AT & S India Pvt. Ltd., Karnataka V. DCIT, Circle-11(1), Kolkata, Kolkata

MA 120/KOL/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5235 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 29-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD GHYASUDDIN JCITSRDR
• Keywords: Transfer pricing
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT, MEMBER AND SHRI S.S.VISWANETHRA RAVI JUDICIAL MEMBER (MISC. APPLICATION) M.ANO.120/KOL/2016 (ARISING OUT ITA NO.179/KOL/2016) / ASSESSMENT YEAR:2011-12 AT & S INDIA PVT. LTD. 12A INDUSTRIAL AREA, NANJANGUD-571301, MYSORE DIST. KARNATAKA [ PAN NO.AAECA 2930 J ] / V/S . DCIT, CIRCLE-11(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 (ORIGINAL APPELLANT) (ORIGINAL R ESPONDENT) (APPELLANT) .. (RESPONDENT) / BY APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE / BY RESPONDENT MD. GHYAS UDDIN, JCIT-SR-DR ! / DATE OF HEARING 09-12-2016 '# ! / DATE OF PRONOUNCEMENT 20-01-2017 / ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER:- BY WAY OF THIS MISCELLANEOUS APPLICATION U/S 254(2) OF THE ACT THE ASSESSEE HAS PRAYED TO RECTIFY THE ORDER PASSED BY THE HONB LE TRIBUNAL DATED 03-08-2016 IN ITA NO 179/KOL /2016 FOR THE ASSESSMENT YEAR 2011-12 BY POINTING OUT TH AT THERE ARE CERTAIN MISTAKES APPARENT FROM THE RECORD WITHIN TH E MEANING OF SECTION 254(2) OF THE ACT. 2. THE LD. AR BEFORE US SUBMITTED THAT THE ISSUE IN THE INSTANT CASE RELATES TO THE DETERMINATION OF TRANSFER PRICE AT ARM LENGTH BETWE EN THE ASSESSEE AND ITS ASSOCIATE ENTERPRISES. THE HONBLE TRIBUNAL WAS PLEASED TO DE LETE THE ADDITION MADE BY THE LOWER AUTHORITIES WHILE APPLYING THE COMPARABLE UNC ONTROLLED PRICE (CUP) METHOD. MA NO.120/KOL/2016 AT & S INDIA PVT. LTD. V. DCIT, CIR-11(1), KOL. PAGE 2 HOWEVER THE HONBLE TRIBUNAL WHILE ADJUDICATING THE APPEAL ERRED IN GIVING FINDING THAT THE ASSESSEE SHOULD BE TREATED AS TESTED PARTY . IT IS BECAUSE ONCE THE CUP METHOD HAS BEEN APPLIED IN THE DETERMINATION OF ALP THEN T HERE IS NO NEED TO IDENTIFY THE TESTED PARTY. THE NEED TO IDENTIFY THE TESTED PARTY ARISES WHERE THE PROFIT BASED TRANSFER PRICING METHOD SUCH AS RESALE PRICE METHOD , COST PLUS METHOD OR TRANSACTION NET MARGIN METHOD ARE ADOPTED FOR THE DETERMINATION OF ALP. IN THIS CONNECTION, THE LD. AR RELIED IN THE OECD TRANSFER PRICING GUIDELIN ES. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS WRITTEN BACK THE PROVISION IN THE BOOK S OF ACCOUNTS BY CREDITING THE PROFIT & LOSS ACCOUNT BUT INADVERTENTLY IN THE COMPUTATION OF INCOME THE SAME WAS INSTEAD OF REDUCING ADDED TO THE TOTAL INCOME. HENCE, IT WA S ADDED TWO TIMES TO THE TOTAL INCOME I.E. FIRSTLY IN THE PROFIT & LOSS ACCOUNT AN D SECONDLY IN THE COMPUTATION OF INCOME. HOWEVER, THE TRIBUNAL WAS PLEASED TO DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES BUT OMITTED TO DIRECT FOR THE ALLOWING OF THE CLAIM I.E. REDUCING FROM THE TOTAL INCOME. ACCORDINGLY THE LD. AR PRAYED FOR ALL OWING THE CLAIM FOR THE PROVISIONS OF IN THE VALUE OF INVENTORIES. ON THE OTHER HAND, THE LD DR APPEARING ON BEHALF OF REVENUE VEHEMENTLY CONTENDED THAT THERE IS NO APPARENT MISTAKE IN TRIBUNALS OR DER FROM THE RECORDS WITHIN THE MEANING OF SECTION 254(2) OF THE ACT. THE LD. DR AL SO SUBMITTED THAT THE HONBLE TRIBUNAL HAS GIVEN VERY CLEAR FINDING BY HOLDING TH E ASSESSEE AS TESTED PARTY. THEREFORE THERE IS NO SCOPE FOR FINDING ANY APPAREN T MISTAKE FROM THE ORDER OF HONBLE ITAT. SIMILARLY THE DR FURTHER SUBMITTED T HAT THERE WAS NO MISTAKE APPARENT IN THE FINDING OF PROVISION FOR IN THE VALUE OF INV ENTORIES. THE LD. DR ALSO SUBMITTED THAT THE SCOPE OF SECTION 254(2) OF THE ACT IS LIMI TED TO THE RECTIFICATION OF APPARENT MISTAKE. THE LD. DR, IN THIS CONNECTION, RELIED ON THE ORDER OF HONBLE ITAT KOLKATA BENCHES IN THE CASE OF MAHESH BERRY VS. ACIT REPORT ED IN 126 ITD 435 AND ON THE ORDER HONBLE ITAT DELHI BENCHES IN THE CASE OF M/S BEAUTEX INDIA PVT. LTD. VS. ITO VIDE MISC. NO. 14/DEL/2010 ARISING OUT OF ITA 271/ DEL/2008. 3. WE HAVE CAREFULLY GONE THROUGH THE CONTENTS OF T HE MISC. APPLICATION AND RIVAL SUBMISSIONS WERE ALSO CONSIDERED. FROM THE PERUSAL OF THE RECORDS AND FACTS OF THE MA NO.120/KOL/2016 AT & S INDIA PVT. LTD. V. DCIT, CIR-11(1), KOL. PAGE 3 CASE, WE FIND THAT THE FINDING OF HONBLE ITAT WITH REGARD TO THE TESTED PARTY HAS NO BEARING IN THE INSTANT CASE. INDEED THE CONCEPT OF RELATED PARTY IS NOT RELEVANT IN DETERMINING THE ALP BASED ON THE CUP METHOD. WE, FO R ARRIVING AT THIS OPINION, HAVE REFERRED TO THE OECD TRANSFER PRICING GUIDELINES FO R MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATION JULY 2010, THE RELEVANT PARAGRAP H 3.18 READS AS UNDER:- A.3.3 CHOICE OF THE TESTED PARTY 3,18 WHEN APPLYING A COST PLUS, RESALE PRICE OR TR ANSACTIONAL NET MARGIN METHOD AS DESCRIBED IN CHAPTER II, IT IS NECESSARY TO CHOOSE THE PARTY TO THE TRANSACTION FOR WHICH A FINANCIAL INDICATOR (MARK-U P ON COSTS, GROSS MARGIN, OR NET PROFIT INDICATOR) IS TESTED. THE CHOICE OF THE TESTED PARTY SHOULD BE CONSISTENT WITH THE FUNCTIONAL ANALYSIS OF THE TRAN SACTION. NOW, THE QUESTION ARISES FOR THE FINDING GIVEN BY T HE HONBLE ITAT WITH REGARD TO THE TESTED PARTY IN THE INSTANT CASE. ON THE PERUSAL OF THE GROUNDS OF APPEAL FILED BY THE ASSESSEE, WE FIND THAT THERE WAS NO DIRECT GROUND F OR THE ADJUDICATION THE ISSUE OF TESTED PARTY. ADMITTEDLY, THE ISSUE FOR THE TESTED PARTY WAS EMERGING FROM THE ORDER OF LOWER AUTHORITIES. THEREFORE, THERE WAS THE DISCUSS ION ABOUT THE ISSUE OF TESTED PARTY IN THE ORDER OF HONBLE ITAT. UNDOUBTEDLY, HOWEVER, TH ERE WAS NO NEED TO GIVE THE FINDING OF THE TESTED IN THE INSTANT CASE AS THE IS SUE WAS DECIDED IN DETERMINING THE ALP ON THE BASIS OF CUP METHOD. UNDER THE CUP METHO D, THE ASPECT OF TESTED PARTY IS NOT RELEVANT. THEREFORE, THE SAME WAS NOT REQUIRED TO BE ADJUDICATED. HOWEVER, THE CASE LAWS CITED BY THE LD. DR IN THE INSTANT CASE A RE NOT RELEVANT BECAUSE IN THOSE CASES IT WAS OBSERVED THAT THE HONBLE TRIBUNAL CANNOT RE VIEW ITS ORDER U/S 254(2) OF THE ACT. IN THE INSTANT CASE, THE LD. AR IS NOT PRAYING TO REVIEW THE ORDER BUT HE IS PLEADING THAT THE FINDING GIVEN BY THE HONBLE IS NOT RELEVA NT TO THE FACTS OF THE CASE. HENCE, WE CONCLUDE THAT THERE WAS NO NEED TO ADJUDICATE THE I SSUE FOR THE TESTED PARTY IN THE INSTANT CASE. HENCE, THE RELEVANT PORTION OF THE HO NBLE ITAT ORDER BEGINNING FROM 4 TH LINE OF PARAGRAPH NO. 11 AND ENDING ON THE 17 TH LINE OF PAGE 35 IS HEREBY DELETED. HOWEVER, IT IS IMPORTANT TO NOTE THAT THE DELETION OF TESTED PARTY CONCEPT SHOULD NOT BE CONSTRUED AS PRECEDENT OF THE CASE. T HE REVENUE IS AT FULL LIBERTY TO EXAMINE THE ISSUE OF TESTED PARTY INDEPENDENTLY IF SUCH ISSUE ARISES IN ANY OF THE PROCEEDINGS OF THE ASSESSEE. MA NO.120/KOL/2016 AT & S INDIA PVT. LTD. V. DCIT, CIR-11(1), KOL. PAGE 4 SIMILARLY, FOR THE OTHER ISSUE WITH REGARD TO THE P ROVISION IN THE VALUE OF INVENTORIES, WE FIND THAT THE ASSESSEE IS ENTITLED FOR THE RELIE F AS IT WAS WRONGLY ADDED BY THE ASSESSEE IN THE COMPUTATION OF INCOME. HOWEVER, WHI LE ADJUDICATING THE ISSUE THE HONBLE TRIBUNAL HAS DIRECTED TO DELETE THE ADDITIO N AS CONFIRMED BY THE LOWER AUTHORITIES BUT OMITTED TO DIRECT THE LOWER AUTHORITIES TO ALLOW THE CLAIM OF THE ASSESSEE . THEREFORE, WE ARE OF THE VIEW THAT THE MISTAKE AP PARENT FROM THE RECORD HAS CREPT IN ORDER OF HONBLE ITAT WHICH NEEDS RECTIFIC ATION U/S 254(2) OF THE ACT. ACCORDINGLY, WE DIRECT THE LOWER AUTHORITIES TO DELETE THE ADDITION AND ALLOW THE CLAIM OF THE ASSESSEE . HENCE THE MA FILED BY THE ASSESSEE IS ALLOWED. 4. IN THE RESULT, MA OF ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/01/201 7 . SD/- SD/- (%&) (!&) (S.S.VISWANETHRA RAVI) (WASEEM A HMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP ()*- 20 / 01 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-AT & S INDIA PVT. LTD., 12A INDUSTRIAL A REA, NANJANGUD-571301, MYSORE DIST. KARNAT AKA 2. /RESPONDENT-DCIT, CIRCLE-11(1), AAYAKAR BHAWAN, P7, CHOWRNGHEE SQ. KOLKATA-69 3.)2)3 4 / CONCERNED CIT 4. 4- / CIT (A) 5.783, 3 , KOLKATA / DR, ITAT, KOLKATA 6.8; <= / GUARD FILE. BY ORDER/ , /TRUE COPY/ /) 3 , #