Infac India Pvt Limited, Kancheepuram V. DCIT, CHENNAI

ITA 633/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8707 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-03-2016
• Court: TRIBUNAL
• Department Lawyers: M N MAURYA
• Assessee Lawyers: S RAGHUNATHAN
• Keywords: Transfer pricing

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , ! ' , # $% & [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.633/MDS./2016 / ASSESSMENT YEAR : 2011-12 M/S.INFAC INDIA PVT LTD ., NO.113,EILLAIMANNAM KOIL STREET, PADAPPAI, KANCHIPURAM DISTRICT 601 301. VS. DY. COMMISSIONER OF INCOME TAX, CORPORATION CIRCLE 2(2), 512,5 TH FLOOR,WANAPARTHY BLOCK, CHENNAI-34. PAN AADCS 4890 C ( '( / APPELLANT ) ( )*'( / RESPONDENT ) / APPELLANT BY : MR.S.RAGHUNATHAN,ADVOCATE /RESPONDENT BY : MR.M N MAURYA, CIT,D.R / DATE OF HEARING : 19 - 07 - 201 6 ! / DATE OF PRONOUNCEMENT : 22 - 07 - 2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE FINAL ORDER OF THE LD. ASSESSING OFFICER PASSED U/S.143(3) R.W .S.144C(13) OF THE ACT VIDE ORDER DATED 05.01.2016 PURSUANT TO THE OR DER OF THE T.P.O ITA NO. :- 2 -: DATED 29.01.2015 AND THE DIRECTIONS ISSUED BY THE D .R.P. DATED 23.12.2015. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEA L IS WITH REGARD TO DISALLOWING OF MANAGEMENT FEE PAID TO M/S.INFA C CORPORATION, KOREA, THE ASSOCIATED ENTERPRISE (A.E) TO THE EXTEN T OF ` 17,26,745/-. 3. THE FACTS OF THE ISSUE ARE THAT MANAGEMENT FEE PAID TO M/S.INFAC CORPORATION, KOREA, THE A.E IS USD 360,00 0/- AND GROSSED UP TDS AND RBI CESS AMOUNTS TO US $ 407,447 (EQUIVALEN T RS.19,025,120) FOR THE FOLLOWING SERVICES RENDERED FROM THE TOP MANAGEMENT OF A.E. A) ECB LOAN RELATED WORK B) NEW CUSTOMER DEVELOPMENT RELATED WORK C) RAW MATERIAL PROCUREMENT SUPPORT D) TEST WORK SUPPORT E) QUALITY & OTHER SUPPORT WORK F) FINANCE & ACCOUNTS SUPPORT WORKS G) TIME COST CHARGE IN RESPECT OF TOP MANAGEMENT PERSONS SUPPORT H) AUDIT CO-ORDINATION HOWEVER, ON PERUSAL OF LD.A.RS SUBMISSION, TPO CAM E TO A CONCLUSION THAT THERE ARE NO SPECIFIC SERVICED PROVIDED BY THE A.E AND ALL THE ADVICES RECEIVED BY THE AE ON ARE ON ACCOUNT OF THE PASSIVE ASSOCIATION WITH THE ASSESSEE AND HENCE THERE WAS N O NEED TO PAY ANY ITA NO. :- 3 -: MANAGEMENT SERVICES FEE TO THE AE. AFTER CONSIDERI NG THE SUBMISSION OF ASSESSEE, THE TPO REJECTED THE CLAIM AND MADE A DOWN-WARD ADJUSTMENT OF ` 1,72,62,745/- AFTER DETERMINING THE ALP AT ` 17,62,375/-. 3.1. BEFORE THE DRP, THE MAIN CONTENTION OF LD.A.R IS THAT THE ASSESSEE HAS INCURRED PAYMENTS TO ITS AE TOWARDS TH E TECHNICAL SERVICES FEE BASED ON THE DETAILS OF SERVICES AND V ARIOUS DOCUMENTARY EVIDENCES SUBMITTED BUT THE TPO CONSIDERED PART OF THE SAME AT ARMS LENGTH BUT REFUSED TO CONSIDER THE CATEGORIES OF SE RVICES AMOUNTING TO ` 1,72,62,745/-. THE DRP OBSERVED THAT THIS ISSUE WA S DISCUSSED ELABORATELY BY TPO FROM PAGE 11 TO 19 TO HIS ORDER AND FOUND THAT EACH COMPONENT OF WORK PERFORMED UNDER TECHNICAL SERVICES/MANAGEMENT SERVICES HAVE BEEN VERIFIED BY THE TPO WITH REFERENCE TO DETAILS AND EVIDENCE. FOR EACH COMPONE NT TPO HAS RECORDED HIS CATEGORICAL FINDINGS ABOUT THE AVAILAB ILITY OR LACK OF THE DETAILS AND EVIDENCES. ACCORDING TO THE DRP, THE D ETAILS OF DOCUMENTS SUBMITTED AND EXAMINED ARE ALSO LISTED IN THE ORDER OF TPO AND ALSO TPO HAS ACCEPTED THE ARMS LENGTH AT ` 17,62,375/-. CONSEQUENTLY, THE BALANCE AMOUNT OF ` 1,72,62,745/- HAS BEEN ADJUSTED DOWNWARDS. HENCE, THE DRP CONFIRMED THE ORDER OF THE TPO. AGAI NST THE DIRECTION OF DRP, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. :- 4 -: 4. THE SIMILAR ISSUE IS CAME FOR CONSIDERATION BEF ORE THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO.745/MDS./2015 DATED 12.08.2015. THE TRIBUNAL OB SERVED AS FOLLOWS:- 6. AFTER HEARING BOTH SIDES, WE ARE OF THE CONSIDE RED VIEW THAT THE ENTIRE MATTER HAS TO BE REMITTED BACK TO THE FILE OF LD. TPO FOR DENOVO CONSIDERATION BECAUSE BO TH THE ASSESSEE AS WELL AS THE REVENUE HAS NOT EXAMINED TH E ISSUE WITH RESPECT TO THE CORRECT FACTUAL MATRIX. MANAGEMENT SERVICES AND TECHNICAL SERVICES FALS E UNDER DIFFERENT FIELD AND THE NATURE OF WORK INVOLV ED BOTH THESE SERVICES ARE DIFFERENT. FURTHER, WHEN THE ASS ESSEE HAS MADE PAYMENTS TO ITS PARENT COMPANY IT HAS TO ESTABLISH AND JUSTIFY THE NATURE OF PAYMENT AND THE NATURE OF SERVICE RECEIVED FOR THE PURPOSE OF DETER MINING ARMS LENGTH PRICE IN TRANSFER PRICING MATTERS. THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM. JUST BE CAUSE THE OPERATING COST INCURRED BY THE ASSESSEE COMPANY IS LESS THAN THE OPERATING COST OF THE COMPARABLE COMPANIES, THE CLAIM OF EXPENSES INCURRED TOWARDS PAYMENT MADE TO ITS PARENT COMPANY ON AN ADHOC BASI S CANNOT BE JUSTIFIED. IN MODERN MANAGEMENT AND TECHNICAL FIELD THERE ARE SUFFICIENT WAYS AND MEASU RES TO MEASURE THE SERVICES RENDERED BY ONE ENTITY TO OTHE R ENTITY. THEREFORE, AS REQUIRED BY THE REVENUE, THE ASSESSEE IS BOUND TO PRODUCE SATISFACTORY EVIDENCE BEFORE THE REVENUE TO ESTABLISH ITS STAND. IN FACT IN THIS INSTANCE CASE THE ENTIRE CONFUSION HAS ARISEN BECAU SE THE ITA NO. :- 5 -: ASSESSEE COMPANY HAS NOT SUBMITTED THE EVIDENCE FOR THE SERVICE RENDERED BY THE PARENT COMPANY TO THE ASSESSEE COMPANY AGAINST WHICH THE PAYMENTS ARE MAD E TO THE PARENT COMPANY BY THE ASSESSEE COMPANY. WITH THESE OBSERVATIONS WE REMIT THE MATTER BACK TO THE FILE OF LD.TPO FOR FRESH CONSIDERATIONS. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO REMIT THE ISSUE TO THE FILE OF TPO FOR FRESH CONSIDERATION. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22 ND JULY, 2016, AT CHENNAI. SD/ - SD/ - ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ' ) (CHANDRA POOJARI) # / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 22 ND JULY, 2016 K S SUNDARAM &' () *) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. + /' / CIT(A) 6. -0 1 / GF