M/s. Philips Electronics India Ltd., Kolkata V. DCIT, Circle - 11, Kolkata, Kolkata

MA 5/KOL/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 7815 (ITAT-KOLKATA)
• Duration Of Justice: 1 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-02-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 09-01-2012
• Court: TRIBUNAL
• Department Lawyers: P S DUTTA
• Assessee Lawyers: A V SONDE
• Keywords: Transfer pricing
• Section: 92C

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH B, KOLKATA () BEFORE . .. . , ,, , !, SHRI N.VIJAYAKUMARAN, JUDICIAL MEMBER. ' ' ' ' /AND . .. .#$ #$#$ #$. .. . , %& ! SHRI C.D.RAO, ACCOUNTANT MEMBER '' '' '' '' / M.A.NO.05/KOL/2012 A/O ITA NO . 948/KOL/2009 () *+/ ASSESSMENT YEAR : 2003-04 (-. / APPELLANT ) M/S PHILIPS ELECTRONICS INDIA LTD., KOLKATA (PAN: AABCP 9487 A) - - - VERSUS - . (01-./ RESPONDENT ) THE D.C.I.T.,CIRCLE-11, KOLKATA. -. 2 3 %/ FOR THE APPELLANT: SHRI A.V.SONDE 01-. 2 3 %/ FOR THE RESPONDENT: SHRI P.S.DUTTA 4 2 $& /DATE OF HEARING : 03.02.2012. 5* 2 $& /DATE OF PRONOUNCEMENT : 09.02.2012. %6 / ORDER ( (( ( . .. .#$ #$#$ #$. .. . ) )) ), , , , %& ! PER SHRI C.D.RAO, AM THE ABOVE MISCELLANEOUS APPLICATION HAS BEEN FILED BY ASSESSEE TO RECTIFY THE ORDER OF THE TRIBUNAL DATED 11.10.2011 VIDE ITA NO. 948/KOL/2009 FOR ASSESSMENT YEAR 2003-04. 2. BY THIS MISCELLANEOUS APPLICATION THE ASSESSEE WANTS TO RECTIFY THE ORDER OF THE TRIBUNAL DATED 11.10.2011 BY STATING AS UNDER :- 2. VIDE GROUND NO. 3 OF THE AFORESAID APPEAL, TH E APPLICANT HAD RAISED THE FOLLOWING OBJECTION: 3 . USE OF +/- 5% RANGE FOR TRANSFER PRICING ADJUSTME NT 2 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN NOT GRANTING THE BENEFIT OF +/- 5% RANGE WHILE COMP UTING THE ARM S LENGTH PRICE AND CONSEQUENT ADJUSTMENT TO THE TOTAL INCOME . 3. THE HONBLE TRIBUNAL HAS DISPOSED OF THIS GROU ND OF APPEAL IN PARAGRAPHS 12 AND 13 OF ITS ORDER WHICH READS AS UNDER: 12. AFTER HEARING THE RIVAL SUBMISSIONS, AND ON CA REFUL CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAW S RELIED UPON BY THE ASSESSEE WE ARE OF THE CONSIDERED OPINION THAT WHEN ONLY ONE PRICE HAS BEEN DETERMINED UNDER (MOST APPROPRIATE METHOD) FOR EVALUATING ARM S LENGTH PRICE, THE QUESTION OF APPLICABILITY OF PROVISO 2 OF SECTION 92C(2) DOE S NOT ARISE. THEREFORE ASSESSEE WAS NOT ENTITLED TO THE CONCESSION OF PLUS OR MINUS 5% AS PRESCRIBED IN THE SAID PROVISION. 13. IN THE RESULT GROUND NO. 3 OF THE ASSESSEE IS D ISMISSED. WHILE REACHING THE ABOVE CONCLUSION, THE HONBLE TR IBUNAL HAS INADVERTENTLY COMMITTED THE ERROR AS EXPLAINED BELOW: I. THE TPO HAD MADE TRANSFER PRICING ADJUSTMENTS FOR FIVE CATEGORIES OF TRANSACTIONS, BY COMPARING, INTER ALIA, THE PROFITA BILITY OF THE APPLICANT IN DIFFERENT SEGMENTS. II. HOWEVER, IN RESPECT OF THE ADJUSTMENT MADE FO R IMPORT OF MONITORS, THE TPO HAD CONSIDERED 73 COMPANIES AS BEING COMPARABLE TO THE APPLICANT. HE ARRIVED AT AN ARITHMETIC MEAN OF THE MARGINS AT GROSS LEVEL FOR T HESE 73 COMPANIES AT 14.04% IN ORDER TO COMPUTE THE RELEVANT TRANSFER PRICING ADJU STMENT. III. SECTION 92C(L) OF THE ACT READS AS BELOW: THE ARMS LENGTH PRICE IN RELATION TO AN INTERNATI ONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING T HE MOST APPROPRIATE METHOD, HAVING REGARD TO THE NATURE OF THE TRANSACTION OR C LASS OF TRANSACTION. AS IS CLEAR FROM THE ABOVE, THE ARMS LENGTH PRICE HAS TO BE DETERMINED USING THE MOST APPROPRIATE METHOD, WHICH CAN ONLY BE ONE METHOD. IV. FURTHER, THE PROVISO TO SECTION 92C(2) (AS RELE VANT FOR AY 2003-04) READS AS BELOW: PROVIDED THAT WHERE MORE THAN ONE PRICE IS DETERMI NED BY THE MOST APPROPRIATE METHOD, THE ARM S LENGTH PRICE SHALL BE TAKEN TO B E THE ARITHMETICAL MEAN OF SUCH PRICES, OR, AT THE OPTION OF THE ASSESSEE, A PRICE WHICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING FIVE P ER CENT OF SUCH ARITHMETICAL MEAN THE SAID PROVISO REQUIRES A PERSON TO : (A ) DETERMINE THE MOST APPROPRIATE METHOD; (B) ARRIVE AT THE DIFFERENT PRICES (I.E.. OF THE CO MPARABLES) USING THE MOST APPROPRIATE METHOD: C) COMPUTE THE ARITHMETICAL MEAN OF THE PRICES WHER E DIFFERENT PRICES OF THE COMPARABLES HAVE BEEN DETERMINED BY THE MOST APPROP RIATE METHOD; AND D) AT THE OPTION OF THE ASSESSEE, VARY THE ARITHMET ICAL MEAN ARRIVED AT IN POINT NUMBER C ABOVE BY AN AMOUNT NOT EXCEEDING 5 PERCENT. IN THE CURRENT CONTEXT, FOR DETERMINING THE ARMS L ENGTH PRICE FOR IMPORT OF MONITORS, THE TPO HAS CONSIDERED THE PRICES OF THE 73 COMPARA BLE COMPANIES USING THE MOST 3 APPROPRIATE METHOD. HE HAS, THEREAFTER, COMPUTED TH E ARITHMETICAL MEAN OF THE PRICES OF THE 73 COMPARABLE COMPANIES IN LINE WITH THE PRO VISO TO SECTION 92C(2). ACCORDINGLY, THE APPLICANT IS ENTITLED TO THE BENEF IT OF THE PROVISO TO SECTION 92C(2). IN VIEW OF THE ABOVE, IT IS MOST RESPECTFULLY SUBMI TTED THAT, ON FACTS, THE HONBLE TRIBUNAL HAS INADVERTENTLY ERRED IN REACHING THE FO LLOWING CONCLUSION FOR THE ADJUSTMENT MADE ON ACCOUNT IMPORT OF MONITORS : WHEN ONLY ONE PRICE HAS BEEN DETERMINED UNDER (MOS T APPROPRIATE METHOD) FOR EVALUATING ARM S LENGTH PRICE, THE QUESTION OF APP LICABILITY OF PROVISO 2 OF SECTION 92C(2) DOES NOT ARISE. THEREFORE ASSESSEE WAS NOT E NTITLED TO THE CONCESSION OF PLUS OR MINUS 5% AS PRESCRIBED IN THE SAID PROVISIO N. V. THE APPLICANT FURTHER HIGHLIGHTS THAT, ON SIMILA R FACTS, THE BENEFIT OF THE PROVISO TO SECTION 92C(2) HAS BEEN ALLOWED BY VARIOUS BENCHES OF THE HONBLE TRIBUNAL, INCLUDING THE JURISDICTIONAL BENCH OF THE HONBLE T RIBUNAL IN THE CASE OF DEVELOPMENT CONSULTANTS PRIVATE LIMITED V DCIT, CIRCLE 11 (ITA NO. 79 AND 80/ KOL/2008). 5. IN VIEW OF THE ABOVE BACKGROUND, IT IS RESPECTFU LLY SUBMITTED THAT THE HONBLE TRIBUNAL MAY BE PLEASED TO SUITABLY AMEND ITS ORDER TO RECTIFY THE AFORESAID MISTAKE WHICH IS APPARENT FROM THE RECORD. 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR ASSE SSEE HAS REITERATED THE ABOVE SUBMISSIONS AND FURTHER POINTED OUT DIFFERENT PAGES OF PAPER BOOK WHEREIN FOR ARRIVING THE ARMS LENGTH PRICE IN RESPECT OF IMPORT OF MONI TORS THE TPO HAS TAKEN THE ARITHMETIC MEAN OF 73 COMPANIES. HENCE THE ARMS LE NGTH PRICE DETERMINED IN RESPECT OF IMPORT OF MONITORS ADJUSTMENT IS REQUESTED U/S 9 2C(2) OF THE ACT TO BE ALLOWED. 4. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHA LF OF THE REVENUE RELIED ON THE ORDERS OF THE TRIBUNAL. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL CONSIDERATION OF THE MATERIALS AVAILABLE ON RECORD INCLUDING THE ARGUMEN TS OF THE LD. COUNSEL FOR ASSESSEE WE CONSIDER IT FIT TO REPRODUCE THE PROVISION OF SE CTION 92C OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR 2003-04 WHICH READS AS UND ER :- COMPUTATION OF ARMS LENGTH PRICE 92C (1) THE ARMS LENGTH IN RELATION TO AN INTERNATION AL TRANSACTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING T HE MOST APPROPRIATE METHOD, HAVING REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTION OR CLASS OF ASSOCIATED PERSONS OR FUNCTIONS PERFORMED BY SUCH P ERSONS OR SUCH OTHER RELEVANT FACTS AS THE BOARD MAY PRESCRIBE NAMELY :- 4 (A) COMPARABLE UNCONTROLLED PRICE METHOD; (B) RESALE PRICE METHOD; (C) COST PLUS METHOD; (D) PROFIT SPLIT METHOD; (E) TRANSACTIONAL NET MARGIN METHOD; (F) SUCH OTHER METHOD AS MAY BE PRESCRIBED BY THE BOARD . (2)THE MOST APPROPRIATE METHOD REFERRED TO IN SUB-S ECTION (1) SHALL BE APPLIED FOR DETERMINATION OF ARMS LENGTH PRICE, IN THE MANNER AS MAY BE PRESCRIBED : [ PROVIDED THAT WERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARMS LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES, OR, AT THE OPTION OF THE ASSESSEE, A PRIE W HICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING FIVE PER CENT OF SU CH ARITHMETICAL MEAN. 5.1. AFTER CAREFUL PERUSAL OF THE ABOVE PROVISIONS WE ARE OF THE VIEW THAT WHEN THE ASSESSEE ARRIVES THE ARMS LENGTH PRICE AS PRESCRIB ED IN SUB-SECTION (1) OF SECTION 92C I.E.(A) COMPARABLE UNCONTROLLED PRICE METHOD; (B) RESALE PRICE METHOD; (C)COST PLUS METHOD; (D)PROFIT SPLIT METHOD; (E)TRANSACTIONAL NET MARGIN METHOD; (F)SUCH OTHER METHOD AS MAY BE PRESCRIBED BY THE BO ARD. AND IN ORDER TO APPLY THE PROVISO OF SECTION 92C(2) OF THE ACT WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO +/- 5% OF THE ARITHMETI C MEAN, IF THE ASSESSEE HAS ARRIVED THE ARMS LENGTH PRICE MORE THAN THE ONE AS SPECIFIED A BOVE (A TO F) OF SECTION 92C(1) OF THE ACT THEN ONLY ADJUSTMENT AS PROVIDED IN THE PRO VISO IS APPLICABLE. IN THIS CASE THE ASSESSEE HAS ARRIVED ARMS LENGTH PRICE BY APPLYING THE METHOD ON COMPARABLE UNCONTROLLED PRICE METHOD. WHILE ARRIVING THAT METH OD HE HAS TAKEN THE AVERAGE OF 73 COMPARABALE COMPANIES THAT DOES NOT MEAN THAT THE P ROVISO OF SUB-SECTION (2) OF SECTION 92C OF THE ACT IS APPLICABLE FOR ADJUSTMENT . SINCE THE ASSESSEE HAS ADOPTED ONLY ONE METHOD PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 92C OF THE ACT WE ARE OF THE VIEW THAT THERE IS NO MISTAKE APPARENT FROM REC ORD AS POINTED OUT BY THE LD. COUNSEL FOR ASSESSEE. THEREFORE WE DISMISS THE MISC ELLANEOUS APPLICATION OF ASSESSEE. 5 5. IN THE RESULT THE MISCELLANEOUS APPLICATION OF T HE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 09.02.2012. SD/- SD/- . .. . , , , , ( ( ( ( ! ! ! ! N.VIJAYAKUMARAN, JUDICIAL MEMBER . .. .#$ #$#$ #$. .. . , , , , %& ! %& ! %& ! %& !, C.D.RAO, ACCOUNTANT MEMBER. ( (( ($& $& $& $&) )) ) DATE: 09.02.2012. %6 2 0(( 7%*8- COPY OF THE ORDER FORWARDED TO: 1. M/S.PHILIPS ELECTRONICS INDIA LTD., 7, JUSTICE CHAN DRA MADHAB ROAD, KOLKATA-700020. 2 THE D.C.I.T., CIRCLE-11, KOLKATA. 3. THE CIT, 4. THE CIT(A)-XI, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 1 0(/ TRUE COPY, %6/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)