Mylan Laboratories Ltd., Hyderabad, Hyderabad V. Addl. CIT, Range-16, Hyderabad, Hyderabad

MA 120/HYD/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3756 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: S RAGHUNATHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER M.A. NO. 120/HYD/2015 (ARISING OUT OF ITA NO. 66/HYD/2013) ASSESSMENT YEAR : 2008-09 M/S. MYLAN LABORATORIES LTD., HYDERABAD [PAN: AADCM3491M] (APPLICANT) VS ADDL. COMMISSIONER OF INCOME TAX, RANGE-16, HYDERABAD (RESPONDENT) FOR ASSESSEE : SHRI S. RAGHUNATHAN , AR FOR REVENUE : SHRI B. KURMI NAIDU , DR DATE OF HEARING : 04 - 1 2 - 2015 DATE OF PRONOUNCEMENT : 23 - 12 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS MISCELLANEOUS APPLICATION IS PREFERRED BY ASS ESSEE AGAINST THE ORDER OF ITAT, B BENCH IN ITA NO. 66/ HYD/2013 DT. 10-01-2014. THE PETITION OF ASSESSEE ABOUT THE MIST AKE IS AS UNDER: USAGE OF THE WORD INTERNAL CUP (GROUND NOS: 4 TO 8, PAGE: 18, PARA 26 & 27 OF THE ORDER) THE TPO HAS CONSIDERED OPERATING PROFIT ON OPERATIN G COST AS THE PROFIT LEVEL INDICATOR FOR DETERMINING THE COMPARABLE COMP ANIES OPERATING PROFIT MARGIN (OPM). 2 M.A. NO. 120/HYD/2015 M/S. MYLAN LABORATORIES LTD., THE PLEAS MADE BEFORE THE HON'BLE TRIBUNAL ARE THAT THE OPERATING MARGINS (OPERATING PROFIT/OPERATING COSTS) DERIVED FROM SEG MENTAL RESULTS DULY CERTIFIED BY THE COST AUDITORS OF THE TAX PAYER ARE TO BE ACCEPTED AND INTERNAL COMPARABLES SHOULD HAVE PRIORITY OVER EXTE RNAL COMPARABLES. THE HON'BLE ITAT ACCEPTED THE APPELLANTS CONTENTIO NS AND HELD THAT SEGMENTAL REPORTING UNDERTAKEN BY THE APPELLANT BAS ED ON THE COST AUDIT REPORT SHOULD BE THE BASIS FOR NECESSARY ANALYSIS B Y THE TPO. WHILE ADJUDICATING THE SECOND PLEA, THE HON'BLE TRIBUNAL IN LINE NOS. 9 & 10 OF PARA 27, HELD THAT TPO CAN EXAMINE WHETHER INTERNA L CUP IS AVAILABLE INSTEAD OF THE TPO CAN EXAMINE WHETHER INTERNAL CO MPARABLES ARE AVAILABLE. HENCE, IT IS RESPECTFULLY SUBMITTED THAT THE HON'BL E TRIBUNAL MAY BE PLEASED TO SUITABLY AMEND ITS ORDER AND PASS A REVI SED ORDER BY SUBSTITUTING THE WORDINGS INTERNAL CUP WITH INTERNA L COMPARABLES IN LINE NOS. 9 & 10 OF PARA NO. 27 (GROUND NOS: 4 TO 8) OF THE ORDER. 2. THE RELEVANT SENTENCE IN PARA 27 IS AS UNDER: SINCE ASSESSEES SEGMENTAL PROFITS AND ITS PROFIT MARGINS BETWEEN AE AND NON-AE ARE ALSO AVAILABLE, THE TPO C AN EXAMINE WHETHER THE INTERNAL CUP AVAILABLE WITH THE ONE OF THE BUSINESS SEGMENTS CAN BE ACCEPTED AS SUCH. 3. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERU SING THE ORDER OF THE CO-ORDINATE BENCH OF ITAT (IN WHICH ONE OF U S AM IS AN AUTHOR), WE ARE OF THE OPINION THAT THERE IS NO NEE D TO CORRECT THE ORDER. BUR IT REQUIRES LITTLE CLARIFICATION. ASSES SEE HAS SUBMITTED SEGMENTAL PROFITS AND ITS PROFITS MARGINS BETWEEN T HE AE AND NON- AE IN EACH OF THE SEGMENTS. THEREFORE, TPO WAS DIR ECTED TO EXAMINE WHETHER ANY INTERNAL CUP IS AVAILABLE IN ON E OF THE BUSINESS SEGMENTS AND IF SO, THE SAME CAN BE ACCEPT ED. WHETHER IT IS INTERNAL CUP OR INTERNAL COMPARABLE AS SU GGESTED BY ASSESSEE, THE ISSUE IS SAME. WHAT THE ITAT HAS INT ENDED IS TO EXAMINE WHETHER ASSESSEES INTERNATIONAL TRANSACTIO NS WITH AE ARE COMPARABLE WITH ANY OTHER NON-AE TRANSACTIONS, SO A S TO EXAMINE 3 M.A. NO. 120/HYD/2015 M/S. MYLAN LABORATORIES LTD., WHETHER THE PRICE CHARGED IS AT ARMS LENGTH OR NOT ? IN CASE IT IS NOT POSSIBLE TO ACCEPT, THEN THE TPO/AO WAS DIRECTE D TO SELECT FRESH COMPARABLES AND PLI HAS TO BE DETERMINED SO A S TO EXAMINE ASSESSEES PROFIT MARGINS. SINCE THE ENTIRE ISSUE WAS RESTORED TO THE FILE OF AO, WE ARE OF THE OPINION THAT NO MISTA KE HAS OCCURRED IN THE ORDER. 4. HOWEVER, WE NOTICED THAT THERE IS A TYPOGRAPHICA L ERROR IN 7 TH LINE IN PARA 26 (PAGE 17 OF THE ORDER) WHILE ACCEPTING THAT THE SEGMENTAL FINANCIALS CERTIFIED BY THE COST AUDITORS AND THE PROFIT MARGINS ARRIVED BETWEEN THE AE AND NON-AE TRANSACTI ONS ARE COMPARABLE, WHY THE DRP DID NOT ACCEPT THE ENTIRE SEGMENTAL FINANCES FURNISHED WITH REFERENCE TO TWO BUSINESS SEGMENTS IS NOT EXPLAINED . BY MISTAKE, INSTEAD OF FINANCIALS, THE WORD US ED WAS FINANCES. THEREFORE, IN THE ABOVE SENTENCE, THE ENTIRE SEGMENTAL FINANCIALS SHOULD BE READ INSTEAD OF ENTIRE SEGMENTAL FINANCES. 5. IN THE RESULT, MISCELLANEOUS APPLICATION IS ACCO RDINGLY PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DECEMBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 23 RD DECEMBER, 2015 TNMM 4 M.A. NO. 120/HYD/2015 M/S. MYLAN LABORATORIES LTD., COPY TO : 1. MYLAN LABORATORIES LTD., PLOT N O. 564/A/22, ROAD NO. 92, JUBILEE HILLS, HYDERABAD. 2. ADDL. COMMISSIONER OF INCOME TAX, RAGE-16, HYDERABAD. 3 . THE DISPUTE RESOLUTION PANEL , HYDERABAD. 4 . CIT - I , HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE