M/s Freescale Semiconductor India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5613/DEL/2010

• Counselvise Citation: 561320114 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 13-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: TARANDEEP SINGH; SYALI
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI A. D. JAIN, JUDICIAL MEMBER ITA NO. 5613/DEL/2010 (ASSESSMENT YEAR: 2006 -07) M/S FREESCALE SEMICONDUCTOR INDIA PVT. LTD., 13, ABUL FAZAL ROAD, BENGALI MARKET, NEW DELHI-110001 VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACZ1978P ASSESSEE BY: SHRI M. S. SYALI & SHRI TARANDEEP SINGH REVENUE BY: SHRI PEEYUSH JAIN DATE OF HEARING 13.3.2014 DATE OF PRONOUNCEMENT 14.3.2014 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S 144C(13) IN RELATION TO THE A SSESSMENT YEAR 2006- 07. 2. GROUND NO. 1 IS GENERAL WHICH DOES NOT REQUIRE A NY ADJUDICATION. 3. GROUND NO. 2.2 IS AGAINST THE USE OF CURRENT YEA R DATA OF COMPARABLES WHILE COMPUTING PROFIT LEVEL INDICATOR. THE LD. AR FAIRLY ADMITTED THAT THE POSITION ON THIS ISSUE STANDS COV ERED IN FAVOUR OF THE REVENUE BY SEVERAL DECISIONS IN WHICH IT HAS BEEN H ELD THAT THE DATA FOR THE CURRENT YEAR SHOULD BE USED. THIS GROUND IS, TH EREFORE, DISMISSED. ITA NO. 5613/DEL/2010 FREESCALE SEMICONDUCTOR INDIA PVT. LTD. 2 4. GROUND NO. 2.3 ALONGWITH GROUNDS 3, 4, 5 AND 7 A RE AGAINST THE TP ADJUSTMENT MADE BY THE A.O. GROUND NO. 8 IS AGAI NST THE PASSING OF NON-SPEAKING ORDER BY THE DRP. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ADDITION MADE BY THE ASSESSING OFFICER IN HIS FINAL ORDER U/S 144C RESULTED FROM T HE TP ADJUSTMENT. FROM THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANEL (DRP), IT IS SEEN THAT THERE ARE CERTAIN GLARING MISTAKE. IN PAR A 2.1, THE DRP HAS RECORDED THAT THE TPO DETERMINED ALP OF THE INTERN ATIONAL TRANSACTIONS BY TAKING AVERAGE MEAN OF TWO COMPARAB LES, THAT IS, INFOSYS TECHNOLOGIES AND SATYAM COMPUTER LTD. CONTR ARY TO IT, IT HAS BEEN SHOWN TO US THAT THERE WERE, IN FACT, 24 COM PARABLES TAKEN NOTE BY THE TPO ON PAGES 12 & 13 OF HIS ORDER. THEN IT H AS BEEN SHOWN THAT THE DRP RECORDED THAT THERE WAS TP ADJUSTMENT OF RS . 11,96,61,358/-. THIS WAS ALSO SHOWN TO BE INCORRECT INASMUCH AS THE TP ADJUSTMENT WORKED OUT AT RS. 10,31,13,374/-. THE DRP NOTICED I N PARA 2.3 OF ITS ORDER THAT THE AVERAGE MARGIN TAKEN BY TPO WAS AT 3 6.90%. THIS WAS ALSO STATED TO BE A WRONG MENTION. APART FROM THAT , THE LD. AR ARGUED THAT THE ASSESSEE RAISED SEVERAL OBJECTIONS BEFORE THE DRP, WHICH REMAINED UNDECIDED. IN PARTICULAR IT WAS STATED THA T THE OBJECTIONS ABOUT THE FOLLOWING ISSUES WHICH ARE PART OF GROUND NO. 2 .3 OF THE PRESENT APPEAL REMAINED UNDISPOSED OFF : - A) APPLYING A FILTER OF DECLINING PROFITS TO THE S ET OF COMPARABLES SELECTED BY THE ASSESSEE. ITA NO. 5613/DEL/2010 FREESCALE SEMICONDUCTOR INDIA PVT. LTD. 3 B) REFUSING TO APPLY A FILTER FOR HIGH SALES/PROFIT ABILITY. C) HOLDING THAT THE ASSESSEE HAS ASSUMED MORE CRITI CAL RISKS AS COMPARED TO ITS A.E AND IS THUS ENTITLE TO A HIGHER REMUNERATION. D) HOLDING THAT THE ASSESSEE HAD DEVELOPED AND OWNE D HUMAN CAPITAL INTANGIBLE AT ITS COST AND THAT ALL RELATED RISKS IN CREATION AND MAINTENANCE OF SUCH HUMAN INTANGIBLE W AS BORNE BY THE ASSESSEE. E) NOT APPRECIATING THAT THE PROFITABILITY OF SOME OF THE COMPARABLES IS AFFECTED BY RELATED PARTY TRANSACTIO NS AND THEREFORE THEY SHOULD BE REJECTED. F) DECLINING ECONOMIC ADJUSTMENTS FOR DIFFERENCES I N WORKING CAPITAL AND RISK PROFILE OF THE ASSESSEE VIS A VIS THE COMPARABLES. 6. THE LD. DR WAS FAIR ENOUGH TO ACCEPT THE POSITIO N STATED ON BEHALF OF THE ASSESSEE AS REGARDS THE WRONG RECORDI NG OF CERTAIN VITAL FACTUAL INFORMATION BY THE DRP AND IN NOT DISPOSING THE OBJECTIONS RAISED BY THE ASSESSEE. 7. WITHOUT GOING INTO THE MERITS OF THE OBJECTION S, WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD M EET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE M ATTER IS RESTORED TO THE FILE OF DRP FOR PASSING A SPEAKING ORDER IN CON FORMITY WITH LAW BASED ON THE CORRECT FACTS OF THE CASE. NEEDLESS TO SAY, THE ASSESSEE WOULD BE ALLOWED A REASONABLE OPPORTUNITY BEING HEA RD IN SUCH FRESH PROCEEDINGS. ITA NO. 5613/DEL/2010 FREESCALE SEMICONDUCTOR INDIA PVT. LTD. 4 8. GROUND NO. 6 ABOUT THE LEVY OF INTEREST U/S 234B IS ALSO REMITTED TO THE DRP FOR PROPER ADJUDICATION. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14/03/2014. SD/- SD/- (A. D. JAIN) (R. S. S YAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14/03/2014 *SUBODH* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 13.3.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 13.3.2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *