DRESSER-RAND INDIA P.LTD, MUMBAI V. ADDL CIT CIR 6(2), MUMBAI

ITA 5412/MUM/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9147 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2007-2008
• Appeal Filed On: 27-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMANTHA MULLUMUDILD
• Assessee Lawyers: NITESH JOSHI LD
• Keywords: Transfer pricing
• Section: 143(3); 144C; 44AB

Judgement Text

DRESSER-RAND INDIA PRIVATE LIMITED, ITA NOS.5412 &5435/MUM/2014 ASSESSMENT YEAR : 2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI , , BEFORE HONBLE SHRI VIKAS AWASTHY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.5412/MUM/2014 ( / ASSESSMENT YEAR: 2007-08) DRESSER - RAND INDIA PRIVATE LIMITED, BIRLA AURORA TOWER LEVEL 21 DR. ANNIE BESANT ROAD CENTURY BHAVAN, PRABHADEVI MUMBAI 400 030 CIN: U29100MH1998PTC117293 / VS. ADD L. C IT - CIRCLE - 6(2) ROOM NO.504, 5 TH FLOOR, AAYKAR BHAVAN MK ROAD, MUMBAI 400 020 PAN/GIR NO. AA A CD - 9897 - P ( /APPELLANT ) : ( !' / RESPONDENT ) & ./ I.T.A. NO.5435/MUM/2014 ( %&' (&/ ASSESSMENT YEAR: 2007-08) D CIT - CIRCLE 6(2), ROOM NO.563, AAYKAR BHAVAN, M.K. ROAD MUMBAI 400 020 / VS. DRESSER - RAND INDIA PRIVATE LIMITED, BIRLA AURORA TOWER LEVEL 21 DR. ANNIE BESANT ROAD CENTURY BHAVAN, PRABHADEVI MUMBAI 400 030 CIN: U29100MH1998PTC117293 PAN/GIR NO. AA A CD - 9897 - P ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : SHRI NITESH JOSHI LD. AR REVENUE BY : SMT. SAMANTHA MULLUMUDI-LD. DR / DATE OF HEARING : 31/07/2020 / DATE OF PRONOUNCEMENT : 10/08/2020 DRESSER-RAND INDIA PRIVATE LIMITED, ITA NOS.5412 &5435/MUM/2014 ASSESSMENT YEAR : 2007-08 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS-APPEALS FOR AY 2007-08 WHICH CON TEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-10/ADDL. CIT(IT).RG. 6(2)/IT-122/13-14 D ATED 20/02/2014 ON CERTAIN GROUNDS OF APPEAL. 2. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. THE MATERIAL ON RECORD WOULD SHOW THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED T O BE ENGAGED IN MANUFACTURING OF VARIOUS TYPES OF PROCESS GAS COMPR ESSORS ETC. WAS ASSESSED U/S 143(3) R.W.S. 144C VIDE ORDER DATED 21 /01/2011. IN THE SAID ORDER, THE ASSESSEE WAS SADDLED WITH CERTAIN TRANSF ER PRICING (TP) ADJUSTMENTS OF RS.726.84 LACS ON ACCOUNT OF INTERNA TIONAL TRANSACTIONS IN THE NATURE OF COST CONTRIBUTION ALLOCATION AS CARRIED OUT BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. THESE ADJ USTMENTS WERE PROPOSED BY LD. TRANSFER PRICING OFFICER IN ITS ORD ER U/S 92CA(3) DATED 15/10/2010. WHILE FRAMING THE ASSESSMENT, THESE ADJ USTMENTS WERE INCORPORATED IN THE ORDER. AS AN ALTERNATIVE, LD. A O ALSO PROPOSED DISALLOWANCE OF THE SAME U/S 37, 40A(2)(B) & 40(A)( IA) AS WELL. 3. UPON FURTHER APPEAL BY ASSESSEE, LD. CIT(A) REDU CED THE ADJUSTMENT TO 50% I.E. RS.363.42 LACS AND REJECTED ALTERNATIVE DISALLOWANCE AS PROPOSED BY LD. AO. THE ADJUDICATIO N BY LD. CIT(A) HAS GIVEN RISE TO CROSS-APPEALS BEFORE US. THE REVENUE IS AGITATING THE RELIEF DRESSER-RAND INDIA PRIVATE LIMITED, ITA NOS.5412 &5435/MUM/2014 ASSESSMENT YEAR : 2007-08 3 GRANTED BY LD. CIT(A) WHEREAS THE ASSESSEE, BY WAY OF GROUND NOS. 1 TO 6, IS AGITATING THE ADDITIONS TO THE EXTENT SUSTAIN ED BY LD. CIT(A). 4. IT IS ADMITTED POSITION BEFORE US THAT THE ASSES SEE OPTED FOR MUTUAL AGREEMENT PROCEDURE (MAP), AS PER ARTICLE 27 OF IND IA USA TAX TREATY, FOR AYS 2007-08 TO 2011-12 BEFORE APPROPRIATE AUTHO RITIES VIDE F.NO.480/24/2012-FTD-1 DATED 19/04/2018 WHEREIN THE ARMS LENGTH PRICE (ALP) OF COST CONTRIBUTION ARRANGEMENT FOR AY 2007-08 WAS RESOLVED VIDE PARA 5 AT RS.545.13 LACS AND THE ADJU STMENTS WERE SETTLED AT RS.181.71 LACS. IN FACT, THE EFFECT OF THE SAID PROCEEDINGS HAS ALREADY BEEN GIVEN BY LD. AO VIDE ORDER DATED 02/03/2020 WH EREIN THE ADJUSTMENTS OF RS.726.84 LACS HAS BEEN REVISED TO R S.181.71 LACS. THE COPY OF THE ORDER HAS BEEN PLACED ON PAGE NO. 410 O F THE PAPER-BOOK. ACCORDINGLY, THE ASSESSEE, VIDE LETTER DATED 08/11/ 2018, REQUESTED FOR WITHDRAWAL OF GROUND NOS. 1 TO 6 OF THE APPEAL. WE FIND THAT SINCE THE ISSUE OF TP ADJUSTMENTS HAS ALREADY ATTAINED FINALI TY BY COMPETENT AUTHORITIES WITH MUTUAL AGREEMENT, THE REVENUES AP PEAL AS WELL AS ASSESSEES GROUND NOS. 1 TO 6 WOULD NOT SURVIVE AND ACCORDINGLY, STAND DISMISSED AS BEING INFRUCTUOUS. WE ORDER SO. 5.1 THE ONLY SURVIVING GROUND IN ASSESSEES APPEAL IS GROUND NO.7 WHICH READ AS UNDER: - GROUND NO.7 ADDITIONS UNDER SECTION 145A OF THE A CT OF RS.81,61,042/- 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 81,61,042/- MAD E UNDER SECTION 145A OF THE ACT. THE APPELLANT PRAYS THAT THE ADJUSTMENT UNDER SECTI ON 145A ON ACCOUNT OF UNUTILIZED CENVAT CREDIT TO THE CLOSING STOCK IS UN WARRANTED AND BE DELETED. DRESSER-RAND INDIA PRIVATE LIMITED, ITA NOS.5412 &5435/MUM/2014 ASSESSMENT YEAR : 2007-08 4 5.2 THE RELEVANT FACTS ARE THAT DURING THE COURSE O F ASSESSMENT PROCEEDINGS, IT WAS NOTED BY LD. AO THAT THE ASSESS EE FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING FOR MODVAT / CENVAT CREDIT WITH REGARD TO INVENTORY, PURCHASES AND CONSUMPTION IN C ONTRADICTION TO THE PROVISIONS OF SEC.145A WHICH MANDATE THE ASSESSEE T O FOLLOW INCLUSIVE METHOD OF ACCOUNTING FOR THE SAME. THE ASSESSEE SUB MITTED THAT THE AFORESAID ADJUSTMENT SHALL HAVE NO IMPACT ON THE PR OFIT OF THE ASSESSEE AS SUPPORTED BY GUIDANCE NOTE ON TAX AUDIT U/S 44AB ISSUED BY ICAI. ACCORDING TO THE GUIDANCE NOTE, THERE WILL BE NO DI FFERENCE IN THE PROFIT IRRESPECTIVE OF METHOD OF ACCOUNTING BEING FOLLOWED BY AN ASSESSEE. THE ASSESSEE ALSO FORWARDED THE RE-CASTED PROFIT & LOSS ACCOUNT FOLLOWING INCLUSIVE METHOD OF ACCOUNTING TO SUPPORT THE SAID PROPOSITIONS. RELIANCE WAS PLACED ON VARIOUS JUDICIAL PRONOUNCEMENTS. IT W AS ALSO POINTED THAT PURSUANT TO THE DIRECTIONS OF ITAT FOR AY 2001-02, THE ASSESSEE HAD PREPARED RE-CASTED PROFIT & LOSS ACCOUNT AS PER THE PROVISIONS OF SEC 145A WHICH WAS ACCEPTED BY LD. AO AND ALLOWED RELIE F ON THIS ACCOUNT. FURTHER, SIMILAR ADJUSTMENT MADE IN AY 2006-07 PURS UANT TO THE DIRECTIONS OF LD. DRP WERE SUBJECT MATTER OF CHALLE NGE BEFORE THE TRIBUNAL. IN THE ALTERNATIVE, IT WAS SUBMITTED THAT OPENING STOCK SHOULD BE INCREASED BY ADDITIONS MADE IN AY 2006-07 FOR RS.98 .85 LACS ON CLOSING STOCK. HOWEVER, NOT CONVINCED, LD. AO CHOSE TO ADOP T THE STAND TAKEN IN AY 2006-07 AND MADE NET ADDITION OF RS.81.61 LACS A FTER PROVIDING ADJUSTMENT IN OPENING STOCK AS PROPOSED BY THE ASSE SSEE IN THE ALTERNATIVE. 5.3 UPON FURTHER APPEAL, LD.CIT(A) ALTHOUGH OBSERVE D THAT PURSUANT TO DIRECTIONS OF TRIBUNAL FOR AY 2001-02 AND PURSUANT TO THE DIRECTIONS OF DRESSER-RAND INDIA PRIVATE LIMITED, ITA NOS.5412 &5435/MUM/2014 ASSESSMENT YEAR : 2007-08 5 LD. CIT(A) FOR AY 2005-06, LD. AO ACCEPTED THE RE-C ASTED PROFIT & LOSS ACCOUNT IN BOTH THESE YEARS, BUT CONFIRMED THE ADDI TIONS BY OBSERVING THAT LD.AO HAD ALREADY MADE NECESSARY ADJUSTMENT IN THE OPENING STOCK AS WELL AS IN CLOSING STOCK. AGGRIEVED, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 5.4 AS RIGHTLY POINTED OUT BY LD. AR, WE FIND THAT TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2006-07, ITA NO.8753/MUM/2010 ORDER DATED 07/09/2011 FOLLOWED ITS EARLIER ORDER FOR AY 2001-0 2 DATED 07/02/2008 AND VIDE PARA 20, REMITTED THE MATTER BACK TO THE F ILE OF LD. AO FOR REDOING THE COMPUTATION IN ACCORDANCE WITH ORDER FO R AY 2001-02. FACTS BEING PARI-MATERIA THE SAME, WE RESTORE THE MATTER BACK TO THE FILE OF LD. AO ON SIMILAR LINES TO REDO THE COMPUTATIONS IN ACC ORDANCE WITH EARLIER YEARS AS PER THE DIRECTIONS OF THE TRIBUNAL. RESULT ANTLY, THIS GROUND STAND ALLOWED FOR STATISTICAL PURPOSES. 6. FINALLY, THE APPEAL OF THE REVENUE STAND DISMISS ED WHEREAS THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2020. SD/- SD/- (VIKAS AWASTHY) (M ANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 10/08/2020 SR.PS, JAISY VARGHESE DRESSER-RAND INDIA PRIVATE LIMITED, ITA NOS.5412 &5435/MUM/2014 ASSESSMENT YEAR : 2007-08 6 !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./!*% , % , / DR, ITAT, MUMBAI 6. /0&1 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.