Appeal details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 5014 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-02-2020
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Next Hearing Date
04-12-2019
Assessment Year
2012-2013
Appeal Filed On
05-04-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, PUNE BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, J UDICIAL MEMBER . / ITA NO . 804 /PUN/201 7 / ASSESSMENT YEAR : 20 1 2 - 13 E ATON FLUID POWER LIMITED, 145, OFF MUMBAI - PUNE ROAD, PIMPRI, PUNE 411018 PAN : AAACV8426E ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 8, PUNE / RESPONDENT ASSESSEE BY : SHRI VISHAL KALRA REVENUE BY : SHRI T. VIJAYA BHASKAR REDDY / DATE OF HEARING : 2 9 - 01 - 2020 / DATE OF PRONOUNCEMENT : 19 - 0 2 - 20 20 / ORDER PER S.S. VISWANETHRA RAVI, JM : TH IS APPEAL BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER DATED 30 - 01 - 2017 PASSED BY THE AO ( A CIT, CIRCLE - 8, PUNE) PASSED U/S. 143(3) R.W.S. 144C(13) OF THE ACT FOR ASSESSMENT YEAR 201 2 - 13. 2. G ROUND NO. 1 IS GENERAL IN NATURE, HENCE, REQUIRES NO ADJUDICATION. 2 ITA NO. 804/PUN/2017, A.Y. 2012 - 13 3. GROUND NO. 2 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/DRP IN REJECTING INTERNAL TRANSACTIONAL NET MARGIN METHOD ( TNMM ) AND APPLY ING THE EXTERNAL TNMM. 4. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RECORD ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTURE AND DISTRIBUTION OF FLUID POWER EQUIPMENT SUCH AS PUMPS, GEAR PUMPS, VALVES, CYLINDERS AN RELATED COMPONENTS FOR MOBILE AND INDUSTRIAL MARKETS. THE ASSESSEE COMPANY IS A JOINT VENTURE OF MAHINDRA & MAHINDRA L TD. PRESENTLY, THE ASSESSEE HAS BECOME A WHOLLY OWNED SUBSIDIARY OF EATON CORPORATION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE REPORTED INTERNATIONAL TRANSACTIONS WITH ITS AE PERTAINING TO IMPORT OF RAW MATERIALS, TRADING GOODS AND COMPONENTS. IN MANUFACTURING ACTIVITY, THE ASSESSEE SUBMITTED SEGMENTAL PROFITABILITY OF ACCOUNTS OF AE TRANSACTIONS AND NON - AE TRANSACTIONS AND APPLIED INTERNAL TNMM COMPARING LOSS INCURRED WITH NON - AE SEGMENT WITH PROFIT THAT ARRIVED IN AE SEGMENT. THE TPO NOTICED CERTAIN ERRORS AND AFTER DETAILED DISCUSSION HE REJECTED THE INTERNAL TNMM. BEFORE THE DRP, THE ASSESSEE SUBMITTED THAT THE ITAT, PUNE BENCHES IN ASSESSEES OWN CASE FOR A.Y. 2007 - 08 UPHELD THE USE OF INTERNAL TNMM FOR DEMONSTRATING ARMS LENGTH PRICE OF ITS INTERNATIONAL TRANSACTIONS PERTAINING TO MANUFACTURING SEGMENT. FURTHER, IT WAS SUBMITTED THAT THE DRP FOR A.Y. 2011 - 12 UPHELD THE APPLICABILITY OF INTERNAL TNMM BUT HOWEVER THE DRP UPHELD THE ACTION OF TPO IN REJECTING THE INTERNAL TNMM SELECTED BY THE ASSESSEE AS MOST APPROPRIATE METHOD FOR DETERMINING ALP OF ITS INTERNATIONAL TRANSACTIONS VIDE PARA 3.2.4. 5. BEFORE US, THE LD. AR SUBMITTED THAT THE TPO ACCEPTED THE ALP DEMONSTRATED BY THE ASSESSEE IN RESPECT OF AE AND NON - AE SEGMENTS RELATING TO TRADING SEGMENTS. FURTHER, THE ITAT, PUNE BENCHES IN ASSESSEES OWN CASE REPORTED IN (2015) 56 TAXMANN.COM 135 FOR 3 ITA NO. 804/PUN/2017, A.Y. 2012 - 13 A.Y. 2007 - 08 HELD THAT THE INTERNAL THMM IS THE MOST APPROPRIATE METHOD AND REFERRED TO PAGE 236 OF THE PAPER BOOK AND DO OUR ATTENTION TO PARA 17 WHEREIN THIS TRIBUNAL UPHELD INTERNAL TNMM IS THE MOST APPROPRIATE METHOD TO COMPUTE ARMS LENGTH PRICE FOR T HE INTERNATIONAL TRANSACTIONS OF PURCHASE OF RAW MATERIAL AND COMPONENTS FROM ASSOCIATED ENTERPRISES. THE LD. AR BROUGHT TO OUR NOTICE THE ITAT, PUNE BENCHES UPHELD THE SAME INTERNAL TNMM FOR A.YS. 2008 - 09, 2010 - 11 AND 2011 - 12. THERE IS NO CONTRARY ORDER BROUGHT ON RECORD BY THE RESPONDENT - REVENUE IN THIS REGARD. THEREFORE, WE UPHOLD THE INTERNAL TNMM ADOPTED BY THE ASSESSEE IN DETERMINING ALP OF ITS INTERNATIONAL TRANSACTIONS IN PURCHASE OF RAW MATERIAL, COMPONENTS AND FINISHED GOODS. ACCORDINGLY, GROU ND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED. 6. IN VIEW OF OUR DECISION IN GROUND NO. 2 IN FAVOUR OF ASSESSEE, THE GROUND NOS. 3 AND 4 RAISED BY THE ASSESSEE ARE BECOME ACADEMIC, HENCE, REQUIRE NO ADJUDICATION. 7. GROUND NOS. 5, 6 AND 7 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/DRP IN MAKING THE UPWARD TP ADJUSTMENT RELATING TO INTERNATIONAL TRANSACTION IN RESPECT OF PAYMENT MADE TO AES FOR CORPORATE SUPPORT SERVICES. 8. BRIEF FACTS RELATING TO THE ISSUE ON HAND, D URING THE YEAR , THE ASSES SEE PAID AN AMOUNT OF RS.7,39,03,220/ - TOWARDS CORPORATE SERVICE CHARGES. A SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE ASKING AS TO WHY VALUE OF THESE SERVICES RECEIVED SHOULD NOT BE CONSIDERED AS NIL. THE AO WAS OF THE OPINION THAT THE S IMILAR ISSUE WAS U NDER DISCUSSION IN PREVIOUS YEAR ALSO AND THE CONTENTION RAISED BY THE ASSESSEE WAS NOT ACCEPTED THEREIN AND THE VALUE OF SERVICES AS RECEIVED BY THE ASSESSEE WAS CONSIDERED AS NIL. AS PER THE CLAUSES TO THE AGREEMENT THE COST OF SERVICE 4 ITA NO. 804/PUN/2017, A.Y. 2012 - 13 IS THE COST AND E XPENSES ACTUALLY INCURRED BY ECICL IN PERFORMANCE OF THE SERVICES, AS DEMONSTRATED TO PARTICIPANT. MERELY ALLOCATION OF THE COST ON THE BASIS OF TURNOVER DOES NOT JUSTIFY THE EVENT EITHER OF AVAILING THE SERVICES OR THE ARM'S LENGTH PRICE OF THE TRANSACTIO N. THE TAXPAYER TO ESTABLISH THAT THE PAYMENTS WERE MADE COMMENSURATE TO THE VOLUME AND QUALITY OF SERVICES AND SUCH COSTS ARE COMPARABLE. FURTHER, THE AO HELD THAT THE ASSESSEE HAS NOT SUBMITTED ANY DETAILS OF THE EXPENSES INCURRED BY THE ASSOCIATED ENTERPRISES AND FAILED TO ESTABLISH THAT FEES CHARGED ARE COMMENSURATE BENEFITS AGAINST THE PAYMENT OF SERVICE FEES TO THE AE. THAT THE EXPENSES WERE APPORTIONED BY THE AE AMONG DIFFERENT COUNTRY - CENTRES ON THE BASIS OF THEIR OWN AGREEMENTS AND IT HAS NO DIRECT RELATION WITH THE ACTUAL SERVICES RENDERED TO INDIVIDUAL UNITS. IT WAS DUTY OF THE ASSESSEE TO PROVIDE THE COMPLETE DETAILS OF THE TRANSACTION SO THAT THE COMPARABLE TRANSACTIONS CAN BE IDENTI FIED AND NOT BEEN ABLE TO DEMONSTRATE EXPERTISE OF ECICL , THE COST ACTUALLY INCURRED BY ECICL IN PROVIDING SUCH SERVICES TO AE , THERE WAS NECESSITY TO IDENTIFY PROCUREMENT OF SERVICES WITH REFERENCE TO TANGIBLE BENEFITS DERIVED , ARM'S LENGTH PRICE OF THE TRANSACTION IS DETERMINED AS NIL. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE IS BEFORE US. 9. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR DREW OUR ATTENTION THE PAGE 256 OF PAPER BOOK , SUBMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2010 - 11, DEALT THE ISSUE AND DECIDE THE SAME IN FAVOUR OF ASSESSEE AND REFERRED TO PARA NOS. 18 TO 21. ON PERUSAL OF THE SAME, WE NOTE THAT THIS TRIBUNAL DECIDED THE SIMILAR ISSUE IN ITS CONSOLIDATED ORDER FOR A.YS. 2010 - 11 AND 2011 - 12. WE FIND THE TRIBUNAL DECIDED THE ISSUE IN DETAIL IN PARA 13 OF PAPER BOOK AT PAGE 267 FOR A.Y. 2010 - 11, BY PLACING RELIANCE ON THE ORDER OF TRIBUNAL FOR A.Y. 2008 - 09 HELD IN FAVOUR OF ASSESSEE. FURTHER, THE SAME HAS BEEN H ELD TO BE APPLICABLE TO A.Y. 2011 - 12 VIDE PARA 21 AT PAGE 278. WE FIND THE FACTS RELATING TO THE ISSUE ON HAND FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL, 5 ITA NO. 804/PUN/2017, A.Y. 2012 - 13 AND THERE IS NO DISPUTE IN THIS REGARD. HAVING NO CONTRARY ORDER AGAINST THE FINDINGS OF THIS T RIBUNAL, WE HOLD THAT THE FINDING RENDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS. 2010 - 11 AND 2011 - 12 IS APPLICABLE TO THE ISSUE RAISED IN GROUND NOS. 5, 6 AND 7. THUS, GROUND NOS. 5, 6 AND 7 RAISED BY THE ASSESSEE ARE ALLOWED. 10. IN GROUND NO. 8 OF THE APPEAL, THE ASSESSEE HAS ASSAILED CHARGING OF INTEREST U/S. 234B AND 234C OF THE ACT. CHARGING OF INTEREST U/S. 234B AND 234C IS CONSEQUENTIAL AND MANDATORY, HENCE, GROUND NO. 8 RAISED IN APPEAL BY THE ASSESSEE IS DISMISSED BEING DEVOID OF A NY MERIT. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2020 . SD/ - SD/ - (ANIL CHATURVEDI) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBE R / PUNE; / DATED : 19 TH FEBRUARY, 20 20 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE DISPUTE RESOLUTION PANEL - 3 , MUMBAI 4. THE CIT ( IT & TP), PUNE 5. , , , / DR, ITAT, C BENCH, PUNE. 6. / GUARD FILE. // // TRU E COPY // / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE
