UNI DESIGN JEWELLERY P.LTD, MUMBAI V. DCIT CEN CIR 9, MUMBAI

ITA 5416/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8014 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH LD
• Assessee Lawyers: RAKESH MOHAN LD
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 153A

Judgement Text

1 ITA NO.5416/MUM/2016 UNI DESIGN JEWELLERY PVT.LTD. ASSESSMENT YEAR-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.5416/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) UNI DESIGN JEWELLERY P RIVATE LIMITED PLOT NO.4-5-6-, UNI DESIGN SEEPZ, ANDHERI (E) MUMBAI-400 096 / VS. DY . COMMISSIONER OF INCOME TAX C C - 9 [PRESENTLY ASSESSED WITH DCIT, CC-1(2)] PRATISHTHA BHAWAN MUMBAI 400 020 !' ./ ./PAN/GIR NO. AAACU-0572-G ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : RAKESH MOHAN- LD.AR / RESPONDENT BY : MANISH KUMAR SINGH- LD. DR / DATE OF HEARING : 17/12/2018 / DATE OF PRONOUNCEMENT : 02/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-58, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-58/ARR.176/2014-15 DATED 23/05/2016 ON FOLLOWING SOLE GROUND OF APPEAL:- 2 ITA NO.5416/MUM/2016 UNI DESIGN JEWELLERY PVT.LTD. ASSESSMENT YEAR-2011-12 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED IN UPHOLDING THE COMPARABLE ENTITIES ADOPTED BY THE LD. TRANSFER PRICING OFFICER FOR THE PURPOSE OF BENCHMARKING TH E INTERNATIONAL TRANSACTION BY USING TRANSACTIONAL NET MARGIN METHOD IN RESPECT OF INTER NATIONAL TRANSACTIONS OF SALES TO ASSOCIATED ENTERPRISES THEREBY MAKING AN UPWARD TRA NSFER PRICING ADJUSTMENT OF RS.71,87,085/-. AS EVIDENT FROM GROUNDS OF APPEAL, THE ONLY ISSUE I NVOLVED UNDER THE APPEAL IS SELECTION OF APPROPRIATE COMPARABLE. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ENTITY STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURI NG / EXPORT OF JEWELLERY WAS ASSESSED U/S 143(3) READ WITH SECTION 153A & 144C(4) ON 06/05/2014 WHEREIN THE ASSESSEE WAS SADDLED WITH TRANSFER PRICING ADJUSTMENT [TP] OF RS.71.87 LACS AS PROPOSED BY LD. TRANSFER PRICING O FFICER [TPO] IN ITS ORDER DATED 26/03/2014. 2.2 DURING IMPUGNED AY, THE ASSESSEE HAD CARRIED OU T TRANSACTIONS OF EXPORT AS WELL AS IMPORT WITH ITS ASSOCIATED ENTERPRISES [AE] AND BENCHMARKED THE SAME USING TRANSACTIONAL NET MARGIN METHOD [TNMM] , PROFIT LEVEL INDICATOR [PLI] BEING OPERATING PROFIT / COST . SINCE ITS OWN PLI OF 2.37% AS AGAINST 2.46% OF TWO COMPARABLE SELECTED B Y IT WAS WITHIN THE PRESCRIBED RANGE OF 5%, NO TP ADJUSTMENT WAS OFFERED. HOWEVER, LD. TPO BY EXCLUDING ASSESSEES 2 COMPARABLE AND BY SELECTI NG 6 NEW COMPARABLE ARRIVED AT PLI OF 7.13% AS AGAINST ASSESSEES REVISED PLI OF RS.1.71% WHICH WAS OUTSIDE THE PRESCRIBED RANGE OF 5% AND TH EREFORE, PROPOSED UPWARD ADJUSTMENT OF RS.71.87 LACS. 3 ITA NO.5416/MUM/2016 UNI DESIGN JEWELLERY PVT.LTD. ASSESSMENT YEAR-2011-12 3. AGGRIEVED, THE ASSESSEE AGITATED THE ISSUE OF CO MPARABLE WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 23/05/2016 WHEREIN LD. CIT(A) DELETED ONLY ONE COMPARABLE BUT CONFIRME D THE SELECTION OF 5 COMPARABLE. AGGRIEVED, THE ASSESSEE IS IN FURTHER A PPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI RAKESH MOHAN, ON THE STRENGTH OF DOCUMENTS PLACED IN THE PAPER-BOOK PLEADED FOR EXCLUSION OF 2 COMPARABLE VIZ. GOENKA DIAMONDS & JEWELS LTD. & GITANJALI GEMS LTD. WHICH REFLECTED HIGH PLI OF 10.10% & 12.24% RESPECTIVELY. 4. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ENT ITY NAMELY GITANJALI GEMS LIMITED IS A PART OF TAINTED GROUP NAMELY MEHUL C.CHOKSI GROUP AND IT HAD TURNOVER OF MORE THAN 18 TIMES THAN THAT OF ASSESSEE. FURTHER, THIS ENTITY HAD APPROX. 29% EXPORT SALE AS AGAINST THE A SSESSEE WHICH IS PREDOMINANTLY INTO EXPORT ACTIVITIES. THEREFORE, TH IS ENTITY, IN OUR OPINION, COULD NOT BE CONSIDERED AS PROPER COMPARABLE THEREF ORE, WE DIRECT EXCLUSION OF THE SAME. 5. SO FAR AS THE OTHER ENTITY IS CONCERNED, THE ASS ESSEE HAS SOUGHT EXCLUSION OF THE SAME ON THE BASIS OF SIZE OF DIAMO NDS AND HIGH DIAMOND CONTENT IN THE JEWELLERY BEING DEALT BY THE AFORESA ID ENTITY. HOWEVER, IN THE ABSENCE OF CREDIBLE AND ACCURATE DATA OF THE ASSESS EE AS WELL AS THIS COMPARABLE, THIS PLEA CANNOT BE ACCEPTED. THE STAND OF LD. CIT(A) IN INCLUDING THE SAME REQUIRES NO INTERFERENCE. THE LD . AO IS DIRECTED TO RECOMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OU R ABOVE ORDER. 6. THE APPEAL STANDS PARTLY ALLOWED. 4 ITA NO.5416/MUM/2016 UNI DESIGN JEWELLERY PVT.LTD. ASSESSMENT YEAR-2011-12 ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/01/2019 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. '& / THE APPELLANT 2. '('& / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ) *' + , + , / DR, ITAT, MUMBAI 6. * -./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.