Socomec Innovative Power Solutions Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 848/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5186 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 06-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIVASA RAO CITD R
• Keywords: Transfer pricing

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , , BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI S.JAYARAMAN , ACCOUNTANT MEMBER ./ I.T.A.NO.848/CHNY/2017 AND S.P.NO.148/CHNY/2018 / ASSESSMENT YEAR : 2012-13 M/S.SOCOMEC INNOVATIVE POWER SOLUTIONS PRIVATE LTD., (FORMERLY KNOWN AS SOCOMEC UPS INDIA PVT. LTD.) THIRU-VI-KA INDUSTRIAL ESTATE, GUINDY,CHENNAI 600 032. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), ROOM NO.705, 7 TH FLOOR, WANAPARATHY BLOCK, CHENNAI 600 034. [PAN AAKCS 3579 H] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.DARPAN KIRPALANI, C.A !' /RESPONDENT BY : MR.SRINIVASA RAO, CIT,D.R # $ %& / DATE OF HEARING : 04 - 0 6 - 201 8 '( %& / DATE OF PRONOUNCEMENT : 04 - 0 6 - 201 8 !' / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER ITA NO.848/CHNY/2017 IS AN APPEAL FILED BY THE AS SESSEE AGAINST THE ORDER OF THE DISPUTE RESOLUTION PANEL (DRP) -2, BANGALURU IN F. NO.151/DRP-2/BANG/2016-17 DATED 15.12.2016 FOR T HE AY 2012-13. ITA NO.848/CHNY/2017 SP NO.148/CHNY/2018 :- 2 -: 2. S.P NO.108 /CHNY/2018 IS THE STAY PETITIONS FIL ED BY THE ASSESSEES IN ITA NO.848/CHNY/2017 FOR THE A.Y 2012- 13. 3. MR.DARPAN KIRPALANI REPRESENTED ON BEHALF OF TH E ASSESSEE AND MR.SRINIVASA RAO REPRESENTED ON BEHALF OF TH E REVENUE. 4. THE APPEAL FILED BY THE ASSESSEE IS DELAYED FOR 04 DAYS, FOR WHICH, THE ASSESSEE HAS FILED NECESSARY AFFIDAVIT F OR CONDONATION OF DELAY. THE REVENUE HAS NOT RAISED ANY SERIOUS OBJE CTION IN REGARD TO THE CONDONATION OF THE DELAY. THE AFFIDAVIT FILED BY THE ASSESSEE IS FOUND TO BE EXPLAINED. CONSEQUENTLY, THE DELAY OF 04 DAYS IN FILING OF THE APPEAL BY THE ASSESSEE IS CONDONED AND THE APPE AL OF ASSESSEE IS DISPOSED OFF ON MERITS. 5. IT WAS SUBMITTED BY THE LD.A.R THAT THE ASSESSE E WAS INCORPORATED IN JUNE,2006 AS A JOINT VENTURE BETWEE N NUMERIC POWER SYSTEM LIMITED AND SOCOMEC SA, FRANCE. SUBSEQUENTLY ON 22.04.2008 THE ASSESSEE BECAME A SUBSIDIARY OF SOCOMEC SA. IT WAS A SUBMISSION THAT ASSESSEE IS IN THE BUSINESS OF TRADING IN UNIN TERRUPTED POWER SUPPLY (UPS)/ INVERTORS. THE ASSESSEE PURCHASED TH E UPS FROM ASSOCIATED ENTERPRISES (A.ES) LOCATED IN FRANCE, IT ALY, CHINA AND ITA NO.848/CHNY/2017 SP NO.148/CHNY/2018 :- 3 -: SINGAPORE AND THE SAME ARE SOLD IN INDIA. IT WAS A SUBMISSION THAT POST SALES SERVICES OF SOLD UPS IN INDIA ARE RENDER ED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE HAD SUBMITTED IT S TRANSFER PRICING STUDY BY APPLYING COMPARABLE UNCONTROLLED PRICE (CU P) METHOD ADOPTED FOR BENCHMARKING ITS INTERNATIONAL TRANSACT ION. IT WAS A SUBMISSION THAT THE LD.TPO REJECTED THIS AND HAD AD OPTED THE MOST APPROPRIATE METHOD AS TNMM WITH BERRY RATIO AS PROF IT LEVEL INDICATOR (PLI). IT WAS A SUBMISSION THAT CONSEQUENTLY THE T PO HAD DETERMINED THE COMPARABLES IN THE ASSESSEES CASE BY APPLYING THE FILTERS AS MENTIONED IN PARA 5.2 OF THE ORDER U/S.92CA OF THE ACT DATED 25.01.2016 WHEREIN THE FILTERS WERE ONE OF THE INDU STRIES TRADING IN UPS/INVERTORS. 1 ALL INDUSTRIES TRADING IN UPS/INVERTERS 2 FINANCIALS NOT AVAILABLE 3 SALES ABOVE 1 CRORE & LESS THAN 200 CR. 5 CONSECUTIVE LOSSES ARE REJECTED 7 RPT IS MORE THAN 25% 8 FUNCTIONALLY SIMILAR THUS, IT WAS SUBMITTED THAT IN ITEM THREE OF THE FI LTERS, THE SALES ABOVE ` 1 CRORE AND LESS THAN ` 200 CRORES WAS TAKEN AS THE TURNOVER FILTER. IT WAS A SUBMISSION THAT CONSEQUENTLY IN PARA-7 OF THE ORDER OF THE TPO, THREE COMPARABLES WERE DETERMINED BEING ADOR POWER SYSTEM HAVING A BERRY RATIO 0.12, SU-KAM POWER SYSTEMS LTD., HAVI NG A BERRY RATIO 0.36 AND SWELECT ENERGY SYSTEMS LTD., HAVING A BERR Y RATIO 0.34. IT ITA NO.848/CHNY/2017 SP NO.148/CHNY/2018 :- 4 -: WAS A SUBMISSION THAT THE COMPARABLES FOR SU-KAM PO WER SYSTEMS LTD., AND SWELECT ENERGY SYSTEMS LTD., WERE NOT COM PARABLES INSOFAR AS THE TURNOVER OF SWELECT ENERGY SYSTEMS LTD., WAS SHOWN AT ` 534.64 CRORES AND THE TURNOVER OF SU-KAM POWER SYSTEMS LTD ., WAS SHOWN AT ` 680.41 CRORES. IT WAS A SUBMISSION THAT THE ASSESS EES TURNOVER WAS ` 89.77 CRORES. IT WAS A SUBMISSION THAT THE TURNOVE R FILTER AS APPLIED BY THE LD.TPO ITSELF SHOULD HAVE EXCLUDED SWELECT E NERGY SYSTEMS LTD., AND SU-KAM POWER SYSTEMS LTD. IT WAS A SUBMIS SION THAT HOWEVER, THE LD.TPO DID NOT EXCLUDE THE TWO. IT WAS A SUBMISSION THAT IF THE SAID TWO COMPARABLES WERE EXCLUDED THE BERRY RATIO IN RESPECT OF THE COMPARABLE LEFT AND THAT OF THE ASSESSEE WOU LD BE WELL WITHIN THE 5% OF MARGINS PERMISSIBLE U/S.92CA(2) OF THE ACT. IT WAS THE PRAYER THAT AS THE TURNOVER OF SWELECT ENERGY SYSTEMS LTD., AND SU-KAM POWER SYSTEMS LTD., FAILED IN THE TURNOV ER FILTER, THE SAME MAY BE EXCLUDED. 6. IN REPLY, LD.D.R SUPPORTED THE ORDER OF LD.TPO AND THE DIRECTION OF DRP. IT WAS A SUBMISSION THAT THE ISSU ES COULD BE RE-DECIDED BY APPLYING FRESH FILTERS, AND CONSEQUEN TLY, THE SAME IS LIABLE TO BE RESTORED TO THE FILE OF LD.TPO. 7. IN REPLY TO A SPECIFIC QUERY FROM THE BENCH AS TO WHAT WAS THE DECISION OF THE LD.DRP. IT WAS SUBMITTED BY LD. A.R THAT THOUGH THE ISSUE WAS BROUGHT BEFORE THE DRP, THE DRP DID NOT A CCEPT THE ITA NO.848/CHNY/2017 SP NO.148/CHNY/2018 :- 5 -: CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE A SSESSEE HAD NOT MADE OUT THE CASE AS TO HOW THE HIGH OR LOW TURNOVE R INFLUENCED MARKETING MARGINS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITT EDLY, THE HIGHER THE TURNOVER, THE HIGHER THE PLI INSOFAR AS THE FIXED COSTS REMAINED CONSTANT. IN ANY CASE, PERUSAL OF THE FILT ERS AS DETERMINED BY THE LD.TPO ITSELF SHOWS THAT THE LD.TPO HAS DETERMI NED THE FILTERS AND IT IS NOT THE ASSESSEE, WHO HAS DETERMINED THE FILT ERS. THE LD.TPO WHO HAVING DETERMINED THE FILTERS, COMPARABLES MUST CON FORM TO SUCH FILTERS PLACED. ADMITTEDLY BOTH SU-KAM POWER SYSTE MS LTD., & SWELECT ENERGY SYSTEMS LTD., CLEARLY FALL OUTSIDE THE PURVI EW OF BEING COMPARABLE ON ACCOUNT OF THE TURNOVER FILTERS, THE SAME SHOULD BE EXCLUDED AND WE DIRECT IT. ONCE THE TWO COMPARABLES BEING SU-KAM POWER SYSTEMS LTD., AND SWELECT ENERGY SYSTEMS LTD. , ARE EXCLUDED THE PLI APPLYING THE BERRY RATIO ON COMPARABLES BEING WITHIN THE 5% MARGIN, THERE WOULD BE NO ROOM FOR ANY FURTHER ADJUSTMENTS. THE CLAIM OF THE LD.D.R , THE ISSUE MU ST BE RESTORED TO THE FILE OF LD.TPO FOR RE-ADJUDICATION WOULD NO MORE SURVIVE INSOFAR AS IF THERE WAS A COMPARABLE OTHER THAN THA T WHICH HAS BEEN TAKEN BY THE LD. ASSESSING OFFICER, THEN OBVIO USLY HE WOULD HAVE BROUGHT IT OUT IN HIS ORDER. THE FACT, THE LD . ASSESSING OFFICER ITA NO.848/CHNY/2017 SP NO.148/CHNY/2018 :- 6 -: HAS CONSIDERED ONLY THREE COMPARABLES AND IT IS ON ACCOUNT OF THE FILTERS APPLIED BY THE LD. ASSESSING OFFICER THAT T WO OF THE COMPARABLES HAVE TO BE EXCLUDED, WE FIND NO REASON TO RESTORE THIS ISSUE TO THE FILE OF LD.TPO FOR RE-ADJUDICATION. 9. AS THE APPEAL OF THE ASSESSEE HAS ALREADY BEEN DISPOSED OFF, THE STAY PETITIONS FILED BY THE ASSESSEE IN SP NO.1 48/CHNY/2018 HAVE BECOME INFRUCTUOUS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED AND THE STAY PETITION FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 04 TH JUNE, 2018, AT CHENNAI. SD/ - SD/ - ( ) (S. JAYARAMAN) # !$ /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) % !$ / JUDICIAL MEMBER ) $ / CHENNAI * / DATED: 04 TH JUNE, 2018. K S SUNDARAM + !%,- . -% / COPY TO: 1 . / APPELLANT 3. # /% () / CIT(A) 5. -23 !%4 / DR 2. !' / RESPONDENT 4. # /% / CIT 6. 35 6$ / GF