Deputy Commissioner of Income Tax Circle 1(1), Guntur V. Alliance One Industries India Private Limited, Hyderabad

MA 68/VIZ/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2896 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-04-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 20-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: APARNA VILLURI
• Section: 119

Judgement Text

1 आयकरअपीलीयअधिकरण, विशाखापटणमपीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्रीद ु व्ि ू रुआरएलरेड्डी, न्याययकसदस्यएिंश्रीएसबालाक ृ ष्णन, लेखासदस्यकेसमक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER (Through Hybrid Hearing) M.A. No. 68/Viz/2023 (In आयकरअपीलसं./ I.T.A. No.68/Viz/2022) (निर्धारणवर्ा/ Assessment Year :2017-18) Deputy Commissioner of Income Tax,Circle-1(1), Guntur. Vs. Alliance One Industries India Private Limited, Hyderabad. PAN: AAACT 8064 A (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थीकीओरसे/ Appellant by : Sri K.C. Devdas, AR प्रत्यधर्थीकीओरसे/ Respondent by : Dr. Aparna Villuri, Sr. AR स ु िवधईकीतधरीख/ Date of Hearing : 22/03/2024 घोर्णधकीतधरीख/Date of Pronouncement : 19/04/2024 O R D E R PER S. BALAKRISHNAN, Accountant Member : This Miscellaneous Application is filed by the Revenue seeking recall of the Tribunal’s order in ITA No. 68/Viz/2022 (AY 2017-18), dated 14/07/2023. 2 2. At the outset, the Ld. Departmental Representative [Ld. DR] submitted that the Tribunal has erred in excluding the comparables selected by the Ld. Transfer Pricing Officer [TPO] and thereby leaving no comparables left for determining the Arm’s Length Price [ALP] for the tested party. The Ld. DR therefore pleaded that there is a mistake apparent on record in the order of the Tribunal as explained above and hence prayed for recalling of the Tribunal’s order dated 14/07/2023. 3. Per contra, the Ld. Authorized Representative [AR] submitted that the ITAT has considered the submissions of the assessee and has rightly excluded the comparables selected by the Ld. TPO and therefore there is no mistake apparent on record in the order of the Tribunal dated 14/7/2023 and therefore pleaded that the same may be upheld. 4. We have heard both the sides and perused the material available on record. We have also gone through the order of the Tribunal in ITA No. 68/Viz/2022, dated 14/7/2023. On perusal of the Tribunal’s order (supra), we find that the ITAT, while adjudicating the appeal of the assessee, has held a view that the comparables selected by the Ld. TPO and confirmed by the Ld. Dispute Resolution Panel [DRP] cannot be considered as good comparables with that of the assessee-company for the purpose of benchmarking the assessee’s transactions. 3 Accordingly, based on the issues involved in the appeal as well as considering the facts and circumstances of the case, the Tribunal has directed to exclude all the comparables selected by the Ld. TPO by relying on various judicial pronouncements. The plea of the Revenue is that there is no comparable left for the purpose of comparison and for determining the ALP for the tested party because of Tribunal’s decision in excluding the comparables selected by the Ld. TPO. On this issue, we find that, while adjudicating the issues involved in the appeal, after discussing the issues at length, the Tribunal considered the comparables selected by the Ld. TPO as not good comparables and has held as under: “12. We h ave heard bo th the sides and perused the material avail able on record and the orders of the Ld. Revenue Au th oriti es. With respect to the in clusion of comparable of BVPL by th e Ld. TPO wh ich was confirmed by th e Ld. DRP, from th e submissions mad e by th e Ld. AR we fin d th at if an y company wh ich should be considered as a g ood comparabl e wi th th at of the assessee-company for the purpose of bench marking its in tern ation al tr ansac tions, i t sh ould be based on th e F AR an alysis ie., Fun ction s performed, Assets employed an d Risk under taken. In the instan t case, the Assets employed by th e assessee compan y in the f orm of Pl an t & Machinery is Rs. 68,67,22,223/- whereas the comparable viz., BVPL selected th e Ld. TPO h as empl oyed Asse ts in the form of Pl an t & Machin ery for Rs. 55,20,109/-. We are therefore of th e considered view th a t based on on e of the parameters of F AR an al ysis ie., Assets employed, we hold th at the compar able BVPL coul d not be a good compar able wi th th at of th e assessee company. Hence, the Ld. TPO / Ld. AO is directed to exclude th e en ti ty BVPL from the f in al set of compar ables while reworking the in tern atio n al tr ansac tions. 