JAIPUR RUGS COMPANY PVT. LTD., Jaipur V. ACIT, Jaipur

MA 49/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0386 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 19-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAL JCIT DHK
• Keywords: Transfer pricing; International transaction; Notional interest; Set aside
• Section: 254(2)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM M.A. NOS. 48, 49, 50 & 51/JP/2019 ( ARISING OUT OF VK;DJ VIHY LA-@ ITA NOS. 1124, 1125, 738 & 1083/JP/2016) FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10, 10-11, 08-09 & 10-11. M/S. JAIPUR RUGS CO. PVT. LTD., G-250, MANSAROVAR INDUSTRIAL AREA, JAIPUR. CUKE VS. THE DCIT, CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. A ABCJ 6934 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.12.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23/12/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THESE FOUR MISCELLANEOUS APPLICATIONS BY THE ASSESS EE ARE DIRECTED AGAINST THE COMPOSITE ORDER DATED 22 ND JANUARY, 2019 OF THIS TRIBUNAL WHEREBY THE APPEALS OF THE REVENUE FOR THE ASSESSMENT YEAR 2008-09, CRO SS APPEALS FOR THE ASSESSMENT YEAR 2009-10 AND APPEAL OF THE ASSESSEE FOR THE ASS ESSMENT YEAR 2010-11 WERE DISPOSED OFF. IN ALL FOUR APPEALS THE ISSUES INVOLV ED WERE REGARDING T.P. ADDITIONS MADE BY THE TPO/AO IN RESPECT OF SALE OF CARPETS BY THE ASSESSEE TO THE AE AS WELL AS NOTIONAL INTEREST FOR THE CREDIT PERIOD ALLOWED BY THE ASSESSEE TO THE AE FOR REALIZATION OF SALE PROCEEDS. 2 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR. 2. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE TRIBUNAL HAS DISPOSED OFF THESE APPEALS BY REMANDING THE MATTER TO THE TPO/AO FOR REDETERMINATION OF ARMS LENGTH PRICE BY TAKING THE WEIGHTED AVERAGE OF ALL THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH AE AS WELL AS THE TRANSACTIONS TO NON AE WHICH WERE TAKEN AS COMPARABLE UNCONTROLLED PRICE BY THE ASSESSEE IN TH E TP STUDY ANALYSIS AND THE CUP METHOD WAS ACCEPTED BY THE TPO. THE LD. A/R HAS SU BMITTED THAT THE FIRST MISTAKE IS REGARDING THE OBSERVATIONS OF THE TRIBUNAL AROU ND 300 DIFFERENT VARIETIES OF PRODUCTS WERE SOLD BY THE ASSESSEE TO AE WHEREAS TH ESE ARE ONLY NUMBERS OF INVOICES ISSUED BY THE ASSESSEE TO AE FOR SALE OF C ARPETS AND THE VARIETIES OF PRODUCTS SOLD BY THE ASSESSEE TO AE IS ONLY 53 DURI NG THE ASSESSMENT YEAR 2008-09 AND 46 DURING THE ASSESSMENT YEAR 2009-10. HE HAS REFERRED TO THE DETAILS OF THE VARIETY OF CARPETS AS CLUBBED AT PAGES 1 TO 11 AND 1 TO 20 OF THE PAPER BOOK FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. THE LD. A/R HAS FURTHER SUBMITTED THAT THE TRIBUNAL HAS IN PARA 7 OBSERVED THAT THE ASSESSEE HAS TAKEN SIMPLE AVERAGE PRICE IN RESPECT OF VARIOUS VARIETIE S AND PRICE OF WHICH VARIES UPTO 8 TIMES WHEREAS THE ASSESSEE IN THE TP ANALYSIS HAS N OT TAKEN A SIMPLE AVERAGE BUT HAS GIVEN THE TP ANALYSIS BY CLUBBING TOGETHER OF T HE TRANSACTIONS OF SAME VARIETY AND, THEREFORE, THIS ANALYSIS IS QUALITY-WISE AND N OT A GENERAL CLUBBING TOGETHER OF ALL SALES. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO COMPUTED THE WEIGHTED AVERAGE IN THE TP ANALYSIS. THUS THE LD. A/R HAS S UBMITTED THAT THE DIRECTIONS GIVEN BY THE TRIBUNAL FOR REDETERMINATION OF ALP BY CLUBB ING TOGETHER ALL THE TRANSACTIONS HAS CREPT A MISTAKE AS THE ASSESSEE HAS ALREADY GIV EN THE QUALITY-WISE DETAILS OF SALES MADE TO THE AE AS WELL AS NON AE. THEREFORE, EACH VARIETY OF CARPETS SOLD TO 3 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR. THE AE AND NON AE HAS BEEN CLEARLY GIVEN IN THE TP STUDY AS WELL AS THE DETAILS WHICH CAN BE CONSIDERED FOR THE PURPOSES OF DETERMI NING THE ARMS LENGTH PRICE. 3. THE NEXT MISTAKE IS POINTED OUT BY THE LD. A/R I S REGARDING THE DIRECTIONS OF THE TRIBUNAL FOR TAKING 60 DAYS AS NORMAL CREDIT PE RIOD ALLOWED TO THE AE AND BEYOND 60 DAYS SHALL BE TAKEN FOR DETERMINING THE A RMS LENGTH PRICE OF THE SALES MADE TO THE AE. HE HAS CONTENDED THAT EXCEPT ASSES SMENT YEAR 2008-09, THE AO HAS ACCEPTED THE CREDIT PERIOD GRANTED BY THE ASSES SEE AS MENTIONED IN THE INVOICES WHICH RANGES FROM 150 TO 180 DAYS AND, THEREFORE, T HE TPO HIMSELF HAS CONSIDERED THE EXCESS CREDIT PERIOD WHICH IS OVER AND ABOVE TH E CREDIT PERIOD MENTIONED IN THE INVOICES. THE LD. A/R HAS SUBMITTED THAT SINCE THE ASSESSEE IS NOT CHARGING THE INTEREST ON THE CREDIT PERIOD ALLOWED TO AE AS WELL AS NON AE, HENCE NO ADDITION CAN BE MADE ON ACCOUNT OF CREDIT PERIOD ALLOWED TO THE AE. EVEN OTHERWISE WHEN THE TPO HAS ACCEPTED THE CREDIT PERIOD AS GIVEN IN THE INVOICES, THEN RESTRICTING THE SAME TO 60 DAYS IS GOING TO BE ENHANCEMENT OF ASSES SMENT. ACCORDINGLY, THE LD. A/R HAS SUBMITTED THAT APPROPRIATE MODIFICATION AND CLARIFICATION MAY BE PASSED IN THIS RESPECT. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE TRIBUNAL HAS DECIDED THE ISSUE ON MERITS AFTER CONSIDERING THE FACTS AS WELL AS SUBMISSIONS OF THE ASSESSEE ADVANCED AT THE TIME OF APPELLATE PROCEEDINGS, THER EFORE, THE SAID DECISION OF THE TRIBUNAL ON THE MERITS OF THE MATTER CANNOT BE REVI EWED IN THE PROCEEDINGS UNDER SECTION 254(2) OF THE IT ACT. THE ASSESSEE CANNOT B E ALLOWED TO IMPROVE ITS CASE IN THESE PROCEEDINGS. SHE HAS OBJECTED TO THE MISCELL ANEOUS APPLICATIONS FILED BY THE ASSESSEE. 4 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE FIRST MISTAKE AS POINTED OUT BY THE AS SESSEE IS REGARDING THE OBSERVATIONS OF THE TRIBUNAL IN RECORDING THE FACT THAT THERE ARE 300 DIFFERENT VARIETIES OF PRODUCTS SOLD BY THE ASSESSEE TO AE. THESE DETAILS WERE TAKEN BY THE TRIBUNAL FROM THE ORDER OF THE TPO. HOWEVER, AS PER THE DETAILS GIVEN IN THE TP STUDY, THE LD. A/R HAS NOW EXPLAINED THE ACTUAL NUM BER OF VARIETIES SOLD DURING THE ASSESSMENT YEARS 2008-09 AND 2009-10 ARE 53 AND 46 RESPECTIVELY. THE RELEVANT PART OF THE OBSERVATIONS IN PARA 7 OF THE IMPUGNED ORDER READS AS UNDER :- AS PER THE DETAILS REPRODUCED BY THE TPO, THERE A RE AROUND 300 DIFFERENT VARIETIES OF PRODUCTS SOLD TO THE AE. XXXXXXXX THE ABOVE OBSERVATIONS ARE MODIFIED AND BE READ AS UNDER :- AS PER THE DETAILS AVAILABLE IN THE TP STUDY OF T HE ASSESSEE, THERE ARE AROUND 53 DIFFERENT VARIETIES OF PRODUCT SOLD BY THE ASSESSEE TO THE AE IN THE ASSESSMENT YEAR 2008-09 A ND SIMILARLY 46 DIFFERENT VARIETIES OF PRODUCTS SOLD I N THE ASSESSMENT YEAR 2009-10. EVEN OTHERWISE, THIS IS NOT GOING TO AFFECT ON THE FINDING OF THE TRIBUNAL ON THIS ISSUE. 6. THE SECOND MISTAKE AS POINTED OUT BY THE ASSESSE E IS REGARDING THE FOLLOWING OBSERVATIONS OF THE TRIBUNAL IN PARA 7 WHICH READS AS UNDER :- 5 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR. THE ASSESSEE HAS COMPUTED THE ARMS LENGTH PRICE BY TAKING THE AVERAGE PRICE OF ALL THE CARPETS SOLD TO THE NON AE AND THEN COMPARED THE AVERAGE PRICE OF ALL THE CARPETS SOLD TO THE AE . WE FIND THAT THOUGH THE ASSESSEE HAS GIVEN THE SEP ARATE DETAILS IN THE TP STUDY OF EACH VARIETY OF CARPETS SOLD TO THE AE AND NON AE, HOWEVER, SINCE THIS FACT IS STILL REQUI RES VERIFICATION, THEREFORE, WE DO NOT EXPRESS ANY OPIN ION AT THIS STAGE. THE ORDER IS ACCORDINGLY MODIFIED. OUR DIRECTIONS TO THE TPO IS ALSO CONSEQUENTLY MODI FIED AS GIVEN IN THE LAST PART OF THE PARA 7 AS UNDER : HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO/TPO TO CARRY OUT A FR ESH EXERCISE OF DETERMINING THE ARMS LENGTH PRICE AS WELL AS THE P RICE OF THE INTERNATIONAL TRANSACTION BY USING WEIGHTED AVERAGE INSTEAD OF SIMPLE AVERAGE OF ALL THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH AE AS WELL AS ALL THE TRANSACTIONS OF SALE OF CARPETS TO NON-AE. FURTHER ONCE THE COMPARABLE UNCONTROLLED PRICE TAKEN ARE MORE TH AN ONE THEN THE BENEFIT OF SECOND PROVISO TO SECTION 92C(2) OF THE ACT HAS TO BE ALLOWED AND THEREBY IF THE PRICE OF THE INTERNATION AL TRANSACTION IS WITHIN THE TOLERANCE RANGE OF + 5% OF THE ARMS LEN GTH PRICE THEN NO ADJUSTMENT IS CALLED FOR. 6 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR. NOW THE SAID PART MAY BE READ AS UNDER :- HENCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO/TPO TO CAR RY OUT THE FRESH EXERCISE OF DETERMINING THE ARMS LENGTH PRIC E AS WELL AS PRICE OF INTERNATIONAL TRANSACTION BY USING THE WEI GHTED AVERAGE OF EACH VARIETY OF CARPETS SOLD BY THE ASSE SSEE TO AE AS WELL AS NON AE. FURTHER, IN CASE MORE THAN ONE COMPARABLE UNCONTROLLED PRICES ARE TAKEN FOR DETERMINATION OF THIS ARMS LENGTH PRICE, THEN THE BENEFIT OF SECOND PROVISO TO SECTION 92C(2) OF THE ACT HAS TO BE ALLOWED. 7. AS REGARDS THE ADJUSTMENT ON ACCOUNT OF EXCESS C REDIT PERIOD GRANTED TO THE AE, WE FIND THAT THE TRIBUNAL HAS FIRST DECIDED THI S ISSUE FOR THE ASSESSMENT YEAR 2008-09 WHICH WAS ADOPTED FOR THE SUBSEQUENT ASSESS MENT YEAR. THEREFORE, THE PECULIAR FACT REGARDING THE CREDIT PERIOD GIVEN IN THE INVOICES ACCEPTED BY THE AO WAS NOT TAKEN INTO CONSIDERATION. ACCORDINGLY, WE MODIFY OUR FINDING IN PARA 7.1, 9 & 10 OF THE IMPUGNED ORDER AND DIRECT THE AO /TPO THAT THE ADJUSTMENT ON ACCOUNT OF CREDIT PERIOD ALLOWED TO T HE AE SHALL BE MADE ONLY IN RESPECT OF THE EXCESS TIME PERIOD BEYOND TH E TIME GIVEN IN THE INVOICES AND ACCEPTED BY THE TPO FOR THE ASSESSMENT YEARS 2008-09 AND 09-10, THEREFORE, THE TPO CANNOT TAKE DIFFERENT STA ND ON THE SAME ISSUE FOR DIFFERENT ASSESSMENT YEAR. 7 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR. SUBJECT TO THESE MODIFICATIONS, ALL OTHER DIRECTION S REMAIN THE SAME, THE MISCELLANEOUS APPLICATIONS ARE ALLOWED. 8. IN THE RESULT, MISCELLANEOUS APPLICATIONS OF THE ASSESSEE ARE ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23/12/2 019. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 23/12/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- JAIPUR RUGS CO. PVT. LTD., JAIPUR . 2. THE RESPONDENT THE DCIT, CIRCLE-2, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (MA NO. 48,49, 50 & 51/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 MA NOS. 48, 49, 50 & 51/JP/2019 M/S. JAIPUR RUGS CO. PVT. LTD., JAIPUR.