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

ITA 5524/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53384 (ITAT-DELHI)
• Duration Of Justice: 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: SALIL KAPOOR SH VIKAS JAIN
• Keywords: Transfer pricing; Opportunity of being heard; Application of stay; Set aside
• Section: 143(3)

Judgement Text

ITA NO.5524/DEL/2011 & STAY NO.172/D/11 1 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.5524/DEL/2011 ASSTT. YEAR: 2007-08 IKEA TRADING (INDIA) PVT. LTD., VS ASSTT. COMMISSIONER OF INCOME TAX, DLF INFINITY TOWER-A, 8 TH FLOOR, CIRCLE 11(1), NEW DELHI. DLF CYBERCITY, SECTOR-25, GURGAON. (PAN NO. AAACH1483Q) STAY NO.172/DEL/2011 (IN ITA NO.5524/DEL/2011) ASSTT. YEAR: 2007-08 IKEA TRADING (INDIA) P. LTD. VS ACIT, CIR CLE 11(1), NEW DELHI. GURGAON. (APPELLANT) (RE SPONDENT) APPELLANT BY: SHRI SALIL KAPOOR, SH. VIKAS JAIN RESPONDENT BY: SHRI B.R.R. KUMAR , SR. DR O R D E R PER C. L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 31.10.2011 PASSED BY THE AO U/S 143(3) OF THE I.T. ACT, 1961 AFTER FOLLO WING THE DIRECTIONS OF LEARNED DRP GIVEN U/S 144C OF THE ACT FOR THE ASSTT . YEAR 2007-08. ITA NO.5524/DEL/2011 & STAY NO.172/D/11 2 2. THE VARIOUS GROUNDS OF APPEAL RAISED BY THE ASSE SSEE ARE DIRECTED AGAINST THE AOS ORDER IN MAKING AN ADJUSTMENT OF R S.112,21,85,040 TO THE ARMS LENGTH PRICE (ALP) OF INTERNATIONAL TRANSACTI ONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES. THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF SOURCING FINISHED GOODS FOR ITS ASSOCIA TED ENTERPRISES LOCATED OUTSIDE INDIA. IT IDENTIFIES SUPPLIERS OF FINISHED TEXTILE PRODUCTS LIKE CARPETS, UPHOLSTERY, RUGS ETC. BASED ON PRODUCT SPECIFICATIO NS RECEIVED FROM VARIOUS GROUP COMPANIES OF ASSESSEE. THE ASSESSEE FURNISHE D TRANSFER PRICING STUDY BEFORE THE TPO, WHO SUGGESTED OVERALL ADJUSTMENT OF RS. 112,21,85,040, AND ON THE BASIS OF TPOS ORDER, A DRAFT ORDER WAS MADE BY THE AO, AGAINST WHICH AN OBJECTION WAS FILED BEFORE THE LD. DISPUTE RESOLUTION PANEL (DRP) AGAINST SECTION 144C OF THE ACT. WHILE DECIDING VA RIOUS ISSUES RAISED BY THE ASSESSEE IN THE OBJECTION FILED AGAINST THE DRAFT A SSESSMENT ORDER, THE LD. DRP DIRECTED TO EXCLUDE M/S REYMOND LTD. FROM THE LIST OF COMPARABLES INASMUCH AS THE AFORESAID CONCERN WAS NOT A RIGHT C OMPARABLE FUNCTIONALLY IN THE YEAR UNDER CONSIDERATION. THE DRP THEREFORE DIRECTED TO RECOMPUTE THE ALP ACCORDINGLY. THE LEARNED TPO THEN EXCLUDED THE SAME FROM COMPARABLES. 3. LD. DRP FURTHER DIRECTED THE TPO: I) TO ALLOW WO RKING CAPITAL ADJUSTMENT AND; II) VERIFY AND CORRECT ANY ERROR IN THE OPERATING MARGIN ITA NO.5524/DEL/2011 & STAY NO.172/D/11 3 CALCULATION FOR EXCLUDING NON-OPERATING EXPENSES. HOWEVER, THE TPO FAILED TO CARRY OUT THE AFORESAID THESE TWO DIRECTIONS OF THE LD. DRP. THE TPO HAS STATED THAT SINCE WORKING CAPITAL ADJUSTMENT DETAIL S HAVE NOT BEEN RECEIVED FROM DRP AS WELL AS THE ASSESSEE, IT WAS NOT POSSIB LE TO ALLOW SUCH ADJUSTMENT AT THE MOMENT. THUS, THE TPO MADE NO SU CH ADJUSTMENT TO THE ALP IN HIS FINAL ORDER WHILE GIVING EFFECT TO LD. D RPS ORDER. IT HAS BEEN ADMITTED BY THE LD. DR THAT THESE TWO DIRECTIONS GI VEN BY THE LD. DRP IN THEIR ORDER HAVE NOT BEEN CARRIED OUT WHILE FINALIZ ING THE ASSESSMENT MADE BY THE AO. THESE TWO ADJUSTMENTS TO THE ALP MAY GO TO THE ROOT OF THE MATTER AND ARE RELEVANT TO DETERMINE VARIOUS OTHER ISSUES SUCH AS WHETHER BENEFIT OF VARIATION OF 5% IN DETERMINING THE ALP IS AVAILABLE TO THE ASSESSEE OR AS TO WHETHER ANY ADJUSTMENT IS CALLED FOR IN VIEW OF ALP TO BE DETERMINED AFTER CARRYING OUT THE DIRECTIONS OF LD. DRP. WE, THEREFORE, FIND THAT THE TPO SHOULD MAKE A FRESH ORDER AFTER FOLLOW ING THE DIRECTIONS GIVEN BY THE LD. DRP IN THEIR ORDER DATED 9 TH AUGUST 2011, AND ON THE BASIS OF REVISED TPOS ORDER, THE LD. AO PASSED A FRESH DRAF T ASSESSMENT ORDER AGAINST WHICH THE ASSESSEE SHALL BE FURTHER ENTITLE D TO RAISE OBJECTIONS BEFORE THE LD. DRP. WE, THEREFORE, SET ASIDE THE ASSESSME NT ORDER MADE BY THE AO AND RESTORE THE WHOLE ASSESSMENT BACK TO HIS FILE F OR HIS FRESH ADJUDICATION. VARIOUS OTHER OBJECTIONS RAISED BY THE ASSESSEE AGA INST THE TPOS ORDER SHALL ITA NO.5524/DEL/2011 & STAY NO.172/D/11 4 ALSO BE FRESHLY CONSIDERED BY THE AUTHORITIES BELOW . THE AO AND TPO SHALL PROVIDE REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE LIGHT OF OUR ORDER RESTORING THE WHOLE AS SESSMENT BACK TO THE FILE OF THE AO FOR HIS FRESH ASSESSMENT, STAY APPLI CATION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED TO BE ALLOWED FOR STATISTICAL PURPOSES AND STAY APPLICATION FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23RD DE CEMBER, 2011, IMMEDIATELY AFTER THE HEARING WAS OVER. SD/- SD/- (SHAMIM YAHYA ) ( C.L. SETH I ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 23RD DECEMBER, 2011 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (A) 4. CIT 5. DR BY ORDER DY. REGISTRAR ITA NO.5524/DEL/2011 & STAY NO.172/D/11 5