INGRAM MICRO INDIA EXPORTS PTE. LTD, V. DCIT (IT) 3(1), MUMBAI

ITA 8134/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1785 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 23-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 24-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDER KUMAR
• Assessee Lawyers: K K VED; J D MISTRI MR NISHANT THAKKAR
• Keywords: Transfer pricing; Search and seizure; Principle of natural justice; Permanent establishment

Judgement Text

ITA NO.8134 OF 2010 INGRAM MICRO (INDIA) EXPORTS PV T LTD MUMBAI PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.8134/MUM/2010 (ASSESSMENT YEAR: 2008-09) INGRAM MICRO (INDIA) EXPORTS PVT. LTD, 205 KALLANG BAHRU, LEVEL I.M. SINGAPORE-339341 VS. DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-3(1) SCINDIA HOUSE, BALLARD ESTATE,MUMBAI 400038 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI J.D.MISTRI, MR.NISHANT THAKKAR, & MR. K.K.VED DEPARTMENT BY: SHRI NARENDER KUMAR, CIT DR DATE OF HEARING: 31/01/2013 DATE OF PRONOUNCEMENT: 07/02/2013 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY ASSESSEE COMPANY WHO IS A RES IDENT OF SINGAPORE, CONTESTING THE ACTION OF AO AND THE DRP ON THE ISSUE OF HOLDING THAT ASSESSEE HAS A PERMANENT ESTABLISHMENT IN INDIA AND WITHOUT PREJUDICE THE PROFITS ATTRIBUTABLE TO THE P E IN INDIA WERE DETERMINED ARBITRARILY BY ESTIMATING THE BUSINESS I NCOME AT 90% OF THE BUSINESS PROFITS AND ALSO NON CONSIDERATION OF DETAILS PLACED ON RECORD, LEVY OF INTEREST ETC. IN ITS SIX GROUNDS OF APPEAL RAISED. 2. AT THE OUTSET THE LEARNED COUNSEL REQUESTED FOR RES TORING THE APPEAL AFRESH TO THE FILE OF AO ON THE REASONS STAT ED BY HIM WITHOUT GOING TO THE MERITS OF THE CASE ABOUT THE PE AND TH E ATTRIBUTION OF PROFITS. THE REASONS FOR REQUEST FOR RESTORATION AR E THAT THE JURISDICTIONAL COMMISSIONER WAS ON THE DISPUTE RESO LUTION PANEL WHICH HEARD THE OBJECTIONS FILED BY ASSESSEE AGAINS T THE DRAFT ASSESSMENT ORDER. FOLLOWING THE PRINCIPLES LAID DOW N BY THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF HYUNDAI HEAVY INDUSTRIES LTD. VS. UNION OF INDIA, 201 TAXMANN.COM 237 FOLLOW ED BY ITAT IN THE CASE OF LIONBRIDGE TECHNOLOGIES (P) LTD. VS. DE PUTY ITA NO.8134 OF 2010 INGRAM MICRO (INDIA) EXPORTS PV T LTD MUMBAI PAGE 2 OF 6 COMMISSIONER OF INCOME-TAX, RANGE 8(2) 51 SOT 40 (M UM) AND HUNTSMAN INTERNATIONAL (INDIA) (P.) LTD. VS. ADDITI ONAL COMMISSIONER OF INCOME-TAX 10(3), 54 SOT 35 ON THE REASON OF POSSIBLE BIAS/CONFLICT OF INTEREST, THE LD.COUNSEL OBJECTED TO THE PRESENCE OF JURISDICTIONAL CIT ON THE DRP PANEL. IN SUPPORT THE LEARNED COUNSEL PLACED ON RECORD THE POSTING ORDER OF MRS. POONAM DUTT AS DIT (IT) WHO WAS THE JURISDICTIONAL COMMISS IONER NOT ONLY AT THE TIME OF PASSING THE DRAFT ASSESSMENT ORDER B UT ALSO PART OF DRP AND AT THE TIME OF FINAL ORDER. THEREFORE, THE FIRST OBJECTION IS WITH REFERENCE TO THE ABOVE ISSUE. 3. THE NEXT OBJECTION IS THAT THE CONTENTION OF ASSESS EE THAT INDIAN ENTITY HAS BEEN APPROPRIATELY REMUNERATED AT ARMS LENGTH SEPARATELY BY WAY OF REBATES/INCENTIVES PAID TO IND IAN ENTITY INGRAM MICRO (INDIA) PVT. LTD DIRECTLY BY VARIOUS VENDORS, SUPPORTED BY VARIOUS DOCUMENTS PLACED ON RECORD, WHICH WERE REJE CTED BY THE AO WITHOUT EXAMINATION AND NOT CONSIDERED BY THE DRP I NSPITE OF RAISING OBJECTIONS ON THIS ISSUE. HE HAS MENTIONED THAT THIS ASPECT HAS TO BE EXAMINED BY AO. THE THIRD REASON IS THAT THE LEARNED DDIT ERRED IN NOT GIVING OPPORTUNITY FOR CROSS EXAM INING THE INDIVIDUALS WHOSE STATEMENTS WERE RECORDED DURING T HE SEARCH AND SEIZURE OPERATIONS AND RELIED UPON BY REVENUE, THE REQUEST OF WHICH WAS MADE BEFORE THE AUTHORITIES IN THE PROCEEDINGS, BUT NOT CONSIDERED. 4. IN SUPPORT OF THE ABOVE CONTENTIONS, THE LEARNED CO UNSEL PLACED ON RECORD THE ORDERS OF THE POSTING OF THE J URISDICTIONAL COMMISSIONER, THE PAPERS SUBMITTED TO AO/DRP ON THE ABOVE ISSUES AND REQUEST FOR CROSS EXAMINATION WHICH WERE NOT CONSIDERED. IN VIEW OF THIS, THE LEARNED COUNSELS SUBMISSION WAS THAT THE ORDER BE RESTORED TO THE FILE OF AO FOR FR ESH CONSIDERATION WITHOUT GOING TO THE MERITS OF THE GROUNDS RAISED O N WHICH DETAILED SUBMISSIONS ARE REQUIRED. THE LEARNED COUNSEL ALSO PLACED ON RECORD CERTAIN DOCUMENTS IN THE FORM OF FINANCIAL S TATEMENTS OF INGRAM MICRO (INDIA) PVT. LTD FOR THE YEAR ENDED MA RCH, 2008 AND ITS EXTRACTS AND DRAFT ORDERS IN SUPPORT OF THE CONTENT IONS ABOUT THE ITA NO.8134 OF 2010 INGRAM MICRO (INDIA) EXPORTS PV T LTD MUMBAI PAGE 3 OF 6 REBATES/INCENTIVES RECEIVED FROM THE INDIAN VENDORS ON ALL THE SALES MADE THROUGH THE SINGAPORE COMPANY, STATING THAT TH ESE DOCUMENTS WERE DIRECTED BY THE BENCH OF ITAT EARLIE R TO FILE. 5. THE LEARNED DR OBJECTED TO THE FILING OF NEW DOCUME NTS AS DIRECTED BY THE ITAT, WHEN THE ITAT IS ONLY DIRECTE D TO FILE ONLY THE ORDER OF THE ASSESSMENT OF THE INDIAN COMPANY. FURT HER, HE ALSO OBJECTED TO THE CONTENTIONS OF THE LEARNED COUNSEL ON THE POSSIBILITY OF BIAS OF THE JURISDICTION ON THE REASON THAT ASSE SSEE HAS NOT RAISED ANY ADDITIONAL GROUNDS AND THEREFORE, FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF DRESDNER BANK AG IN ITA NO.2962 /MUM/2004 DATED 16.01.2013, THIS PLEA OF ASSESSEE CANNOT BE A CCEPTED. FURTHER, WITH REFERENCE TO THE CONTENTIONS THAT THE REBATES AND INCENTIVES WERE PASSED ON TO THE INDIAN COMPANIES, HE REFERRED TO THE SEGMENTAL PROFITS STATED BY THE ASSESSEE COMPAN Y TO SUBMIT THAT IF THE ENTIRE PROFITS WERE PASSED ON TO THE IN DIAN COMPANY AS STATED BY THE LEARNED COUNSEL, HOW THERE ARE FURTHE R SUBSTANTIAL PROFITS IN THE HANDS OF THE SINGAPORE COMPANY, AS D ISCLOSED IN ACCOUNTS. 6. WITH REFERENCE TO THE OBJECTION THAT THE CROSS EXAM INATION WAS NOT ALLOWED, HE HAS REFERRED TO THE ORDERS OF A O THAT THE ENTIRE DOCUMENTS PLACED ON RECORD WERE TAKEN DURING THE SE ARCH/SURVEY AND NOWHERE THIS ISSUE WAS RAISED. FURTHER, IT IS A LSO SUBMITTED THAT ASSESSEE HAS NOT UNDERTAKEN ANY FAR ANALYSIS A ND HAS NOT GONE THROUGH THE TP PROVISIONS TO DETERMINE THE ARM S LENGTH PRICE AND RELIED ON THE DECISION OF THE HON'BLE DELHI HIG H COURT IN THE CASE OF ROLLS ROYCE SINGAPORE (P.) LTD. VS. ASSISTA NT DIRECTOR OF INCOME-TAX, 13 TAXMANN.COM 81, DATED 30.8.2011 TO C ONTEND THAT ASSESSEE CANNOT AGITATE IF HE HAS NOT UNDERTAKEN TH E FAR ANALYSIS. IT WAS FURTHER SUBMITTED THAT THE ENTIRE INCOME EAR NED BY THE SINGAPORE COMPANY WAS FROM THE OPERATIONS FROM INDI A AND SO PE PROFITS WERE ATTRIBUTED AT 90% AFTER ANALYZING THE VOLUMINOUS DOCUMENTS. TT WAS THE LEARNED DRS SUBMISSION THAT THERE IS NO NEED TO SET ASIDE THE ISSUE TO THE FILE OF THE DRP/ AO AND THE ISSUE CAN BE DECIDED ON MERITS. ITA NO.8134 OF 2010 INGRAM MICRO (INDIA) EXPORTS PV T LTD MUMBAI PAGE 4 OF 6 7. COUNTERING THE CONTENTIONS OF THE LEARNED DR, THE L EARNED COUNSEL SUBMITTED THAT NON-ADHERENCE TO THE PRINCIP LES OF NATURAL JUSTICE, NON EXAMINATION OF THE CONTENTION OF INDIA N ENTITY BEING REMUNERATED AT ARMS LENGTH AND NOT PROVIDING THE CR OSS EXAMINATION FORM THE VERY BASIS OF THE ORDER WHICH REQUIRE RECONSIDERATION BY AO. WITH REFERENCE TO THE OBJECT ION THAT ASSESSEE HAS NOT RAISED ANY ADDITIONAL GROUND, HE RELIED ON THE RULE 11 OF THE ITAT RULES AND THE PRINCIPLES LAID DOWN IN THE CASE OF AMINES PLASTICIZERS LTD. VS. COMMISSIONER OF INCOME-TAX, 2 23 ITR 173 AND IN THE CASE OF ASSAM CARBON PRODUCTS LTD. VS. COMMI SSIONER OF INCOME-TAX, 224 ITR 57. SINCE THIS ISSUE GOES TO TH E ROOT OF THE JURISDICTION AND ALSO EXAMINATION ON FACTS, IT WAS ONLY PRAYER THAT THE MATTER MAY BE RESTORED TO THE FILE OF AO FOR FR ESH EXAMINATION. WITH REFERENCE TO THE OBJECTIONS RAISED BY THE DR T HAT THE FAR ANALYSIS WAS NOT DONE AND TRANSFER PRICING PROCEDUR E NOT UNDERTAKEN, THE LEARNED COUNSEL REFERRED TO THE PAP ER BOOK FROM PAGES 173 TO 270 TO SUBMIT THAT THE FAR ANALYSIS WA S UNDERTAKEN AND THESE MATTERS WERE BEFORE AO AND THE DRP. IT WA S FURTHER SUBMITTED THAT AO DID NOT MAKE ANY TP REFERENCE. SI NCE THE ISSUE OF JURISDICTION ITSELF WAS RAISED, THE PRAYER IS FO R RESTORING TO AO FOR FRESH EXAMINATION OF ALL THE ISSUES. 8. WE HAVE CONSIDERED THE CONTENTIONS RAISED BY BOTH T HE PARTIES. AS SEEN FROM THE ORDERS PLACED ON RECORD, THE FIRST OBJECTION WITH REFERENCE TO POSSIBLE BIAS ON THE PART OF THE JURISDICTIONAL COMMISSIONER CANNOT BE REJECTED OUTRIGHT, AS THE JU RISDICTIONAL COMMISSIONER IS PART OF THE DRP WHICH REJECTED ASSE SSEE OBJECTIONS. VARIOUS BENCHES OF ITAT, FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE HIGH COURT OF UTTARAKHAND IN TH E CASE OF HYUNDAI HEAVY INDUSTRIES LTD. VS. UNION OF INDIA, 2 01 TAXMANN.COM 237, IS SETTING ASIDE THE ORDERS OF THE DRP WITH A DIRECTION TO RECONSTITUTE THE DRP WITHOUT THE JURIS DICTIONAL COMMISSIONER AND PASS FRESH ORDERS. THEREFORE, ON F IRST OBJECTION ITSELF THE ORDER HAS TO BE SET ASIDE TO THE FILE OF THE DRP. ITA NO.8134 OF 2010 INGRAM MICRO (INDIA) EXPORTS PV T LTD MUMBAI PAGE 5 OF 6 9. HOWEVER, THE PLEA IS TO RESTORE TO THE FILE OF AO A S THE OTHER TWO ISSUES REGARDING APPROPRIATELY REMUNERATING IND IAN ENTITY AT ARMS LENGTH AND ALLOWING THE CROSS EXAMINATION OF T HE PERSONS WHOSE STATEMENT WAS RECORDED AND USED AGAINST ASSES SEE ARE TO BE UNDERTAKEN BY AO. EVEN THOUGH AO WAS SEIZED OF THE MATTER OF RECEIVING REBATES/INCENTIVES FROM THE INDIAN VENDOR COMPANIES, THERE SEEMS TO BE NO DETAILED EXAMINATION OF ASSESS EES CONTENTIONS ON THE BASIS OF THE LETTERS FILED FROM THE VENDORS. AO REJECTED THE CONTENTIONS AS THE SAID REBATE WAS NOT SHOWN AS THE INCOME BY THE SINGAPORE COMPANY AND ALSO NOT SHOWN AS EXPENDITURE . PRIMA FACIE, THERE SEEMS TO BE JUSTIFICATION IN ASSESSEE S CONTENTION THAT THE ENTIRE REBATE/ INCENTIVES ON THE SALES MADE IN INDIA ARE DIRECTLY PASSED ON TO THE INDIAN COMPANY AND NO PART OF IT W AS RECEIVED BY THE SINGAPORE COMPANY. THERE IS ALSO JUSTIFICATION IN THE DRS CONTENTIONS THAT IF THE INDIAN ENTITY WAS APPROPRIA TELY REMUNERATED AT ARMS LENGTH, THERE CANNOT BE ANY FURTHER PROFIT IN THE SINGAPORE COMPANY ON THE INDIAN OPERATIONS. HOWEVER, THESE AS PECTS REQUIRE FRESH EXAMINATION ON THE BASIS RELEVANT AGREEMENT/U NDERSTANDING IF ANY AND DETAILS OF INCENTIVES RECEIVED AND PROFIT A TTRIBUTION WHICH WAS TO BE DONE AFTER EXAMINATION OF FACTS. THEREFOR E, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE RESTORED TO THE F ILE OF AO, WITHOUT GOING INTO THE ISSUE OF PE/ ATTRIBUTION OF PROFITS. AO IS DIRECTED TO GIVE AN OPPORTUNITY TO ASSESSEE FOR CROSS EXAMINING PERSONS WHOSE STATEMENTS ARE USED AGAINST ASSESSEE. THE STATEMENT S HAVE BEEN RECORDED FROM THE INDIAN PERSONNEL AND MIGHT HAVE B EEN EXAMINED WITH REFERENCE TO THE INDIAN COMPANY, HOWEVER, ASSE SSEES CONTENTION THAT BEING A FOREIGN COMPANY, IT HAS A R IGHT TO CROSS EXAMINE THE PERSONS WHO GAVE STATEMENTS CANNOT BE D ENIED. IT IS ALREADY ON RECORD THAT ASSESSEE HAS MADE THE REQUES T BEFORE AO AS WELL AS THE DRP ON THIS ISSUE. THEREFORE, WE DIRECT AO TO ALLOW THE ASSESSEE TO CROSS EXAMINE THE INDIVIDUALS WHOSE STA TEMENTS WERE RECORDED AND WERE RELIED UPON BY THE REVENUE SO THA T ASSESSEE CAN CONTEST/JUSTIFY/ACCEPT THE STATEMENTS. ITA NO.8134 OF 2010 INGRAM MICRO (INDIA) EXPORTS PV T LTD MUMBAI PAGE 6 OF 6 10. IN VIEW OF THIS, ACCEPTING THE REQUEST OF THE LEARN ED COUNSEL, WE SET ASIDE THE ORDERS OF AO AND DRP AND RESTORE T HE ENTIRE ASSESSMENT TO THE FILE OF AO, LEAVING THE ISSUES CO NTESTED NOW OPEN FOR EXAMINATION AT A LATER TIME, IF REQUIRED. SINCE THE ENTIRE ASSESSMENT WAS RESTORED TO THE FILE OF AO, THERE IS NO NEED TO DISCUSS THE ISSUE OF PE AND ATTRIBUTION OF PROFITS NOW, WHICH MAY HAVE TO BE CONSIDERED WHEN IT ARISES IN THE RE-ASSE SSMENT PROCEDURE. WITH THESE OBSERVATIONS AND DIRECTIONS, WE SET ASIDE THE ORDERS OF AO AND THE DRP AND RESTORE THE ENTIRE ASS ESSMENT PROCEDURE TO THE FILE OF AO FOR DOING IT AFRESH. AS SESSEE IS FREE TO SUBMIT THE RELEVANT DOCUMENTS AND MAKE CONTENTIONS AND AO IS ALSO FREE TO MAKE NECESSARY INQUIRES BEFORE FINALIZ ING DRAFT ORDER. DRP WHICH SHOULD BE WITHOUT THE JURISDICTIONAL CIT/ DIT, SHOULD ALSO CONSIDER THE OBJECTIONS, IF ANY, RAISED BY ASS ESSEE BY EXAMINING THE FACTS AND LEGAL PRINCIPLES AND ISSUE NECESSARY DIRECTIONS IN THIS REGARD. 11. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH FEBRUARY, 2013 SD/- SD/- (AMIT SHUKLA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 7 TH FEBRUARY, 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI