Toshiba India Pvt. Ltd., Gurgaon V. DCIT, Circle- 25(2), New Delhi

ITA 7547/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7288 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Assessment Year: 2014-2015
• Appeal Filed On: 28-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K CHAUDHARY
• Keywords: Transfer pricing; International transaction; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.7547/DEL/2018 ASSESSMENT YEAR: 2014-15 M/S TOSHIBA INDIA (P) LTD., 3 RD FLOOR, BUILDING NO.10, TOWER B, DLF CYBER CITY, PHASE-II, GURGAON PAN: AABCT4829N VS DY.COMMR. OF INCOME-TAX CIRCLE-25(2) ,NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY SHRI UPVAN GUPTA, ADVOCATE REVENUE BY SHRI H.K. CHAUDHARY, CIT DR ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 25.10.2018 FOR THE ASSTT. YEAR 2014-15 PASSED BY THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 25(2), NEW DELHI PURSUANT TO THE DIRECTIONS OF THE DISPUTE REDRESSAL PANEL DATED 10.09.2018, ASSESSEE PREFERRED THIS APPEAL. 2. BRIEFLY STATED, RELEVANT FACTS ARE THAT THE ASSESSEE I.E. TOSHIBA INDIA P. LTD. IS A JAPANESE TECHNOLOGY COMPANY SPECIALIZING IN ADVANCED ELECTRONICS AND HAS BEEN ENGAGED IN MANUFACTURING AND MARKETING INFORMATION AND COMMUNICATION SYSTEMS, ELECTRONIC DATE OF HEARING 02.01.2019 DATE OF PRONOUNCEMENT 10.01.2019 2 COMPONENTS, HEAVY ELECTRICAL APPARATUS, CONSUMER PRODUCTS, MEDICAL DIAGNOSTIC IMAGING EQUIPMENT ETC. FOR THE ASSTT. YEAR 2014-15 THEY HAVE FILED THEIR RETURN OF INCOME ON 30.11.2014 DECLARING A LOSS OF RS.36,08,68,474/-. 4. IT WAS NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS ASSOCIATE ENTERPRISES, AS SUCH, THE MATTER WAS REFERRED TO THE TPO FOR DETERMINATION OF THE ARMS LENGTH PRICE. IT WAS CONTENDED BEFORE THE TPO BY THE ASSESSEE THAT THE AMP EXPENDITURE INCURRED BY THEM DOES NOT CONSTITUTE AN INTERNATIONAL TRANSACTION; THAT THE ASSESSEE HAD UNDERTAKEN DEMPE FUNCTION ASSOCIATED WITH BRAND AND IT COULD BE CONSTRUED AS THE ECONOMIC OWNER OF THE BRAND AND ENTITLED TO RESIDUAL PROFITS IN INDIA; THAT INASMUCH AS IT IS A MANUFACTURER AND NOT JUST DISTRIBUTOR, THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERICSSON (2015) 55 TAXMANN.COM 240(DEL) HAS NO APPLICATION.ASSESSEE PLACED RELIANCE ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF MARUTI SUZUKI INDIA LTD., ITA NO.110/2014 IN SUPPORT OF THEIR CONTENTIONS AND THAT AMP EXPENDITURE IS NOT A TRANSACTION IN CASE OF MANUFACTURERS. 5. LEARNED TPO, HOWEVER, BRUSHED ASIDE THE CONTENTIONS OF THE ASSESSEE AND PROPOSED TO ENHANCE THE INCOME OF THE ASSESSEE BY RS.2,23,63,226/- AND ADDITION OF RS.78,87,40,908/- ON PROTECTIVE BASIS ON ACCOUNT OF BRIGHT LIGHT TEST (BLT). AN ADDITION OF RS.81,11,04,134/- WAS, ACCORDINGLY, PROPOSED IN THE DRAFT ASSESSMENT ORDER U/S 144C OF THE INCOME-TAX ACT,,1961. 6. ASSESSEE FILED OBJECTIONS WITH THE LEARNED DRP AND THE LEARNED DRP VIDE ORDER DATED 10.9.2018 GAVE CERTAIN DIRECTIONS TO THE LEARNED 3 TPO. PURSUANT THERETO, INASMUCH AS NO DIRECTION HAS BEEN ISSUED BY THE LEARNED DRP ON THE ISSUE OF SUBSTANTIVE BASIS, THE ADJUSTMENT TO THE INCOME OF THE TAX PAYER ON THE AMP BASED ON SUBSTANTIVE BASIS WAS REVISED TO NIL, AND IN SO FAR AS THE ADDITION ON PROTECTIVE BASIS IS CONCERNED, AFTER EXCLUDING THE COMPARABLE M/S CEREBRA INTEGRATED TECHNOLOGIES LTD., TPO REVISED THE SAME FROM RS.78,87,40,910/- TO RS.73,42,99,419/- FOLLOWING THE BLT METHOD ON THE GROUND THAT THE DEPARTMENT IS IN APPEAL AGAINST THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERICSON (SUPRA) BEFORE THE HONBLE SUPREME COURT. 7. AT THE OUTSET, IT IS THE SUBMISSION OF THE LEARNED AR THAT AN IDENTICAL QUESTION HAD ARISEN FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSTT. YEARS 2009-10 AND 2013-14 IN ITA NOS. 1438/DEL/2018 AND ITA NO.6531/DEL/2017 AND THE TRIBUNAL, AFTER CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES REACHED A CONCLUSION THAT SUCH AN ADDITION CANNOT BE SUSTAINED. THERE IS NO DOUBT AS TO THE INVOLVEMENT OF A SIMILAR QUESTION IN LAW IN THOSE TWO MATTERS AS ARE INVOLVED IN THIS CASE IN THE SAME FACTUAL MATRIX. 8. IN ITA NO.6531/DEL/2017, A COORDINATE BENCH OF THIS TRIBUNAL VIDE PARA 6.3 FOLLOWED THE DECISION OF THE ANOTHER COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE NIKON INDIA P. LTD., ITA NO.4574/DEL/2017 DATED 20.9.2017 AND HELD THAT IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERICSON MOBILE COMMUNICATIONS (INDIA (P) LTD.(SUPRA), NO ADJUSTMENT BY APPLICATION OF BLT METHOD COULD BE SUSTAINED ON PROTECTIVE BASIS HAVING NO STATUTORY MANDATE. THIS FINDING OF THE TRIBUNAL IN ITA NO.6531/DEL/2017 FOR THE ASSTT. YEAR 2013-14 WAS FOLLOWED IN ASSESSEES OWN CASE FOR THE ASSTT. YEAR 2009-10 IN ITA 4 NO.1438/DEL/2018 AND DELETED THE ADDITION MADE ON PROTECTIVE BASIS BY FOLLOWING THE METHOD OF BLT. 9. SINCE THE FACTS ARE SIMILAR, THAT TOO IN ASSESSEES OWN CASE AND THE DECISIONS OF THE COORDINATE BENCHES ARE RENDERED BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SONY ERICSSON (SUPRA), THIS BENCH CANNOT HOLD THE ISSUE IN SOME OTHER WAY BY TAKING A DIFFERENT VIEW. RULE OF CONSISTENCY AS LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF RADHASOAMI SATSANG, 1992 AIR 377, DOES NOT PERMIT SUCH A COURSE. WE, THEREFORE, WHILE RESPECTFULLY FOLLOWING THE SAME, HOLD THAT THE ADDITION ON PROTECTIVE BASIS BY FOLLOWING THE BLT METHOD CANNOT BE SUSTAINED. WE ANSWER THE ISSUE ACCORDINGLY IN FAVOUR OF THE ASSESSEE, 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JANUARY, 2019. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH JANUARY, 2019 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 DRAFT DICTATED ON 8.01.2019 DRAFT PLACED BEFORE AUTHOR 9.01.2019 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON DATE OF UPLOADING ORDER ON THE WEBSITE FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.