M/s. Panasonic Industrial Asia Pte. Ltd.- India Branch Office, New Delhi V. DDIT, New Delhi

ITA 5830/DEL/2012

• Counselvise Citation: 583020114 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 09-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN C I T D R TP
• Assessee Lawyers: HARPREET AJMANI S
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Additional evidence; Avoidance of tax
• Section: 92C; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT. DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-5830/DEL/2012 (ASSESSMENT YEAR-2008-09) M/S PANASONIC INDUSTRIAL ASIA PTE LTD., VS DDIT, INDIA BRANCH OFFICE, CIRCLE-2(1), C/O-S.R.BATLIBOI & ASSOCIATES, INTERNATIONAL TAX ATION, 6 TH FLOOR, HINDUSTAN TIMES HOUSE, R.NO.-412, DRUM SHAP ED KASTURBA GANDHI MARG, NEW DELHI. BUILDING, I.P.ESTA TE, NEW DELHI. PAN-AACCP7345J (APPELLANT) (RESPONDENT) APPELLANT BY: SH. DEEPAK CHOPRA, SH. MANONEET DALA L & SH. HARPREET AJMANI, ADVOCATES. RESPONDENT BY: SH. PEEYUSH JAIN, CIT DR (TP) ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED AGAINST THE ASSES SMENT ORDER DATED 04.10.2012 PASSED U/S 143(3)/144C OF THE INCOME TAX ACT, 1961 ON THE FOLLOWING GROUNDS :- 1. THAT ON FACTS AND IN LAW THE ORDER/DIRECTIONS PASSE D BY THE ASSESSING OFFICER (AO)/TRANSFER PRICING OFFICER (TPO)/ DI SPUTE RESOLUTION PANEL (DRP) ARE BAD IN LAW AND VOID AB-INITIO. 2. THAT THE AO/TPO/DRP HAVE HAS ERRED IN COMPUTATION O F THE PROFIT LEVEL INDICATOR (PLI) OF THE ASSESSEE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE DRP/AO/TPO ERRED IN BY NOT EXERCISING ITS POWER OF MAKING FURTHER ENQUIRY UNDER SECTION 144C OF THE ACT AND REFUSING TO CONSI DER THE ADDITIONAL EVIDENCE FILED BY THE APPELLANT IDENTIFYING NEW COM PANIES AS COMPARABLE. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO/AO/DRP HAS ERRED IN LAW BY CONSIDERING A VERY N ARROW APPROACH RESULTING IN REJECTION OF CERTAIN COMPANIES CONSIDE RED COMPARABLE BY THE APPELLANT. 5. THE HONBLE DRP HAS COMMITTED A GROSS ERROR BY ENDO RSING THE APPROACH FOLLOWED BY THE TPO WHO HAS ERRONEOUSLY ACCEPTED IC C INTERNATIONAL AGENCIES LTD. A SUPER NORMAL PROFIT MAKING COMPANY AS COMPARABLE. I.T.A .NO.-5830/DEL/2012 2 6. WITHOUT PREJUDICE TO OUT OTHER GROUNDS OF APPEAL, T HE ADDITION TO THE INCOME OF THE APPELLANT HAS BEEN MADE WITHOUT PROVIDING FO R APPROPRIATE ADJUSTMENTS FOR DIFFERENCES IN LEVEL OF WORKING CAP ITAL EMPLOYED BY THE APPELLANT VIS--VIS OTHER COMPANIES. 7. WITHOUT PREJUDICE TO OUT OTHER GROUNDS OF APPEAL, T HE ADDITION TO THE INCOME OF THE APPELLANT HAS BEEN MADE WITHOUT PROVIDING FO R APPROPRIATE ADJUSTMENTS FOR DIFFERENCES IN LEVEL OF RISK UNDERT AKEN BY THE APPELLANT VIS-- VIS OTHER COMPANIES. 8. WITHOUT PREJUDICE TO OUT OTHER ABOVE GROUNDS, THE L EARNED TPO/AO/DRP HAS ERRED IN LAW IN USING THE SINGLE YEAR DATA FOR DETERMINATION OF ARMS LENGTH PRICE INSTEAD OF MULTIPLE YEAR DATE WHICH EV EN OUT DIFFERENCE IN INDUSTRY AND PRODUCE CYCLES. 9. WITHOUT PREJUDICE TO OUT OTHER ABOVE GROUNDS, THE L EARNED TPO/AO/DRP HAS ERRED IN LAW IN PLACING RELIANCE ON THE FINANCI AL DATA WHICH WAS NOT AVAILABLE IN THE PUBLIC DOMAIN AT THE TIME WHEN THE ECONOMIC ANALYSIS WAS UNDERTAKEN AND TRANSFER PRICING STUDY WAS DOCUMENTE D. 10. THE LEARNED DRP ERRED IN LAW IN NOT APPLYING THE PR OVISO TO SECTION 92C OF THE ACT AND HAS FAILED TO ALLOW THE APPELLANT THE B ENEFIT OF UPWARD VARIATION OF 5 PERCENT IN DETERMINING THE ARMS LENGTH PRICE. 11. THAT ON FACTS AND IN LAWS, THE AO/DRP ERRED IN HOLD ING THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN R ESPECT OF EACH ITEM OF DISALLOWANCE/ADDITIONS AND IN INITIATING PENALTY PR OCEEDINGS UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT. THE APPELLANT CRAVES LEAVE TO SUBMIT SUCH FURTHER G ROUNDS AT OR BEFORE THE HEARING OF THE APPEAL, SO AS TO ENABLE YOUR HONOUR TO DECID E THE APPEAL ACCORDING TO LAW. 2. THE ASSESSEE, M/S PANASONIC INDUSTRIAL ASIA PTE. LTD. IS A COMPANY INCORPORATED IN SINGAPORE AND IS OPERATING IN INDIA THROUGH ITS BRANCH OFFICE- PANASONIC INDUSTRIAL ASIA PTE. LTD-INDIA BRANCH OFF ICE (ASSESSEE OR BRANCH OFFICE) ESTABLISHED ON 07.09.2002. THE RELEVANT F ACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN DECLARING AN INCOME OF ` 10,307,032/- WHICH WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2). BASED O N THE ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER (HEREINAFTER REFERRED TO A S THE TPO) CONSEQUENT TO THE ORDER OF THE DISPUTE RESOLUTION PANEL (HEREINAFTER REFERRED TO AS THE DRP), THE PRESENT ASSESSMENT ORDER HAS BEEN PASSED. 2.1. THE TPO IN HER ORDER U/S 92CA(3) DATED 28.10.2 011 DETERMINED THE ARMS LENGTH MARGIN OF THE COMPARABLE ENTITIES OF THE ASS ESSEE AS 24.14% WHICH WAS MODIFIED BY HER VIDE ORDER DATED 04.10.2012 AND TH E ARMS LENGTH MARGIN WAS RE- CALCULATED AS 25.01% THEREBY MAKING AN ADJUSTMENT O F ` 1,03,07,032/-. I.T.A .NO.-5830/DEL/2012 3 3. LD. AR AT THE TIME OF HEARING INVITING ATTENTION TO THE GROUNDS RAISED SUBMITTED THAT GROUNDS 1 & 2 ARE GENERAL IN NATURE AND GROUND NO-6 & 7 ARE NOT PRESSED. IT WAS FAIRLY CONCEDED THAT GROUNDS 8 & 9 ARE AGAINST THE ASSESSEE. IN THE SAID BACKGROUND, IT WAS SUBMITTED THAT HE WOULD BE ARGUING GROUNDS 3, 4 & 5. 4. ADDRESSING GROUND NO-5 FIRST, WHICH WAS STATED T O BE THE MAJOR GROUND, OUR ATTENTION WAS INVITED TO PAGE 1 OF THE APPEAL SET W HICH CONTAINS THE ORDER OF THE TPO PASSED U/S 92C(3). INVITING ATTENTION TO PARA 2 OF THE SAME, IT WAS SUBMITTED THAT THE AE OF THE ASSESSEE IS A BRANCH OFFICE OF PANASONIC INDUSTRIAL PTE. LTD. SINGAPORE (PIAPL OR HEAD OFFICE) AND WAS ESTABLISHED ON S EPTEMBER 7, 2002 PURSUANT TO RECEIPT OF NECESSARY APPROVAL FROM RESERVE BANK OF INDIA (RBI). IT WAS STATED THAT THE ASSESSEE WAS FURTHER GRANTED A CERTIFICATE OF E STABLISHMENT OF PLACE OF BUSINESS IN INDIA BY THE REGISTRAR OF COMPANIES ON 26.09.2002. THE INTERNATIONAL TRANSACTIONS REPORTED BY THE ASSESSEE IN FORM NO-3CEB WERE AS UN DER :- 3. THE INTERNATIONAL TRANSACTIONS REPORTED BY THE ASSESSEE IN FORM 3CEB ARE GIVEN BELOW:- S.NO. NATURE OF TRANSACTION METHOD USED BY ASSESSEE VALUE OF TRANSACTION METHOD PLI 1. PROVISION OF SUPPORT SERVICES TNMM OP/OC 70,545,187/- 2. REIMBURSEMENT OF EXPENSES NA OP/OC 10,134,619/- 4.1. THE TPO IT WAS SUBMITTED TAKING INTO CONSIDERA TION THE INTERNATIONAL TRANSACTIONS WITH THE AE SHOW-CAUSED, THE ASSESSEE ON THE FOLLOWING GROUNDS :- II. THE PLI OF OP/OC AS DERIVED BY YOU IS 11.50%, WHICH HAS BEEN BENCHMARKED WITH THE ARITHMETIC MEAN OF 11.75% ON 11 COMPARABLES SELECTED BY YOU AND THUS YOUR CONTENTION REMAINS THAT YOUR NET MARGINS ARE WITHIN THE RANGE. III. YOUR CONTENTION AS STATED ABOVE WAS CONSIDERED. HO WEVER THE COMPARABLES SELECTED BY YOU ARE REJECTED FOR THE FOLLOWING ANY OR ALL INAPT FILTERS: COMPANIES WHOSE SUPPORT SERVICE INCOME