ROCHE DIAGNOSTICS INDIA P.LTD, MUMBAI V. ADDL CIT RG 8(3), MUMBAI

MA 117/MUM/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 4069 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTILAKSHMI NAYAK
• Assessee Lawyers: NITESH JOSHI LD
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM M.A. NO. 117/MUM/2019 [ARISING OUT OF ITA NO. 7566/MUM/2012] ( / ASSESSMENT YEAR: 2008-09) ROCHE DIAGNOSTICS INDIA PRIVATE LIMITED PLOT NO.114, ROAD NO.15 MIDC, ANDHERI(E) MUMBAI-400 093 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-8(3) ROOM NO.220,2 ND FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI 400 020 ./ ./PAN/GIR NO. AAACA-0266-H ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ASSESSEE BY : SHRI NITESH JOSHI, LD. AR REVENUE BY : MS. JYOTI LAKSHMI NAYAK / DATE OF HEARING : 07/06/2019 / DATE OF PRONOUNCEMENT : 23/08/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. BY WAY OF THIS APPLICATION, THE ASSESSEE SEEKS R ECALL OF TRIBUNAL ORDER DATED 04/05/2018 WHICH HAS DISPOSED-OFF ASSES SEES APPEAL FOR AY 2008-09. THE ISSUE UNDER APPEAL WAS RELATED WITH DETERMINATION OF ALP OF DISTRIBUTION SEGMENT WHICH CONSISTED OF PURC HASE OF TRADING GOODS BY ASSESSEE FROM ITS AE AND RECEIPTS FROM AE S AGAINST SALE 2 MADE TO INDIAN CUSTOMERS PURSUANT TO A GLOBAL MASTE R AGREEMENT. BOTH THESE TRANSACTIONS WERE AGGREGATED FOR THE PURPOSE OF DETERMINATION OF ALP. THE ASSESSEES, IN ITS TP STUDY, HAD SELECTED 9 COMPARABLE TO BENCHMARK THE TRANSACTIONS OUT WHICH 4 COMPARABLE G OT EXCLUDED DUE TO APPLICATION OF UPPER TURNOVER FILTER OF RS.1000 CRO RES. THE ASSESSEE OBJECTED TO INCLUSION OF ONE COMPARABLE ENTITY NAME LY M/S ASHCO NEWLAB INDUSTRIES LTD. ON ACCOUNT OF RESTRUCTURING AND ALSO SUBMITTED FRESH BENCHMARKING. HOWEVER, BOTH THESE PLEAS GOT R EJECTED BY LD. TPO AND CERTAIN TP ADJUSTMENTS WERE PROPOSED. THE ACTIO N OF LOWER AUTHORITIES, UPON CONFIRMATION BY LD. DRP, WAS UNDE R CHALLENGE BEFORE US. THE ASSESSEE, BY WAY OF GROUND NO. 3, HAD PLEAD ED FOR CONSIDERATION OF FRESH BENCHMARKING ANALYSIS DONE BY THE ASSESSEE DURING PROCEEDINGS BEFORE LD. TPO. IN GROUND NO. 4, THE AS SESSEE CONTESTED INCLUSION OF M/S ASHCO NEWLAB INDUSTRIES LTD., INTER-ALIA, ON ACCOUNT OF THE FACT THAT TRADING INCOME WAS ONLY 49.96% AND SE GMENTAL RESULTS FOR TRADING ACTIVITY WERE NOT AVAILABLE. AT THE SAME TI ME, LD. AR HAD PLEADED FOR INCLUSION OF M/S FRONTLINE ELECTRO MEDICAL LIMI TED AS IDENTIFIED BY THE ASSESSEE IN THE FRESH BENCHMARKING BEFORE LD. TPO. THE LD. DRP HAD REJECTED THIS ENTITY FINDING THE SAME NOT FUNCTIONA LLY COMPARABLE AND IN VIEW OF THE FACT THAT ITS TURNOVER WAS LESS THAN 20 CRORES AS AGAINST ASSESSEES TURNOVER OF AROUND RS.200 CRORES. IN GRO UND NO. 5, THE ASSESSEE HAD CONTESTED THE REJECTION OF CERTAIN COM PARABLE ENTITIES ON ACCOUNT OF TURNOVER FILTER. 2. THE TRIBUNAL, AFTER CONSIDERING THE GROUNDS OF A PPEAL AS WELL AS RIVAL SUBMISSIONS, VIDE PARA 4.1 TO 4.4, REMITTED T HE MATTER BACK TO THE FILE OF LD. AO / TPO FOR FRESH DETERMINATION OF ALP OF THE TRANSACTIONS 3 UNDER DISPUTE KEEPING IN CERTAIN FACTORS AS ENUMERA TED IN THOSE PARAGRAPHS. AT PARA 4.2, IT WAS OBSERVED THAT NOTHI NG WAS ON RECORD TO DEMONSTRATE WHETHER THE TURNOVER FILTER WAS A RELEV ANT FACTOR / DETERMINATIVE FACTOR FOR ARRIVING AT MARGINS IN ASS ESSEES PARTICULAR LINE OF BUSINESS. THE ISSUES WERE PRIMARILY REVOLVING AR OUND APPLICATION OF TURNOVER FILTER AND FUNCTIONAL COMPARABILITY OF THE COMPARABLE. IN THE LIGHT OF ALL THESE FACTORS, THE BENCH, IN ITS WISDOM, HAD REMITTED THE MATTER BACK TO THE FILE OF LOWER AUTHORITIES. 3. COMING TO THE PRESENT MISCELLANEOUS APPLICATION, LD. AR HAS PLEADED THAT THE ISSUE UNDER APPEAL WAS LIMITED TO SELECTION OF TWO COMPARABLE ENTITIES AND THE FACT WHETHER LD. TPO/DR P WAS JUSTIFIED IN APPLYING / UPHOLDING THE TURNOVER FILTER OF RS.1000 CRORES IN THE COMPARABILITY ANALYSIS. IT HAS BEEN SUBMITTED THAT THE ASSESSEE IS AGGRIEVED BY THE DIRECTION WITH RESPECT TO FRESH DE TERMINATION OF ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTIONS SINCE IT WOULD PLACE UNREASONABLE BURDEN ON IT TO CARRY OUT FRESH ANALYS IS AFTER A PERIOD OF ALMOST A DECADE. THE LD. AR FURTHER POINTED OUT THA T IT WAS ARGUED THAT THERE WAS NO LINEAR RELATIONSHIP BETWEEN THE TURNOV ER AND OPERATING PROFIT MARGIN OF THE COMPARABLE ENTITIES AND THEREF ORE, THE OBSERVATION THAT NO SUBMISSIONS WERE MADE TO DEMONSTRATE WHETHE R THE TURNOVER FILTER WAS RELEVANT WAS FACTUALLY INCORRECT. RELIAN CE HAS BEEN PLACED ON THE DECISION OF HONBLE APEX COURT RENDERED IN HOND A SIEL POWER PRODUCTS LIMITED V/S CIT [295 ITR 466] TO SUBMIT TH AT IF TRIBUNALS MISTAKE RESULTS IN PREJUDICE TO A PARTY THEN THE TR IBUNAL WOULD BE JUSTIFIED IN RECTIFYING THE MISTAKE. IN THE ABOVE CIRCUMSTANC ES, LD. AR PLEADED FOR RECALL OF THE ORDER. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THERE 4 WAS NO POWER TO REVIEW THE ORDER AND THE SAME COULD BE INTERFERED ONLY TO RECTIFY MISTAKE APPARENT FROM RECORD. 4. UPON CAREFUL CONSIDERATION, WE FIND THAT THE ISS UES UNDER APPEAL PRIMARILY REVOLVED AROUND APPLICATION OF TURNOVER F ILTER, IF ANY AND FUNCTIONAL COMPARABILITY OF THE COMPARABLE ENTITIES AND THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE WERE ALSO CONCERNED W ITH THE SAME. THE BENCH, AFTER CONSIDERING, THE ORDERS OF LOWER AUTHO RITIES OBSERVED THAT NOTHING WAS ON RECORD TO DEMONSTRATE WHETHER THE TU RNOVER FILTER WAS A RELEVANT FACTOR / DETERMINATIVE FACTOR FOR ARRIVING AT MARGINS IN ASSESSEES PARTICULAR LINE OF BUSINESS AS AGAINST THE ARGUMENT S OF LD. AR THAT TURNOVER FILTER WAS NOT A RELEVANT CRITERION. THERE FORE, CONSIDERING THE FACT THAT SPECIFIC GROUNDS WERE RAISED BY THE ASSESSEE A ND THE ASSESSEE HAD ALSO SUBMITTED FRESH BENCHMARKING DURING PROCEEDING S BEFORE LD. TPO, WHICH WAS NOT CONSIDERED BY LD. TPO ON THE GROUND T HAT EARLIER TP STUDY WAS NOT REJECTED, THE MATTER WAS REMITTED BAC K. 5. TO DISPEL THE CONCERN RAISED BY LD. AR, IT IS MA DE CLEAR THAT THE METHODOLOGY ADOPTED BY THE ASSESSEE INCLUDING SELEC TION OF MOST APPROPRIATE METHOD AS ACCEPTED BY THE REVENUE IN TH E ORIGINAL PROCEEDINGS, SHALL NOT BE DISTURBED AND THE ISSUES SHALL BE LIMITED TO APPLICATION OF TURNOVER FILTER, IF ANY AND SELECTIO N OF COMPARABLE ENTITIES. 6. THE APPLICATION STAND ALLOWED TO THE EXTENT INDI CATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ K UMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23.08.2019 SR.PS:-JAISY VARGHESE 5 / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. +, '%- , - , / DR, ITAT, MUMBAI 6. ,./0 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI