M/s. Faurecia Automotive Seating India Private Limited, Pune V. Deputy Commissioner of Income-tax, Circle - 9, Pune

ITTPA 812/BANG/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3511 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 17-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-07-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 09-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Additional evidence
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, PUNE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHUR, JM IT(TP) A No. 812/Bang/2017 : A.Y. 2012-13 Faurecia Automotive Seating India Pvt. Ltd. Plot No. T-187, Pimpri Industrial Area (B.G. Block), Bhosari, Pune-411 026 PAN; AADCS 8694 Q Appellant Vs. Asstt. C.I.T. Cir. 3(1)(1), Bangalore Respondent Appellant by : S/Shri Ajit Kumar Jain and Siddesh Chaugule Department by : Shri Shishir Srivastava Date of Hearing : 12-07-2022 Date of Pronouncement : 18-07-2022 ORDER PER PARTHA SARATHI CHAUDHURY, JM This Appeal preferred by the Assessee emanates from the findings of the learned Dispute Resolution Panel-1, Bangalore, dated 20-12-2016 for the A.Y. 2012-13 as per the following grounds of appeal. Based on the facts and circumstances of the case, Faurecia Automotive Seating India Private Limited (hereinafter referred to as the' Appellant') respectfully craves leave to prefer an appeal against the order passed by the Assistant Commissioner of Income Tax, Circle - 3(1)(1) (' AO') dated 23 January 2017 (received by the Appellant on 10 February 2017) in pursuance of the directions issued by Dispute Resolution Panel ('DRP'), Bangalore, dated 20 December 2016 under section 253 of the Income-tax Act, 1961 (' Act') on the following grounds, which are independent of and without prejudice to each other: On the facts and in the circumstances of the case and in law, the Hon'ble DRP and consequentially the learned AO/Transfer Pricing Officer ('TPO') has: A. General 1. erred in assessing the total income at Rs 23,72,62,506 as against income of Rs 10,97,59,880 (as per the return of income filed by the Appellant); B. Transfer Pricing adjustment under provisions of Chapter X of the Act in respect of international transactions 2. erred in conforming the arm's length price for international transaction in respect of availing professional services by the Appellant from its Associated Enterprises (' AEs') at Rs. NIL as against the sum of Rs. 12,75,02,6261- as determined by the Appellant and thereby proposing an adjustment of Rs. 12,75,02,626/- 3. exceeded their jurisdiction by computing the transfer pricing addition without applying any prescribed methods and thus their orders on this issue are bad in law. 2 IT(TP) A No. 812/Bang/2017 Faurecoa Automotive A.Y. 2012-13 4. erred in alleging that no tangible or direct benefit was derived by the Appellant from the receipt of professional services and further erred in disregarding the service agreement, factual details, submissions and various documentary evidences filed by the Appellant from time to time to substantiate the receipt, benefits derived there from and cost incurred by the AE for rendering these services. 5. erred in not appreciating that payment for these services is based on allocation of costs on an arm's length basis, and application of a mark-up that has been benchmarked on an arm's length basis. 6. erred in disregarding the benchmarking analysis conducted by the Appellant using the Transactional Net Margin Method ('TNMM') to demonstrate the arm's length nature of the pricing of the said international transaction 7. exceeded their jurisdiction by making an adhoc disallowance of the payment of professional services by challenging the commercial wisdom of the appellant. 8. erred in ignoring the fact that the AE has paid tax on professional fees and has filed the return of income in India for the year under consideration. 9. erred in computing interest under Section 234B and 234C of the Act; The appellant prays that the additions made by the ld. A.O TPO under the directions of the learned DRP be deleted and consequential relief be granted. The appellant craves leave to add, alter, amend and/or withdraw any of the above grounds of appeal and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per law.” 2. At the outset, the learned counsel submitted that ground No. 1 is general in nature. Ground No. 2 onwards and rest of the grounds are with regard to one single issue i.e. determination of Arm’s Length Price (ALP) for international transactions in respect of professional services by the assessee with its AE. The T.P.O has dealt with this issue at para 2.1 in his order wherein he has discussed the business nature of the assessee. Then at para 8.1 onwards in his order, the T.P.O has conducted detailed analyses regarding professional charges of Rs. 12,75,02,626. The T.P.O has scrutinized in detail the evidences submitted by the assessee regarding actual receipt of services from its AE entailing it to incur such huge expenditure. The T.P.O observed that the assessee has furnished copy of e-mail and presentation has been made available. However, no other evidence regarding actual receipt of services and economic and commercial benefits has been furnished to the T.P.O. Therefore, the T.P.O held that no services having economic and commercial benefits have been received by the assessee and hence, the ALP of service is ‘nil’. In the light of above, the T.P.O came to the conclusion that the assessee 3 IT(TP) A No. 812/Bang/2017 Faurecoa Automotive A.Y. 2012-13 was not able to justify the need for making payment of professional charges to its AE. The documents submitted by the taxpayer mentioned above though voluminous, are general in nature and do not prove (i) that services were received; (ii) the taxpayer derived tangible commercial benefit out of this alleged services; (iii) the payment made is commensurate to the benefits received; and (iv) a third party would have also made similar payment for similar services to an uncontrolled party. Therefore, since the assessee was not able to provide any documentary proof of tangible benefits received on account of alleged services in effect, the assessee failed to demonstrate the alleged services received from its AE for which the payment of professional charges were paid. 3. The learned D.R.P has dealt with this issue from para 10 onwards in their order. Substantially they have dealt with the issue on page 17 onwards to page 24. In the course of proceedings before the learned D.R.P, the assessee has filed various additional evidences in support of their case. These additional evidences were not accepted by the learned D.R.P since they were not inconformity with the rules of DRP Rules. Therefore, these additional evidences were not accepted by the ld. D.RP and they had upheld the findings of the learned T.P.O. 4. At the time of hearing, the learned counsel submitted that their only prayer is that the entire matter and the grounds raised in the appeal memo may be restored back to the file of the ld. D.R.P for consideration of the additional evidences regarding the actual receipt of the services with the same directions given to them as per the assessee’s case in preceding assessment year i.e. 2011-12 in ITA No. 1592/PUN/2019 dated 20-05-2022. In fact, to this effect, the assessee has also filed an additional ground of appeal. The ld. D.R submitted that he does not have any objection if the entire matter is restored 4 IT(TP) A No. 812/Bang/2017 Faurecoa Automotive A.Y. 2012-13 back to the file of the ld. D.R.P for consideration of the additional evidence as per asessee's case (supra). 5. Having heard the parties and in the interest of justice, we are of the considered view that since the additional evidence though filed before the ld. D.R.P were not considered by them and also for the fact that these additional evidences are in regard to the case demonstration of facts of actual receipt of service as submitted by the assessee, therefore, the principles of natural justice demands that the ld. D.R.P should re-adjudicate the issue considering these additional evidences after giving proper opportunity to the assessee. In light of the above, we set aside the findings of the ld. D.R.P and remand the matter back to their file for adjudication as per law as directed hereinabove. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on this 18 th day of July 2022. Sd/- sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated, this 18 th day of July 2022 Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. the D.R.P – 1, Bangalore 4. The D.R. ITAT C’ Bench, Pune. 5. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune. 5 IT(TP) A No. 812/Bang/2017 Faurecoa Automotive A.Y. 2012-13 0 Date 1 Draft dictated on 12-07-2022 Sr.PS 2 Draft placed before author 14-07-2022 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS Sr.PS 6 Kept for pronouncement on 18-07-2022 Sr.PS 7 Date of uploading of order 18-07-2022 Sr.PS 8 File sent to Bench Clerk 18-07-2022 Sr.PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order