTING A PROPER FAR ANALYSIS OF THE COMPARABLES SELECTED BY HIM. (B) NOT APPLYING PROPER FILTERS FOR THE PURPOSE OF COMPARABLE IDENTIFICATION. 3 ITA 5368/DEL/2010 (C) REJECTING THE COMPARABLE DATA SUBMITTED BY THE ASSESSEE VIDE SUBMISSIONS DATED 23RD OCTOBER 2009. (D) COMPUTING THE AVERAGE OPERATING MARGINS OF THE COMPARABLES AT 5.61 % AS AGAINST 1.76% COMPUTED BY THE ASSESSEE. (E) TREATING THE DOMESTIC TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH UNRELATED PARTIES AS INTERNATIONA L TRANSACTIONS. (F) APPLYING THE ALLEGED ARM'S LENGTH MARGIN OF 5. 61 % TO A TURNOVER OF RS 160,71,65,7711- (INCLUDING DOMESTIC TURNOVER OF PULSES). 5. WITHOUT PREJUDICE, ON FACTS AND IN LAW WHILE APP LYING TNMM THE TPOIDRP ERRED IN COMPARING THE OPERATING MARGINS OF THE ASSESSEE WITH THE MEAN OPERATING MAR GINS OF THE ALLEGED COMPARABLES. 6. THAT WITHOUT PREJUDICE ON FACTS AND IN LAW THE A O/DRP ERRED IN NOT GRANTING THE BENEFIT FOR ADJUSTMENT OF THE A RMS LENGTH PRICE ('ALP') BY AS PER THE PROVISO TO SECTION 92 C(2). 7. THAT ON THE FACTS AND IN LAW THE AO ERRED IN NOT ALLOWING A DEDUCTION ON ACCOUNT OF (I) ADVANCES WRITTEN OFF OF RS 20,245/-. (II) CLUB EXPENSES OF RS 55,975/-. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AOIDRP ERRED IN CHARGING INTEREST U/S 234B OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINESS OF PROVIDING CONSU LTANCY SERVICE IN COMMODITY RESOURCES LIKE COAL, CRUDE OIL, SUPERIOR KEROSENE OIL, METALS, 4 ITA 5368/DEL/2010 GRAINS MAINLY TO STAFFORD AG AND ITS CLIENTS. DURIN G THE YEAR, IT HAD COMMENCED OPERATIONS IN RESPECT OF TRADING IN COMMO DITIES INCLUDING FUTURES, THROUGH ITS AUTHORIZED BROKERS, AT THE NAT IONAL COMMODITIES & DERIVATIVES EXCHANGE OF INDIA & MULTI COMMODITIES & DERIVATIVES EXCHANGE OF INDIA UNDER THE NAME GLENCORE GRAIN IN DIA DIVISION. THE ASSESSEE HAD FILED RETURN DECLARING BUSINESS LOSS O F RS. 4,80,58,657/-. THE AO HAD MADE A REFERENCE U/S 92CA(1) TO LD. TPO TO D ETERMINE ALP IN RESPECT OF FOLLOWING INTERNATIONAL TRANSACTIONS UND ERTAKEN BY THE ASSESSEE WITH ITS AES: S. NO. DESCRIPTION OF TRANSACTION VALUE (IN RS.) 1. IMPORT OF TRADED GOODS 2,219,956,150 2. EXPORT OF TRADED GOODS 36,618,761 3. DEBIT NOTE OF SHORTAGE AGAINST PURCHASE 14,297, 895 4. CONSULTANCY SERVICES 189,395,907 3. LD. TPO NOTICED THAT ASSESSEE HAD USED CUP AS TH E MOST APPROPRIATE METHOD FOR BENCHMARKING INTERNATIONAL TRANSACTIONS OF IMPORT AND EXPORT OF TRADED COMMODITIES TO AND FROM ITS AES. IN REGARD TO IMPARTING OF CONSULTANCY SUPPORT SERVICE TO ITS AES, ASSESSEE HA D USED TNM METHOD AND PLI OF OP/OE TO BENCHMARK INTERNATIONAL TRANSACTION S. LD. TPO, AFTER CONSIDERING VARIOUS SUBMISSIONS OF ASSESSEE, FINALL Y CONCLUDED THAT TNMM WOULD BE APPLIED FOR THE PURPOSE OF BENCH MARKING O F INTERNATIONAL TRANSACTIONS. HE, ACCORDINGLY, DETERMINED THE PBIT/ SALES OF VARIOUS COMPARABLES IN PARA 10 OF HIS ORDER AT 5.61% AS AGA INST THE MARGIN SHOWN BY THE ASSESSEE AT .284% AND COMPUTED THE ADJUSTMENT A T RS. 8,55,92,971/-. THE ASSESSEE HAD FILED DETAILED OBJECTIONS AND HAD ALSO ADVANCED SUBMISSIONS BEFORE LD. DRP WHICH ARE PLACED ON RECORD. 5 ITA 5368/DEL/2010 4. LD. DRP, HOWEVER, WITHOUT CONSIDERING ALL THESE OBJECTIONS AND SUBMISSIONS CONFIRMED THE LD. TPOS ACTION. 5. THE ASSESSEE HAD POINTED OUT THAT THE COMPUTATIO N OF AVERAGE OPERATING MARGINS IN RESPECT OF 15 ALLEGED COMPARAB LES WAS FACTUALLY INCORRECT. THE DETAILED SUBMISSIONS WERE FILED ON V ARIOUS OTHER ASPECTS ALSO BUT LD. DRP HAS NOT AT ALL CONSIDERED THE SAME. UND ER SUCH CIRCUMSTANCES, WE ARE CONSTRAINED TO SET ASIDE THE ASSESSMENT ORDE R PASSED IN PURSUANCE TO THE DIRECTIONS OF LD. DRP AND RESTORE THE MATTER BA CK TO THE FILE OF LD. DRP FOR DE NOVO CONSIDERATION OF ASSESSEES DETAILED OB JECTIONS/ SUBMISSIONS, FILED BEFORE LD. DRP. NEEDLESS TO SAY THAT ASSESSEE WILL BE PROVIDED REASONABLE OPPORTUNITY OF BEING HEARD WHILE DISPOSI NG OF ITS OBJECTIONS. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCEMENT IN OPEN COURT ON 07/01/2016. SD/- SD/- (BEENA PILLAI) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/01/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.