Lotus Footwear Enterprises Limited (India Branch), Tiruvannamalai V. DCIT, CHENNAI

ITA 801/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8464 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 07-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Keywords: Transfer pricing; International transaction; Additional evidence

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , !' . #$#% , & '' ( [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./ I.T.A.NOS.779/MDS/2014, 801/MDS/2015 & 810/MDS/2016 / ASSESSMENT YEARS : 2009-10, 2010-11 & 2011-12 M/S LOTUS FOOTWEAR ENTERPRISES LTD (INDIA BRANCH) PLOT NO.3, SIPCOT INDUSTRIAL PARK MATHUR POST, MANGAL VILLAGE AKKUR VIA, CHEYYAR TALUK TIRUVANNAMALAI DIST 631 701 VS. THE DY. COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION 1/1(2) CHENNAI [PAN AABCL 3407 G] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI SRIRAM SESHADRI, CA /RESPONDENT BY : DR. MILIND MADHUKAR BHUSARI, CIT / DATE OF HEARING : 7 - 09 - 2016 ! / DATE OF PRONOUNCEMENT : 21 - 0 9 - 2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEA RS 2009- 10, 2010-11 AND 2011-12 ARE DIRECTED AGAINST ASSESS MENT ORDERS DATED 30.1.2014, 30.1.2015 AND 27.1.2016 ALL PASSED PURSUANT TO DIRECTIONS OF THE DISPUTE RESOLUTION PANEL UNDER SE CTION 144C(13) OF THE INCOME-TAX ACT, 1961(IN SHORT THE ACT). ITA NO. 779/14 ETC :- 2 -: 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL TH ESE APPEALS ASSAILED ADDITION MADE ON ACCOUNT OF TRANSF ER PRICING ADJUSTMENTS MADE FOR THE RESPECTIVE YEARS, APART FR OM ONE SOLITARY GROUND TAKEN FOR ASSESSMENT YEAR 2009-10 WHICH ASSA ILED DISALLOWANCE OF PRE-COMMENCEMENT EXPENDITURE OF ` 3,47,94,198/-. AS PER THE LD. AR, THE LATTER GROUND WAS ALSO INTRI NSICALLY CONNECTED TO THE TRANSFER PRICING ISSUES. LD. AR BROUGHT TO THE NOTICE OF THE BENCH THAT ASSESSEE HAD FILED A PETITION FOR ADMITTING A DDITIONAL EVIDENCE RELYING ON RULE 29 OF THE INCOME TAX (APPELLATE TRI BUNAL) RULES, 1963, WHICH WAS IN THE NATURE OF UNILATERAL ADVANCE PRICI NG AGREEMENT(APA) ENTERED BY IT WITH CENTRAL BOARD OF DIRECT TAXES (C BDT) ON 24.5.2016. 3. PLEADING FOR ADMISSION OF THE ADDITIONAL EVIDENCE M ENTIONED ABOVE, LD. AR SUBMITTED THAT IT HAD A FUNDAMENTAL B EARING ON THE TRANSFER PRICING ISSUES RAISED IN THE IMPUGNED YEAR S. AS PER THE LD. AR, THE TPO HAD IN ALL THESE YEARS PROCEEDED ON A FOOTI NG THAT ASSESSEE WAS A CONTRACT MANUFACTURER OF ITS ASSOCIATED ENTER PRISE(AE) NAMED LOTUS FOOTWEAR LTD BASED IN BRITISH VIRGIN ISLAND S. HOWEVER, AS PER THE LD. AR, ASSESSEE HAD BECOME A CONTRACT MANUFAC TURER ONLY AFTER MULTIPLE LABOUR STRIKES IN ITS UNITS WHICH HAPPENED DURING FINANCIAL YEAR 2010-11. RELIANCE WAS PLACED ON LETTER DATED 17.6.2015 ITA NO. 779/14 ETC :- 3 -: ADDRESSED TO THE JCIT(APA) AND ANSWER TO QUESTION O NE GIVEN THEREIN. AS PER THE LD. AR., THE APA WAS APPLICABLE FOR FINA NCIAL YEAR 2014-15 TO FINANCIAL YEAR 2018-19 WITH A ROLLBACK OF THREE YEARS. CONTINUING HIS SUBMISSION, LD. AR STATED THAT AS PER SEC. 92CC(9A) OF THE ACT READ ALONGWITH RULE 10MA(2)(I) OF INCOME TAX RULES, 1962 , IT WAS MANDATORY TO HAVE ROLLBACK OF APA FOR A PERIOD OF F OUR YEARS. ONLY EXEMPTION AS PER LD. AR, WAS WHEN CIRCUMSTANCES MEN TIONED IN CBDT CIRCULAR NO.10/2015 WAS APPLICABLE. AS PER THE LD. AR, BY VIRTUE OF THE APA, ASSESSEE COULD BE CONSIDERED AS A CONTRACT MA NUFACTURER ONLY FROM FINANCIAL YEAR 2011-12 AND CBDT HAD EXEMPTED I T FROM BEING CONSIDERED SO FOR FINANCIAL YEAR 2010-11 RELEVANT T O ASSESSMENT YEAR 2011-12. IN OTHER WORDS, ACCORDING TO HIM, FOR YEA R 2010-11 AND THE YEAR PRIOR TO THAT THE GOVERNMENT HAD AGREED TO THE CONTENTION OF THE ASSESSEE THAT IT WAS NOT A CONTRACT MANUFACTURER AN D THIS WENT AGAINST THE CONCLUSION OF THE TPO FOR SUCH EARLIER YEARS. HENCE, ACCORDING TO HIM, THE APA WAS CRUCIAL IN DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. 4. LD. DR FAIRLY AGREED THAT THE APA REQUIRED CONSIDER ATION WHILE BENCHMARKING THE PRICING OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE. ITA NO. 779/14 ETC :- 4 -: 5. WE HAVE CONSIDERED THE CONTENTIONS. IN OUR OPINION , THE APA HAS CONSIDERABLE BEARING FOR THE YEARS UNDER AP PEAL, SINCE PRIMA FACIE, THE ROLLBACK OF FOUR YEARS WHICH WENT TO ASS ESSMENT YEAR 2011- 12, WAS CURTAILED TO THREE YEARS. OBVIOUSLY, THE C URTAILMENT WAS ALLOWED IN THE APA AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE THAT IT HAD BECOME A CONTRACT MANUFACTURER ONLY IN FINANCIAL YEAR 2010-11 PURSUANT TO LABOUR UPHEAVAL. LD TPO IN THE ORDERS FOR ALL THE IMPUGNED ASSESSMENT YEARS HAD CONSIDERED ASSESSEE TO BE A CONTRACT MANUFACTURER AND IN HIS ORDER FOR ASSESSMENT YEAR 2 009-10, THIS IS SPECIFICALLY MENTIONED AT PAGE 69 OF THE ORDER. NA TURE OF BUSINESS OF THE ASSESSEE WOULD HAVE CONSIDERABLE BEARING ON TH E ARMS LENGTH PRICING STUDY OF THE INTERNATIONAL TRANSACTIONS WIT H ITS AES. THE APA HAVING BEEN SIGNED ON 24.5.2016, ASSESSEE HAD NO O CCASION TO PRODUCE IT BEFORE LOWER AUTHORITIES. WE ARE, THERE FORE, OF THE OPINION THAT THE ADDITIONAL EVIDENCE HAS TO BE ADMITTED. W E, THEREFORE, ADMIT THE ADDITIONAL EVIDENCE, SET ASIDE THE ORDERS OF TH E LOWER AUTHORITIES AND REMIT ALL THE ISSUES BACK TO THE ASSESSING OFFI CER/TPO FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. NEEDL ESS TO SAY ALL THE PLEADINGS TAKEN BY THE ASSESSEE SHALL REMAIN OPEN. 6. IN THE RESULT, APPEALS OF THE ASSESSEE FOR ALL TH E YEARS ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 779/14 ETC :- 5 -: ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 21 ST SEPTEMBER, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF