M/s Abbott Medical Optics Pvt Ltd , Bangalore V. The Deputy Commissioner of Income Tax Circle-11(1), Bangalore

MA 11/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1110 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-12-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-11-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AJIT TOLANI
• Keywords: Transfer pricing; Principle of natural justice; Question of law; Non passing of speaking order; Capital receipt
• Section: 254(2); 2(A); 54; 154

Judgement Text

M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER M.P. NO.11/BANG/2019 (ARISING OUT OF IT(TP)A NO.8/BANG/2014) ASSESSMENT YEAR: 2008-09 M/S. ABBOTT MEDICAL OPTICS PVT. LTD., (FORMERLY ADVANCED MEDICAL OPTICS INDIA PVT. LTD.) THE MASTERPIECE, LEVEL 5 GOLF COURSE ROAD, SECTOR 54 GURGAON 122 002 HARYANA PAN NO : AAECA8659C VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE11(1) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI AJIT TOLANI, A.R. RESPONDENT BY : SHRI KANNAN NARAYANAN, D.R. DATE OF HEARING : 11.12.2020 DATE OF PRONOUNCEMENT : 18.12.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS MISCELLANEOUS APPLICATI ON, WHEREIN IT IS SUBMITTED THAT THERE ARE CERTAIN MISTAKES APPARE NT FROM RECORD IN THE ORDER DATED 22-06-2018 PASSED BY THE TRIBUNAL I N THE APPEAL MENTIONED IN THE CAPTION. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE READS AS UNDER:- M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE PAGE 2 OF 7 MISTAKES APPARENT FROM RECORD - I) THE ASSESSEE HAS TAKEN SPECIFIC GROUND NO 2(B) REGA RDING EXCLUSION BY TPO OF CLAIMS RECEIVED, PROVISIONS WRITTEN BACK AND LIABILITY WRITTEN BACK FROM OPERATING MARGIN. THE SAID GROUND IS REPR ODUCED BELOW:- 2 (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A) ERRED IN - UPHOLDING THE COMPUTATION OF OPERATING MARGIN OF THE APPELLANT BY THE LEARNED AO/TPO BY EX CLUDING 'CLAIMS RECEIVED', 'PROVISIONS WRITTEN BACK', AND ' LIABILITY WRITTEN BACK' AS NON-OPERATING IN NATURE. IN THE IMPUGNED ORDER THE HON'BLE BENCH INSTEAD OF DECIDING THE 3 ISSUES AGITATED IN THIS SUB GROUND HAS ADJUDICATED ONLY ON 'PROVISIONS WRITTEN BACK' IN PARA 10 OF THE ORDER. THE FINDING THAT 'WE FIND THAT NO SPECIFIC GROUND O F APPEAL IS RAISED' IS AN ERRONEOUS FINDING WHICH IS CONTRARY TO RECORD IN AS MUCH AS IN THE MEMO OF APPEAL SPECIFIC GROUNDS QUA PROVISIONS WRITTEN BACK AND CLAIMS RECEIVED AND LIABILITY WRITTEN BACK HAVE BEEN RAISED (KINDLY REFER GROUND 2(B)). THUS THE HON'BLE BENCH HAS INADVERTENTLY NOT ADJUDICATED THE SPECIFIC GROUNDS A) CLAIMS RECE IVED AND (B) LIABILITY WRITTEN BACK. NON ADJUDICATION OF A GROUN D OR PART THEREOF IN THE ORDER CONSTITUTES A CLEAR MISTAKE APPARENT F ROM THE RECORD IN THE IMPUGNED ITAT ORDER IN TERMS OF SEC. 254(2). II) EVEN WHILE ADJUDICATING ON THE SPECIFIC ISSUE OF PR OVISION WRITTEN BACK, THE HON'BLE TRIBUNAL IN PARA 10 HAS HELD THAT - THE ISSUE OF WRITE BACK RELATES TO BUSINESS TAKEN OVER BY THE AS SESSEE AND THEREFORE ANY PROFIT ARISING OUT OF BUSINESS TAKEN BY THE ASSESSEE CONSTITUTES CAPITAL RECEIPTS AND DOES NOT FORM PART OF OPERATING INCOME FOR CALCULATING OPERATING MARGIN OF THE ASSE SSEE. III) IT IS SUBMITTED THAT THERE ARE THREE PARTS OF PROVI SION WRITTEN BACK A) PROVISION FOR SALES COMMITMENT WHICH ARE W RITTEN BACK AND B) PROVISION OF WARRANTY WRITTEN BACK (I.E. EXC ESS WARRANTY PROVISION REVERSED DURING THE YEAR) C) LIABILITIES WRITTEN BACK. IT IS CONTENDED THAT HON'BLE BENCH COMMITTED AN APP ARENT ERROR III AS MUCH AS THESE PROVISIONS PERTAINS TO OWN BUS INESS OF ASSESSEE AND NOT ATTRIBUTABLE TO BUSINESS TAKEN OVE R BY THE ASSESSEE. (KINDLY SEE ANNEXURE 'B' ENCLOSED AT PAGE 14 TO 18 OF THIS APPLICATION). THIS CRUCIAL FACT IS APPAREN T FROM THE RECORD, M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE PAGE 3 OF 7 BEING APPARENTLY MISTAKEN FINDING THE SAME NEEDS TO RECTIFIED U/S 254(2). IV) GROUND NO.2(C) - THE ASSESSEE HAD TAKEN A SPECIFIC GROUND REGARDING NON-ISSUE OF SHOW CAUSE NOTICE BY AO/TPO WHICH IS REPRODUCED BELOW - GROUND NO. 2(C) -THAT ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE THE LD. CIT(A) ERRED IN-NOT ADDRESSING THE APP ELLANT GRIEVANCE IN FULL FOR NOT PROVIDING A SHOW CAUSE NO TICE BY THE LEARNED AO/TPO TO THE APPELLANT DETAILING THE CONTE NTIONS AND BY PROVIDING/CONTENTIONS FOR THE FIRST TIME IN THE ORD ER, THEREBY NOT FOLLOWING PRINCIPLE OF NATURAL JUSTICE IN THE COURS E OF ASSESSMENT PROCEEDINGS. THOUGH THIS IMPORTANT GROUND WAS FULLY ARGUED, THE HONBLE BENCH HAS INADVERTENTLY OMITTED TO ADJUDICATE ON THIS PAR TICULAR GROUND. OMISSION TO DECIDE A GROUND UNEQUIVOCALLY CONSTITUT ES MISTAKE APPARENT FROM RECORD IN TERMS OF SEC. 254(2) WHICH DESERVES TO BE RECTIFIED. V) THE ASSESSEE HAS ALSO TAKEN A GROUND IN RESPECT OF APPARENT CALCULATION MISTAKES COMMITTED BY THE TPO IN COMPUT ATION OF A) ARITHMETIC MEAN AND B) OPERATING MARGIN OF THE COMP ARABLE COMPANIES WHICH IS REPRODUCED AS FOLLOWS 2(H) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN- UPHOLDING THE ERRONEOUS COMPUT ATION OF ARITHMETIC MEAN MARGIN OF THE COMPARABLE COMPANIES 2(I) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) ERRED IN-UPHOLDING THE ERRONEOUS COMPUTATION OF THE OPERATING MARGIN (OPERATING PROFIT/SALES) OF THE CO MPARABLE COMPANIES. THE ABOVE GROUNDS HAVE BEEN DISCUSSED IN THE ORDER OF THE HON'BLE TRIBUNAL (IN PARA 9) WHEREIN THIS PARTICULAR GROUND OF APPEAL HAS BEEN DISMISSED ON THE REASON THAT THIS ISSUE IS ALR EADY SUBJECT MATTER OF PETITION U/S. 154 BEFORE THE TPO VIDE APP LICATION DTD. 27/2/12. THE HON'BLE BENCH FAILED TO APPRECIATE THAT BY INAC TION OF THE PART OF ITO IN NOT PASSING THE ORDER U/S 154 WITHIN 4 YEARS FROM T HE END OF THE FINANCIAL YEAR IN WHICH ORDER IS PASSED IN TERMS OF SEC. 154( 7), THE SAID APPLICATION HAD BECOME TIME BARRED. THEREFORE, A MISTAKE HAS CR EPT IN THE IMPUGNED M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE PAGE 4 OF 7 ORDER IN AS MUCH AS ITO IS FUNCTUS OFFICIO AND CANN OT PASS ANY ORDER U/S 154 ON THE ASSESSES APPLICATION. THUS THE HON'BLE BENCH OUGHT TO HAVE DECIDED THIS GROUND. IT IS A MISTAKE OF LAW THAT THE ITO HA S BEEN DIRECTED TO PASS AN ORDER WHICH HE IS BARRED BY LAW TO PASS. VI) THE ASSESSEE HAS ALSO TAKEN A GROUND WITH RESPE CT TO CERTAIN COMPARABLES BEING FUNCTIONALLY INCOMPARABLE TO ITSE LF. THE HON'BLE ITAT HAS INADVERTENTLY NOT ADJUDICATED ON ONE SUCH COMPARABLE, I.E., SOUTH INDIA SURGICAL LIMITED. THOUGH THIS GROUND WAS FULLY ARGUED, THE HON'BLE BE NCH HAS INADVERTENTLY OMITTED TO ADJUDICATE ON THIS PARTICULAR GROUND. OM ISSION TO DECIDE A GROUND UNEQUIVOCALLY CONSTITUTES MISTAKE APPARENT FROM REC ORD IN TERMS OF SEC. 254(2) WHICH DESERVES TO BE RECTIFIED. VII) THE APPLICANT HAS RAISED TWO ADDITIONAL GROUN DS WHICH ARE REPRODUCED BELOW- GROUND 3(1) THAT THE ID. AO AND THE ID. CIT(A) ER RED IN NOT UNDERTAKING WORKING CAPITAL ADJUSTMENT IN RESPECT OF THE LEVEL OF INVENTORY, DEBTORS, CREDITORS ETC. FOR ANALYZING/APPLICATION OF RESALE PRICE METHOD AS MAM. GROUND 3(2) WITHOUT PREJUDICE TO APPLICATION OF T NMM METHOD, THE ID. AO AND ID. CIT(A) ERRED IN NOT PROVIDING APPROPRIATE A DJUSTMENT TOWARDS THE SIGNIFICANT EXPENSES BY THE APPLICANT TOWARDS MARKE TING, ADVERTISEMENT AND SALES PROMOTION ACTIVITIES DUE TO INITIAL YEAR OF I TS DISTRIBUTION OPERATION. THE HON'BLE TRIBUNAL (IN PARA NO.11)WHILE DISMISSIN G THEM HAS HELD THAT ADDITIONAL GROUNDS CANNOT BE ADMITTED FOR REASON THAT THESE IS SUES REQUIRE TO BE ADJUDICATED BASED ON FACTUAL ISSUE AND NOT QUESTION OF LAW. IT IS SUBMITTED THAT IN THE APPLICATION FOR THE ABO VE ADDITIONAL GROUNDS THE ASSESSEE HAS GIVEN DETAILED JUSTIFICATION SUPPORTED WITH CATENA OF JUDICIAL PRECEDENTS JUSTIFYING CONSIDERATION OF WORKING CAPI TAL ADJUSTMENT TOWARDS AMP (ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES) W HILE CALCULATING THE OPERATING MARGINS OF TESTED PARTY OR CORRESPONDING COMPARABLE. WITHOUT CONSIDERING THESE DETAILED SUBMISSIONS HON' BLE BENCH HAS REFUSED TO ADMIT THEM WITHOUT SPEAKING ORDER AND OMITTING TO C ONSIDER THE RECORD ITSELF. IGNORING ASSESSEE'S SUBMISSIONS AND RELIANCE ON CAT ENA OF JUDICIAL PRECEDENTS ('ANNEXURE C' ENCLOSED AT PAGE LE1 TO AE OF THIS APPLICATION) AND PASSING NON SPEAKING ORDER IN THIS BEHALF CONSTITUTE MISTAKE AP PARENT FROM THE RECORD IN TERMS OF SEC 254(2). IT IS A JUDICIALLY RECOGNIZED OBLIGATION ON ITAT TO ENSURE A FAIR AND PROPER ASSESSMENT IS MADE AND ASSESSEE IS ACCORDED PROPER DEDUCTIONS AND ADJUSTMENTS, RELIANCE IS PLACED ON HON'BLE SUPR EME COURT JUDGMENT IN THE CASE OF KAPURCHND SHRIMAL 131 ITR 451. ABDICATION OF SUCH OBLIGATION CONSTITUTES A MISTAKE APPARENT FROM THE RECORD. M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE PAGE 5 OF 7 IN THE CASE OF APPLICANT'S APPEAL, THE ABOVE ASPECT S CARRY PARAMOUNT SIGNIFICANCE FOR ASSESSIBILITY OF PROPER TAX SINCE THE MAM HAS B EEN CHANGED AND DOWNWARD CALCULATION OF TP ADJUSTMENT HAS BEEN APPLIED TO MA RGIN OF THE ASSESSEE. IN THIS SCENARIO ALL THE RELEVANT ELIGIBLE ADJUSTMENTS ARE TO BE ACCORDED TO ASSESSEE TO ENSURE FAIR AND PROPER ASCERTAINMENT OF TAX LIABILI TY IN A LAWFULLY PROPER MANNER AS ENSHRINED BY HON'BLE SUPREME COURT IN KAPURCHAND SHRIMAL JUDGMENT (SUPRA). IT IS RESPECTFULLY SUBMITTED THAT ALL THE ABOVE LIS TED MISTAKES APPARENT FROM THE RECORD WHICH HAVE CREPT IN THE ORDER OF ITAT DESERV E TO BE RECTIFIED BY RECALLING THE IMPUGNED ORDER DATED 22.6.2018. 3. WE HEARD THE PARTIES AND PERUSED THE RECORD . THE ASSESSEE HAS POINTED OUT THE ALLEGED MISTAKES IN CLAUSES (I) TO (VI) IN THE MISCELLANEOUS PETITION. IT IS A WELL SETTLED PROPO SITION OF LAW THAT THE TRIBUNAL, UNDER THE POWERS GIVEN TO IT U/S 254(2) O F THE ACT CAN RECTIFY ONLY MISTAKES WHICH ARE APPARENT FROM RECORD. UNDE R THE GARB OF RECTIFICATION, THE TRIBUNAL IS NOT ENTITLED TO REVI EW ITS ORDER. THE HONBLE SUPREME COURT, IN THE CASE OF T.S BALARAM V S. VOLKART BROTHERS (1971 AIR 2204) HAS EXPLAINED SCOPE OF SEC . 154 OF THE ACT AS UNDER:- A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOU S AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LON G DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY TWO OPINIONS.....AN ERROR WHICH HAS TO BE ESTABLISHED BY A LONG DRAWN P ROCESS OF REASONING ON POINTS WHERE THERE MAY BE CONCEIVABLY BE TWO OPINIO NS CANNOT BE SAID TO BE AN ERROR APPARENT ON THE FACE OF RECORD. A DECISIO N ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. 4. BASED ON THE ABOVE DISCUSSED LEGAL PROPOSITION S, WE SHALL NOW EXAMINE THE PETITION FILED BY THE ASSESSEE. 5. IT IS THE SUBMISSION OF THE ASSESSEE IN CLAUSE S (I) TO (V) OF THE MISCELLANEOUS APPLICATION THAT GROUNDS NUMBERED AS 2(B), 2(C), 2(H) AND 2(I) HAVE NOT BEEN ADJUDICATED ON ALL POINTS BY THE TRIBUNAL. ALL THE ABOVE SAID GROUNDS ARE RELATED TO THE ADDITION MADE BY THE AO M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE PAGE 6 OF 7 ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT MADE BY T HE TPO. HOWEVER, WE NOTICE THAT THE TRIBUNAL HAS EXAMINED G ROUNDS NUMBERED AS 2(B) AND 2(C) IN PARAGRAPH 7 OF ITS ORD ER, I.E., THE TRIBUNAL HAS COMBINED GROUNDS 2(A) TO 2(D) IN PARAG RAPH 7 AND ACCORDINGLY ADJUDICATED THEM TOGETHER. SIMILARLY, WE NOTICE THAT GROUNDS NUMBERED AS 2(H) AND 2(I) HAVE BEEN ADJUDIC ATED BY THE TRIBUNAL IN PARAGRAPH 9 OF ITS ORDER. HENCE, WE AR E OF THE VIEW THAT IT CANNOT BE SAID THAT THE TRIBUNAL HAS OMITTED TO CONSIDER THE ABOVE SAID FOUR GROUNDS. IT IS A CASE, WHERE THE TRIBUNA L HAS DISPOSED OF THE GROUNDS IN A PARTICULAR MANNER. ACCORDINGLY, W E ARE OF THE VIEW THEY CANNOT BE INTERFERED WITH U/S 254(2) OF THE AC T. 6. IN CLAUSE (VI) OF THE MISCELLANEOUS APPLICA TION, IT IS STATED THAT TRIBUNAL HAS NOT DECIDED ABOUT ONE COMPARABLE COMPA NY NAMED M/S SOUTH INDIA SURGICAL LIMITED. WE NOTICE THAT T HE ASSESSEE HAS NOT RAISED ANY GROUND BEFORE THE TRIBUNAL WITH REGA RD TO THE ABOVE SAID COMPARABLE COMPANY. IT IS ONLY STATED THAT TH E ASSESSEE HAS ARGUED BEFORE THE TRIBUNAL ON THE ABOVE SAID COMPAR ABLE. SINCE THE ABOVE FACTS ARE NOT APPARENT FROM RECORD, WE ARE NO T ABLE TO APPRECIATE THIS CONTENTION OF THE ASSESSEE AND ACCO RDINGLY REJECT THE SAME. 7. IN CLAUSE (VII), IT IS STATED THAT THE TRIBU NAL HAS REFUSED TO ADMIT TWO ADDITIONAL GROUNDS. IT IS FURTHER STATED THAT THE TRIBUNAL HAS OBSERVED IN PARAGRAPH 11 OF ITS ORDER AS UNDER WITH REGARD TO THE ADDITIONAL GROUNDS:- THE ADDITIONAL GROUNDS CANNOT BE ADMITTED FOR THE REASON THAT THESE ISSUES REQUIRE TO BE ADJUDICATED BASED ON FACTUAL ISSUE AN D NOT QUESTION OF LAW. THEREFORE, THE ADDITIONAL GROUNDS OF APPEAL FILED B Y THE ASSESSEE COMPANY ARE DISMISSED. M.P. NO.11/BANG/2019 (IT(TP)A NO.8 /BANG/2014) M/S. ABBOTT MEDICAL OPTICS PVT. LTD., BANGALORE PAGE 7 OF 7 IT IS THE SUBMISSION OF THE ASSESSEE THAT THE TRIBU NAL HAS COMMITTED AN ERROR IN NOT ADMITTING THE ADDITIONAL GROUNDS. HOWEVER, WE NOTICE THAT THE TRIBUNAL HAS TAKEN A PARTICULAR VIEW ON TH E ABOVE MATTER. HENCE, THE SAME CANNOT BE INTERFERED WITH U/S 254(2 ) OF THE ACT. 8. IN THE RESULT, THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DEC, 2020 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH DEC, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.