13. With respec t to DTE Expor ts Pvt L td., we f ind th at the expor ts consti tu te only 3.74 % of the to tal turnover and therefore the Ld. TPO / Ld. DRP considered the insignif ican t expor ts of DTE Expor ts Pv t Ltd., and rejec ted i t as a comparabl e. However, the Ld. DRP h as considered the inclusion of Premier Tobacco Packers Private Limited wh ich does n ot h ave any export turnover. We find th at th e Ld. TPO h as n ot applied fil ter of minimu m of 50 % sh ould be from expor ts tu rnover in the case of Premier Tobacco Packers Private Limited. While observing the in consisten cy in the comparables selected by th e Ld. TPO wherein Ld. DRP al so affirmed th e selec tion of Premier Tobacco Packers Private Limited, we fin d th at th e same is not in 4 accordance wi th Rule 10B(2)(d) of the Income Tax Rules, 1 962. Therefore, we direc t the Ld. TPO / Ld. AO to exclu de Premier Tobacco Packers Private Limi ted as a comparable in determin ing the ALP of th e assessee compan y. Ho wever, we no ticed th at the Ld. DRP h as al ready excluded DTE Expor ts Pv t L td., based on the insignif ican t tu rnover an d followin g the principle of con sis tency, we confirm th e same. 14. With respec t to the export incen tives, whether i t is to be treated as operating or n on-operating income for the purpose of PL I compu tation, we fin d th at Rule-10B of the IT Rules, 1962 provides meth odology for compu tation of ALP. Since th e assessee h as adop ted TNM Method which was no t dispu ted by the Revenue, Net Profi t is used as a bench mark for ALP compu tation. Rule 10B(1)(e)(ii) provides for compu tation of net profi t margin in the uncon trolled compar able tr an sacti ons whereas a ne t margin real ized by the en terprise n amely the tested par ty as well as the comparables, the to tal income and expendi ture of the bu sin ess should be considered. It is al so a g eneral principle th at all the subsidies / expor t incen tives are f ac tored by all the exporters while de termining their sales price in the in tern ation al marke t. We also fin d th at variou s Cour ts h ave held the export incen tives as operating in n ature while calcul ating the operating marg ins. Reliance pl aced by th e Ld. TPO in Hon’ble Bombay High Court decision in the case of CIT-2 vs. Welspun Zucchi Textiles Limited wherein the Hon’ble High Court dismissed the Revenue’s appeal and confirmed that the DEPB benefit is operating revenue includable in arriving at operating profi t. Simil ar views h ave been held by variou s Cour ts viz., (i) DCIT vs. Indo Span ish Tasty Foods Pvt Ltd TS-118-ITAT-2016 (Bang ); (ii) Greenl an d Exports Pvt L td vs. DC IT TS-87 9-ITAt-2016(Chny)-TP; (iii) Cummins India L td vs. DC IT [2019] 101 taxmann.com 325 (Pune- Trib.); (iv) FC I OEN Connectors Ltd vs. AC IT [2017] 77 taxmann.com 223 (Coch in-Trib.) (v) AB INBEV GCC Services In dia Pv t L td vs. DCIT (IT)(TP) A No. 792/Bang/2022; (vi) Sami Labs Ltd vs. DC IT ( IT)(TP) A No. 186/Bang /2015; (vii) Rei tzel India Pvt L td vs. DC IT [2020] 119 taxmann.com 401 (Bang alore – Trib.); (viii) Carraro In dia (P.) Ltd vs. AC IT [ IT appeal No. 1629 an d 1673 (Pune) of 2013), dated 19/1/2017]; (ix) Beh r India L td vs. AC IT [2 017] 81 taxmann.com 46 (Pune-Trib.). Th e case l aw rel ied on by the Ld. DR in the case of Goodyear In dia Limited vs. DC IT [2013] 33 taxmann.com 507 (Del hi – Trib.) is distinguish able on the f acts th at the export incen tive was redu ced from the cos t of goods sold wh ereas in th e instan t case it is treated as operating revenue arising ou t of th e expor t sales. Fu rther, in th at c ase, i t was h eld th at th e expor t in cen tives were no t accrued at the time of sal e of goods for treating i t as a componen t of th e cost of goods sold. Therefore, in our considered vie w, th is case is of no help to the Revenue. Considering th e f acts and circumstances as discussed above, we direc t th e Ld. TPO / Ld. AO to consider the export incen tives as operating income while compu ting th e PL I of th e assessee. It is ordered accordingly.” 5. Since the Tribunal has passed a detailed order as extracted above, in our considered view there is no mistake apparent on record 5 in the order of the Tribunal (supra) and therefore the Miscellaneous Application filed by the Revenue is hereby dismissed. 6. In the result, Miscellaneous Application filed by the Revenue is dismissed. Order pronounced in the open Court on 19 th April, 2024. Sd/- Sd/- (द ु व्ि ू रुआर.एलरेड्डी) (एस.बालाक ृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER लेखासदस्य/ACCOUNTANT MEMBER Dated :19/04/2024 OKK - SPS आदेशकीप्रतिलिपिअग्रेपिि/Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee– Alliance One Industries India Private Limited,1-90/28/C/5 &10, Suryakanth Mansion, Plot No. 5 & 10, Madhapur, Gafoor Nagar, Hyderabad – 500 081, Telangana. 2. रधजस्व/The Revenue – Deputy Commissioner of Income Tax, Circle-1(1), Hyderabad. 3. The Principal Commissioner of Income Tax, 4. आयकरआय ु क्त (अपील)/ The Commissioner of Income Tax 5. ववभधगीयप्रनतनिधर्, आयकरअपीलीयअधर्करण, ववशधखधपटणम/ DR,ITAT, Visakhapatnam 6. गधर्ाफ़धईल / Guard file आदेशधि ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam