Siemens Limited, Mumbai V. DCIT, CHENNAI

ITA 988/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8424 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-04-2015
• Court: TRIBUNAL
• Department Lawyers: JAIRAM RAIPURACIT
• Assessee Lawyers: SAMPATH RAGHUNATHAN
• Keywords: Transfer pricing; Bad and doubtful debts; Valuation report
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . ! '# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.988/MDS./2015 / ASSESSMENT YEAR : 2010-11 M/S.SIEMENS LIMITED., (SUCCESSOR IN INTEREST TO SIEMENS BUILDING TECHNOLOGIES PVT. LTD.) NO.130,PANDURANG BUDHAKAR MARG, WORLI, MUMBAI 400 018. VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-VI(2), CHENNAI -34. [PAN AAACD 1235 B ] ( $% / APPELLANT) ( &'$% /RESPONDENT) / APPELLANT BY : MR.SAMPATH RAGHUNATHAN, ADVOCATE /RESPONDENT BY : MR.JAIRAM RAIPURA,CIT DR / DATE OF HEARING : 19 - 0 9 - 201 6 !' / DATE OF PRONOUNCEMENT : 23 - 0 9 - 2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE DIRECTION OF THE DISPUTE RESOLUTION PANEL, CHENNAI (DRP) PASS ED U/S.144C OF THE ACT DATED 24.12.2014 PERTAINING TO ASSESSMENT YEA R 2010-11. ITA NO. 988/MDS./2015 :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING MAIN GROU NDS FOR OUR ADJUDICATION. 3. THE LD. PANEL AND THE AO/ITPO ERRED IN DETERMINA TION OF ARMS LENGTH PRICE (ALP) OF SALES OF SOFTWARE AS RS.95, 621,6001- AS AGAINST THE ALP OF RS.78,676,000/- DECLARED BY THE ASSESSEE . I. THE AO/TPO ERRED IN LAW AND FACTS IN DETERMINATI ON OF ALP OF SALE OF SOFTWARE WITHOUT APPRECIATING THE ECONOMIC AND C OMMERCIAL NATURE OF THE ASSESSEE BUSINESS AND THE LD. PANEL E RRED IN CONFIRMING THE SAME. II. THE AO/TPO ERRED IN LAW AND FACTS IN REJECTING THE VALUATION METHODOLOGY ADOPTED BY THE ASSESSEE FOR DETERMINATI ON OF ARMS LENGTH PRICE AND THE LD. PANEL ERRED IN CONFIRMING THE SAME. III. THE LD. PANEL ERRONEOUSLY CONCLUDED THAT NO DO CUMENTARY EVIDENCE PROVIDED BY THE ASSESSEE TO SUBSTANTIATE T HE NEGOTIATED VALUE ARRIVED FOR THE SALE OF SOFTWARE LICENSE THOU GH THE VALUE WAS BASED ON THE VALUATION REPORT OF A THIRD PARTY. IV. THE AO/TPO FAILED TO APPRECIATE THE FACT THAT T HE SOFTWARE LICENSE SOLD TO ITS AES, HAD BEEN WRITTEN OFF IN THE IMMEDI ATE SUCCEEDING YEAR AND LD. PANEL ERRONEOUSLY CONFIRMED THE SAME. 4. THE AO/TPO ERRED IN LAW AND FACTS IN DISALLOWING BAD DEBTS AMOUNTING TO RS.7,831,468/- WITHOUT APPRECIATING THE ECONOMIC AN D COMMERCIAL NATURE OF THE ASSESSEE S BUSINESS AND THE LD. PANEL ERRED IN CONFIRMING THE SAME. ITA NO. 988/MDS./2015 :- 3 -: GROUNDS IN RELATION TO CORPORATE LAX ADJUSTMENTS: 5. THE AO ERRED IN LAW AND FACTS IN DISALLOWING BAD DEBTS (EARNEST MONEY DEPOSIT) AMOUNTING TO RS.1,299,833/- WITHOUT APPREC IATING THE BUSINESS NECESSITY AND CONTRACTUAL OBLIGATION BEHIND IT AND THE LD. PANEL ERRED IN CONFIRMING THE SAME. 6. THE AO ERRED IN ESTIMATING DISALLOWANCE AMOUNTI NG TO RS.207,500/- U/S. 14A READ WITH RULE 8D WITHOUT APPRECIATING THE UNIQ UENESS OF THE CASE AND THE LD. PANEL ERRED IN CONFIRMING THE SAME. 7. AO ERRED IN LAW AND FACTS IN LEVYING INTEREST AN D INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 2.1 THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONA L GROUND. (A) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E IMPUGNED ORDER PASSED BY THE LD. ASSESSING OFFICER /DEPUTY COMMISS IONER OF INCOME TAX IS ERRONEOUS AND THAT NO ASSESSMENT CAN BE FRAMED ON NON-EXISTING ENTITY I.E. M/S.SIEMENS BUILDING TE CHNOLOGIES PVT LTD., WHICH IS VOID AB INITIO AND BAD IN LAW. 3. THE LD.A.R PRAYED TO ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE AND SUBMITTED THAT THE ADDITIONAL GROU ND WAS INADVERTENTLY NOT RAISED BEFORE THE DRP AND PRAYED THAT THIS GROUND GOES TO THE ROOT OF THE MATTER, HENCE IT IS TO BE A DMITTED. 4. ON THE OTHER HAND, LD.D.R HAS NOT PUT ANY OBJEC TION FOR ADMISSION OF ADDITIONAL GROUND. ITA NO. 988/MDS./2015 :- 4 -: 5. THE LD.A.R SUBMITTED THAT IN THIS CASE TPO PASS ED THE ORDER ON 28.01.2014 IN THE NAME OF M/S.SIEMENS LTD.,130, PANDURANG BUDHAKAR MARG, WORLI, MUMBAI. IT IS BROUGHT TO OUR NOTICE THAT MADRAS HIGH COURT IN THE MATTER OF COMPANY PETITION NO.60 AND 61 OF 2010 VIDE ORDER DATED 3 RD SEPTEMBER, 2010 HAS APPROVED THE SCHEME OF AMALGAMTION OF M/S.SIEMENS BUILDING TECHNOLOGIES PVT LTD., M/S.VISTA SECURITY TECHNICS PRVT LTD. WITH M/S.SIEM ENS LTD., AND THE APPOINTED DATE WAS 1 ST OCTOBER,2010 OR SUCH OTHER DATE AS MAY BE FIXED OR APPROVED BY THE HIGH COURT. ACCORDING TO HIM, THE DATE WAS 15 TH SEPTEMBER, 2010. CONSEQUENTLY, THE ASSESSEE FILED THE FORM NO.21 WITH ROC ON 14.10.2010 AND CORRESPONDING LETT ER WAS FILED BEFORE THE AO ON 30.06.2011 AND 28.03.2013. ACCORD ING TO HIM, THE TPO HAS RIGHTLY PASSE D HIS ORDER IN THE NAME OF M/S.SIEMENS LTD., ON 28.01.2014. HOWEVER, THE AO P ASSED DRAFT ASSESSMENT ORDER IN THE NAME OF NON-EXISTING COMPAN Y ON 28.03.2014 AND FINAL ASSESSMENT ORDER ALSO PASSED IN THE NAME OF M/S.SIEMENS BUILDING TECHNOLOGIES PVT LTD. ON 26.02.2015. ACCO RDING TO HIM, THE TPO ORDER WAS PASSED M/S.SIEMENS LTD., CONTRARY TO THIS THE DRAFT ASSESSMENT ORDER AND FINAL ASSESSMENT ORDER WAS WR ONGLY PASSED IN THE NAME OF M/S.SIEMENS BUILDING TECHNOLOGIES PVT L TD., WHICH WAS NO MORE EXISTING, IN VIEW OF THE APPROVAL OF SCHEME O F AMALGAMATION BY THE MADRAS HIGH COURT VIDE ORDER CITED SUPRA. IT IS ALSO SUBMITTED ITA NO. 988/MDS./2015 :- 5 -: THAT THE ASSESSEE HAS WENT BEFORE THE DRP FOR THE DIRECTION AGAINST THE DRAFT ASSESSMENT ORDER AND TO THE SURPRISE OF T HE ASSESSEE, THE DRP PASSED THE ORDER FIN THE NAME OF M/S.SIEMENS BU ILDING TECHNOLOGIES PVT LTD. IN VIEW OF THIS, ACCORDING TO LD.A.R, ALL THE ORDERS OF THE LOWER AUTHORITIES ARE TO BE QUASHED AS BAD I N LAW. 6. THE LD.D.R SUBMITTED THAT THERE IS SUFFICIENT EV IDENCE BEFORE THE AUTHORITIES TO HOLD THAT THE ASSESSEE ITSELF IS MIS-REPRESENTED BEFORE THE LOWER AUTHORITIES THAT M/S.SIEMENS BUILD ING TECHNOLOGIES PVT LTD., IS STILL EXISTING, AS SUCH THE DRP AS WEL L THE AO HAS PASSED THE ORDER IN THE NAME OF M/S.SIEMENS BUILDING TECHN OLOGIES PVT LTD. AND IT IS TO BE VALID ORDER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE RAISING OF ADDITIONAL G ROUND IS JUSTIFIED AND IT IS DUE TO INADVERTENCE, THIS GROUND WAS NOT RAIS ED BEFORE THE LOWER AUTHORITIES AND FIRST TIME RAISED BEFORE THIS TRIBU NAL. ACCORDINGLY, WE PLACE RELIANCE ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED REPORTED IN 229 ITR 383(SC), AND ADMIT THE ADDITIONAL GROUNDS. HOWEVER , THIS GROUND WAS RAISED FIRST TIME BEFORE THIS TRIBUNAL AND THE DRP HAS NO OCCASION TO EXAMINE THE ISSUE REGARDING THE VALIDITY OF PASSING ASSESSMENT ORDERS IN THE NAME OF M/S.SIEMENS BUILDING TECHNOLOGIES PV T LTD. HENCE, IN THE INTEREST OF JUSTICE, WE ARE INCLINED TO REMIT T HE ISSUE IN DISPUTE IN ITA NO. 988/MDS./2015 :- 6 -: RESPECT OF ADDITIONAL GROUND TO THE FILE OF DRP TO EXAMINE THE RECORDS AND THE DRP WOULD DECIDE THE ISSUE FROM THEIR END I N ACCORDANCE WITH LAW. ACCORDINGLY, THE ISSUE IS REMITTED TO THE FIL E OF DRP FOR FRESH CONSIDERATION. 8. IT NEEDLESS TO SAY THAT THE ASSESSEE SHALL BE G IVEN FAIR OPPORTUNITY OF HEARING BEFORE DECIDING THE ISSUE. SINCE, WE HAVE REMITTED THE LEGAL ISSUE TO THE FILE OF DRP FOR FRE SH CONSIDERATION, AT THIS STAGE, WE REFRAIN FROM GOING TO THE OTHER GROU NDS RAISED BY THE ASSESSEE BEFORE US. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 23 RD SEPTEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) ! / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 23 RD SEPTEMBER, 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF