DCIT - 16(3), MUMBAI V. M/s. TWINKLE DIAMONDS, MUMBAI

ITA 7024/MUM/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1789 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2002-2003
• Appeal Filed On: 05-12-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Transfer pricing; Opportunity of being heard; International transaction
• Section: 143(3); 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI R.S. PADVEKAR, JM & SHRI R.K.PANDA, AM I.T.A. NO. 7024/MUM/2005 (ASSESSMENT YEAR : 2002-03) DY. COMMISSIONER OF INCOME-TAX-16(3) MATRU MANDIR, TARDEO ROAD, MUMBAI-400 007 VS. M/S. TWINKLE DIAMONDS 403-404, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI-400 004 PAN: AAAFT1133F APPELLANT RESPONDENT APPELLANT BY : MR. AARSI PRASAD RESPONDENT BY : NONE ORDER DATE OF HEARING: 10.06.2010 DATE OF ORDER: 10.06.2010 PER R.K. PANDA, AM , THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 22 ND SEPTEMBER, 2005 OF THE CIT(A)-XVII, MUMBAI RELATING TO ASSESSMENT YEAR 2002-03. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING. SINCE THE MAJOR GROUND IN THE IMPUGNED AP PEAL BY THE REVENUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05 AND THE OTHER GROUND HAS BEEN DECIDED BY THE SPECIAL BENCH OF THE TRIBUNAL, THERE FORE, THE APPEAL WAS HEARD ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LEARNED DR. 3. GROUNDS OF APPEAL NOS. 1 AND 2 BY THE REVENUE ARE A S UNDER: 1. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.1,85,29,410/- (IN THE GROUND WRONGLY TYPES AS RS.1,85,294/-) BEING ADJUSTMENT TO ARMS LENGTH ITA NO. 7024/MUM/2005 M/S. TWINKLE DIAMONDS ===================== 2 PRICE IN RESPECT OF INTERNATIONAL TRANSACTIONS WITH ASSOCIATE ENTERPRISE. 2. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN EXCLUDING THE TRADING RESULTS OF M/S. DHARAMNADA DIAMONDS AND M/S. ROYAL DIAM, FROM THE LIST OF COMPARABLE CASES CITED BY THE ASSESSING OFFICER ON THE ERRONEOUS ASSUMPTION THAT INCLUSION OF TRADING RESULTS OF THESE TWO CONCERNS HAD GIVEN A DISTORTED WORKING OF OPERATING PROFIT MARGIN TO SAL ES AND COST. 4. AFTER HEARING THE LEARNED DR AND ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THE ASSESSEE IS E NGAGED IN THE BUSINESS OF PROCESSING AND DEALING IN POLISHED DIAM ONDS WHERE ROUGH DIAMONDS ARE IMPORTED FROM OUT SIDE INDIA AND AFTER PROCESSING THESE DIAMONDS ARE EXPORTED OUT OF INDIA . DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE PURCHASE D DIAMONDS WORTH RS.18,05,65,209 FROM THE AES WHICH FORMS 74% OF THE TOTAL PURCHASES. SIMILARLY, THE ASSESSEE HAS SOLD DIAMONDS WORTH RS.14,71,22,127 TO THE AES WHICH FORM 37% OF THE TOTAL SALE MADE DURING THE YEAR. THE ASSESSEE HAS PREPAR ED A TP STUDY REPORT FOLLOWING THE COST PLUS METHOD. NOT B EING SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND AFTE R COMPARING THE RESULTS OF OTHER COMPANIES ENGAGED IN THE SIMIL AR BUSINESS ACTIVITIES, THE TPO WORKED OUT ARMS LENGTH PRICE FO R PURCHASE AND SALE SEPARATELY AND MADE ADJUSTMENT OF RS.1,85, 29,410. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF THIS AMOUNT IN THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I .T. ACT. 5. IN APPEAL, THE CIT(A) DELETED SUCH ADDITION FOR WHI CH THE REVENUE IS IN APPEAL BEFORE US. 6. AFTER HEARING THE LEARNED DR, WE FIND UNDER IDENTIC AL FACTS AND CIRCUMSTANCES, THE TRIBUNAL IN ASSESSEES OWN C ASE VIDE I.T.A. NO. 5033/MUM/07 ORDER DATED 30 TH APRIL, 2010 FOR THE A.Y. 2004-05 HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. RESPECTFULLY FOLLO WING THE ITA NO. 7024/MUM/2005 M/S. TWINKLE DIAMONDS ===================== 3 DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE RESTORE THE ABOVE TWO GROUNDS OF THE REVENUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN. THE ASSESSING OFFICER SHALL DECIDE THE IS SUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS OF APPEAL NOS. 1 AN D 2 BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. 7. GROUNDS OF APPEAL NO. 3 BY THE REVENUE READS AS UND ER: 3. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO CONSIDER FOREIGN EXCHANGE RATE DIFFERENCE GAIN OF RS.1,42,117/- PERTAINING TO THE EXPORTS OF EARLIER YEARS ELIGIBLE FOR DEDUCTION U/S.80HHC OF THE I.T. ACT, 1961 WITHOUT APPRECIATING THE FACTS THAT THE SAID AMOUNT DID NOT FORM PART OF EXPORT TURNOVER FOR THE ASSESSMENT YEA R UNDER QUESTION AS DEFINED IN CLAUSE (B) OF EXPLANATION BELOW SUB-SECTION (4C) OF SEC. 80HHC OF THE I.T. ACT, 1961. 8. THE LEARNED DR, AT THE OUTSET, SUBMITTED THAT THE A BOVE GROUND ALSO SHOULD BE RESTORED TO THE FILE OF THE A SSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF PRAKAS H L. SHAH REPORTED IN 118 TTJ 577. WE FIND MERIT IN THE ABOV E SUBMISSION OF THE LEARNED DR AND RESTORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATIO N IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH CITED ABOVE. THI S GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF, I.E., ON 10.06.2010. SD/- (R.S. PADVEKAR) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 10 TH JUNE, 2010 ITA NO. 7024/MUM/2005 M/S. TWINKLE DIAMONDS ===================== 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XVII, MUMBAI 4. THE CIT, MC-XVI, MUMBAI 5. THE DR L BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES, MUMBAI TPRAO