Mitsubishi Corporation India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6619/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6766 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 07-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Transfer pricing; Wholly owned subsidiary
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER IN I.T.A NO.6619/DEL/2016 ASSESSMENT YEAR : 2012-13 MITSUBISHI CORPORATION INDIA PVT. LTD., 5 TH FLOOR, BIRLA TOWER, BARAKHAMBA ROAD, NEW DELHI. PAN: AAACM4764G VS DCIT, CIRCLE-16(2). NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M.S SYALI, SR. ADVOCATE & SHRI TARANDEEP SINGH, ADVOCATE REVENUE BY: SHRI AMRENDRA KUMAR, CIT, DR DATE OF HEARING 07.02.2017 DATE OF PRONOUNCEMENT 08.02.2017 ORDER PER R. S. SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE FINA L ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (A O) U/S ITA NO.6619/DEL/2016 2 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT , 1961 ON 25.11.2016 IN RELATION TO THE ASSESSMENT YEAR 20 12-13. 2. THE ONLY ISSUE ASSAILED BEFORE US IS AGAINST THE DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT. BRIEFLY STATED, THE FACTS O F THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN TRADING O F GOODS DIRECTLY IMPORTED FROM OVERSEAS SUPPLIERS AND PROCURED INDIGENOUS LY. THE ASSESSEE IS A 100% SUBSIDIARY OF MITSUBISHI CORPORA TION, JAPAN, A GENERAL TRADING COMPANY. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE MADE P URCHASES FROM ITS SIX ASSOCIATED ENTERPRISES (AES) AMOUNTING TO RS.2 951.02 CRORE, DETAILED AS UNDER :- S.NO. NAME AND ADDRESS OF THE AE DESCRIPTION OF TRANSACTION AMOUNT OF PURCHASES (RS.) 1. ASIA MODIFIED STARCH CO. LTD. 130-132 SINDHORN BUILDING, 2 ND FLOOR, TOWER-1, WIRELESS ROAD, LUMPINI PATHUMWAN, IMPORT OF GOODS 2,06,62,532 ITA NO.6619/DEL/2016 3 BANGKOK-10330, THAILAND. 2. MITSUBISHI CORPORATION, JAPAN (INCLUDING OVERSEAS BRANCHES), HEAD OFFICE, 3-1, MARUNOUCHI, 2-CHOME, CHIYODA-KU, TOKYO, JAPAN IMPORT OF GOODS 28,40,79,55,972 3. MC ENERGY, INC., 4 TH FLOOR, MITSUBISHI CORP, BUILDING, 6-3, MARUNOUCHI 2-CHOME, CHIYODA-KU, TOKYO 100- 0005, JAPAN. IMPORT OF GOODS 93,77,96,507 4. MITSUBISHI SHOJI CHEMICAL CORPORATION, 6-1, KYOBASHI, 1-CHOME, CHUO-KU, TOKYO 104- 0031, JAPAN. IMPORT OF GOODS 1,19,87,495 5. MITSUBISHI CORPORATION (TAIWAN) LTD., EMPIRE BLDG., 14 TH FL., 87, SUNG CHIANG ROAD, TAPEI, TAIWAN. IMPORT OF GOODS 54,20,449 6. SPDC LTD., 2-13-10 NAGATA-CHO, CHIYODA-KU IMPORT OF GOODS 1,264,72,774 3. THE AO NOTED THAT NO DEDUCTION OF TAX AT SOURCE WAS MADE BEFORE MAKING PAYMENTS OF SUCH PURCHASE PRICE. INVOKI NG THE ITA NO.6619/DEL/2016 4 PROVISIONS OF SECTION 195, THE AO HELD THAT THE ASSE SSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE. IN THE ABSENCE OF SUCH NON-DEDUCTION, THE AO ESTIMATED GROSS PROFIT ON SUCH PURCHASES MADE BY THE ASSESSEE, AT 2.75% OF THE SALE PRICE. 50% OF SUCH P ROFIT WAS ATTRIBUTED TO BUSINESS OPERATIONS OF THESE COMPANIES IN INDIA, WHICH RESULTED INTO AN ADDITION OF RS.40,57,66,566/-. THI S WAS DONE BY THE AO FOLLOWING THE VIEW CANVASSED BY HIM IN HIS ORDER F OR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE REMAINED UNSU CCESSFUL BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THAT IS HO W, AN ADDITION OF RS.40.57 CRORE CAME TO BE MADE. THE ASS ESSEE IS AGGRIEVED AGAINST THIS ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT MATERIAL ON RECORD. IT IS NOTICED FROM THE ASSESSMENT O RDER ITSELF THAT THE AO FOLLOWED THE VIEW TAKEN BY HIM IN HIS ORDER FO R THE A.Y. 2010-11 FOR MAKING THIS ADDITION. THE DRP, THOUGH TO OK COGNIZANCE OF THE ORDERS PASSED BY THE TRIBUNAL ON S UCH ISSUE IN ITA NO.6619/DEL/2016 5 FAVOUR OF THE ASSESSEE FOR EARLIER YEARS, CHOSE TO GO WI TH THE AOS VIEW AS IN HIS OPINION NO FINALITY WAS ATTACHED TO SUCH ORDERS OF THE TRIBUNAL. IT IS A MATTER OF RECORD, AND ALSO NOT CONTR OVERTED BY THE LD. DR AS WELL, THAT THE TRIBUNAL IN ITS ORDERS FOR EARLI ER YEARS HAS DELETED THE DISALLOWANCE U/S 40(A)(I) UNDER SIMILAR CIRC UMSTANCES BY APPLYING NON-DISCRIMINATION CLAUSE UNDER THE DOUBLE T AXATION AVOIDANCE AGREEMENT IN RESPECT OF SOME OF THE PURCHASE TRANSACTIONS AND BY HOLDING THAT NO PE EXISTED OF T HE RELATED ENTITIES IN RESPECT OF THE OTHERS. A CHART HAS BEEN PLACED BEF ORE US ENUMERATING PURCHASE MADE BY THE ASSESSEE DURING THE YEAR FROM THE RELATED PARTIES IN RESPECT OF WHICH DISALLOWANCE HAS BEEN MADE. IT CAN BE SEEN THAT ALL THE PARTIES ARE SIMILAR TO EARLI ER YEAR EXCEPT MITSUBISHI CORPORATION (THAILAND) LTD. AND SPDC LTD. IN SO FAR AS THE OTHER PARTIES FROM WHOM PURCHASES WERE MADE BY THE ASSESSEE, THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE EARLIER ORDERS PASSED BY THE TRIBUNAL. AS REGARDS MITSUB ISHI ITA NO.6619/DEL/2016 6 CORPORATION (THAILAND) LTD., WHICH IS ONE OF THE NEW C OMPANIES FROM WHOM THE ASSESSEE MADE PURCHASES DURING THE YEAR, THE FINDING GIVEN IN EARLIER ORDERS QUA NO PE OF RELATED ENTITY, APPLIES. AS REGARDS M/S SPDC LTD., THE NON-DISCRIMINATION CLAUS E, AS HELD TO BE APPLICABLE IN EARLIER ORDERS, APPLIES WITH FULL VIGO R. THIS POSITION HAS NOT BEEN DISPUTED ON BEHALF OF THE REVENUE. FU RTHER, THE LD. DR COULD NOT POINT OUT ANY FACTUAL OR LEGAL DISTINCT ION BETWEEN THE FACTS OF THE EARLIER YEARS VIS--VIS THE CURRENT YEAR. RESPECTFULLY FOLLOWING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN THE EARLIER YEARS, WE DELETE THE DISALLOWANCE MADE U/S 40(A)(I) OF THE ACT. 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.02.2017. SD/- SD/- (KULDIP SINGH) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08.02.2017 ITA NO.6619/DEL/2016 7 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR