CADBURY SCHWEPPES OVERSEAS LTD, MUMBAI V. ASST DIT (IT) 1(2), MUMBAI

ITA 921/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2521 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Assessee Lawyers: SSH PARAS SAVLA PRATIK PODDAR; HARSH KAPADIAAR
• Keywords: Transfer pricing; International transaction
• Section: 92D; 92F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.921/MUM/2014 ASSESSMENT YEAR: 2008-09 CADBURY SCHWEPPES OVERSEAS LTD . C/O CADBURY HOUSE, 19, BHULABHAI DESAI ROAD, MUMBAI -400026 PAN: AAACC4968N VS. ASSISTANT DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) -1(2) , MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SH. PARAS SAVLA, PRATIK PODDAR AND HARSH KAPADIA(AR) REVENUE BY : SH. K. MOHAN DAS (DR) DATE OF HEARING : 03.08.2016 DATE OF PRONOUNCEMENT : 21.10.2016 O R D E R PER PAWAN SINGH, JM: 1. THIS APPEAL U/S 253 IS DIRECTED BY THE ASSESSEE AGA INST THE ORDER OF CIT (A)-15 MUMBAI DATED 28.11.2013FOR ASSESSMENT YEAR 2008-09. THOUGH THE ASSESSE HAS RAISED AS MANY AS SIX GROUNDS OF APPEAL, HOWEVER AS PER OUR CONSIDERED OPINION THE ONLY SUBSTANTIAL GROUND OF THE APPEAL IS W HETHER LD CIT(A) ERRED IN CONFIRMING THE ORDER OF PENALTY UNDER SECTION 271AA OF THE ACT OF RS. 4870467 /-, REST OF THE GROUNDS ARE ARGUMENTATIVE IN NATURE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A FOREIGN COMPANY ENGAGED IN PROVIDING SERVICES FOR MANUFACTURING AND SELLING FM CO PRODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT ASSESSEE HAD INTERNATIONAL TRANSACTION AS REPORTED IN FORM NO. 3CEB. ACCORDING LY, A REFERENCE WAS MADE TO TPO FOR COMPUTATION OF ALP IN RELATION TO INTERNATI ONAL TRANSACTION. THE TPO ITA NO.921/M/ 014, AY 2008-09 CADBURY SCHWEPP ES OVERSEAS LTD 2 PASSED ORDER U/S 92CA(3) AND ACCEPTED THE ALP IN RE SPECT OF INTERNATIONAL TRANSACTION. HOWEVER, THE TPO REPORTED THAT THE ASS ESSEE HAS FAILED TO FURNISH THE INFORMATION OR DOCUMENTS UNDER SECTION 92D. AFTER C OMPLETING THE ASSESSMENT U/S143(3) AND ACCEPTING THE RETURNED INCOME, THE AO INITIATED PENALTY PROCEEDINGS U/S 271AA. THE AO WORKED OUT THE PENALTY @ 2% OF TH E INTERNATIONAL TRANSACTION OF RS.24,45,23,345/- AND LEVIED THE PENALTY OF RS.4 8,70,467/-. WHEN THE ORDER OF PENALTY WAS SERVED ON THE ASSESSEE, THE ASSESSEE FI LED APPEAL BEFORE CIT(A) WHERE THE ORDER OF PENALTY WAS SUSTAINED, THUS THIS SECON D APPEAL IS FILED BEFORE US. 3. WE HAVE HEARD THE LD AR FOR THE ASSESSEE AND THE LD DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AND PERUSED THE MATERIAL AVAIL ABLE ON RECORD. THE LD AR FOR THE ASSESSEE WOULD ARGUE THAT THE ASSESSEE WAS NOT SERVED WITH THE NOTICE OF PENALTY. THE ASSESSEES ADDRESS OF BHULABAHAI DESAI ROAD WAS AVAILABLE ON THE RECORD AS THE ALL CORRESPONDENCE FROM THE OFFICE OF THE TPO WAS MADE ON THE SAME ADDRESS. THE AO SENT THE NOTICE OF PENALTY AT OLD A DDRESS. THE ASSESSEE CAME TO KNOW ABOUT THE ORDER ONLY WHEN IT WAS SERVED AT THE ADDRESS OF ASSESSEE AT BHULABAHAI DESAI ROAD AND IMMEDIATELY FILED APPEAL BEFORE THE LD CIT(A). THE LD CIT(A) FAILED TO APPRECIATE THE FACT AND THE SUBMIS SION MADE BEFORE HIM THAT THERE WAS NO FAILURE ON THE PART OF ASSESSEE IN MAINTAINI NG THE RECORD AS REQUIRED UNDER RULE 10D. IT WAS ARGUED THAT THE TPO HAS ACCEPTED T HE ALP IN RESPECT OF THE INTERNATIONAL TRANSACTION OF ASSESSEE WITH ITS AE A ND NO FURTHER ADDITION WAS PROPOSED. THE TPO VIDE HIS NOTICE U/S 9CA(2) DATED 13.1.2010 ASKED THE ASSESSEE TO SUBMIT VARIOUS INFORMATION. THE ASSESSEE SUBMITT ED ITS REPLY AND CONTENDED THAT THE TRANSACTION IS REPLICA TRANSACTION AS OF CADBUR Y INDIA LIMITED AND THE DATA SUBMITTED IS THE SAME AS REQUIRED IN CASE OF ASSESS EE. THE LD TPO TOOK THE COGNIZANCE OF THE FACTS AND THE DOCUMENTS IN CASE O F CADBURY INDIA LIMITED AND ACCEPTED THE ALP OF ASSESSEE WITHOUT ANY VARIATION. ON THE CONTRARY THE LD TPO STATED IN HIS ORDER THAT THE ASSESSEE HAD FURNISHED THE DETAILS IN SUPPORT OF THE INCOME. IT WAS FINALLY ARGUED THAT IF THE DOCUMENTS AND THE INFORMATION WERE NOT FURNISHED BY ASSESSEE TO THE LD TPO, THEN, HOW THE LD TPO ACCEPTED THE ALP. ON THE OTHER HAND, LD DR FOR REVENUE RELIED UPON THE O RDER OF AO AND ARGUED THAT THE ASSESSEE NOT PARTICIPATED BEFORE THE AO DURING THE PENALTY PROCEEDINGS DESPITE ITA NO.921/M/ 014, AY 2008-09 CADBURY SCHWEPP ES OVERSEAS LTD 3 NOTICE. AS THE ASSESSEE FAILED TO FURNISH THE INFOR MATION AS REQUIRE UNDER RULE 10D THE AO LEVIED THE PENALTY AS PROVIDED IN THE STATUE . 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE ORDER OF THE AUTHORITIES BELOW. THERE IS NO DISPUTE THAT LD TPO HAS NOT MADE ANY ADJUSTMENT IN RESPECT OF THE INTERNATIONAL TRANSAC TION OF ASSESSEE WITH ITS AE .THIS FACT ITSELF SHOWS THAT THE LD PTO AND NO FURTHER AD DITION WAS PROPOSED. WE HAVE SEEN THE ORDER OF TPO U/S 92CA(3) DATED 28/10/2011 WHICH DOES NOT MENTION THAT THERE WAS ANY FAILURE ON THE PART OF ASSESSEE TO MA INTAIN DOCUMENTS AS REQUIRED UNDER RULE 10D. THOUGH, THE ORDER CONTAIN THE REFER ENCE THAT ASSESSEE FAILED TO SUBMIT THE DOCUMENT AND TRANSFER PRICING REPORT. IN PART-5 OF ITS REPORT LD. TPO REFERRED THAT IN VIEW OF THE FACT THAT THESE REPLICA TRANSACTION S OF CADBURY INDIA LTD., WHERE ALP IS DETERMINED OF THESE VERY TRANSAC TION. AS SUCH THE ALP DETERMINED BY ASSESSEE IS NOT BEING DISTURBED . FURTHER, WE HAVE SEEN THAT ASSESSEE FILED FORM 3CEB, ROYALTY AGREEMENTS ENTERED INTO WI TH AE AND (COPY OF WHICH ARE AVAILABLE AT PAGE NO.19 TO 53 OF PB). THESE DOC UMENTS WERE FURNISHED BY ASSESSEE ALONG WITH ASSESSEES LETTER DATED 16.11.2 011 WHICH WAS DULY ACKNOWLEDGED. FURTHER, THE ASSESSEE FURNISHED THE A GREEMENT OF ASSESSEE WITH ITS AE WITH REGARD TO PROVISIONS FOR BRAND LICENSE AND TECHNICAL ASSISTANCE AND NO-HOW VIDE ASSESSEES APPLICATION DATED 23.12.2011. THE R EPORT UNDER FORM NO. 3CEB IS AVAILABLE AT PAGE NO. 6 TO 12 OF PB WHICH WAS FURNI SHED TO DDIT WITH LETTER DATED 30.09.2008 FOR RELEVANT AY. THE REPORT IS DULY CERT IFIED BY C.A. THAT ALL THE DOCUMENTS IN RESPECT OF INTERNATIONAL TRANSACTION H AVE BEEN MAINTAINED BY ASSESSEE. THE ORDER IN CASE OF ASSESSEE U/S 92CA(3) WAS PASSED ON 28.10.2011 AND IN CASE OF CADBURY INDIA LTD. WAS PASSED ON 30.10.2 011. AS PER OUR CONSIDERED OPINION, THE ORDER U/S 92CA(3) WAS MADE BY TPO AFTE R DUE CONSIDERATION OF THE DOCUMENTS, INFORMATION FURNISHED BY THE ASSESSEE. T HE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ACIT VS. SMITH & NEPHEW HEALTHCARE PVT. LTD. (2016) 16 TAXMANN.COM 5 (MUMBAI) ON ALMOST SIMILAR FACTS HELD AS UNDER: THE ASSESSEE HAS TO 'KEEP AND MAINTAIN' INFORMATIO N AND DOCUMENTS IN RESPECT OF INTERNATIONAL TRANSACTION ENTERED INTO WITH AE. RULE 10D(4) OF THE RULES ENVISAGES THAT THE INFORMATION AND DOCUMENTS SPECIF IED UNDER SUB-RULES (1) AND (2) SHOULD, AS FAR AS POSSIBLE, BE CONTEMPORANEOUS AND SHOULD EXIST LATEST BY THE SPECIFIED DATE REFERRED TO IN CLAUSE (IV) OF SECTION 92F , WHICH IS DUE DATE FOR ITA NO.921/M/ 014, AY 2008-09 CADBURY SCHWEPP ES OVERSEAS LTD 4 FILING RETURN OF INCOME U/S.139(1) OF THE ACT. THE ASSESSMENT ORDER AND THE ORDER IMPOSING PENALTY U/S.271AA OF THE ACT, DOES N OT SPECIFY WHAT WAS THE FAILURE ON THE PART OF THE ASSESSEE UNDER SEC.92D R EAD WITH RULE 10D OF THE RULES. THE ASSESSEE HAS IN THE COURSE OF ASSESSMENT PROCEEDINGS FURNISHED ALL DETAILS REQUIRED BY THE AO AND THE INTERNATIONAL TR ANSACTION WITH THE AE HAS BEEN ACCEPTED TO BE ONE CONFIRMING TO THE ARM'S LEN GTH PRICE. NO ADDITION WHATSOEVER WAS MADE BY THE AO IN THE ORDER OF ASSES SMENT IN RESPECT OF THE INTERNATIONAL TRANSACTION WITH AE. THUS THE AO HAS FOUND NO DIFFICULTY IN EXAMINING THE CORRECTNESS OF THE PRICE ADOPTED BY T HE ASSESSEE IN RESPECT OF INTERNATIONAL TRANSACTION WITH THE AE. IN OTHER WOR DS THE AO WAS NOT HANDICAPPED IN EXAMINING THE PRICE OF THE INTERNATI ONAL TRANSACTION BETWEEN THE ASSESSEE WITH ITS AE HAVING REGARD TO ARM'S LENGTH PRICE. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION FOR IMPOSITION OF PENALTY. FURTHER, THE HONBLE DELHI HIGH COURT IN CIT VS. LE ROY SOMER & CONTROLS INDIA (P.) LTD. (2013) 37 TAXMANN.COM 407 (DELHI) HELD AS UNDER: THERE CANNOT BE ANY END OR LIMIT TO THE DOCUMENTAT ION OR INFORMATION RELATING TO DATA BASES OR THIRD PARTIES. WHEN THERE IS GENER AL AND SUBSTANTIVE COMPLIANCE OF THE PROVISIONS OF RULE 10D, IT IS SUF FICIENT. THE LEGISLATURE WAS CONSCIOUS OF THIS FACT AND, THEREFORE, HAD SPECIFIC ALLY STIPULATED IN SECTION 92D(3) THAT THE ASSESSING OFFICER OR COMMISSIONER (APPEAL S) MAY REQUIRE A PERSON TO FURNISH ANY INFORMATION OR DOCUMENT IN RE SPECT THEREOF AND ON FAILURE OF THE SAID PERSON TO FURNISH THE DOCUMENTATION WIT HIN THE SPECIFIED TIME, PENALTY UNDER SECTION 271G CAN BE IMPOSED. THUS, FOR IMPOSING PENALTY THE REVENUE MUST FIRST MENTION THE DOCUMENT AND INFORMA TION, WHICH WAS REQUIRED TO BE FURNISHED BUT WAS NOT FURNISHED BY THE ASSESS EE WITHIN THE SPECIFIED TIME. THE DOCUMENTATION OR INFORMATION SHOULD BE ONE SPEC IFIED IN RULE 10D, WHICH HAS BEEN FORMULATED IN TERMS OF SECTION 92D(1) OF THE ACT. LOOKING FROM ANY QUARTER AND ANGLE, THE APPEAL OF THE REVENUE IS MIS CONCEIVED, TOTALLY LACKING IN MERITS AND IS, THEREFORE, DISMISSED. 5. IN VIEW OF THE ABOVE LEGAL PREPOSITION, WE ARE OF T HE OPINION THAT ASSESSEE MADE THE SUFFICIENT COMPLIANCE FOR MAINTAINING THE RECORD AS REQUIRED U/S 92D R.W. RULE 10D. WE ALSO FIND FROM THE ORDER OF LD. TPO THAT THERE W AS NO RECOMMENDATION FOR INITIATING ANY PENALTY PROCEEDING U/S 271AA OF THE ACT NOR ANY FINDING THAT ASSESSEE FAILED TO MAINTAIN THE RECORD PRESCRIBED U NDER RULE 8D. WITH THESE OBSERVATIONS, THE APPEAL OF THE ASSESSEE IS ALLOWED . NO ORDER AS TO COST. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST OCTOBER, 2016 SD/- SD/- (R. C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 21/10/2016 S.K.PS ITA NO.921/M/ 014, AY 2008-09 CADBURY SCHWEPP ES OVERSEAS LTD 5 COPY OF THE ORDER FORWARDED TO : / BY ORDER, (ASSTT.REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/