M/s. Carraro India Pvt.Ltd, Pune V. Deputy Commissioner of Income-tax, Circle - 1(1), Pune

MA 01/PUN/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8149 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-01-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 19-08-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TRIBUNAL IN
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER M.A. NO.01/PUN/2020 (ARISING OUT OF ITA NO.1260/PUN/2018) / ASSESSMENT YEAR : 2009-10 M/S. CARRARO INDIA PRIVATE LIMITED, B/2/2, MIDC, RANJANGAON, PUNE 412 220 MAHARASHTRA, INDIA PAN : AAACC5292M VS. DCIT, CIRCLE-1(1), PUNE (APPLICANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THE PRESENT MISCELLANEOUS APPLICATION HAS BEEN MOVED BY THE ASSESSEE REQUESTING TO ELABORATE THE DIRECTION GIVEN IN THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.1260/PUN/2018 ON 27-02-2019. THE LD. AR SUBMITTED THAT THE TRIBUNAL HAS RESTORED THE ISSUE OF DETERMINATION OF THE ARMS LENGTH PRIC E (ALP) OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF MANAGEMENT FEES TO THE AO/TPO WITH A DIRECTION TO SELECT THE CORRECT METHOD AND THEN DETERMINE ITS ALP. HE SUBMITTED THAT APPLICANT BY SHRI M.P. LOHIA RESPONDENT BY SHRI S.P. WALIMBE DATE OF HEARING 15-01-2021 DATE OF PRONOUNCEMENT 18-01-2021 M.A NO.01/PUN/2020 M/S. CARRARO INDIA PVT. LTD., 2 THE TRIBUNAL, IN ITS ORDER U/S 254(1), HAS REJECTED THE SELECTIO N OF THE COST PLUS METHOD (CPM), THE TRANSACTION NET MARGINAL METHOD (TNMM) AND THE COMPARABLE UNCONTROLLED PRICE (CUP) METHOD. IT WAS PUT FORTH THAT A PRECISE METHOD TO BE SELECTED FOR THE ALP DETERMINATION SHOULD BE DIRECTED RATHER THAN LEAVING IT AS SUCH. THIS WAS OPPOSED BY THE LD. DR, WH O SUBMITTED THAT THERE IS NO INFIRMITY IN THE TRIBUNAL ORDER LEAVING THE SELECTION OF METHOD OPEN TO THE TPO. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS THROUGH VIRTUAL C OURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. THE IS SUE IN THE EXTANT MISCELLANEOUS APPLICATION REVOLVES AROUND THE DETERMINATION OF ALP OF THE INTERNATIONAL TRANSACTION OF MANAGEMENT FEES. THE TRIBUNAL HAS RESTORED THE MATTER VID E PARA 34 OF ITS ORDER U/S.254(1) BY DIRECTING THE AO/TPO TO F IRST DETERMINE THE MOST APPROPRIATE METHOD AND THEN FIND OUT THE ALP OF THE INTERNATIONAL TRANSACTION. THE ASSESSEE APPLIED THE TNMM WITH ITS FOREIGN AE AS A TESTED PARTY AND ALSO BY ADOPTING THE AGGREGATE APPROACH. THE TRIBUNAL DID NOT APPR OVE THE SELECTION OF FOREIGN AE AS A TESTED PARTY FOR THE REASON S GIVEN IN PARA 24 OF THE IMPUGNED ORDER; AND THE AGGREGATIO N APPROACH FOR THE REASONS GIVEN IN PARAS 28 TO 30 BY RE LYING ON M.A NO.01/PUN/2020 M/S. CARRARO INDIA PVT. LTD., 3 THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN KNORR BREMSE INDIA PVT. LTD (2016) 380 ITR 307 AND THAT OF THE HONBLE DELHI HIGH COURT IN MANGNETI MARELLI POWER (2016) 289 ITR 469 . THE TRIBUNAL DID NOT APPROVE THE APPLICATION OF THE COST PLUS METHOD FOR THE REASONS GIVEN IN PARAS 25 AND 26 OF ITS ORDER. THE TPOS APPLICATION OF THE CUP METHOD WAS REJECTED BECAUSE OF REASONS GIVEN IN PARA 3 3 OF THE ORDER AS NO COMPARABLE UNCONTROLLED TRANSACTION WAS GIVEN A S COMPARABLE. 3. ON GOING THROUGH THE RELEVANT DISCUSSION MADE IN VARIOUS PARAS OF THE TRIBUNAL ORDER PASSED U/S.254(1), IT IS GRAP HICALLY CLEAR THAT THE TRIBUNAL HAS REJECTED THE APPLICATION OF TNMM, CUP OR CPM AND NOT THEIR SELECTION. THE TRIBUNAL HAS ASSIGNED REASONS AS TO HOW THESE METHODS WERE WRONGLY APPLIED. 4. AT THIS JUNCTURE, WE WANT TO UNDERSCORE THAT THERE AR E TWO THINGS RELEVANT IN ALP DETERMINATION QUA THE MOST APPROPRIATE METHOD VIZ., FIRST, SELECTION OF THE METHOD AND SECOND, ITS APPLICATION. WHAT HAS BEEN FAULTED WITH IN THE IMPUGNED ORDER IS THE WRONG APPLICATION OF THE METHODS AND NOT THE WRONG M.A NO.01/PUN/2020 M/S. CARRARO INDIA PVT. LTD., 4 SELECTION OF METHODS. IN OTHER WORDS, THE TRIBUNAL OBSERVED CERTAIN INCONSISTENCIES IN THE APPLICATION OF THE METHODS BY THE ASSESSEE AND THE TPO, WHICH DID NOT PROPERLY FIT INTO THE APPLICATION MECHANISM. THOSE WERE THE RAISON DETRE FOR DISCARDING THEIR APPLICATION. FOR EXAMPLE, THE ASSESSEE WRONG LY CONSIDERED FOREIGN AE AS A TESTED PARTY OR DID BENCHMARKIN G UNDER THE TNMM IN AN AGGREGATE MANNER. THE TRIBUNAL DID N OT APPROVE THIS. BOTH THESE FALL IN THE DOMAIN OF WRONG APPLICATION OF METHOD. SIMILARLY, THE TPO DID NOT SELECT ANY COMPARABLE UNCONTROLLED TRANSACTION UNDER THE CUP METHOD, WHICH GOT DISAPPROVED BY THE TRIBUNAL IN ITS ORDER U/S 254(1) OF THE ACT. THIS IS AGAIN AN INSTANCE OF WRONG APPLICATION OF METHOD. OVERRULING THE WRONG APPLICATION OF THE METHOD DOESNT MEAN RULING OUT THE SELECTION OF THAT METHOD AS WELL. IF THE WRONG APPLICATION OF A METHOD IS CORRECTED, THERE CAN BE NO IMPEDIMENT IN ITS SELECTION. TO PUT IT SIMPLY, IT IS STILL OPEN IN THE FRESH PROCEEDINGS TO CHOOSE THE ASSESSEE AS A TESTED PARTY AND BENCHMARK THE TRANSACTION ON SEGREGATE BASIS AND APPLY THE TNMM; OR TO FIND OUT A SUITABLE COMPARABLE UNCONTROLLED TRANSACTION AND APPLY THE CUP METHOD; SO ON AND SO FORTH. TH E LONG AND THE SHORT OF THE WHOLE THING IS THAT SELECTION OF A NY OF M.A NO.01/PUN/2020 M/S. CARRARO INDIA PVT. LTD., 5 THE METHODS IS OPEN BEFORE THE TPO, WHO CAN RESHUFFLE THE EXISTING DATA OR REQUIRE THE ASSESSEE TO MAKE GOOD THE DEFICIENCIES IN THE EXISTING DATA AS OBSERVED BY THE TRIBUNAL I N ITS ORDER U/S 254(1) AND PROCEED WITH THE DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION. 5. ONCE THE MATTER HAS BEEN SENT BACK TO THE TPO FOR A FRESH DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION OF THE PAYMENT OF MANAGEMENT SERVICES, WE DO NOT WISH TO CLIP HIS WINGS BY DIRECTING TO ADOPT A PARTICULAR METHOD ONLY. NOW IT IS WITHIN HIS DOMAIN TO FIND OUT THE MOST APPROPRIATE METHOD IN THE FACTS AND CIRCUMSTANCES AND PROCEED ACCORDINGLY. THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IN THE MISCELLAN EOUS APPLICATION FOR DIRECTING THE SELECTION OF A SPECIFIC METHOD, IS, ERGO, JETTISONED. 6. IN THE RESULT, THE MISCELLANEOUS APPLICATION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2021. SD/- SD/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESI DENT PUNE; DATED : 18 TH JANUARY, 2021. M.A NO.01/PUN/2020 M/S. CARRARO INDIA PVT. LTD., 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-13, PUNE 4. THE PR. CIT-1, PUNE 5. , , / DR A, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 15-01-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 15-01-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *