JCB India Ltd., New Delhi V. DCIT, CIRCLE- 13(2), New Delhi

ITA 8312/DEL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8025 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Assessment Year: 2014-2015
• Appeal Filed On: 28-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Keywords: Transfer pricing; International transaction; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA . NO. 8312 /DEL/20 1 8 ASSESSMENT YEAR S 20 14 - 15 JCB INDIA LTD. B1/I-1, 2 ND FLOOR, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI. V. DCIT CIRCLE 13(2), NEW DELHI. PAN: AAACE0078BP (APP ELL ANT) (RESPONDENT) & ITA. NO.9753/DEL/2019 ASSESSMENT YEARS 2015 - 16 JCB INDIA LTD. B1/I-1, 2 ND FLOOR, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI. V. DCIT CIRCLE 13(2), NEW DELHI. PAN: AAACE0078BP (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI TARANDEEP SINGH, ADV. RESPONDENT BY: SHRI SURENDER PAL, CIT DR DATE OF HEARING: 2 1 0 7 20 20 DATE OF PRONOUNCEMENT: 30 07 20 20 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEALS HAVE BEEN FILE D BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER DATED 29.11.2018 PASSED IN PURSUANCE OF DIRECTIONS GIVEN BY THE DRP IN ORDER D ATED ITA NO.3255/DEL/2019 2 25.09.2018 FOR THE AY 2014-15; AND FINAL ASSESSMENT ORDER DATED 28.10.2019 PASSED IN PURSUANCE OF DRP DIRECTIONS DA TED 28.08.2019 FOR THE AY 2015-16. IN BOTH THE APPEALS THE COMMON ISSUES INVOLVED ARE THE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF ROYALTY. SINCE FACTS IN ISSUES ARE COMMON ARISING OUT OF IDENTICAL SET OFF FACTS, THEREFORE, SAME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SHRI TARANDEEP SINGH POINTED OUT THAT THE ONLY DISPUTE OF TP ADJUS TMENT IS WITH REGARD TO ROYALTY OF PAYMENT. THE ASSESSEE HAS PAI D ROYALTY TO ITS AE @ 5%, WHEREAS TPO HAS ALLOWED ROYALTY @ 2% AND T HEREBY MAKING ADJUSTMENT OF RS. 91,85,00,341/- IN AY 2014- 15 AND RS. 79,18,90,775/- IN THE AY 2015-16. HE SUBMITTED THA T IN MAP PROCEEDINGS THIS ISSUE HAS BEEN SETTLED BY THE COMP ETENT AUTHORITIES OF UK AND INDIA, WHEREIN IT HAS BEEN MU TUALLY AGREED THAT FOR THE AY 2014-15 THE ALP OF ROYALTY PAYMENT WOULD BE @ 4% AND FOR THE AY 2015-16 IT WOULD BE 3%. 3. LD. DR ADMITTED THAT THIS ISSUE NOW STANDS COVER ED UNDER THE MAP PROCEEDINGS. 4. THE JCB INDIA IS MANUFACTURING OF EARTHMOVING AN D CONSTRUCTION EQUIPMENT AND IS WHOLLY OWNED SUBSIDIA RY OF JCB, UK. AS PER THE TP STUDY REPORT AES ARE RESPONSIBLE FOR DEVELOPMENT AND DESIGNING OF PRODUCTS AND UP-GRADAT ION OF EXISTING PRODUCTS. FOR HEAVY MACHINES THE JCB INDI A ENTERED INTO AN AGREEMENT FOR MANUFACTURING OF VARIOUS MACHINES FOR WHICH IT HAS PAID ROYALTY @ 5%. FOR AY 2014-15 IT HAS MADE FOLLOWING PAYMENTS OF ROYALTY TO AE: ITA NO.3255/DEL/2019 3 PRODUCTS ROYALTY AMOUNT IN INR HEAVY LINE MA CHINE 289,917,150 BACKHOE LOADERS - 3DX 1,530,833,902 - 2DX 34,031,604 TOTAL 1,564,865,506 5. FURTHER THE HISTORY OF PAYMENT OF ROYALTY HAS EX PLAINED IN THE FOLLOWING MANNER: S.N. AGREEMENT DT. PARTIES TO THE AGREEMENT PRODUCT ROYALTY % PERIOD OF AGREEMENT 1. 13/02/1979 ESCORTS JCB LTD., INDIA & JCB, UK TWO WHEEL DRIVE EXCAVATOR LOADER 5% 5 YRS FROM THE COMMENCEMENT OF COMMERCIAL PRODUCTION 2. 07/07/1983 -DO- HYDRAULIC WHEEL LOADER -DO- -DO- 3. 27/02/1987 -DO- SYNCHROMESH GEAR BOX WITH INBUILT FORWARDING & REVERSING FACILITY [3D TECHNOLOGY WAS INTRODUCED IN 1986 AS STATED IN PT 4 OF LETTER DATED 22/09/2016] -DO- -DO- 4. 04/03/1992 -DO- TELESCOPIC HANDLERS (LOAD ALL MACHINES) -DO- -DO- 5. NO ROYALTY PAID BY THE ASSESSEE FROM 1997 TILL 2 004 6. 05/03/2004 -DO- 3DX TECHNOLOGY -DO- CONTINUING TILL DATE 6. THE ASSESSEE HAS SUBMITTED THAT FOR THE TECHNO LOGY TRANSFERRED ROYALTY PAYMENT HAS BEEN MADE TO AE. F OR BENCH MARKING THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY THE ASSESSEE HAS CONSIDERED CUP AS MOST APPROPRIATE MET HOD AND HAD ITA NO.3255/DEL/2019 4 IDENTIFYING FOUR COMPARABLES AND ALP OF COMPARABLES WAS ARRIVED AT 6.3% AND HENCE IT WAS REPORTED THAT THE ASSESSEE S PAYMENT OF ROYALTY IS AT ARMS LENGTH PRICE. HOWEVER, THE LD. TPO AFTER DETAILED DISCUSSION HELD THAT AFTER COMPARING VARIO US AGREEMENTS OF UNCONTROLLED TRANSACTION HELD THAT ROYALTY PAYAB LE BY THE ASSESSEE SHOULD BE AT 2% AND, ACCORDINGLY, HAS MADE TRANSFER PRICING ADJUSTMENT. 7. NOW THAT ISSUE HAS BEEN SETTLED BY THE COMPETENT AUTHORITY THAT UK & INDIA UNDER MUTUAL AGREEMENT PROCESS (MAP ), WHEREIN IT HAS BEEN AGREED THAT PAYMENT OF ROYALTY FOR AY 2 014-15 SHOULD BE @ 4% AND FOR AY 2015-16 IT SHOULD BE AT 3%. ACC ORDINGLY, TPO DIRECTED TO WORK OUT THE ADJUSTMENT FOLLOWING THE M AP ORDER AND DETERMINE THE ARMS LENGTH RATE OF ROYALTY PAYABLE FOR THE AY 2014- 15 @ 4% AND FOR AY 2015-16 @ 3%. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2020. SD/- SD/- (O.P. KANT) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30/07/2020 KAVITA ARORA, SR. PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR