JCB India Ltd., New Delhi V. DCIT, New Delhi

ITA 6359/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3159 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 18-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 24-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARU
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Scheme of amalgamation
• Section: 92D; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6359/DEL./2012 (ASSESSMENT YEAR : 2008-09) M/S. JCB INDIA LIMITED, VS. DCIT, CIRCLE 4 (1), (FORMERLY KNOWN AS M/S. JCB NEW DELHI. MANUFACTURING PVT. LTD.) B 1/1 1, 2 ND FLOOR, MOHAN CO-OP. INDUSTRIAL ESTATE, NEW DELHI 110 044. (PAN : AABCJ4286D) ITA NO.618/DEL./2014 (ASSESSMENT YEAR : 2009-10) DCIT, CIRCLE 4 (1), VS. M/S. JCB MANUFACTURING PVT . LTD., NEW DELHI. B 1/1 1, 2 ND FLOOR, MOHAN CO-OP. INDUSTRIAL ESTATE, NEW DELHI 110 044. (PAN : AABCJ4286D) CO NO.284/DEL/2014 (IN ITA NO.618/DEL./2014) (ASSESSMENT YEAR : 2009-10) M/S. JCB MANUFACTURING PVT. LTD., VS. DCIT, CIRCLE 4 (1), (NOW KNOWN AS M/S. JCB INDIA LTD.) NEW DELHI. B 1/1 1, 2 ND FLOOR, MOHAN CO-OP. INDUSTRIAL ESTATE, NEW DELHI 110 044. (PAN : AABCJ4286D) (APPELLANT) (RESPONDENT) ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 2 ASSESSEE BY : SHRI ASHWANI TANEJA, ADVOCATE REVENUE BY : SHRI SANJAY I. BARU, CIT DR DATE OF HEARING : 15.11.2017 DATE OF ORDER : 12.12.2017 O R D E R PER BENCH : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEALS AND CROSS OBJECTION, THE SAME ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, M/S. JCB INDIA LTD. (FORMERLY KNO WN AS M/S. JCB MANUFACTURING PVT. LTD.) (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILING THE PRESENT APPEAL BEING ITA NO.6359/DEL/2012 SOUGHT TO SET ASIDE THE IMPUGNED O RDER DATED 25.10.2012, PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TPO UNDER SECTION 143 (3) REA D WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T) QUA THE ASSESSMENT YEAR 2008-09 ON THE GROUNDS INTER ALIA T HAT :- TRANSFER PRICING MATTERS GROUND 1: ERRONEOUS REJECTION OF THE TRANSFER PRICI NG ANALYSIS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. ASSESSING OFFICER ('AO'), THE LD. TRAN SFER PRICING OFFICER (TPO') PURSUANT TO THE DIRECTIONS O F THE ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 3 LD. DISPUTE RESOLUTION PANEL (DRP') ERRED IN REJEC TING THE BENCHMARKING APPROACH ADOPTED BY THE APPELLANT IN THE TRANSFER PRICING STUDY AND THEREBY MAKING A TRANSFER PRICING ADJUSTMENT OF RS.9,82,34,197 TO TH E INTERNATIONAL TRANSACTION OF EXPORT OF COMPONENTS F ROM PLANT I AND RS.17,098,544 TO THE TRANSACTION OF PROVISION OF ENGINEERING DESIGN SERVICES FROM PLANT II OF THE APPELLANT BY HOLDING THAT THESE INTERNATIONA L TRANSACTIONS DO NOT SATISFY THE ARM'S LENGTH PRINCI PLE ENVISAGED UNDER THE INCOME-TAX ACT, 1961 (THE ACT ). GROUND 2: REJECTION OF ECONOMIC ADJUSTMENTS CONDUCTED BY THE APPELLANT TO COMPUTE THE OPERATING PROFIT FROM THE INTERNATIONAL TRANSACTION OF EXPORT OF COMPONENTS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP/AO/TPO HAS ERRED IN REJECTING THE ECONOMIC ADJUSTMENTS CONDUCTED BY THE APPELLANT FOR COMPUTATION OF OPERATING PROFIT FROM INTERNATIONAL TRANSACTION OF EXPORT OF COMPONENTS, WHILE DOING SO , THE LD. DRP/ AO/TPO HAS ERRED IN REJECTING THE NEED TO MAKE ECONOMIC ADJUSTMENTS TO THE TESTED PARTY (INST EAD OF ADJUSTMENTS TO THE COMPARABLES) AND STATING THAT ADJUSTMENTS ARE PERMISSIBLE ONLY TO COM PARABLES AN D NOT TO THE APPELLANT, I.E. TESTED PARTY, AS PER PRO VISIONS OF RULE 10B (1) (E) (III) OF THE RULES. GROUND 3: DENIAL OF WORKING CAPITAL ADJUSTMENT TO T HE COM PARABLES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP/AO/TPO ERRED IN DENYING A WORKING CAPITAL ADJUSTMENT TO THE OPERATING PROFIT MARGINS OF THE COM PARABLES AS CONDUCTED BY THE APPELLANT DESPITE THE FACT THAT SUCH AN ADJUSTMENT WAS CONDUCTED IN THE TRANSFER PRICING DOCUMENTATION AS MAINTAINED BY THE APPELLANT IN TERMS OF SECTION 92D OF THE ACT READ W ITH RULE 10D OF THE RULES AND ALL THE DETAILS WERE SUBM ITTED BEFORE THE LD. DRP/ AO/TPO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 4 GROUND 4: ERRONEOUS REJECTION OF COMPARABLE UNCONTR.9L1ED PRICE DATA IN RESPECT OF INTERNATIONA L TRANSACTION OF PROVISION OF ENGINEERING DESIGN SERV ICES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP/AO/TPO HAS ERRED IN REJECTING THE COMPARABLE UNCONTROLLED PRICE DATA PROVIDED BY THE APPELLANT IN RESPECT OF ITS INTERNATIONAL TRANSACTI ON PERTAINING TO PROVISION OF DESIGN ENGINEERING SERVI CES TO ITS ASSOCIATED ENTERPRISES. GROUND 5: ERRONEOUS COMPUTATION OF ADJUSTMENT ON TH E ENTIRE SERVICE INCOME OF DESIGN ENGINEERING SERVICE S SEGMENT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP/AO/TPO HAS ERRED IN COMPUTING THE ADJUSTMENT ON THE ENTIRE SERVICE INCOME OF THE DESI GN ENGINEERING SERVICES SEGMENT (PLANT III) OF THE APPELLANT AMOUNTING TO RS.67,388,310, WHEREAS THE INTERNATIONAL TRANSACTION PERTAINING TO THIS SEGMEN T AMOUNTS ONLY TO RS.52,611,526. THUS, THE LD. DRP/AO/TPO HAVE ERRED BY NOT COMPUTING THE ADJUSTMENT ON A PROPORTIONATE BASIS. GROUND 6: ERRONEOUS SELECTION I REJECTION OF COMPARABLES FOR INTERNATIONAL TRANSACTION OF PROVIS ION OF ENGINEERING DESIGN SERVICES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP/AO/TPO HAS ERRED IN: A) REJECTING ONWARD TECHNOLOGIES LIMITED AS FUNCTIONALLY NOT COMPARABLE COMPANY; DESPITE THE FA CT THAT RELEVANT CUP DATA FOR SERVICES PROCURED BY THE ASSOCIATED ENTERPRISES FROM ONWARD TECHNOLOGIES WAS SUBMITTED BY THE APPELLANT; B) CONSIDERING ROLTA INDIA LIMITED AS COMPARABLE COMPANY; THOUGH THE SAME IS NOT FUNCTIONALLY COMPARABLE. ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 5 GROUND 7: DENYING THE USE OF MULTIPLE YEAR DATA TO THE APPELLANT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD DRP/AO/TPO HAS ERRED IN CONSIDERING THE SINGLE YEAR DATA FOR THE COM PARABLES I.E. DATA FOR FINANC IAL YEAR ('FY') 2007-08 ONLY AND DISREGARDING MULTIPLE YEAR DATA WHICH WAS CONSIDERED BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B (4) OF T HE RULES. WHILE DOING SO, THE LD. DRP/AO/TPO ERRED IN APPRECIATING THE FACT THAT THE APPELLANT HAS COMPUT ED ARM'S LENGTH PRICE FOR THE TRANSACTION OF PROVISION OF ENGINEERING DESIGN SERVICES ON THE BASIS OF CONTEMPORANEOUS AND MULTIPLE YEAR DATA OF COM PARABLES AVAILABLE AT THE TIME OF CONDUCTING THE TRANSFER PRICING STUDY AND BASED ON THE SAME HAD OFFERED A SUO-MOTO ADJUSTMENT OF RS.96,09,029 AS INCOME IN ITS RETURN OF INCOME, THEREBY CLEARLY COMPLYING WITH THE PROVISO TO RULE 108 (4) OF THE R ULES. GROUND 8: IGNORING THE FACT THAT THE APPELLANT IS ENTITLED TO TAX HOLIDAY UNDER SECTION 10B OF THE AC T ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. DRP/AO/TPO ERRED IN IGNORING THE FACT THAT THE APPELLANT IS ENTITLED TO TAX HOLIDAY UNDER SECTION 108 OF THE ACT ON ITS PROFITS OF PLANT I AND THEREF ORE WOULD NOT HAVE ANY UNTOWARD MOTIVE OF DERIVING A TA X ADVANTAGE BY MANIPULATING TRANSFER PRICES OF ITS INTERNATIONAL TRANSACTIONS. 3. THE APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX , CIRCLE 4 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE R EVENUE) BY FILING THE PRESENT APPEAL BEING ITA NO.618/DEL/2014 SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 29.01.2014, PASSED B Y THE AO IN CONSONANCE WITH THE ORDERS PASSED BY THE LD. DRP/TP O UNDER SECTION 143 (3) READ WITH SECTION 144C OF THE INCOM E-TAX ACT, 1961 ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 6 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2009- 10 ON THE GROUNDS INTER ALIA THAT :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. MEMBERS OF DRP HAS ERRED IN DIRECTING THE TPO / AO TO ALLOW ADJUSTMENT ON ACCOU NT OF WORKING CAPITAL, IN RESPECT OF PLANT 1. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. MEMBERS OF DRP HAS ERRED IN HOLDING THE CUP METHOD AS MOST APPROPRIATE FOR THE PERIOD 01.04.2008 TO 31.12.2008 ON THE BASIS OF INV OICE OF A.E. IGNORING THE FACT THAT THERE WAS NO MATERIA L DIFFERENCE WHEN THE ASSESSEE IS WORKING AS 'LICENSE MANUFACTURING' OR 'CONTRACT MANUFACTURE' 3. THAT THE ORDER OF THE DRP IS ERRONEOUS AND IS NO T TENABLE ON FACTS AND IN LAW. 4. THE OBJECTOR, M/S. JCB MANUFACTURING PVT. LTD., BY FILING THE PRESENT CROSS OBJECTIONS CHALLENGED THE ASSESSM ENT ORDER DATED 29.01.2014 PASSED BY THE ASSESSING OFFICER QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD AO HAS ERRED IN CONFIRMING THE LD. TPO' S JUDGMENT REGARDING REJECTION OF TRANSFER PRICING AP PROACH UNDERTAKEN BY THE APPELLANT. IN PARTICULAR, THE AO /TPO HAS ERRED IN: GROUNDS PERTAINING TO INTERNATIONAL TRANSACTION OF EXPORT OF COMPONENTS FROM PLANT I 1.1 REJECTION OF ECONOMIC ADJUSTMENT CONDUCTED BY THE RESPONDENT ON ACCOUNT OF UNABSORBED OVERHEADS DUE TO UNDERUTILISATION OF CAPACITY TO COMPUTE THE OPERATING PROFIT FROM THE INTERNATIONAL TRANSACTION OF EXPORT OF COMPONENTS; ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 7 1.2 REJECTION OF ACCOUNTING ADJUSTMENT CONDUCTED B Y THE RESPONDENT (TO ACCOUNT FOR DIFFERENCES IN RATES OF DEPRECIATION ADOPTED BY THE RESPONDENT VIS-A-VIS COMPARABLES) FOR COMPUTATION OF OPERATING PROFIT FROM INTERNATIONAL TRANSACTION OF EXPORT OF COMPONENTS WITHOUT APPRECIATING THAT THE SAID RATIONALE IS' SQUARELY COVERED UNDER SEVERAL JUDICI AL PRECEDENCE FROM HON'BLE TRIBUNAL; GROUNDS PERTAINING TO INTERNATIONAL TRANSACTION OF EXPORT OF EQUIPMENT FROM PLANT II 1.3 INCORRECT CONSIDERATION OF B E M L LIMITED AS A COMPARABLE COMPANY WITHOUT APPRECIATING THE FACT THAT THE SAME IS A PUBLIC SECTOR UNDERTAKING WHEREA S, THE SELECTION OF PUBLIC SECTOR UNDERTAKINGS IS INCORRECT, THE SAID RATIONALE IS SQUARELY COVERED UNDER SEVERAL JUDICIAL PRECEDENCE FROM HON'BLE TRIBUNAL; AND 1.4 REJECTION OF ADJUSTMENT FOR MARKETING FUNCTION WHICH WAS ABSENT IN CASE OF THE ASSESSEE VIS-A-VIS THE COMPARABLES AS CONDUCTED BY THE ASSESSEE IN ITS TP DOCUMENTATION. ITA NO.6359/DEL/2012 (AY 2008-09) ASSESSEES APPEAL 5. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. JCB MANUFACTURING PV T. LIMITED (JCBMPL), THE TAXPAYER HAS BEEN MERGED WITH M/S. JC B INDIA LIMITED (JCBIL) W.E.F. 01.04.2009 AS APPROVED BY HONBLE HIGH COURT OF BOMBAY VIDE ORDER DATED 05.02.2010 AND HON BLE HIGH COURT OF DELHI VIDE ORDER DATED 05.02.2010 AND ANOT HER ORDER PASSED BY HONBLE DELHI HIGH COURT DATED 26.05.2010 AND CONSEQUENTLY JCBML CEASES TO BE A SEPARATE LEGAL EN TITY. THE ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 8 TAXPAYER IS A 100% EXPORT ORIENTED UNIT AND COMPONE NT MANUFACTURING PLANT (PLANT I) HAS BEEN SET UP FOR MANUFACTURING COMPONENTS AND SPARE PARTS FOR CONSTRUCTION EQUIPME NT AND DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER MANUFACTURE D WELDED STEEL FABRICATIONS IN THE NATURE OF EXCAVATOR COMPONENTS SUCH AS BACK BLADES, BUCKETS, DIPPERS, SHOVELS, LOADER ARMS, BOO MS ETC. FOR BACKHOE LOADER 220, 360 DEGREE EXCAVATOR AND OTHER MACHINES THE TAXPAYER HAS SET UP EQUIPMENT MANUFACTURING PLA NT (PLANT - II) TO CATER THE EXPORT AS WELL AS DOMESTIC MARKET COMM ENCED IN OCTOBER 2006 AND HAS SET UP IN-HOUSE ENGINEERING DE SIGN CENTRE, TO PROVIDE SERVICES TO OVERSEAS GROUP COMPANIES AND OT HER INDIAN COUNTERPARTS SUCH AS PLANT I, PLANT II AND DELHI UN IT OF JCBIL. 6. THE TAXPAYER DURING THE YEAR UNDER ASSESSMENT EN TERED INTO FOLLOWING INTERNATIONAL TRANSACTIONS :- S.NO. NATURE OF TRANSACTIONS AMOUNT OF TRANSACTIONS METHOD ADOPTED 1. IMPORT OF RAW MATERIALS 2,03,11,666 TNMM 2. EXPORT OF FINISHED COMPONENTS 1,47,13,85,613 TNMM 3. EXPORT OF FINISHED GOODS 88,09,17,903 TNMM 4 . IMPORT OF KITS 39,72,80,839 CUP 5. EXPORT OF RAW MATERIAL / PARTS (COMPONENTS) 35,02,75,661 TNMM 6. EXPORT OF RAW MATERIAL 1,43,87,723 TNMM 7 . PURCHASES OF CAPIT AL ASSETS 25,68,296 CUP 8. DESIGN ENGINEERING SERVICES 5,26,11,526 TNMM 9. WRITE BACK OF PROVISION FOR RECTIFICATION & REWORK CHARGES 1,52,34,244 CUP 10 . RECTIFICATION & REWORK CHARGES 1,32,22,229 CUP 11. RECOVERY OF EXPENSES 6,91,99,394 CUP 12. REIMBURSEMENT OF EXPENSES INCURRED 31,85,15,888 CUP TOTAL 3,60,59,10,982 ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 9 7. THE TAXPAYER CLAIMED TOTAL SALES OF RS.7,31,48,9 7,463/- AND NET SALES AFTER DEDUCTION OF EXCISE DUTY OF RS.6,55 ,22,77,673/- AND ON INCLUDING THE OTHER INCOME OF RS.26,91,61,546/-, THE TURNOVER OF THE TAXPAYER IS RS.6,82,14,39,219/- AND LOSS BEFORE TAXATION OF THE TAXPAYER IS RS.43,10,91,149/- FOR THE YEAR ENDING 3 1.03.2008. THE TAXPAYER FOR THE PURPOSE OF BENCHMARKING THE INTERN ATIONAL TRANSACTION SELECTED FOUR COMPARABLES OP/TC AS PROF IT LEVEL INDICATOR (PLI), HAVING MARGIN OF 16.68% HAVING SIN GLE YEAR DATA AS AGAINST PLI 13.22% QUA INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRISE (AE) IN THE FORM OF SUPPLY OF DESIGN ENGINEERING SERVICES. OUT OF FOUR COMPARABLES, TPO REJECTED ONWARD TECHNOLOGIES LIMITED AND PROPOSED TO INTRODU CE ROLTA INDIA LIMITED HAVING AVERAGE OF 28.52%. AFTER MAKI NG DETAILED ANALYSIS OF THE OBJECTIONS RAISED BY THE TAXPAYER, TPO FINALLY SELECTED FOUR COMPARABLES HAVING OP/TC AT 24.07% WH ICH ARE AS UNDER :- SR.NO. NAME OF THE COMPANY PLI OP/TC 1. TATA TECHNOLOGIES LTD. 18.63% 2. INFOTECH ENTERPRISE (ENGINEERING, MANUFACTURING, INDUSTRIES PRODUCTS SEGMENT) 15.79% 3. KLG SYSTEL LTD. (LIFE CYCLE SOLUTIONS SEGMENT) 2 3.48% 4. ROTLA INDIA LTD. 38.38% MEAN 24.07% ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 10 8. ON THE BASIS OF AFORESAID COMPARABLES AND BY CAL CULATING THE OPERATING REVENUES, OPERATING EXPENSES AND OPERATIN G PROFIT, TPO TAKEN PLI OF THE COMPARABLES AT 24.07% AS AGAINST P LI OF TAXPAYER AT (-) 5.86% AND PROCEEDED TO PROPOSE THE ARMS LEN GTH AS UNDER:- OPERATING COST OF EDC RS.7,15,86,142 MEAN OF THE OPTC OF THE COMPARABLES 29.93% ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION (7,15,86,142 X 129.93/100 = RS.9,30,11,874 ADJUSTMENT OVER OPERATING INCOME RS.9,30,11,874 RS.6,73,88,310 = RS.2,56 ,23,564 27. IN VIEW OF THE FACTS OF THE CASE, SUBMISSIONS O F ASSESSEE AND ECONOMIC ANALYSIS CARRIED OUT BY IT, THE ARMS LENGTH PRICE OF TRANSACTIONS AS REPORTED BY THE ASSESSEE ARE BEI NG DISTURBED FOR THE PLANT I FOR RS.9,82,34,197 AND FOR THE ENGINEER ING DESIGN SERVICES FOR RS.2,56,23,564. 9. THE TAXPAYER CARRIED THE MATTER BY WAY OF RAISIN G OBJECTIONS BEFORE THE LD. DRP, WHICH HAVE BEEN DISPOSED OFF. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEALS. ITA NO.618/DEL/2014 (AY 2009-10) REVENUES APPEAL CO NO.284/DEL/2014 (AY 2009-10) ASSESSEES CROSS OBJECTION 10. THE TAXPAYER IS ENGAGED IN THE BUSINESS OF MANU FACTURING, DEVELOPING, DESIGNING, BUYING, SELLING AND ASSEMBLY OF ALL KIND OF EQUIPMENTS AND MACHINERY USED IN CONSTRUCTION, AGRI CULTURE, ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 11 EARTHMOVING EQUIPMENT, MATERIAL HANDLING EQUIPMENTS , COMPONENTS, SPARES AND STORES, TOOLS ETC. THE TAXP AYER INITIALLY CHALLENGED THE TP ORDER PASSED BY THE TPO ON THE BA SIS OF WHICH DRAFT ASSESSMENT ORDER DATED 07.02.2013 WAS PASSED WHICH WAS CHALLENGED BEFORE THE LD. DRP. THEN LD. DRP PASSED FRESH ORDER DATED 26.11.2013 ON THE BASIS OF WHICH FRESH TP ORD ER DATED 24.01.2014 HAS BEEN PASSED VIDE WHICH WORKING CAPIT AL ADJUSTMENT ON COMPARABLES HAS BEEN GRANTED QUA PLANT I AND F OUND THE INTERNATIONAL TRANSACTION QUA PLANT I AT ARMS LE NGTH BEING WITHIN +/- 5% RANGE. LD. DRP DIRECTED THE TPO TO USE AS C UP A MOST APPROPRIATE METHOD (MAM) FROM APRIL 2008 TO DECEMBE R 2008 AND TO USE TNMM FROM JANUARY 2009 TO MARCH 2009 AS THE TAXPAYER IS A CONTRACT MANUFACTURER AND DETERMINED THE PRICES BASED ON COST PLUS AND APPROPRIATE MARK UP AND AGAI N FOUND THE INTERNATIONAL TRANSACTION QUA PLANT II AT ARMS L ENGTH BEING WITHIN +/- 5%. 11. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFO RE THE TRIBUNAL CHALLENGING THE IMPUGNED ORDER PASSED BY T PO/AO TO ALLOW ADJUSTMENT ON ACCOUNT OF WORKING CAPITAL IN R ESPECT OF PLANT I AND DIRECTING THE TPO TO USE CUP FOR THE PERIOD JANUARY 2009 ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 12 TO MARCH 2009 AS THE ASSESSEE IS WORKING AS LICENSE MANUFACTURER OR CONTRACT MANUFACTURER. CO NO.284/DEL/2014 (IN ITA NO.618/DEL/2014) (AY 2009-10) ASSESSEES CROSS OBJECTION 12. THE TAXPAYER ALSO FILED CROSS OBJECTIONS QUA IN TERNATIONAL TRANSACTIONS OF EXPORT COMPONENT OF PLANT I AND Q UA INTERNATIONAL TRANSACTIONS OF EQUIPMENT OF PLANT II FOR REJECTI ON OF ECONOMIC ADJUSTMENT CONDUCTED BY THE TAXPAYER ON ACCOUNT OF UNABSORBED OVERHEADS AND REJECTION OF ACCOUNTING ADJUSTMENT CO NDUCTED BY THE TAXPAYER AND ALSO CHALLENGED INCORRECT CONSIDERATIO N OF BEML LIMITED AS A COMPARABLE COMPANY AND ALSO CHALLENGED THE REJECTION OF ADJUSTMENT FOR MARKETING FUNCTION WHIC H WAS NOT THERE IN THE CASE OF THE TAXPAYER VIS--VIS THE COMPARABL ES. 13. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 14. THE TAXPAYER MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL GROUNDS IN ITA NO.6359/DEL/2012 FOR AY 2 008-09 AND IN CROSS OBJECTION NO.284/DEL/2014 FOR ASSESSMENT YEAR 2009- 10 FOR THE REASON THAT THE AFORESAID GROUNDS ARE LE GAL AND CAN BE ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 13 ADJUDICATED ON THE BASIS OF MATERIAL ALREADY AVAILA BLE ON RECORD. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IN BO TH THE AYS 2008-09 AND 2009-10 ARE AS UNDER :- ITA NO.6359/DEL/2012 (AY 2008-09) 1. THAT THE DRAFT ASSESSMENT ORDER DATED 21.12.2011 AND FINAL ASSESSMENT ORDER DATED 25.10.2012, BOTH PASSED BY THE LEARNED ASSESSING OFFICER ARE ILLEGAL AND VOID-AB-INITIO, SINCE THESE HAVE BEEN PASSED UPON AN ENTITY WHICH DID NOT EXIST ON T HE DATE OF PASSING OF THESE ORDERS. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, IMPUGNED ORDERS WERE PASSED BY THE LOWER AUTHORITIE S WITHOUT ASSUMING JURISDICTION AS PER THE LAW AND TH US IMPUGNED ORDERS PASSED BY THE LOWER AUTHORITIES INCLUDING THE ORDER BY THE HON'BLE DRP ARE NULLITY IN THE EYES OF LAW AND DESERVE TO BE QUASHED. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, THE IMPUGNED ASSESSMENT ORDERS HAVE BEEN PASSED IN VIOLATION OF PROVISIONS OF SECTION 170(2) OF THE IN COME TAX ACT, 1961 AND THEREFORE THESE ARE NOT SUSTAINAB LE IN THE EYES OF LAW. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ORDERS PASSED IN THE NAME OF A DEAD PERSON OR A NON - EXISTING PERSON IS NULLITY IN THE EYES OF LAW AND M AY BE HELD SO. CO NO.284/DEL/2014 (IN ITA NO.618/DEL/2014 (AY 2009-10) 1. THAT THE DRAFT ASSESSMENT ORDER DATED 07.02.2013 AND FINAL ASSESSMENT ORDER DATED 29.01.2014, BOTH PASSED BY THE LEARNED ASSESSING OFFICER ARE ILLEGAL AND VOID-AB-INITIO, SINCE THESE HAVE ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 14 BEEN PASSED UPON AN ENTITY WHICH DID NOT EXIST ON T HE DATE OF PASSING OF THESE ORDERS. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, IMPUGNED ORDERS WERE PASSED BY THE LOWER AUTHORITIE S WITHOUT ASSUMING JURISDICTION AS PER THE LAW AND TH US IMPUGNED ORDERS PASSED BY THE LOWER AUTHORITIES INCLUDING THE ORDER BY THE HON'BLE DRP ARE NULLITY IN THE EYES OF LAW AND DESERVE TO BE QUASHED. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, THE IMPUGNED ASSESSMENT ORDERS HAVE BEEN PASSED IN VIOLATION OF PROVISIONS OF SECTION 170(2) OF THE IN COME TAX ACT, 1961 AND THEREFORE THESE ARE NOT SUSTAINAB LE IN THE EYES OF LAW. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ORDERS PASSED IN THE NAME OF A DEAD PERSON OR A NON - EXISTING PERSON IS NULLITY IN THE EYES OF LAW AND M AY BE HELD SO. 15. SINCE AFORESAID GROUNDS SOUGHT TO BE RAISED BY THE TAXPAYER IN ITS APPEAL AS WELL AS CROSS OBJECTIONS ARE PUREL Y LEGAL AND NECESSARY FOR COMPLETE ADJUDICATION OF THE CONTROVE RSY AT HAND, THE SAME ARE ALLOWED WITHOUT EXPRESSING ANY OPINION ON MERITS. 16. AT THE VERY OUTSET, IT IS BROUGHT TO OUR NOTICE BY THE LD. AR FOR THE TAXPAYER AS WELL AS BY THE LD. DR FOR THE R EVENUE THAT ON THE DATE OF DRAFT ASSESSMENT ORDER DATED 21.12.2011 AND ASSESSMENT ORDER DATED 25.10.2012 PASSED IN JCBML MERGED WITH JCBIL, THE TAXPAYER IN THIS CASE, WAS NOT IN EXISTENCE AND DRE W OUR ATTENTION TO ASSESSMENT ORDER DATED 25.10.2012 FOR AY 2008-09 IN CASE OF ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 15 JCBMPL MERGED WITH JCBIL W.E.F. 01.04.2009 PURSUANT TO THE SCHEME OF AMALGAMATION AS APPROVED BY HONBLE HIGH COURT OF BOMBAY VIDE ITS ORDER DATED 05.02.2010 AND VIDE ORD ERS DATED 05.02.2010, 26.02.2010 AND 26.02.2010 PASSED BY HON BLE HIGH COURT OF DELHI. THIS FACT HAS BEEN DULY RECORDED B Y LD. DRP IN ITS ORDER DATED 21.09.2012, AVAILABLE AT PAGE 52 OF THE PAPER BOOK. SO, ON THE DATE OF COMPLETION OF ASSESSMENT, IN CASE JC BMPL MERGED WITH JCBIL W.E.F. 01.04.2009, IT WAS NOT IN EXISTEN CE AND WAS A NON-ENTITY. SO, WE ARE OF THE CONSIDERED VIEW THAT ASSESSMENT ORDER ITSELF IS A NULLITY AND IS NOT SUSTAINABLE IN THE EYES OF LAW. 17. SIMILARLY, IN CASE OF JCBMPL FOR AY 2009-10 QUA THE APPEAL FILED BY THE REVENUE AS WELL AS CROSS OBJECT ION FILED BY THE TAXPAYER, ASSESSMENT ORDER WAS PASSED ON 29.01.2014 WHEREAS JCBMPL CEASES TO BE IN EXISTENCE W.E.F. 01.04.2009 AS PER ORDER PASSED BY HONBLE HIGH COURT OF BOMBAY DATED05.02. 2010 AND ORDER PASSED BY HONBLE DELHI HIGH COURT DATED 05.0 2.2010, 26.02.2010 AND 26.02.2010. THIS FACT HAS BEEN HIGH LIGHTED BY THE LD. DRP IN ITS ORDER DATED 21.09.2012 PASSED IN JCB IL FOR AY 2008-09. 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WITHO UT ENTERING INTO THE MERITS OF THE GROUNDS OF APPEAL RAISED BY THE TAXPAYER AS ITA NOS.6359/DEL/2012 ITA NOS.618/DEL/2014 CO NO.284/DEL/2014 16 WELL AS THE REVENUE, ADDITIONAL GROUNDS RAISED BY T HE TAXPAYER IN ITS APPEALS FOR AY 2008-09 AND CROSS OBJECTION FOR AY 2009-10 ARE ALLOWED AND THE ASSESSMENT ORDER DATED 25.10.2012 F OR AY 2008- 09 AND ASSESSMENT ORDER DATED 29.01.2014 FOR AY 200 9-10 ARE HELD TO BE NULLITY. CONSEQUENTLY, ITA NO.6359/DEL/2012 FOR AY 2008- 09 FILED BY THE ASSESSEE IS ALLOWED, ITA NO.618/DEL /2014 FOR AY 2009-10 FILED BY THE REVENUE IS DISMISSED AND CROSS OBJECTION NO.284/DEL/2014 FOR AY 2009-10 FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF DECEMBER, 2017. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH DAY OF DECEMBER, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.