The DCIT, Circle-2(1)(1), Ahmedabad V. M/s. Colwell & Salmon Communication (India) Ltd., Ahmedabad

ITA 956/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3097 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 154

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO.956/AHD/2018 / ASSTT.YEAR : 2008-09 DCIT, CIR.2(1)(1) AHMEDABAD. VS. M/S.COLLWELL AND SALMON COMMUNICATION (INDIA) LTD. NOW MERGED WITH GHCL LTD. GHCL HOUSE, OPP: PUNJAB HALL NAVRANGPURA BUS STAND AHMEDABAD. PAN : AACCC 0322 Q ( APPLICANT ) ( RESPONENT ) REVENUE BY : SHRI DILEEPKUMAR, SR.DR ASSESSEE BY : SHRI S.N. SOPARKAR, SR.ADV WITH SHRI PURIN SHAH / DATE OF HEARING : 11/03/2020 ! / DATE OF PRONOUNCEMENT: 11/03/2020 / O R D E R PER RAJPAL YADAV, VICE-PRESIDENT REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-2, AHMEDABAD DATED 10.1.2018 PASSED FOR T HE ASSTT.YEAR 2008-09. 2. GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) H AS ERRED IN LAW AS WELL AS ON FACTS IN DELETING UPWARD ADJUSTMENT MADE BY T HE AO ON THE RECOMMENDATION OF THE TPO IN THE VALUE OF INTERNATI ONAL TRANSACTION. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE RECORD WOULD IN DICATE THAT THE ASSESSEE HAS ITA NO.956/AHD/2018 2 DECLARED VALUE OF ITS INTERNATIONAL TRANSACTION WIT H ITS ASSOCIATED ENTERPRISE (AE) AT RS.20,14,51,000/-. AN ORDER UNDER SECTION 9 2CA(3) OF THE INCOME TAX ACT, 1961 WAS PASSED BY THE TPO ON 31.10.2011 R ECOMMENDING AN UPWARD ADJUSTMENT IN THE VALUE OF INTERNATIONAL TRA NSACTION OF RS.2,00,87,060/-. THUS, THE TPO HAS DETERMINED VAL UE OF THE INTERNATIONAL TRANSACTION RELATING TO IT ENABLED SERVICES TO THE AE AT RS.22,15,38,060/-. DISSATISFIED WITH THE ASSESSMENT, VIDE WHICH, THE A O HAS MADE ADDITION ON THE RECOMMENDATION OF THE TPO, ASSESSEE WENT IN APP EAL BEFORE THE LD.CIT(A). THE LD.CIT(A) VIDE ORDER DATED 23.5.201 5 FOUND THAT TPO HAS COMMITTED CERTAIN ERRORS WHILE TAKING PROFIT LEVEL INDICATOR OF TWO COMPANIES VIZ. MOLD-TEK TECHNOLOGIES LTD. AND ECLREX SERVICES LTD. IT EMERGES OUT FROM THE RECORD THAT THE PLI WAS COMPUTED BY TAKING OPERATIVE PROFIT AND TOTAL COST I.E PLI = OP/TC. AS PER THE ASSESSEE, PLI OF MOLD-TEK TECHNOLOGIES LTD. SHOULD BE 15.24% WHEREAS THE TPO HAS ADOPTED A T 106.82%. SIMILARLY, IN THE CASE OF ECLREX SERVICES LTD. IT SHOULD BE 58 .79% IN PLACE OF 66.25%. THE LD.CIT(A), AS A MATTER OF FACT FOUND COMPUTATIO NAL ERROR IN THE ORDER OF THE TPO, AND THEREFORE, RECOMMENDED FOR RECTIFICATI ON OF THAT ERROR UNDER SECTION 154 OF THE ACT. THE LD.TPO REJECTED THE CO NTENTIONS OF THE ASSESSEE BY RECORDING THE FOLLOWING FINDING: 4. IN RESPONSE TO THIS, THE REPLY WAS SUBMITTED B Y THE ASSESSEE VIDE HIS LETTER DATED 10.07.2015. THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED, AS THE ARGUMENTS GIVEN BY THE ASSESSEE AR E BEYOND THE SCOPE OF FRNSTAKE APPARENT FROM RECORD. HOWEVER, AS PER T HE DIRECTION GIVEN BY THE CIT(A), THIS OFFICE HAS RECOMPUTED THE MARGI N (OP/TC) IN THE CASES OF MOLD TEK TECHNOLOGIES LTD AND ECLERX SERVI CES LTD USING 'CAPITALINE' DATABASE FOR BOTH THE COMPANIES. IT IS FOUND THAT THE MARGIN IN BOTH THE CASES CALCULATED BY THE TPO IS C ORRECT. COMPUTATION OF PLI IS A DEBATABLE ISSUE FROM THE AS SESSEE' S PROSPECTIVE, WHILE THIS OFFICE WORKED OUT THE PLI W ITH REFERENCE TO THE 'SAFE HARBOR RULES', WHICH IS SETTLED POSITION NOW. A MISTAKE APPARENT FROM THE RECORD MUST BE AN OBVIOUS AND PATENT MISTA KE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG-DRAWN PROCESS OF ITA NO.956/AHD/2018 3 REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVAB LY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTA KE APPARENT FROM THE RECORD - T.S. BALARAM, ITO V. VOLKART BROS. [1971] 82 ITR 50(SC). 'A MISTAKE BECOMES A MISTAKE APPARENT FROM THE RECO RD WHEN IT IS A GLARING, OBVIOUS OR SELF-EVIDENT MISTAKE. A MI STAKE WHICH HAS TO BE DISCOVERED BY LONG-DRAWN PROCESS OF REASONIN G OR EXAMINATION OF ARGUMENTS ON POINTS WHERE THERE MAY CONCEIVABLY TWO OPINIONS CANNOT BE SAID TO BE MISTA KE OR ERROR WHICH IS APPARENT FROM THE RECORD - ARVIND N. MAFAT LAL V. T.A. BALAKRISHNAN, DY. CED (1968) 67 ITR 449 (BOM.). 5. IN VIEW OF THE ABOVE, AS THE COMPUTATION OF PLI DONE BY THE TPO IS NOT A MISTAKE APPARENT FROM RECORD, THE OBJECTION R AISED BY THE ASSESSEE IN RESPECT OF THIS ADJUSTMENT IS HEREBY RE JECTED. COPY OF WORKING OF MARGIN ALONGWITH COPIES OF BALANCE SHEET & PROFIT AND LOSS ACCOUNT IN THE CASES OF MOLD TEK TECHNOLOGIES LTD. AND ECLERX SERVICES LTD ARE AGAIN ENCLOSED WITH THIS ORDER. 4. DISSATISFIED WITH THIS ORDER, THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE LD.CIT(A), AND THE LD.CIT(A)HAS ACCEPTED THE CONTENTIONS OF THE ASSESSEE, AND DELETED THE ADJUSTMENT RECOMMENDED BY THE TPO. THE FINDING RECORDED BY THE LD.CIT(A) READS AS UNDER: DECISION: 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF TH E CASE, ORDER U/S. 154 AND SUBMISSION OF THE APPELLANT. THE TPO / AO HA S MADE THE UPWARD ADJUSTMENT OF RS.2,00,87,060/- ON THE I. T. ENABLE SERVICES TO THE AE. APPELLANT FILED APPEAL BEFORE CIT(A) - 1, N OIDA WHO VIDE HIS ORDER DATED 23/03/2015 HAS NOTED THAT THE TPO HAS T AKEN PLI (OP / TO) IN THE CASE OF TWO COMPARABLES NAMELY; M/S. MOL D-TEK TECHNOLGIES LTD. AT 106.82% AND IN THE CASE OF E CLREX SERVICE LTD. AT 66.25% AS AGAINST APPELLANT'S COMPUTATION OF PLI OF M/S. MOLD-TEK TECHNOLGIES LTD. AT 15.24% AND IN THE CASE OF ECLRE X SERVICE LTD. AT 58.79%. THE CIT(A) - 1, NOIDA IN HIS ORDER HAS NOTED THAT IT WAS A MISTAKE APPARENT FROM RECORD, AND THEREFORE, DIRECT ED THE TPO TO PASS AN ORDER U/S. 154 TAKING ALL RELEVANT FACTS INTO CO NSIDERATION. THE TPO IN HIS ORDER HAS STATED THAT THE CONTENTION OF THE APPELLANT CANNOT BE ITA NO.956/AHD/2018 4 ACCEPTED AS THE ARGUMENTS GIVEN BY THE APPELLANT AR E BEYOND THE SCOPE OF MISTAKE APPARENT FROM RECORD AND STATED THAT MAR GIN IN BOTH THE CASES CALCULATED BY TPO IS CORRECT. THE APPELLANT I N SUPPORT OF ITS CONTENTION HAS SUBMITTED THAT THE CIT(A) IN HIS ORD ER HAS ACCEPTED THAT THERE WAS A MISTAKE APPARENT IN THE ORDER OF TPO, A ND THEREFORE, THE TPO SHOULD HAVE RECTIFIED THE ORDER. THE APPELLANT HAS ALSO RELIED ON THE ORDER OF ITAT IN THE CASE OF TECHNIMONT ICB PVT . LTD. IN ITA NO.7576/MUM/2012 DATED 27/06/2014 FOR A. Y. 2008-09 IN WHICH THE HONOURABLE TRIBUNAL HAS CONSIDERED THE PLI OF M/S. MOLD-TEK TECHNOLGIES LTD. AT 15.24% AND SUBMITTED THAT THE T PO IN THE CASE OF ECLREX SERVICE LTD. HAS TAKEN PLI AT 58.85% IN HIS ORDER U/S. 154 OF THE I. T. ACT, 1961. 3.4. IN VIEW OF THE ABOVE, THE TPO IS DIRECTED TO R ECALCULATE THE TPO ADJUSTMENT AS PER DIRECTIONS OF CIT(A) - 1, NOIDA A ND THE PLI DECIDED BY JUDICIAL AUTHORITIES. 5. THERE IS NO DISPUTE WITH REGARD TO THE PROPOSITI ON THAT THE POWER OF RECTIFICATION UNDER SECTION 154 OF THE INCOME TAX A CT CAN BE EXERCISED ONLY WHEN THE MISTAKE, WHICH IS SOUGHT TO BE RECTIFIED, IS AN OBVIOUS PATENT MISTAKE, WHICH IS APPARENT FROM THE RECORD AND NOT A MISTAKE, WHICH IS REQUIRED TO BE ESTABLISHED BY ARGUMENTS AND LONG DR AWN PROCESS OF REASONING ON POINTS, ON WHICH THERE MAY CONCEIVABLY BE TWO OP INIONS. 6. IT IS PERTINENT TO NOTE THAT IN THE PRESENT CASE , THE LD.CIT(A) IN ITS ORDER DATED 23.3.2015 WAS OF THE VIEW THAT THERE ARE COMP UTATIONAL ERRORS WHICH REQUIRE RECTIFICATION. IT WAS A RECOMMENDATION AT THE END OF THE LD.CIT(A) TO THE TPO, AND THE LD.TPO FAILED TO CONSIDER THIS ASP ECT UNDER GARB OF REASONING THAT IT IS A DEBATABLE ISSUE. ONCE A HIGHER APPELL ATE AUTHORITY RECORDED A FINDING THAT THERE ARE COMPUTATIONAL ERRORS, WHICH REQUIRE RECTIFICATION, THEN, THIS SHOULD BE ADDRESSED. THE LD.CIT(A) HAS LOOKED INTO FROM THIS ANGLE, AND THEREAFTER DELETED THE UPWARD ADJUSTMENT RECOMMENDE D BY THE LD.TPO. AFTER ITA NO.956/AHD/2018 5 GOING THROUGH WELL REASONED ORDER OF THE LD.CIT(A), WE DO NOT FIND ANY ERROR IN THIS ORDER. HENCE, APPEAL OF THE REVENUE IS DIS MISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 11 TH MARCH, 2020 AT AHMEDABAD. S D / - (WASEEM AHMED) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) VICE-PRESIDENT