Noble Resources & Trading India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5722/DEL/2010

• Counselvise Citation: 572220114 RSA 2010
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: ASEEM CHAWLA
• Keywords: Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO. 5722/DEL/2010 (ASSESSMENT YEAR-2006-07) NOBLE RESOURCES & TRADING INDIA PVT. LTD., 1A-D, VANDANA BUILDING, 11 TOLSTOY MARG, NEW DELHI-110001 VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 13(1), 406, C. R BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAACA0443N ASSESSEE BY: SHRI ASEEM CHAWLA REVENUE BY: SHRI PEEYUSH JAIN DATE OF HEARING 3.3.2014 DATE OF PRONOUNCEMENT 5.3.2014 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER DATED 18.10.2010 PASSED BY THE ASSESSING OFFICER U/S 143( 3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (HEREINAFTER C ALLED `THE ACT) IN RELATION TO THE ASSESSMENT YEAR 2006-07. 2. THE ONLY EFFECTIVE ISSUE RAISED IN THIS APPEAL T HROUGH VARIOUS GROUNDS IS AGAINST THE MAKING OF THE ADDITION AMOUN TING TO RS. 7,23,59,322/- DUE TO TRANSFER PRICING ADJUSTMENT P ROPOSED BY THE TRANSFER PRICING OFFICER U/S 92CA(A) OF THE ACT. ITA NO. 5722/DEL/2010 NOBLE RESOURCES & TRADING INDIA PVT. LTD. 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A PART OF NOBLE GRAIN GROUP WHICH OFFERS A RANGE OF H IGHLY DIVERSIFIED AGRICULTURAL COMMODITY PRODUCTS AND TEC HNICAL SERVICES IN CONNECTION THEREWITH. TOTAL INTERNATIONAL TRANSA CTIONS UNDERTAKEN BY THE ASSESSEE HAVE BEEN REPORTED ON PA GE 2 OF THE TPOS ORDER. THE DISPUTE ABOUT THE ARMS LENGTH PR ICE (ALP) IS CONFINED TO TWO SETS OF TRANSACTIONS, VIZ., SALE O F TRADED GOODS AMOUNTING TO RS. 71,06,26,003/- AND PURCHASE OF TR ADED GOODS AMOUNTING TO RS. 17,28,82,215/-. THE ASSESSEE BENCH MARKED THESE INTERNATIONAL TRANSACTIONS BY USING COMPARABLE UNCO NTROLLED PRICE (CUP) METHOD AS THE MOST APPROPRIATE METHOD. `SALE OF TRADED GOODS COMPRISES OF EXPORT OF SOYABEAN MEAL, SESAME SEED, IRON ORE AND EDIBLE OIL. `PURCHASE OF TRADE GOOD CONSIS TS OF IMPORT OF EDIBLE OIL. THE ASSESSEE CONTENDED THAT THE IMPORT AND EXPORT MADE BY IT WERE AT ALP. IN SUPPORT OF ITS CONTENTIO N, THE ASSESSEE RELIED ON PRICE PUBLICATIONS OF SOLVENT EXTRACTORS ASSOCIATION OF INDIA; PRICE PUBLICATIONS OF DBL TRADE CORPORATION; AND CERTAIN THIRD PARTY CONTRACTS. THE TPO NOTICED THAT THE CUP DATA FURNISHED BY THE ASSESSEE DID NOT CONTAIN CERTAIN RELEVANT FA CTORS NECESSARY FOR DETERMINATION OF ALP SUCH AS PAYMENT TERMS, CRE DIT PERIOD AND CERTAIN PARTIES INVOICING AT CIF BASIS WHEREAS CUP IS AVAILABLE AT FOB. IN SUCH BACKGROUND OF FACTS, THE TPO HELD THA T CUP METHOD WAS NOT APPLICABLE AND THE ALP WAS REQUIRED TO BE D ONE UNDER TRANSACTIONAL NET MARTIN METHOD (TNMM). HE COMPUTED THE ITA NO. 5722/DEL/2010 NOBLE RESOURCES & TRADING INDIA PVT. LTD. 3 ASSESSEES PLI OF OP/SALES AT (-) 5.10%. CERTAIN C OMPARABLES WERE CHOSEN WHOSE MEAN OF OP/SALES WAS WORKED OUT A T 3.09%. THAT IS HOW THE ADDITION OF RS. 7.23 CRORES WAS MAD E TOWARDS THE INTERNATIONAL TRANSACTIONS OF SALE AND PURCHASE OF TRADED GOODS. THE ASSESSEE CHALLENGED THE DRAFT ORDER BEFORE THE DISP UTE RESOLUTION PANEL (DRP). THE DRP VIDE ITS ORDER DATED 20.9.2010 REJECTED THE ASSESSEE CONTENTIONS AND UPHELD THE ADDITION PROPO SED IN THE DRAFT ORDER. THUS THE FINAL ORDER WAS PASSED BY THE A.O U /S 143(3) R.W.S. 144C(13) MAKING ADDITION OF RS. 7.39 CRORES. THE AS SESSEE IS AGGRIEVED AGAINST THE ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE FOREMOS T POINT OF DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE IS THE APPLICATION OF THE MOST APPROPRIATE METHOD AND THEN THE SELECTI ON OF COMPARABLES UNDER TNMM. WHEREAS THE ASSESSEE ADOPTE D CUP AS THE MOST APPROPRIATE METHOD, THE REVENUE REJECTED I T AND INSISTED ON THE APPLICATION OF TNMM. THE VIEWPOINT CANVASSED BY THE REVENUE IN SUCH REJECTION IS THAT THE NECESSARY DET AILS REQUIRED FOR THE APPLICATION OF CUP METHOD WERE NOT FORTHCOMING FROM THE ASSESSEES SIDE. SEVERAL BENCHES OF THE TRIBUNAL H AS HELD THAT CUP IS THE MOST APPROPRIATE METHOD IN CASE OF TRADI NG TRANSACTIONS PROVIDED THE UNCONTROLLED TRANSACTIONS RELIED BY T HE ASSESSEE ARE REALLY COMPARABLE AND NECESSARY DATA REQUIRING ADJU STMENTS, IF ANY, ITA NO. 5722/DEL/2010 NOBLE RESOURCES & TRADING INDIA PVT. LTD. 4 IS AVAILABLE. INTERNAL CUP HAS BEEN HELD AS MORE AP PROPRIATE THAN THE EXTERNAL CUP. THE NET EFFECT OF THIS DISCUSSION IS THAT IF THE ASSESSEES SIMILAR TRANSACTIONS WITH NON ASSOCIATED ENTERPRISES ARE AVAILABLE THEN IT IS ALWAYS BETTER TO GO BY SUCH IN TERNALLY COMPARABLE UNCONTROLLED TRANSACTIONS FOR BENCHMARKI NG THE PRICE CHARGED/PAID FROM/TO ITS ASSOCIATED ENTERPRISES IN COMPARABLE TRANSACTIONS. AT THE SAME TIME, IT IS RELEVANT TO O BSERVE THAT IF COMPLETE DATA OF SUCH COMPARABLE UNCONTROLLED TRANS ACTION IS NOT AVAILABLE, THEN THE REVENUE IS AT LIBERTY TO DISCAR D THE CUP METHOD AND RESORT TO ANY OTHER SUITABLE METHOD. 5. ADVERTING TO THE FACTS OF THE INSTANT CASE, IT I S SEEN THAT THE DETAILS OF ITS EXPORT TRANSACTIONS OF SOYABEAN MEAL TO ITS AES IS AVAILABLE ON PAGES 64 & 65 OF THE PAPER BOOK. MAJOR TRANSACTIONS ARE OF EXPORT TO AE IN SINGAPORE AND FEW TRANSACTIO NS ARE OF EXPORT TO ITS AE IN INDONESIA. PAGE 135 OF THE PAPER BOOK IS A COPY OF INVOICE DATED 21.3.2006 PURSUANT TO CONTRACT DATED 2.3.2006 IN WHICH PRICE OF RS. 193 PER MT HAS BEEN CHARGED. THE ASSESSEE ALSO SUPPLIED SIMILAR PRODUCTS TO ITS NON-AE IN SINGAPO RE, A COPY OF WHICH IS AVAILABLE ON PAGE 287 OF THE PAPER BOOK. S IMILARLY, THE DETAILS REGARDING EXPORT OF SESAME SEED MADE TO ITS AES IS AVAILABLE ON PAGE 66 OF THE PAPER BOOK, FOR WHICH T HE LD. AR CONTENDED THAT THOUGH NO ACTUAL COMPARABLE UNCONTRO LLED TRANSACTIONS WAS AVAILABLE BUT THE ASSESSEE COULD S HOW THE PRICE ITA NO. 5722/DEL/2010 NOBLE RESOURCES & TRADING INDIA PVT. LTD. 5 ACTUALLY CHARGED BY COMPARABLES. AS REGARDS THE EX PORT OF IRON ORE OF ITS AES, THE DETAIL OF WHICH IS AVAILABLE ON PAG E 67 OF THE PAPER BOOK, THE ASSESSEE TRIED TO SHOW THAT ITS INVOICES TO ITS AE WERE COMPARABLE WITH THAT CHARGED FROM NON-AES. IN THE L IKE MANNER THE ASSESSEE TRIED TO SHOW THAT THE COMPARABLE DATA OF NON-AES WAS VERY MUCH AVAILABLE, WHICH THE AUTHORITIES BEL OW HAVE REFUSED TO LOOK INTO. FROM THE ORDER PASSED BY THE DRP, WE FIND THAT THERE IS NO WORTHWHILE DISCUSSION ABOUT THE OB JECTIONS TAKEN BY THE ASSESSEE IN FORM NO. 35A. IT CAN BE SEEN FRO M THE DRPS ORDER THAT IT IS SUMMARY OF THE VIEW CANVASSED BY T HE AO/TPO FOR MAKING ADDITION OF RS. 7.23 CRORES WITHOUT PROPERLY NOTING OR DEALING WITH THE OBJECTIONS RAISED BY THE ASSESSEE. THE TRIBUNAL IN EVALUESER CO. PVT. LTD. VS INCOME-TAX OFFICER (2014 ) 134 ITD 546 (DELHI) HAS RESTORED THE MATTER TO THE FILE OF DRP FOR PASSING A DETAILED ORDER WHEN THE OBJECTIONS OF THE ASSESSEE WERE NOT DEALT WITH. THE LD. AR CONTENDED THAT THE ASSESSEE HAS FU LL DETAILS TO SATISFY THE AUTHORITIES BELOW AS REGARDS THE APPLIC ATION OF CUP METHOD AND HENCE THE MATTER SHOULD BE RESTORED TO T HE FILE OF TPO INSTEAD OF DRP, WHO HAD ALSO FAILED TO APPRECIATE T HE CONTENTIONS MADE BEFORE HIM. WE CAN OBSERVE FROM THE ORDER OF T HE TPO AS WELL THAT THOUGH DETAILED SUBMISSIONS WERE FILED BE FORE HIM, BUT THOSE HAVE NOT BEEN APPROPRIATELY CONSIDERED WHILE PROPOSING THE ADDITION OF RS. 7.23 CRORES. THE LD. DR, THOUGH REL IED ON THE IMPUGNED ORDER BUT SUGGESTED THAT IF THE MATTER WAS TO BE SENT ITA NO. 5722/DEL/2010 NOBLE RESOURCES & TRADING INDIA PVT. LTD. 6 BACK THEN IT SHOULD GO TO THE TPO INSTEAD OF DRP. CONSIDERING THE ENTIRE CONSPECTUS OF THE CASE, WE ARE OF THE CONSID ERED OPINION THAT THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IM PUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF TPO. WE ORDER ACCORDINGLY. HOWEVER, WE DO NOT APPROVE, IN PRINCI PLE, THE CONTENTION OF THE LD. AR THAT QUOTATIONS ETC. OR TH E PRICE AS PER SOME PUBLICATIONS CAN BE CONSIDERED FOR BENCHMARKIN G THE ASSESSEES INTERNATIONAL TRANSACTIONS UNDER THE CUP METHOD. THE COMPARISON IS REQUIRED TO BE DONE WITH THE ACTUAL U NCONTROLLED TRANSACTIONS AND NOT QUOTATIONS ETC. IF THE ASSESSE E SUCCEEDS IN PROVIDING APPROPRIATE DATA RELEVANT FOR COMPARISON UNDER THE CUP METHOD, THEN THE TPO SHOULD DETERMINE THE ALP UNDER THE CUP METHOD. IF HOWEVER, IT TURNS OUT THAT NECESSARY DET AILS FURNISHED BY THE ASSESSEE ARE INCOMPLETE OR NOT RELEVANT, THEN THE TPO MAY PROCEED WITH ANY OTHER APPROPRIATE METHOD. NEEDLESS TO SAY THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY O F BEING HEARD IN SUCH DE-NOVO PROCEEDINGS AND WILL ALSO HAVE FULL RI GHT TO PLACE ANY FRESH MATERIAL IN ITS SUPPORT. 6. THE OTHER GROUNDS ARE EITHER GENERAL OR CONSEQUE NTIAL, WHICH DO NOT REQUIRE ANY ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ITA NO. 5722/DEL/2010 NOBLE RESOURCES & TRADING INDIA PVT. LTD. 7 ORDER PRONOUNCED IN THE OPEN COURT ON 5/3/2014. SD/- SD/- (RAJPAL YADAV) (R. S. SY AL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5/3/2014 *SUBODH* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 3.3.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 3.3.2014 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. *