M/s. Shell Global Solutions International BV, Mumbai V. The Dy.CIT, Intl.Taxn.-1, Ahmedabad

MA 89/AHD/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2149 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 07-03-2024
• Assessment Year: 2011-2012
• Appeal Filed On: 26-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER M. A . N os . 8 9to 91 /A hd / 20 2 3 ( in I TA N o s . 7 8 0/ A hd / 20 1 6 , 74 7/ A h d/ 2 01 7 & 2 93 5 / Ah d/20 17) ( A s s e s s me nt Y ea r s : 2 0 11 -1 2 to 2 01 3 - 1 4) Sh e ll G lo ba l So lu tio n s I nt e r na tio na l B . V. , C /o She ll I nd ia M a r k et s Pv t. L td ., Tr e nt H ou se , 1 s t F l oor , G - B l oc k, Pl ot N o . C- 6 0 , B a n dr a K ur la C o m p le x, B a n d r a E a s t , M u m b ai-4 0 0 05 1 V s .De pu t y C o m mi s s io ne r o f I nc o m e Ta x, I nt er n a tio n a l Ta xa t ion - 1 , Ah me da b ad [ P A N N o. A A I C S3 5 89 H ] (Appellant) .. (Respondent) Appellant by : Shri S. N. Soparkar, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. DR D a t e of H ea r i ng 08.03.2024 D a t e of P r o no u n ce me nt 29.05.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: The assessee has filed the present Miscellaneous Application against the order passed in the appeal decided by the assessee vide order dated 11.10.2023, in the case of the assessee for A.Ys. 2011-12 to 2013-14. 2. The first issue raised by the applicant is that the Hon’ble Tribunal while passing the order has inadvertently mentioned that the assessee shall not be pressing for the legal argument of “base erosion”. Vide the present Miscellaneous Application the assessee submitted that during the course of hearing, the Ld. Counsel for the assessee had mentioned that the legal argument on “base erosion” is covered against the applicant by order of Hon’ble Special Bench Calcutta Tribunal in the case of Instrumentarium MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 2 - Corporation Ltd. and also by the order of Divisional Bench of Hon’ble Ahmedabad ITAT in assessee’s own case for A.Y. 2007-08 to A.Y. 2010- 11. However, the applicant’s submission is that the Counsel for the assessee never submitted that he shall not be pressing the argument of “base erosion” and all that the Counsel for the assessee submitted was that the issue may be decided against the assessee in view of the decision of Hon’ble Bench of Calcutta Tribunal in the case of Instrumentarium Corporation Ltd. and in view of the order of ITAT Ahmedabad in assessee’s own case for A.Y. 2007-08 to A.Y. 2010-11. The submission of the applicant is that it desires to carry this issue to the High Court and therefore, the observation by the Hon’ble Tribunal to the extent that the argument is “not pressed” may suitably modified to that the issue regarding the argument of “base erosion” may be decided against the assessee in light of the decision of Hon’ble Special Bench of Calcutta Tribunal in case of Instrumentarium Corporation Ltd. and also in light of assessee’s own case for A.Y. 2007-08 to 2010-11. 3. On going through the facts of the case and the arguments of the Ld. Counsel for the assessee, we are in agreement with the application on this issue filed by the assessee and accordingly, the contents of the order dated 11.10.2023 are directed to be suitably modified to that “the issue may be decided against the assessee in light of the order of Hon’ble Special Bench of Calcutta in the case of Instrumentarium Corporation Ltd. and also in light of the order of ITAT Ahmedabad in the applicant’s own case for A.Y. 2007- 08 to 2010-11, which have decided this issue against the assessee”. MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 3 - 4. In the result, this issue is decided in favour of the assessee / applicant and the order of Ahmedabad Tribunal in assessee’s own case for ITA No. 780/Ahd/2016 stand duly modified to the above extent. 5. The next issue raised before us and the mistake apparent from record pointed out by the assessee / applicant is that the applicant had placed reliance on the Karnataka High Court in the case of UED India Pvt. Ltd. in support of the legal argument on “Mirror ALP”. However, the ITAT has placed reliance on the case of Filtrex rendered by Bangalore ITAT, while deciding the issue of Mirror ALP against the assessee / applicant. The assessee / applicant in the Miscellaneous Application has submitted that the decision of the Hon’ble Karnataka High Court should have been followed, being binding on the Ahmedabad Tribunal and further, while passing the order, the above decision was also not confronted to the counsel for the assessee, so as to rebut the contents thereof. 6. On going through the contents of the Miscellaneous Application, we are of the view that the assessee / applicant has erred in not appreciating the contents of the order dated 11.10.2023, while taking this argument / contention in the present Miscellaneous Application. Therefore, it is important / pertinent to again reiterate the facts while disposing of the present Miscellaneous Application. The back-ground on this issue was that the assessee had provided services related to operation of LNG storage and re-gasification terminal to it’s Associated Enterprises (in short “A.Es.”), Hazira Port Pvt. Ltd. (in short “HPPL”) and Hazira LNG Pvt. Ltd. (in short “HLPL”) for which the assessee charged of very low amount per hour as MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 4 - compared to the price charged a similar services rendered to other third parties in India. Further, the Transfer Pricing Officer (in short “TPO”) observed that the assessee / applicant had provided manpower services to another Associated Enterprises Shell Indian Markets Pvt. Ltd. (in short “SIMPL”) and the TPO observed that the rate charged by the assessee to it’s Associated Enterprises (SIMPL) was much lower than the rate charged by the assessee / applicant from third party for similar services. All throughout the proceedings before the TPO, the assessee never gave any justification for charging a much lower price for the same services rendered to it’s Associated Enterprises, as compared to third parties. Further, during the course of proceedings before the TPO / other lower authorities, the assessee / applicant only took the argument of “taxed base erosion” and never furnished any basis or reason for charging a much lower price for similar services rendered by the assessee / applicant to third parties. Accordingly, the TPO made an upward adjustment on account of the above transactions between the assessee and it’s A.Es. 7. However, before the ITAT, since the issue of “tax base erosion” had already been decided against the assessee by the Special Calcutta Bench in the Instrumentarium Corporation Ltd. and also by the Division Bench of ITAT Ahmedabad in assessee’s own case for A.Y. 2007-08 to 2010-11, the Counsel for the assessee submitted that the argument of “base erosion” may be decided against the assessee. However, the Counsel for the assessee took before us alternate arguments with respect to the aforesaid transfer pricing adjustments. MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 5 - 8. The first argument taken by the Counsel for the assessee was of Mirror ALP. The argument taken before us by the Ld. Counsel for the assessee was that since the transaction has been considered at Arm’s Length Price in the hands of it’s A.Es. i.e. SHELL Indian Markets Pvt. Ltd. (SIMPL), Hazira Port Pvt. Ltd. (HLPL) and Hazira LNG Pvt. Ltd. (HLPL), no transfer pricing adjustments should be made in the hands of the assessee for the same transaction. However, the Tribunal while passing the order, against which the assessee / applicant has filed the present Miscellaneous Application, after carrying out a detailed factual analysis had come to the conclusion that the principle of Mirror ALP is not satisfied in the present facts, looking into the facts of the instant case. The ITAT observed that in the instant facts, the principle of Mirror ALP will not hold good because for this principle to apply, no transfer pricing adjustment should have been made in the hands of the Associated Enterprises of the assessee, after proper transfer pricing scrutiny / assessment of the Associated Enterprises, as a primary pre-condition. But in this case, the ITAT noted that in the case of HPPL no transfer pricing reference was made in the first instance and no transfer pricing adjustment was recommended by the TPO for A.Ys. 2011- 12 and 2012-13 and in absence of any transfer pricing assessment / scrutiny of HPPL the principle of Mirror ALP does not stand satisfied / cannot be invoked. Further, in the case of HLPL for A.Y. 2012-13 for the same services upward adjustment was made by the TPO and the matter is pending adjudication before ITAT Ahmedabad. Therefore, in the instant case, since on the facts of the case itself, the principle of Mirror ALP was not satisfied, the argument of Mirror ALP was rejected by the ITAT Ahmedabad. However, vide this application, the assessee / applicant has submitted / MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 6 - suggested that the argument of Mirror ALP was rejected on the basis of decision of Filtrex rendered by ITAT Bangalore, which is incorrect for the simple reason that ITAT Ahmedabad, after carrying out the detailed factual analysis had come to the conclusion that the principle of Mirror ALP is not satisfied in the present facts since the essential pre-requisite for the principle to apply is that no transfer pricing adjustment has been made in the hands of the A.Es., after carrying out a detailed analysis by the TPO. However, in the instant facts, in case of HLPL, for A.Y. 2012-13 upward transfer pricing adjustments were in fact made and in the case of HPPL, the principle of Mirror ALP does not apply / cannot be pressed into services, for the simple reason that the matter was never referred to the Ld. TPO for carrying out a transfer pricing analysis with respect to the aforesaid decisions. Therefore, this argument of the assessee / applicant was rejected by ITAT on the basis of the facts of the case itself and not on the basis of any judicial precedents. The decision of Filtrex Technologies was only referred to emphasize the point that even for arguments take / if the transaction has been accepted at ALP in the hands of the A.Es., even then this would not in all cases preclude the TPO to make similar adjustments in the hands of the assessee. However, as noted in the order even on facts the principles of Mirror ALP have not been satisfied in the instant case and therefore, the argument of Mirror ALP would not be of any assistance to the assessee / applicant. Therefore, since the issue has been decided against the assessee in light of the assessee’s set of facts and not on the basis of any judicial precedent, this argument / issue raised by the assessee / applicant vide this Miscellaneous Application is hereby rejected. The ITAT is mindful of the fact that it is bound to by the decision of Hon’ble Karnataka High Court, if the principle MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 7 - of Mirror ALP is satisfied in the assessee’s set of facts. However, since on facts, the principles of Mirror ALP have not been satisfied, the argument of Mirror ALP was rejected by ITAT Ahmedabad, while rendering the decision. 9. Without prejudice to the above the issue of upward adjustment made by the Ld. TPO / AO was referred back to the file of Assessing Officer also on account of certain factual aspects noted by the ITAT Ahmedabad while rendering the decision. The ITAT observed that while rendering the aforesaid services, the TPO had observed that apparently the assessee had charged a much lower price for rendering the services to it’s A.Es., as compared to similar services rendered by the assessee to third parties. However, neither before Ld. TPO nor before other Tax Authorities, the assessee / applicant furnished any reason / explanation / basis for charging a much lower price for such services from it’s A.Es. All throughout, the assessee / applicant was pressing the argument of “base erosion”, however, since this issue was decided against the assessee by the Hon’ble Calcutta Special Bench in the case of Instrumentarium Corporation Ltd., the Counsel for the assessee submitted that the issue of “base erosion” may be decided against the assessee before ITAT. Therefore, the ITAT observed that despite several opportunities to the assessee, the assessee had not given any explanation / reason for charging a much lower rate from it’s A.Es. as compared to third parties for similar services and now that the argument of “base erosion” had also been decided against the assessee, in all fairness, it is a fit case that the matter may be restored to the file of the TPO for de- novo adjudication and the assessee was at liberty to furnish necessary MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 8 - documents / evidences to provide justification in support of the price charged by the assessee to it’s A.Es. Another notable point is that before us, the assessee pressed into services altogether new arguments that the Ld. TPO has erred in not comparing “likes with likes” which were never taken at any earlier stage before the Tax Authorities. Before us, the Counsel for the assessee submitted that the agreement of the assessee with this A.Es. are structured in a similar manner as compared to similar agreements entered by the assessee with another A.Es. Brunai LNG (in short “BLNG”). Accordingly, the Counsel for the assessee submitted that since “likes have not been compared with likes” by the TPO, the upward adjustment was not called for. However, while rendering the decision, the ITAT observed that this argument of “likes have not been compared with like” and the argument of similarity of agreement with BLNG was never taken before the Tax Authorities at any stage of hearing. This argument has been pressed for the first time before the ITAT and since this issue required a factual reconsideration, the matter was restored to the file of Ld. TPO to also consider the factual aspects relating to the aforesaid argument taken up by the assessee / applicant for the first time before the ITAT. Further, the ITAT has also made a categorical noting that at any stage of the proceedings, the assessee has given no justification for charging the rates at which the services were rendered to A.Es. as compared to similar services provided to third parties. Therefore, in light of the above factual aspects noted by the ITAT and also of the fact that in the instant case the principles of Mirror ALP are not satisfied in the assessee’s set of facts, the issue was set-aside to the file of Ld. TPO for de-novo consideration. MA Nos.89 to 91/Ahd/2023 (in ITA No.s 780/A/16, 747/A/17 & 2935/A/17) Shell Global Solutions International B.V. vs. DCIT Asst.Years –2011-11 to 2013-14 - 9 - 10. In the result, the argument of Mirror ALP taken up by the assessee / applicant is rejected since this argument was rejected not on the basis of any judicial precedents but on the basis of assessee’s facts itself. Accordingly, in our considered view the Miscellaneous Application with respect to this of Mirror ALP issue has been filed on an incorrect presumption of fact that the argument of Mirror ALP has been rejected on the basis of any judicial precedent, but the argument of Mirror ALP has been rejected keeping into mind the particular facts of the assessee’s case, where the essential pre- requisites for invoking the argument of Mirror ALP have not been satisfied in the assessee’s particular set of facts. 11. Accordingly, the Miscellaneous Application filed by the assessee / applicant on this issue is hereby rejected. 12. In the result, the Miscellaneous Application of the assessee / applicant is partly allowed. This Order pronounced in Open Court on 29/05/2024 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 29/05/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad