Weatherford Drilling & Production Services (India) Pvt. Ltd., Vadodara V. The Asstt. Commissioner of Income Tax, Circel-2(1)(2), Vadodara

MA 109/AHD/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0165 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-05-2024
• Assessment Year: misc
• Appeal Filed On: 21-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 10; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER M. A . N o s. 1 08 & 1 0 9 /A hd/ 2 0 23 ( in I TA N os . 26 2 9 / A h d/ 2 0 17 & 2 5 0 3 / Ah d/ 20 18) ( As s e s s me nt Y ea rs : 20 09 - 1 0 & 20 1 0 - 1 1) Wea th e r fo r d D r il li n g & Pr o du ct io n Ser v i ce s ( I n d i a) P v t. Ltd . , B l o ck N o . 7 4, M uk u tn ag ar , S o kh ada R oa d, M a n j us a r , TA . S a vli , V a do d a r a- 3 9 17 75 V s.A s sis ta n t C o m mi s s i o ne r o f I n c o m e Ta x, C ir cl e - 2 ( 1) ( 2) , V a do d ar a [ P A N N o. A A A C W4 0 6 8M ] (Appellant) .. (Respondent) Appellant by : Shri Amol Mahajan, C.A. & Shri Dhanesh Bafna, C.A. Respondent by: Ms. Saumya Pandey Jain, Sr. DR D a t e of H ea r i ng 31.05.2024 D a t e of P r o no u n ce me nt 13.08.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: The assessee has filed the present Miscellaneous Application challenging the order passed by ITAT in ITA No. 2629/Ahd/2017 for A.Y. 2009-10. 2. The brief facts of the case leading to the present Miscellaneous Application are that the assessee is engaged in the business of manufacturing of oil field equipment, tool operators instrument and allied products etc. The case of the assessee was referred to the Transfer Pricing Officer (in short” TPO) and the draft order was passed by the Ld. TPO on 24.01.2013. The order of Ld. TPO was challenged by the assessee before Dispute Resolution Panel (in short “DRP”). The DRP rejected the assessee’s contention regarding fresh benchmarking conducted by TPO and further held that the TPO should not be MA Nos.108&109/Ahd/2023 (in ITA Nos. 2629/A/17&2503/A/18) Weatherford Drilling & Production Services (India) Pvt. Ltd. vs. ACIT Asst.Years –2009-10 & 2010-11 - 2 - have relaxed the export filter to 25% and based on the same, arrived at a single comparable viz. GTN Engineering Ltd. (in short “GTN”). In appeal before ITAT, the Tribunal in the first round of litigation directed the TPO to conduct fresh benchmarking analysis to identify comparable companies which are comparable with the assessee’s line of business. In the set-aside proceeding, however, the Ld. TPO in light of the directions of Hon’ble DRP in the first round of litigation, took the export filter at 50% and again took GTN as the single / sole comparable and accordingly, conducted a fresh benchmarking analysis by only taking GTN as the single comparable. The DRP dismissed the appeal of the assessee and confirmed the additions made by the TPO. In appeal before ITAT, the ITAT vide order dated 04.08.2023 made the following observations: “8.1 On going through the contents of the aforesaid order passed by Hon’ble ITAT, we observe that proper comparability analysis has not been done by the Ld. TPO taking into consideration the directions of ITAT in the aforesaid order. We observe that the ITAT has specifically observed that the TPO has sought to compare the valves which is a consumer product with the industrial product of the tested party, which would not give a true picture of the profit. However, despite the aforesaid directions of ITAT vide order dated 30.06.2015, the directions of ITAT ostensibly have not been followed and the same comparable was again used for conducting the comparability analysis, which was directed to be excluded. In view of the above, the matter is being again restored to the file of the Ld. TPO for carrying out a fresh benchmarking analysis in light of the observations made by Hon’ble ITAT vide its order dated 30.06.2015. In the result, the matter is being restored to the file of Ld. TPO with the above directions.” 3. Before us, the assessee has filed a present Miscellaneous Application wherein it was contended that the alternate plea of the assessee has not been considered. The Counsel for the assessee submitted that if the export filter of 50% is applied then only GTN would remain as a comparable entity, but then there is an apparent functional dissimilarity between assessee’s business and that of GTN. However, even in the first round of litigation, the ITAT has agreed to the contention of the assessee that transfer pricing study needs to be MA Nos.108&109/Ahd/2023 (in ITA Nos. 2629/A/17&2503/A/18) Weatherford Drilling & Production Services (India) Pvt. Ltd. vs. ACIT Asst.Years –2009-10 & 2010-11 - 3 - conducted afresh by taking into consideration comparable companies in assessee’s line of business, i.e. functionally similar companies, which has not been done in the instant case. Despite specific direction of ITAT in the first round of litigation, GTN was again taken by the TPO as the only / sole comparable and TP adjustments were made ignoring the specific directions of ITAT. The Counsel for the assessee submitted that in the instant facts, in the interest of justice, an appropriate directions may be given to reduce the export filter to 25% (which had also been done by the TPO by way of alternate computation in it’s order) and secondly to exclude GTN from the list of comparables since ITAT in the first round of litigation had given a categorical finding that comparability analysis has not been done by Ld. TPO by taking into consideration those companies in the same line at business. 4. In response, the Ld. D.R. submitted that the TPO had conducted a fresh benchmarking analysis in light of directions to ITAT and as can be seen from the TPO order, the TPO has correctly applied the export filter of 50% and therefore, no direction can be given to the TPO which would bind the Transfer Pricing Officer any way whatsoever. 5. We have heard the rival contentions and have looked into the directions given in the ITAT order, which has been challenged before us. In the order passed by ITAT, a direction was given to the TPO to conduct a fresh benchmarking analysis in light of observations made by the ITAT vide order dated 30.08.2015. However, the Counsel for the assessee has submitted that this would again lead to protracted litigation since TPO would conduct again a fresh benchmarking analysis by only taking into consideration GTN as a comparable by applying the export filter of 50% and therefore, this would MA Nos.108&109/Ahd/2023 (in ITA Nos. 2629/A/17&2503/A/18) Weatherford Drilling & Production Services (India) Pvt. Ltd. vs. ACIT Asst.Years –2009-10 & 2010-11 - 4 - again lead to unnecessary and protracted litigation on the assessee. We observe that vide order dated 30.08.2015, the ITAT had specifically observed that the TPO while conducting the benchmarking analysis erred in not taking into consideration industries engaged in same or similar products and therefore, the benchmarking analysis did not give a correct picture. Accordingly, in view of the observations of ITAT vide order dated 30.08.2015, we hereby direct that GTN may be excluded from the list of comparables since as observed by ITAT vide order dated 30.08.2015, there is a functional dissimilarity between the facts of the assessee’s case / the products the assessee is dealing with and the business done by GTN. The order passed by the ITAT is also directed to be appropriately modified to the extent that the export filters may be appropriately relaxed by the Ld. TPO so as to include comparables which give a fair picture of the list of comparables which are functionally similar to assessee’s line of business. While deciding on the fresh comparables, the TPO may also consider the earlier alternate comparables which were considered by him in his earlier order dated 19.10.2016 or any other comparables which the assessee would like to suggest during the course of set-aside proceedings, and see if the companies are found to be functionally similar and thereafter to decide the issue on merits, by conducting a fresh benchmarking study in accordance with law and if the case of the assessee falls within the +/- 5% range as per Section 92C(2) of the Act, to give relief to the assessee in accordance with law. 6. In the result, the order passed by ITAT dated 04.08.2023 is directed to be modified to the above extent. MA Nos.108&109/Ahd/2023 (in ITA Nos. 2629/A/17&2503/A/18) Weatherford Drilling & Production Services (India) Pvt. Ltd. vs. ACIT Asst.Years –2009-10 & 2010-11 - 5 - 7. In the result, the Miscellaneous Application is filed by the assessee is allowed. M.A. No. 109/Ahd/2023(A.Y. 2010-11): 8. Since the facts and issues for consideration, for both the assessment years before us are identical, the Miscellaneous Application of the assessee for Assessment Year 2010-11 are also decided, accordingly keeping in view of our observations in the preceding paragraphs. 9. In the combined result, both Miscellaneous Applications filed by the assessee are allowed. This Order pronounced in Open Court on 13/08/2024 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 13/08/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad