ACIT, Alwar V. M/S SAKATA INKS (INDIA) LTD., Alwar

ITA 799/JPR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5522 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA GAUR
• Assessee Lawyers: PIYUSH SINGH DHK
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 799/JP/2012 ASSESSMENT YEAR : 2008-09. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2, ALWR. CUKE VS. M/S. SAKATA INX (INDIA) LTD., B-1245-46, PHASE-I, INDUSTRIAL AREA, GHATAL, BHIWADI. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AACCS 4797 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI NARENDRA GAUR (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI PIYUSH SINGH (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08.01.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 22/01/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE PRESENT APPEAL FILED BY THE REVENUE IS ARISING FROM THE ORDER DATED 05.07.2012 PASSED BY THE LEARNED CIT (A)-II, JAIPUR FOR THE ASSESSMENT YEAR 2008-09, RAISING THE FOLLOWING GROUNDS :- 1) THAT THE LD. COMMISSIONER OF INCOME-TAX (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 1,49,99,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADJUSTMENT IN ARMS LENGTH PRICE. 2) THAT THE LD. COMMISSIONER OF INCOME-TAX (A) HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT THE PAYMENT OF ROYALTY TO ASSOCIATED ENTERPRISES (SAKATA INX CORPORATION, JAPAN) IS AT ARMS LENGTH PRICE. 2 ITA NO. 799/JP/2012 A.Y 2008-09. ACIT VS. M/S. SAKATA INX (INDIA) LTD., BHIWADI. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 12,37,95,150/- ON 29.09.2008. THE ASSESSEE HAS DECLARED INCOME FROM BUSINESS AND PROFESSION AT RS 12,21,53,224/- AND INCOME FROM OTHER SOURCES AT RS. 3,92,842/-. THE ASSESSEE IS A 100% SUBSIDIARY OF SAKATA INX CORPORATION, JAPAN. DURING THE YEAR UNDER CONSIDERA TION THE ASSESSEE COMPANY WAS ENGAGED IN MANUFACTURING AND TRADING OF PRINTING IN KS AND ALLIED PRODUCTS. THE ASSESSEE CONTINUES TO DERIVE INCOME FROM SUCH ACTIV ITIES AND INCOME FROM OTHER SOURCES IN THE FORM OF INTEREST ON FDRS ETC. THE CASE OF A SSESSEE WAS SCRUTINIZED UNDER SECTION 143(3) OF THE IT ACT. 2.1. THE AO OBSERVED THAT DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE UNDERTOOK THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES :- S.NO. DESCRIPTION OF TRANSACTION VALUE (IN RS.) 1. IMPORT OF RAW MATERIALS, STORES, SPARES ETC. 134377562 2. EXPORT OF POLYURETHANE RESIN 10807430 3. PURCHASE OF CAPITAL GOODS 976250 4. COMMISSION INCOME 15922 5. PAYMENT OF ROYALTY 14999000 6. SHARING OF COST OF EXPATRIATE EMPLOYEES BY AES 5095230 A REFERENCE U/S 92CA WAS MADE TO THE TRANSFER PRICI NG OFFICER VIDE LETTER NO. ACIT/CIRCLE-2/ALW/2010-11/519 DATED 11.08.2010 AFTE R RECEIVING NECESSARY APPROVAL FROM THE COMMISSIONER OF INCOME TAX, ALWAR VIDE LET TER NO. CIT/DCIT(HQRS.)/ALW/2010-11/692 DATED 10.08.2010. THE ADDITIONAL COMMISSIONER OF INCOME TAX (TRANSFER PRICING OFFICER-1), JAIPUR CON SIDERED THE ARMS LENGTH PRICE OF THE PAYMENT OF ROYALTY BY THE ASSESSEE TO ITS ASSOCIATE D ENTERPRISES AT NIL AS AGAINST RS. 3 ITA NO. 799/JP/2012 A.Y 2008-09. ACIT VS. M/S. SAKATA INX (INDIA) LTD., BHIWADI. 1,49,99,000/- DECLARED IN FORM 3CEB, AFTER MAKING AD JUSTMENT OF RS. 1,49,99,000/-. CONSEQUENTLY, THE SAME WAS DISALLOWED BY THE AO AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THUS THE AO ADOPTED THE TPOS REASONING A PPLYING THE CUP METHOD QUA ROYALTY AMOUNT AND HELD THAT THE ASSESSEE FAILED TO DEMONSTRATE THAT SUBSTANTIAL BENEFIT ACCRUED TO IT BY PAYMENT THIS AMOUNT OF ROYALTY. 3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEFOR E THE LD. CIT (A), WHO DELETED THE ADDITION BY OBSERVING THAT THE CASE OF ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSEE BY HIS EARLIER ORDER DATED 12.01.2012 FOR THE A.Y. 2007-08. THE FINDINGS GIVEN BY THE LD. CIT (A) IN THE CASE OF THE ASSESSEE FOR THE PRECEDI NG A.Y. 2007-08 HAS BEEN REPRODUCED BY LD. CIT (A) IN HIS ORDER DATED 05.07. 2012 FOR THE A.Y. 2008-09 FROM PAGES 9 TO 19 OF HIS ORDER. THE LD. CIT (A) OBSERV ED THAT SINCE THERE IS NO MATERIAL CHANGE IN FACTS AND CIRCUMSTANCES OF THE CASE FOR T HE YEAR UNDER REFERENCE, HE DIRECTED THE AO TO DELETE THE ADDITION OF RS. 1,49,99,000/- MADE ON ACCOUNT OF ADJUSTMENT IN ALP OF THE INTERNATIONAL TRANSACTION FOR PAYMENT OF ROYALTY TO THE ASSOCIATED ENTERPRISES, AND, THEREBY THE GROUND OF THE ASSESSEE WAS ALLOWED. 4. AGGRIEVED BY THE ORDER OF LD. CIT (A), THE REVEN UE IS BEFORE US. 4.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH RECORDS, WE FIND THAT S IMILAR ISSUE WAS RAISED BY THE REVENUE BEFORE THE TRIBUNAL IN PRECEDING ASSESSMENT YEAR 2007-08 IN ITA NO. 376/JP/2012, WHEREIN THE TRIBUNAL HAS DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE. SINCE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTA NCES IN THE PRESENT CASE, RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISION FOR THE A.Y . 2007-08, WE DELETE THE ADDITION OF 4 ITA NO. 799/JP/2012 A.Y 2008-09. ACIT VS. M/S. SAKATA INX (INDIA) LTD., BHIWADI. RS. 1,49,99,000/- MADE BY AO ON ACCOUNT OF ADJUSTME NT IN ALP OF THE INTERNATIONAL TRANSACTION FOR PAYMENT OF ROYALTY TO THE ASSOCIATE D ENTERPRISERS. THUS THE GROUND OF THE REVENUE IS REJECTED AND THE APPEAL IS DISMISSED . 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/201 6. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22/01/2016. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT CIRCLE-2, ALWAR. 2. IZR;FKHZ@ THE RESPONDENT- M/S. SAKATA INX (INDIA) LTD., BHIWA DI. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 799/JP/2012) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 5 ITA NO. 799/JP/2012 A.Y 2008-09. ACIT VS. M/S. SAKATA INX (INDIA) LTD., BHIWADI.