M/s. Toyota Tausho India Private Limited, Bengaluru V. Deputy Commissioner of Income Tax, Circle -3(1)(1), Bengaluru

MA 63/BANG/2023

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 0632 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-09-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 13-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S
• Assessee Lawyers: DARPAN KIRPALANI
• Keywords: Transfer pricing
• Section: 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER M.P. No. 63/Bang/2023 [in IT(TP)A No. 2806/Bang/2017] Assessment Year : 2013-14 M/s. Toyota Tsusho India Pvt. Ltd., Plot Nos. 33 & 34, Bidadi Industrial Area, Ramanagar District, Bangalore – 562 109. PAN: AADCS6230N Vs. The Deputy Commissioner of Income Tax, Circle – 3(1)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Darpan Kirpalani, Advocate Revenue by : Shri Subramanian .S, JCIT-DR Date of Hearing : 21-06-2024 Date of Pronouncement : 04-09-2024 ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER Present miscellaneous petition is filed by the assessee against order dated 02/03/2023 passed by this Tribunal seeking certain rectification. 2. The first issue raised by the assessee in para 6 of the miscellaneous petition is that in ground no. 8, assessee had sought inclusion of Rohan Motors Ltd. and Sicagen India Ltd. as comparable companies to the assessee’s trading segment. The M.P. No. 63/Bang/2023 Page 2 of 7 Ld.AR submitted that following arguments were raised at the time of hearing in respect of the two comparables for inclusion; 1) That these companies pass through the trading / sales filter applied by the Ld.TPO 2) And the Ld.TPO had wrongly excluded these companies by observing that these are engaged in manufacturing activity. 3) The Ld.AR submitted that at the time of hearing, it was argued that this company had a trading segment and the observation of the TPO was contrary to the annual reports of these comparables. 4) It was submitted at the time of hearing the assessee had contested that these comparables were not decided by the DRP though they were raised in form 35. 3. The Ld.AR submitted that this Tribunal excluded these comparables by observing that they are engaged in trading activity of different components i.e. not identical to that of assessee. The Ld.AR also submitted that this Tribunal while excluding these two comparables has relied on the decision of Coordinate Bench of this Tribunal in case of Shri G Natraj vs. ITO in ITA No. 2198/Bang/2019 vide order dated 18/02/2021 which has not been brought to the notice of the assessee before considering the same. 4. We have perused the submissions in the light of the observations of this Tribunal. Admittedly, error has crept in and it is necessary to be corrected. It is noted that the arguments raised by the assessee at the time of hearing deserves to be M.P. No. 63/Bang/2023 Page 3 of 7 considered by the Ld.AO/TPO. More so, when the DRP has not recorded any observations in respect of the same. We accordingly, are of the opinion that the observations of this Tribunal from paras 12.2 to 12.11 deserves to be replaced with the following paragraph. “12.2 After considering the rival submissions of both sides and noting the fact that the DRP did not give any opinion in respect of these comparables that was sought for inclusion by the assessee, we deem it appropriate to remit the issue to the Ld.AO/TPO to consider the submissions of the assessee in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee. In the result, ground no. 8 raised by the assessee stands partly allowed for statistical purposes.” 5. Issue No. 2 is in respect of ground no. 9 wherein the assessee had appealed for tolerance range of +3% to be applied as against +1% applied by the Ld.TPO for the trading segment. The Ld.AR submitted that in para 13.5 this Tribunal has noted that the assessee did not provide data to the lower authorities which is contrary to the facts. He submitted that this Tribunal in assessee’s own case for A.Y. 2014-15 has upheld the tolerance band of +3% to be applicable for the trading segment which has been reproduced in para 13.4 of the impugned order. The Ld.AR has submitted that prior to Finance Act, 2011, the section 92C(2) provided for a tolerance band of 5% with respect to the arithmetic mean for the purposes of computing arms length price. M.P. No. 63/Bang/2023 Page 4 of 7 Thereafter, by Finance Act, 2012, the tolerance band was amended to 3% w.e.f. FY 2012-13. He further submitted that later on the CBDT issued Notification No. 30/2013 which specifies tolerance band of 1% for wholesale traders and 3% in all other cases. He submitted that assessee has never been categorised to be a wholesale trader which has been very categorically observed by this Tribunal in assessee’s own case for A.Y. 2014-15 in ITA No. 3372/Bang/2018 which has been reproduced in the impugned order in para 13.4. Referring to para 28 of the order, the Ld.AR submitted that this Tribunal has always considered assessee to be the trader. He submitted that therefore the observations of this Tribunal that the tolerance band of 1% to be applied is contrary to the facts of the case. 6. We have perused the submissions advanced by both sides in the light of records placed before us. On perusal of the transfer pricing order passed by the Ld.TPO, we note that the assessee has not been categorised as a wholesale trader but it has been called a “stripped-down distributer if it takes risks of distributer” as per TPO order 6.4.3. In assessee’s own case for subsequent year in ITA NO. 3372/Bang/2018 at para No. 28 Tribunal held that the assessee is trader and fixed the tolerance limit at 3% as per para No. 28 which is quoted by us in our order at para No. 13.4. Therefore, para 13.5 deserves to be amended as under: “13.5. The Ld.DR has relied on Notification No. 30/2013 dated 15/04/2013 and has considered assessee to be a wholesale trader M.P. No. 63/Bang/2023 Page 5 of 7 which is contrary to the facts of the case. This Tribunal in assessee’s own case for A.Y. 2014-15 has upheld the assessee to be a trader even the Ld.TPO in para 2 of the 92CA order has considered assessee to be a trader. There is nothing on record placed by the Ld.AR to establish that the assessee is a wholesale trader for the year under consideration. Under such circumstances, respectfully following the view taken by the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2014-15, we direct the Ld.AO to apply tolerance limit at 3% as assessee is categorised to be a trader by the authorities for the year under consideration.” 7. Issue No. 3 raised by the assessee is regarding ground no. 13 wherein the assessee had sought for exclusion of certain expenses from the operating cost while computing the assessee’s margin. The Ld.AR submitted that assessee had incurred following costs which were to be excluded as similar cost were not identifiable in case of the comparables selected. Particulars Amount Finance cost 68,717,963 Forex loss relating to purchase of capital goods 24,494,064 Forex loss 41,897,297 Pre-operative expenses 28,293,617 Total 163,402,941 He submitted that these extraordinary expenses are to be excluded to iron out the difference between the comparables and that of the assessee. M.P. No. 63/Bang/2023 Page 6 of 7 7.1 The Ld.AR submitted that however this Tribunal while considering this issue in para 15.6 placed reliance on certain decisions which has not been relied by the Ld.DR and therefore did not get an opportunity to submit its arguments in respect of the same. 7.2 We have perused the submissions advanced by both sides in the light of records placed before us. It is noted that the details in respect of the costs which is alleged to be non-operative for computing the margin of the assessee needs verification. It is noted that, in para 15.7, this Tribunal rejected the claim of the assessee regarding finance cost, however allowed the ground for statistical purposes. Hence para 15.6 shall be read as under: “15.6 The assessee is directed to furnish the details of costs which are alleged to be non-operative expenses and the same shall be verified by the ld. AO. Assessee is directed to substantiate the details in support of the same. Accordingly this issue is remitted to the ld. AO/TPO for fresh examination in the light of judicial precedents. Needless to say that proper opportunity of being heard be given to the assessee. As the issue is remitted to the file of the ld. AO/TPO for necessary verification, para 15.7 stands deleted.” 8. At page 36 of the impugned order, ground no. 12 after para 14.4 shall be read as Ground nos. 12-13. M.P. No. 63/Bang/2023 Page 7 of 7 9. Ground No. 9 in the miscellaneous petition was not pressed. In the result, the miscellaneous petition filed by the assessee stands allowed. Order pronounced in the open court on 04 th September, 2024. Sd/- Sd/- (BEENA PILLAI) (LAXMI PRASAD SAHU) Judicial Member Accountant Member Bangalore, Dated, the 04 th September, 2024. /MS / DSM / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore